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Aged Care Health
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Behind the market enthusiasm lie the bankers
and financiers who accumulate the funds and invest
or lend money to business projects. This enthusiasm
is reflected in the surging purchases of aged care
operations by the Private Equity arms of these
financial institutions. This page examines how they
have set up investment vehicles for aged care.
These protect their investments from risk by
forming property trusts and then leasing the
facilities to closely associated capital light
operators. National and international investments
are described. Also cashing in on the expanding
sector are the construction companies.
Banks, Trusts and Financiers
invest in
Australian Aged Care
What happens during a recession is well illustrated by the problems in retirement villages in the late 1980s and early 1990s. Investors in aged care lost a lot of money and many facilities closed.
Since then the banks have embraced the aged care bonanza with enthusiasm but have been careful to protect their funds. Several banks and some property developers have bought or funded aged care facilities of various sorts and formed vehicles for these investments.
As I understand it these development trusts buy or build, and own the retirement and nursing home facilities. The management and almost all the risks are vested in a management corporation which leases the facilities from the property trust. It does not own them. Most of the investment is in the expensive properties owned by the trust. If the company goes under the capital investment is not at risk.
A new management company can be formed or the buildings re-purposed. The management groups with few assets, their investors, and the residents who have paid large bonds carry the bulk of the risk. Primelife for example indicated that if regulators had forced it into bankruptcy by disallowing its allegedly illegal transactions then the residents in its villages would have lost $80 million paid in bonds under their contracts. A compromise was found.
In addition to this banks are experts in cutting costs and making profits. They give financial advice. They own enough of the service providers, whose survival depends on running the facilities owned by the banks, to insist that their market prescriptions are followed. They are there to make money for their mostly institutional shareholders and their prime responsibility is to these shareholders. They have little understanding of the consequences of their economic prescriptions for residents and patients. This is a recipe for problems.
One of the misconceptions revealed in their claims is that there are big economies in size. This is a person intensive one on one service. They consequently reduce staffing levels in the expectation that these economies and other efficiencies will make this work. The adverse consequences for care as the USA experience shows so well are only too obvious.
A survey by Arthur Andersen Real Estate Services of bank lending department managers last year showed that 30 per cent of banks had no loans to the retirement sector and only 5 per cent said they were actively seeking to lend to the sector.
Mar 1997 Banks reluctance to invest in aged care changing
About 75 per cent of those surveyed said the retirement sector was rated high risk.
The banks' concerns were based on lack of realisable security, perceived instability of the retirement industry, erratic cashflows and the shortage of experienced and credible operators.
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"There is no doubt that retirement village investment and development have been adversely affected due to the dearth of capital available to fund senior housing projects," Mr Sudholz says.
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"There are at least six suburbs in Melbourne that have an identified need for more aged-care facilities." The property crash and the recession plunged several high-profile village operators such as AV Jennings Retirement Homes into deep trouble.
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"Banks didn't understand the cashflow problems faced by retirement village developers and after a series of collapses in the years 1991 to 1993, the banks were simply reluctant to fund any more."Mr Sudholz believes that banks are now re-focusing on retirement housing, because of their strong investment parameters.
It was now better understood that village cashflows would be limited in the early years of operation.
"It takes 8-12 years for a new village to reach maturity and a level where it can produce an even performance."
New projects would suffer if there was not enough capital to sustain them during the start-up years.
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Mr Sudholz says he can foresee the advent of health-care trusts that develop and own retirement villages."It would be important that the management cashflow rights and the development profits were treated as separate. Sales of units should underwrite the cost of construction - while the cashflow consisting of a service contract to an operator and deferred management fees would provide the future returns."
Chronic Case / Retired Hurt The Australian March 29, 1997
Village Life has entered into 25-year triple net leases with the trust, meaning it will take all occupancy and operational risks of the villages. Westpac Funds Management Limited is the responsible entity of the trust.
