Why the NZ retirement
sector offers great
investment opportunities

The retirement village and aged care industry in New Zealand offers great investment opportunities. Investors stand to earn steady attractive returns, backed by solid assets.

At the same time, money flowing into the retirement sector is helping to provide great accommodation and care for our fellow Kiwis who are getting on in years.

As a specialist investment vehicle for people who want to invest in the New Zealand retirement sector, Senior Trust Capital is perfectly placed to make the most of the great opportunities that the retirement village and aged care sector offers investors.

Six particular characteristics of the NZ retirement industry sets it apart from an investor’s point of view.


1.

Fast growing industry

Over the past decade, the New Zealand retirement village and aged care industry has been fueled by an ageing population and changing tastes in retirement living. It has shown consistent and solid growth and performance over the past 20 years and is projected to increase further over the next 30 years.

The New Zealand retirement village and aged care industry is driven by:

An ageing population

Increased popularity of retirement villages

Strong housing market and home ownership among people of 65 years old and over

Retirement village affordability compared to the traditional housing stock

A decline in suitable alternative accommodation.

This trend is set to continue for decades. Statistics New Zealand predict that people over 75 years of age will rise from 6% of the total population in 2013 to 14% by 2043.

The retirement village industry is beginning to ready itself for another period of growth over the coming decade by land banking, driving new development and pushing the level of quality higher in the face of raised expectations from the market.

Based on the 2016 JLL New Zealand Retirement Village Database white paper, the sector is predicted to grow to 2043. Based on the predicted population growth and age profile, demand is expected from an additional 55,336 retirement village residents.

To meet this demand, New Zealand will need:

42,566

new retirement village units


284

new retirement villages


11.4

new villages per year, effectively one every month.


2.

Well regulated

The retirement village and aged care industries are unique in their operation, with thorough independent and governmental oversight and regulation. This ensures the protection of residents, their financial interests and ongoing security of their lifestyle.

The introduction of the Retirement Villages Act and Code of Practice in 2006 brought much needed regulation underpinning the occupation license structure, which offers consumers transparency and protection alongside a compelling package of services. The model is now well accepted as residents can see the benefits and value of what they are paying for by offering them financial, physical and emotional security in their retirement. This oversight also flows through to Senior Trust Capital by ensuring that operators adhere to strict regulations and monitoring. Their financial sustainability, quality of offer, operation and protection of assets are thoroughly scrutinized.


3.

Solid assets

The Senior Trust Capital loans and investments are secured against actual physical assets (through mortgages, or partial ownership) that can be realized or used to protect investor value during changeable economic conditions.


4.

Occupation right agreement

Most retirement villages in NZ operate under an occupation right agreement (ORA) which has been developed by industry leaders, regulators and advisors. This model is regarded globally as a leader and is a benchmark for many countries, including the UK and Australia.

The occupation right agreement generates longer term revenue streams and capital appreciation than comparable models.

Aged residential care facilities that operate on the more traditional cost-plus model are backed by funding from the Ministry of Health (through District Health Board population based funding) and also offer a regular and consistent income stream.

The combination of the above two financial models provides an operator with long-term ownership of the assets and a diversified income. This is reflected in the strong investor support for the listed retirement village operators over the past 20 years.


5.

A caring industry

The aged care industry is not all about the money. It is a very caring industry, providing valuable and needed services, homes and communities to many older New Zealanders and their families.

The industry’s continued success and growth is a key solution to many of the ageing issues our country faces over the coming decades. It gives residents a continuum of care, security of tenure and the ease of lifestyle that they and their families desire.


6.

Protection

Lending to the retirement village industry affords additional protection through the Retirement Village Act. This is over and above the direct lending protections administered directly through Senior Trust Capital or the Financial Markets Authority.

The layers of protection include:

Retirement village & aged care industry protection

Retirement Village Act and Code of Practice

An independently appointed village statutory supervisor for each village

Ministry of Health

Financial & Senior Trust Capital protection

Financial Markets Conduct Act 2013

General security agreement

Personal guarantees of operators

Senior Trust Capital due diligence process

Senior Trust Capital monitoring