The Post

Retirement village lender welcomes investor influx

- Chris Hutching chris.hutching@stuff.co.nz

Researcher­s at real estate agency JLL estimate that potential demand for retirement villages over the next 20 years is about 11 a year.

The executive director of the Senior Trust Retirement Village Listed Fund, Scott Lester, said his board expects about half the number will be satisfied by the larger operators such as Ryman Healthcare and Summerset Holdings.

But the other half were likely to be built by private developers and supported by funders such as the Senior Trust fund, he said.

The NZX-listed fund has doubled in asset size, largely as a result of investors in another just-closed fund reinvestin­g their money, he said.

It was launched in 2015 with the intention of closing after the maximum 45 million units valued at $1 had been taken up by investors, which was expected to take until about 2020.

But the recent influx of new investors has seen 35 million units taken up, and Lester expects it will be filled in coming months.

The units will be paid back on the maturity date of March 2021, and the loans it has made to retirement village developers are staged to be repaid by then.

Distributi­ons have been paid at a rate of 6.6 per cent a year, slightly above the predicted 6 per cent and higher than most longer bank term deposits, which are currently being offered at about 3.4 per cent.

The higher return recognises the higher risk, although investors might wish to take the advice of a financial adviser to decide if the margin is sufficient for the risk.

Lester said there were about 780 investors in Senior Trust, following a recent influx of younger investors.

The fund currently has loan agreements for $3.5m to Palm Grove Partnershi­p in Orewa in Auckland, $14 million to Quail Ridge Country Club at Kerikeri, $900,000 to Hauraki Village in Paeroa, $15m to Whitby Village (2009) in Wellington, $9m to Arrowtown Lifestyle Retirement Village, and $3.5m to Roys Bay Estate at Wanaka.

The loans to the developmen­ts are at interest rates between 10 per cent and 14 per cent.

The Palm Grove investment is a related-party transactio­n because of common shareholdi­ngs with Senior Trust directors and senior managers.

The retirement villages are at different stages of constructi­on.

For example, earthworks at the Wanaka village close to the waterfront are nearing completion.

An interestin­g feature of the Wanaka village from a potential resident’s perspectiv­e is the sale of individual freehold titles for units instead of solely an occupation right, which is common with most retirement villages. It means the buyer will take any capital gain.

Nor is there the typical 30 per cent deferred management fee at the end of tenure, though there is an exit fee of 7 per cent of the value of a unit. However, there may be other services offered by bigger retirement villages.

 ??  ?? Senior Trust expects no let-up in the number of retirement villages needing developmen­t loans.
Senior Trust expects no let-up in the number of retirement villages needing developmen­t loans.
 ??  ??

Newspapers in English

Newspapers from New Zealand