Apr 2003 Risks allocation in the model
Property - Commercial Property - Investing in the aged takes a leap. The Sydney Morning Herald April 12, 2003
What has emerged is the capacity of groups such as Macquarie Bank to marshall private capital for the sector as long as the returns are underpinned by strong management.
Oct 2004 Banks now investing enthusiastically
Salvos close to selling to MacBank group Australian Financial Review October 28, 2004
Activity in Australia's aged-care industry has reached a frenetic pace over the past few years as a sector once dominated by owner-operators and small businesses is turned over by private-equity players and listed companies.
Mar 2005 Rapidly changing
MacBank going grey Australian Financial Review March 23, 2005
But follow the money and it tells a different story (to the retirement village companies).
Jun 2005 The big investors
Once considered the ugly duckling of the healthcare industry and dominated by family-run operators and individuals, retirement villages are attracting moves by big, well-resourced investors such as Macquarie Bank, Babcock & Brown and ING, who figure the number of wealthy boomers retiring means there has to be money to be made.
Pitch for retiring types The Australian June 25, 2005
An article in the Sydney Morning Herald spells out the approach which the banks and financial institutions take to investing in services for the elderly. This is an industry which is people intensive where time for human contact is essential and where individualised care is critical. What will the impact of "productivity levels" be?
In this instance power and control lie with the bankers who are well removed from the coal face in the facilities. The methods of evaluation, lines of communication and command are commercial and financial. It is not difficult to predict the likely outcomes.
The article below gives the bankers and the markets view of it. A nurse working in the system compares it to battery farming and calls it "people farming". Different worlds (starting points) and different words for the same thing lead to a divide in perceptions. Experience clearly indicates which are the more accurate words. Brave new world!
Nursing homes and hostels that were once run by not-for-profit organisations, such as the Salvation Army, could soon have investment bankers as managers and shareholders looking for returns in the form of capital growth and dividends.
Jul 2006 Its all about profits
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Given the ageing population, says Ben Mitchell, Shaw Stockbroking's head of research, demand for retirement villages and aged-care will continue to escalate. "There's also an increasing acceptance in the community that [the homes are] where we will all end up."What Macquarie and Babcock & Brown are doing is buying assets to put into trusts. They will then list them."
In other words, it's all about profits.
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"Because of the returns places like Macquarie and Babcock & Brown generate, you have to think that they will look to make very big profits out of nursing homes," says Rodney Lewis, a lawyer who specialises in aged-care law at legal firm Dormers."High returns come from keeping costs down and pulling productivity levels right up, as much as possible. These people might be able to get economies of scale and bring in new technology that delivers that.
"The main game for Macquarie and other big players in the nursing home industry will be in extra service places. These allow for the charging of an accommodation bond. It's a matter of choice for people, of course, but the potential for growth in that part of the industry is significant," he says.
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"The aged-care industry is very fragmented. They will bring new capital investment and better management. They will consolidate assets, take it global and run them much more efficiently. They won't be making the beds but they will be running them in the Macquarie way."Kunnen says a fragmented industry may have meant under-utilised capital or under-developed assets. "Macquarie will make fees on it, but it will deliver a yield to investors. That's how it will be sold," he says.
Turning grey power into profits The Sydney Morning Herald July 5, 2006
Most of the big financial institutions,
but particularly Macquarie Bank see aged care as a global cow from
which to milk profits and they have bought aggressively.
Someone does of course have to own the homes and there does need to be some stability in the sector so that frail elderly are not deposited in the street when companies go under. Straight rental arrangements to an operator are one method by which a barrier can be kept between carers and the financial institutions that invest in buildings. What is concerning is the at risk for profit operators and any pressures put on them by the financiers or by their own financial difficulties or eagerness to perform profitably. The strongly profit focused rhetoric used by the big financial investors is not reassuring.
