Reposition, Renovate: The Future of Retirement Communities

Evolution is inescapable, nowhere more so than the retirement sector. Gone are the days of horizontal, yellow brick, one-level units in siloed communities. According to experts at The Urban Developer ’s Retirement Living Summit in Brisbane this month, developers are responding to buyer demands for more and better across land lease communities, vertical living, and integrated aged-care and retirement projects. Operators across the country are stepping up as competition increases in the sector, redeveloping and repositioning assets. The United Protestant Association is spending millions of dollars renovating assets , Baptistcare is working on a $1.9-billion aged-care and retirement masterplan ( pictured top ) at a Macquarie Park site it has owned since 1962, and Levande is redeveloping its Brighton East site after winning VCAT approval . Every retirement village developer-operator is a long-term owner of their building, O’Neill Architecture partner Justin O’Neill points out. “So there’s just a core difference in wanting to create longer-term value and longer-term quality,” O’Neill says. “But one of the challenges in the future is for us to start picking what those next 20-year trends are.” Aged care: Necessity not option One of these trends is investing in more advanced levels of care. “We’re all ageing, but now there is a greater need to understand how couples, for instance, are moving through sickness and back into health—they might need palliative care for a short time, and then come back to their house,” O’Neill says. “How do you actually deal with that shifting, slowly getting towards the end of life? It’s much more binary at the moment. “[But] we’re working on a number of different models as to how care gets embedded in properties.” ▲ Levande’s vertical reworking of its Brighton East project was approved this year by VCAT. Partner at MinterEllison Tammy Berghofer says that support at home will only increase. “If you don’t have a care strategy yet, it is time to think about what that strategy is, and there are some very significant considerations around that, including your built form,” Berghofer says. This aged-care integration is also becoming more intricately tied to the increase in higher-end products. “The shift to higher-value product is obvious, and it’s an obvious response to the construction costs at the moment,” O’Neill says. ▲ Partner at MinterEllison Tammy Berghofer. “It was only five years ago that we actually were thinking about the fact that someone would sell their house for a million dollars, and they put 20 per cent in their pocket into their super and they’d buy an apartment for $800,000 and they live there as a retirement community. “That’s just not possible anymore, [and] I don’t think any of us have the solution to that.” But if the market is reorienting back to that top quartile price point, O’Neill says, then developers and operators need to consider the features and product typologies of new and existing assets. Repositioning assets The move towards aged care and higher-end assets is prompting developers such as Eureka Group to reposition and rework their existing assets, and repurposing other asset classes. Eureka chief executive Simon Owen says that it is not going to do any greenfield, focusing largely on the rental market. “We’re just focusing on either buying other built forms or repurposing existing built form into affordable, all-age housing,” Owen says. That’s buying caravan parks, regional motels or decommissioned retirement facilities, he says, with a particular focus on the regions . ▲ Eureka’s Simon Owen with O’Neill Architecture partner Justin O’Neill, One Fell Swoop’s Liam Carroll and The Urban Developer chief executive Adam Di Marco. “Where there’s existing built form ideally with expansion land, where we can use modular and prefab housing in a cost and time effective way.” But there are considerable challenges working with existing assets, Berghofer says. “We have a lot of ageing stock around Australia. A lot of our villages were built in the 70s and 80s for 55-year-olds to move in and live independently,” Berghofer says. “Those villages are at the end of their useful life and unfortunately, given the housing crisis, we’re not seeing it become any easier to develop those villages. “But it’s really, really tricky from a regulatory perspective.” Legal pitfalls One of the biggest challenges facing developers considering redeveloping assets is what to do with their existing residents, who probably never intended to move again. “It depends on the state you’re working in but I can guarantee you there will be some form of resident consent required under the Retirement Villages Act,” Berghofer says. “We’re finding that residents are becoming more savvy around redevelopments in the village and what their rights are. “They’ve bought into a community where they think they’ll be living for the rest of their life, and they don’t anticipate that they’re going to have to live with noise and dust and new construction and a new body of residents coming in.” ▲ A rendering of Baptistcare’s Macquarie Park redevelopment. This means that redevelopments will have an even longer lead time, Berghofer says. “And if you need to relocate residents, it does not matter what your contracts say, you will not be able to relocate them without their consent. “We thought we were smart a few years ago by putting relocation clauses in our contracts. Those clauses are not really worth the paper they’re written on anymore.” In Queensland, for instance, even with contracts with relocation clauses resident consent is still required for a redevelopment. “That is 75 per cent approval to undertake redevelopment in the village, and residents realise this gives them some leverage. “If there’s a prospect of new buildings coming online in the community and their service charges are going to increase, we see very often, agreements with existing residents about capping service charges. We see payments for compensation. ▲ A rendering of the United Protestant Association development at Wahroonga. “So there is a very long lead time, and you have to accommodate for that if you’re looking at developing or redeveloping villages. “We don’t live in the residential apartment development world. We live in a very regulated space where consumer protection exists.” But taking all these things into consideration when repositioning and redeveloping assets is essential. “All of these things make a value equation that allows individuals to decide where they want to go,” O’Neill says. “There is an opportunity for everyone to be providing their own unique combination of these provisions and services and allowing the market to decide, because the market is actually now large enough for people to actually make [a] choice.”

Reposition, Renovate: The Future of Retirement Communities

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