The next wave of retirement living investment

What’s the secret to attracting investment in the retirement living sector? As managing director of one of Australia’s fastest growing retirement village operators, Mark Bindon has an insight or two.

Bindon (pictured) is the co-founder and chief executive officer of Oak Tree Holdings, which is headquartered in Brisbane. He will be joining the ‘You had me at hello’ panel discussion at the Retirement Living Summit on the Gold Coast on 27-28 November.

Oak Tree, founded by Bindon, Franco De Pasquale and Marco De Pasquale in 2004, has a portfolio of 30 operational retirement villages, with 17 projects under development, and a further 14 in the pipeline.

The vertically integrated company sources, develops and operates retirement villages from Hobart to Cairns, with every stage of a project carefully planned after years of detailed demographic analysis.

The trio owned several businesses together in the 1990s, including a development company specialising in childcare centres, and a market research company.

“We had access to data, and we could see a major demographic shift occurring. A deluge of seniors was coming through, but people hadn’t noticed it,” Bindon says.

“Our data showed that the childcare industry would come under pressure, both demographically and structurally, so we literally moved into retirement living overnight. We stopped building childcare centres one day and started retirement villages the next.”

Bindon says Oak Tree’s business plan “hasn’t changed in a decade”. The company specialises in smaller villages, with an average of 75 affordable villas in each development.

Oak Tree is a “data driven organisation” Bindon says. “We look to qualify every decision we make, from the site location to services in our village. We don’t second-guess anything. We pressure test everything before we make a decision,” he says.

Every stage of a project is carefully planned, and Oak Tree has controlled the construction program “from day one”.

In 2014, Brisbane-based Blue Sky Private Equity purchased around 40 per cent of the company for $20 million, helping to fund further expansion.

And then this June, NSW-based First State Super announced it had purchased a 70 per cent stake in Oak Tree. This is First State’s first foray into the retirement village sector. While no price tag on the deal was made public, it has been reported that the investment could be worth $300 million in just a few years’ time. Blue Sky Private Equity has now bowed out of the company.

“We needed a partner with a long-term horizon. This is very exciting for us.”

Bindon’s advice is to “make the distinction between when you need an investor – someone who will sit on the sidelines but will want their money back reasonably quickly – and when you need a partner who wants to get on board for the long haul”.

“The art of attracting investment and partnerships is about timing – and what stage of evolution your business is in. People get into trouble when they confuse the two – think they need a partner when they need an investor.”

Bindon is optimistic about the sector’s future.

“There’s a lot of upside to our business. Firstly, the data is indisputable – there will be more seniors.

“Secondly, the Kiwis have shown us what’s possible by sticking to a clear business model and doing it well. There is a flourishing retirement living industry in New Zealand for us to learn from.

“And thirdly, Baby Boomers really like the retirement living model. People genuinely like it.

“Where we need to get better is at educating the investment community about the characteristics of each product.”

He says there is still considerable confusion about the differences between the three primary models – retirement village, manufactured home park and rental.

“One’s not better than the other, but they are different from a legislative point of view and from the audience they will attract. And this is what we need the investment community to understand.”

He’d like to see public seminars for investors which explains the different models, money flows, horizons and risks. “I think that would be a terribly exciting thing for our sector.”

Join Mark Bindon at the Property Council’s Retirement Living Summit on Monday 27 November. Register today.