In most instances the financiers also have a stake in the operators (and visa versa) and exert a powerful influence on them as advisers. Although the financier could terminate the contract and employ another operator this is really a partnership and the trust is simply a strategy to protect the investment. This is far more likely to happen for financial reasons than for issues about the quality of care. There could be pressures to compromise care in order to please financially. I do not know if the lease arrangements give the financiers any share in profits. This is an area and a set of arrangements to be watched carefully.
Earlier this year, I made a submission to the Senate Committee on Private Equity. In it, I stated: "In entering not for profit sectors, private equity investors have turfed out traditional non-profit organisations as they compete for the same pool of government funds and subsidies. Indeed, the allure of government subsidies have made the aged care sector a most attractive, stable 'investment' as part of a 'social infrastructure fund'.
Sept 2007 Private equity carving up aged care
"The aged care sector is too important to be carved out by the desires of private equity Wall Street-type managers for short-term gain. The long-term pain will be felt by most Australians, especially those who have people close to them using aged-care facilities.
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"Currently, the sector is an unbalanced, unequal playing field where the short-term investment horizon of private equity investment has placed these players at an unfair advantage against traditional not-for-profit participants. The non-profits are competing against financial behemoths to survive in the current environment. The outlook for them in the sector is stark - relegated to the edges, their former benevolent role reduced or vanquished."
Aged care money may be heading in wrong direction by Marie dela Rama in The Age September 17, 2007
Most of what we are talking about here is now called "private equity". These were once the venture capitalists. Wealthy people invested if they had money to burn and were prepared to accept big risks if there was a chance of very big profits. They invested in startups and enabled new ventures to come to market.
The focus of these groups more recently has shifted from venture capitalism to distressed companies. These venture capitalists became turn around specialists and assumed the mantle of private equity. They bought companies in trouble, put in their own advisers or managers and introduced their market practices, cutting staff, restructuring services and chasing market opportunities. Once the company had been rendered profitable they would sell in and make their profit from the capital gained. The goals were and are short term.
These private equity groups are not listed on the share market so have a lower level of public accountability. The investors are large financiers who themselves are often market listed (eg. banks). This allows them to operate outside the public eye. Part of the swing to private equity is a consequence of the increased scrutiny and oversight we now impose on our market listed companies. This is a response to problems in the sector. This has had obvious attractions for those wanting to make money and they have been very successful. At the same time there has been a shift away from the short term invest and sell strategy and more long term investments have occurred.
The profit focus is as strong or stronger than in shareholder companies, but management is further removed from the actual business and what happens there. The only aim is profitability. The threat to health and aged care is obvious.
Private equity has taken off during the 21st century first in the USA, which leads the world in this and then in Australia.
Health and aged care have become targets first in the USA and then Australia - both for short term gains and for longer term investments as illustrated for aged care on this page. Most of the investments described on this page are part of the private equity phenomenon.
The changes in the marketplace leading up to the private equity phenomenon are criticised by John Bogle in a 2007 article (pdf file) in Daedalus. Bogle is a very successful businessman who is critical of the direction taken by the marketplace. He is a strong supporter of the primacy of the interest of the shareholder. He is not talking about health, and does not recognise the conflict intrinsic to this when it is taken to its logical conclusion in a society increasingly fundamentalist in its beliefs.
The rapid growth of private equity across all sectors of the economy precipitated an inquiry by the senate economic committee in 2007. Marie dela Rama from UTS (206 KB pdf file) and myself (659KB pdf file) both made submissions to the committee in regard to health and/or aged care. These submissions which come from very different perspectives point to serious problems for health and aged care. For a deeper analysis of the implications of private equity please examine them.
In their report released on August 2007 the committee discounted our arguments.
Within a month the New York Times published a study (link to aged care crisis centre page)which revealed that not only had standards of care deteriorated in the large numbers of US nursing homes acquired by private equity firms, but the private equity groups had set up complex structures which made it almost impossible for residents and their families to seek penalties and compensation when they suffered from neglect and abuse in these homes. This had previously been the only really effective means of controlling corporate excesses. Government agencies were experiencing the same difficulties in extracting fines from the substandard private equity owned homes.
