[+] Investors Find Safe Harbour in Specialist Disability Accommodation

Investors are treading carefully. As feasibility issues give developers pause for thought—move ahead or sell up to regain capital and bunker down—the reasons for caution are clear. But some have adjusted their sails for a more favourable wind and pivoted from the more traditional residential and commercial sectors. It is leading them to alternative assets, which comes as no surprise to Cushman and Wakefield alternatives capital markets director Louise Burke. “Investors are now looking elsewhere to sectors with enhanced structural tailwinds and strong underlying demand growth potential,” Burke says. “They’ve found what they’re looking for primarily in alternatives. “Alternatives include social infrastructure, healthcare, living (including build-to-rent and student accommodation), data centres, agriculture, and self-storage.” Burke made the observation at an event focusing on specialist disability accommodation (SDA), a subsector experiencing a surge in interest—and capital. Funding and feasibility Specialist disability accommodation funding is provided for an estimated 6 per cent of eligible NDIS participants who have high care needs. That funding is part of their housing plan and is used to deliver specialist disability accommodation projects. ▲ SDA funding accounts for an estimated 6 per cent of NDIS participants. Once moved in, participants pay their own bills and a reduced rent with specific providers managing their experience within the projects. It means the government can subsidise the rents paid, making it more accessible and viable for participants to get housing and that has a positive affect on the feasibility of such projects. The allocation for SDA is also around 1 to 2 per cent of the overall NDIS budget. Burke says it makes sense for investors to pivot. “The real estate investment landscape has transformed over the last five to seven years,” she says. “Structural changes like working from home and online shopping have seen investors increasingly diversify outside the traditional core real estate sectors of office and retail. ▲ The SDA investment thesis is clear and unique, says Blackoak Capital chief executive David Zimmermann. “SDA lies within this domain, straddling the living and social infrastructure categories.” Developer Blackoak Capital chief executive David Zimmermann believes it is an obvious and feasible option for investors. “The SDA investment thesis is clear and quite unique,” Zimmermann says. “Firstly, demand outstrips supply; we know this from the data and on-the-ground experience. “Secondly, the revenue metrics are linked to CPI and are enshrined in legislation that enjoys support across the political spectrum. “Finally, where homes are designed with the end-user—a person living with a disability—truly in mind, we know this offers a competitive advantage in the market.” But not just anyone can move into the space and thrive. ▲ Blackoak Capital chief executive David Zimmermann speaking at the event with NAB Corporate Health NSW and Qld director Stephen Oliver (left), and Vera Living chief executive Jacob Collier (right). Making it work Vera Living chief executive Jacob Collier says a number of factors determine success in the SDA space but design is a huge part of it. “Our tenants have responded the most favourably to properties that are designed under advice from people living with disabilities,” Collier says. “Practically, this means sensibly designed bathrooms, kitchens that have both height-adjustable cooktops and benches, the absence of ‘lips ’ (for example, between living rooms and balconies) that could obstruct a wheelchair, and single-control-point assistive technology controlling blinds, doors, lights and climate. “Safety and security features are also paramount for vulnerable tenants. “Each tenant has unique needs and preferences, so owners should be prepared to modify a property to suit an incoming tenant’s requirements.” Collier points out that SDA sits under the Capital section of NDIS funding but that if it were used on projects with good design, it had a big impact on the Core and Capacity sections of the NDIS budget. “When people living with disability are in homes designed to increase their independence, they are far less reliant on support staff,” Collier says. “We have seen some participants’ support needs drop from three staff to just one because of design features like hoists that allow easier bed-to-chair transitions. “Support staff can be a major cost item for the NDIS and form part of the rapidly expanding portions of the NDIS budget. “The more people living in well-designed SDA, the lower the overall costs to the NDIS will be and the more sustainable the scheme will become.” ▲ Vera Living chief executive Jacob Collier: Well-designed SDA will lessen how much money the government needs to spend within the NDIS budget. That ability to reduce fiscal burden on the federal government’s ongoing expenditure will ensure the NDIS’s SDA funding continues. Zimmermann agrees that design is key and that those investing in the asset or pivoting to develop it need to understand that. “SDA owners compete for tenants in an open market, and not all SDA is created equal,” Zimmermann says. “SDA developed alongside members of the disability community—those who have experiential knowledge of what works in a property and what features enable independent living—will be the first choice for SDA tenants and therefore have lower vacancy rates.” The current market Much like the build-to-rent sector, investors and developers looking to pivot to these assets cannot use the same approach that they do for more traditional asset classes. It is key to engage housing providers that can help manage the project on a long-term basis and often there are long lead times for transitioning people into the homes. But despite all that there is still a viable market and a current undersupply. “The SDA sector is significantly undersupplied Australia-wide but some states are worse than others,” Zimmermann said. “In Western Australia, there are no places for around 1100 participants with SDA funding approved in their NDIS plans—an undersupply of 63 per cent.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

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Marisa Wikramanayake
Thu 27 Jun 24

[+] Investors Find Safe Harbour in Specialist Disability Accommodation

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