First State Super invests in retirement villages

Sally Rose

By

06/09/2017

First State Super has become the second major Australian industry fund to take a direct stake in a retirement living facility this financial year.

Other superannuation funds across country will be watching with interest to see how these investments perform, as the industry grapples with how to best serve the needs of an ageing member base amid a looming housing affordability crisis.

First State Super, an $85 billion Sydney-based non-profit super fund for public servants, revealed on Wednesday September 6, 2017 that it had taken a majority equity stake in the Oak Tree Group – a business that owns, develops and manages retirement villages throughout the east coast of Australia.

The investment forms part of the First State Super’s income and real assets portfolio, which also includes assets such as Sunshine Coast University Hospital, the new Bendigo Hospital, the International Convention Centre Sydney and Bankstown and Camden Airports.

The value of the stake was not disclosed.

First State Super chief executive Michael Dwyer has commented in the past about the need for the super industry to find innovative ways to put capital to work efficiently in social infrastructure assets that can help ensure a more secure retirement for their members. Many of the fund’s members are police, ambulance, emergency service workers, nurses and teachers.

“First State Super is proud to be investing in Oak Tree and supporting the group’s mission to provide affordable independent retirement communities for Australia’s growing numbers of retirees,” Dwyer said via a media release to announce the deal.

He said the Oak Tree Group’s “impeccable reputation” combined with the retirement living sector’s strong growth potential combined to make it an attractive opportunity for First State Super.

“This is our first investment in the retirement village sector, and with Australia’s ageing population likely to fuel demand for quality retirement housing solutions, we believe this investment will deliver sustainable returns for our members for many years to come,” Dwyer said.

Official projections from the Australian Bureau of Statistics tip the number of people aged over 65 years to double from 3.2 million in 2012 to 6.8 million by 2040, by which time the over 65s are set to comprise over 20 per cent of the total population.

While demographic drivers of growth for the retirement living sector are clear, few institutional investors have ventured into the asset class with operational risks one major hurdle. This was thrown in to the spotlight earlier this year by a joint Fairfax Media – ABC Four Corners investigation into retirement village operator Aveo Group.

Oak Tree Group managing director Mark Bindon said the company prided itself on its reputation for, “building boutique villages that combine residential and recreational facilities into strong and safe communities, and also ensuring high satisfaction and engagement of residents.”

The Queensland-based business has a portfolio of 28 retirement villages up and down the east coast, from Cairns to Hobart, including villages located in Armidale, Orange, Tamworth, Toowoomba and Brisbane. Dwyer said the business is poised for further expansion.

Trend forming

In July, $40 billion industry fund HESTA revealed it had tipped $19 million into a dementia village. The project called Korongee is a partnership between Glenview, HESTA, and Social Ventures Australia. It is to be built in Tasmania with the assistance of the Commonwealth Government, and will be the country’s first facility designed to recreate familiar experiences for those living with dementia.

HESTA made the investment via its $30 million Social Impact Investment Trust. HESTA chief Debby Blakey has spoken publicly about the fund’s desire to find prudent investments that also support a brighter future for their membership, mostly women in low paid health care and caring professions.