This caused considerable community and political concern in the USA with senior members of both US parties pressing for it to be dealt with by congress. John Bogle participated in an interesting television interview with Bill Moyer in which the private equity phenomenon and the findings in nursing homes were discussed. He does confront the problem of providing health and aged care in a market context where the the duty to shareholders dominates - simply they have no place here!
JOHN BOGLE: Well, first, it's a national disgrace. Simply put. And there are some things that must be entrusted to government and some things that must be entrusted to private enterprise. And what we see there, at least in my judgment, is that we've taken medical care, healthcare and going from making it a profession in which the patient is the object of the game - preserving the patient "first do no harm" as Hippocrates would say or would have said and turn that into a business. And so, it's a bottom line. I've often said we're in a bottom line society. We're measuring the wrong bottom line.
Sep 2007 Businessman John Bogle. Market no place for health
Bill Moyer talks with John Bogle Interview Bill Moyers Journal September 28,2007
These developments have been drawn to the attention of Australian federal politicians but the likelihood that either party will be drawn on these contentious issues during an election seems remote.
Is the suitability of the Private Equity Groups being assessed?
All of us I am sure have a basic cultural perception that the sort of people who are permitted to provide care to the vulnerable should be those who can be trusted and we think that the system ensures that this is so. We feel betrayed when we are exploited.
This is a hangover from the days of professional ethics, the social contract and community values. It was enshrined in probity clauses in our health and aged care regulations. Owners who controlled how care was funded and managers who operated facilities were required to be fit and proper people (to include corporate entities).
Probity requirements in state regulations proved a major stumbling block to conservative government plans to bring multinationals into our hospital system in the early 1990s. Most had track records which made them unacceptable and although attempts were made to subvert our probity requirements these companies were checked and failed to prosper.
In 1997 the newly elected federal government restructured aged care to turn it into a corporate marketplace. They removed protective structures including the probity requirements. I was involved in correspondence with them in 1999 and was given a firm insurance that the regulations were intended to ensure that only suitable people provided aged care. This was deceptive and there were two major and, I would argue deliberate flaws, in this legislation which was largely drafted by Doug Moran and the rest of the industry.
When the response in 2007 disclosed that the assurances I was given in 1999 were deceptive if not frankly dishonest I pressed these matters with non-commercial groups interested in aged care and with politicians. I now have letters from both the ministers concerned promising to fix the regulations so that they work. These issues including most of the correspondence is available on, or linked to from, the DCA sale web page.
On October 3, the press reported that BUPA had bought a controlling interest in the DCA nursing home empire from the Citigroup subsidiaries. I immediately faxed then posted the aged care department asking for an urgent assurance that BUPA would now be required to seek approved provider status. Two weeks later and I have had no response. The conclusion I draw is that the recent undertaking to tighten the regulations so that purchasing groups are scrutinised are as deceptive as that given in 1999.
An election has now been called and these ministers are likely to lose office. The labour opposition has given no such assurances and are equally beholden to corporate donors for campaign funds. We would be naive if we automatically assumed that they would fulfil promises made by their opponents.
Citigroup is a massive financial Wall Street entity formed in 1998 by the merger of Citicorp and Traveler. Both had dreadful track records for unsavoury conduct. Citigroup continued in this tradition and was involved in major Wall Street scandals, as well as international scandals in the early 21st century. It has paid out many billions in settlements. It could not possibly reach probity requirements.
In the early 1990s, for tax purposes, Citicorp set up a legal structure to make its European venture capital business, CVC Capital Partners, nominally independent. It acts for Citigroup in Europe and for practical purposes is part of Citigroup.
CVC Asia Pacific is Citigroup's Asian venture capital (Private Equity) arm. It has combined with CVC Capital Partners in a number of very successful ventures in Australia. It has followed the turnaround strategy, buying companies that are performing suboptimally, restructuring them and selling at a profit.
In 2003 this consortium purchased Mayne Health's ailing hospital empire and operated it as Affinity Health. It is interesting that not a single newspaper in Australia revealed that the purchasing entity was a part of Citigroup. Citigroup's conduct at the time was subject to worldwide adverse criticism in the press and the international press, reporting on this acquisition, published the connection. They must have known.
When the true identity of the purchaser was discovered objections followed. NSW commenced a probity review. NSW regulations do not give the department of health much backing but there is no time limit placed on their probity investigation. It was not until 2 years later in 2005 after the hospitals were on the market that licenses with conditions were granted. The Citigroup entities made a huge profit selling to Ramsay Health.
In 2006 this same Citigroup consortium purchased DCA, Australia and New Zealand's largest nursing home operator. Objections were lodged with the federal body responsible for approving nursing home operators. After a long delay it was revealed that Citigroup had not required approval. This matter is dealt with in the section above and in more depth on the web page describing the sale of DCA to Citigroup.
In October 2007 Citigroup sold its DCA nursing home empire to the United Kingdom insurer BUPA. BUPA has already been in an aggressive commercial stouch in Australia, a stouch which must raise some concerns about its suitability as an operator of nursing homes. Developments suggest that in spite of assurances given by ministers in the government, BUPA does not have to seek approval status under the regulations.
In the last few years Macquarie bank has enjoyed enormous success under new management with an aggressive market focus. Its strategy is focused on growth by buying into profitable sectors across the world. Its shareholders have reaped the benefits. It has embraced wrinkle ranching globally and its focus, as the reports reveal, is entirely commercial and so it should be. But should it be allowed into an area where commercial success comes from removing more money from an already depleted system and then calling it productivity.
A major focus has been nursing homes and retirement villages. It has joined with construction companies, other trusts and the providers of nursing care and retirement services in a complex web of corporations nationally and globally. In Australia these include Tricare, Moran Health Care, Zig Inge, Retirement Services Australia and even BUPA - in the proposed purchase of medical insurer Medibank Private. Macquarie has also bought extensively into aged care in Canada and New Zealand - in the latter case in partnership with developer Forrester Kurts (FKP). One of its main vehicles is the nursing home trust Retirement Care Australia. It has expanded rapidly into aged care facilities across the world.
Macquarie Capital Alliance Group (which listed on the Australian Stock Exchange in April last year) has 98 per cent of a company called Retirement Care Australia.
Jul 2006 Retirement Care Australia
Turning grey power into profits The Sydney Morning Herald July 5, 2006
A consortium backed by Macquarie Bank has paid $125 million for the Salvation Army's aged-care hostels, nursing homes and retirement living units, further consolidating the highly fragmented aged-care industry in Australia.
Mar 2005 Macquarie, Retirement Care Australia and Tricare
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A private company called Retirement Care Australia has been formed to house the assets, and the group's board is stacked with Macquarie Bank executives.
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Upon transfer of ownership of the 14 facilities, TriCare, a specialist aged-care and retirement village provider, will provide management services. TriCare will also have a representative on the RCA board.
MacBank sallies into aged-care sector Australian Financial Review March 10, 2005
Leisureworld is based in Ontario and cares for more than 3200 residents in 19 facilities. The business will be housed within Macquarie Bank but could be spun off into one of its growing stable of listed infrastructure and investment arms.
Mar 2005 The attraction - Going global into Canada
Macquarie Bank chief financial officer Greg Ward told The Australian Financial Review the bank was using its extensive network of fund managers and executives to scout for other assets in the aged-care industry around the world, as it recognised the highly lucrative nature of the business.
"We are long-term investors and managers of infrastructure and essential community assets, and what we like is the privileged nature of the [aged-care] asset. So this is high government regulation, stable revenue and cash flow," Mr Ward said.
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The purchase of Leisureworld also includes a business called Preferred Health Care Services, one of Canada's leading providers of professionals for the private-care sector.
MacBank going grey Australian Financial Review March 23, 2005
If you were an oldster, who'd you prefer to look after you, a Salvo or a merchant banker?
Apr 2005 From "about care" to "about profits" - the Salvation Army sale
Macquarie Bank's cash box, Macquarie Capital Alliance Group, trumpeted its first acquisition yesterday.
Old folks homes for Mac cash box The Sydney Morning Herald April 7, 2005
Separately, the bank agreed to pay $552 million for Canada's largest private aged-care provider, Leisureworld.
Apr 2005 Investing in Canada
Casey moves closer to RSA goal Australian Financial Review April 12, 2005
Macquarie bank has been the most recent acquirer of aged care assets. The bank purchased assets in New Zealand, Canada and Australia. Expect the Macquarie team to package these assets into another Macquarie listed asset.
Jun 2005 Breadth of operations
AGED CARE SECTOR : The Ageing Time Bomb, Tick, Tick, Tick........Boom! Your Money Weekly June 9, 2005
"We are attracted to the aged care sector because it offers stable underlying revenue streams and predictable cash flows, primarily as a result of government funding and subsidies which in turn will support MCAG's ability to deliver returns to investors," Macquarie Capital Alliance chief Michael Cook says. The distinction is important.
Jun 2005 The attraction of aged care
Pitch for retiring types The Australian June 25, 2005
RETIREMENT Care Australia, 95 per cent owned by Macquarie Capital Alliance Group, will pay $186 million for 11 nursing homes and the lease on another property from the Moran Group.
Aug 2005 Buying from Moran and in New Zealand
The Moran Group will continue to manage about 1000 beds in these nursing homes.
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RCA now ranks among the biggest three aged-care operators in Australia.
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The bank then dove into the New Zealand age-care sector with a $NZ63.5 million deal for leading health-care and medical services provider ElderCare New Zealand.
Morans picks up $186m on 12 homes The Australian August 18, 2005
Macquarie may also ally itself with Retirement Services Australia, owned by Richmond Football Club president Clinton Casey. Mr Casey plans to use his $140 million group as a platform to build Australia's largest aged-care business after listing.
Aug 2005 Aligning with Retirement Services Australia
Caring Mac buys 12 homes The Age August 18, 2005
Investment fund Macquarie Capital Alliance Group Ltd (MCAG) has scooped up 49 per cent of Zig Inge Retirement Villages Group for $100 million, bolstering its aged care presence.
Aug 2005 Buying up half of Zig Inge
MCAG, which is backed by investment bank Macquarie Bank Ltd, said today the founders of Zig, the Inge family, will retain a 51 per cent stake and day-to-day management responsibility.
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Mr Cook said it was possible that MCAG could take full ownership of Zig in the future.
Macquarie Capital acquires Zig retirement villages Australian Associated Press Financial News Wire August 31, 2005
Zig Inge spans all facets of retirement village development and management in Australia. It owns and manages 15 villages, predominantly in Victoria as well as in NSW, the ACT and Queensland.
Sep 2005 Zig Inge
MacBank in move on Zig Inge villages Australian Financial Review September 1, 2005
GIANT Australian investment bank Macquarie has made its second foray into the aged-care sector in New Zealand, buying 11 rest homes from the Salvation Army.
Sep 2005 Buys Salvation army in New Zealand
The Australian investor is on a buying spree in the retirement business, having also snapped up ElderCare New Zealand for $63.5 million in May.
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With this purchase, Macquarie will have nearly 1400 rest home and hospital beds in New Zealand as part of 25 aged-care facilities.The sale draws to a close the Salvation Army's 50 years in providing homes for the elderly.
SALLIES SELL REST HOMES TO AUSTRALIA Dominion Post September 7, 2005
FKP Property Group and Macquarie Bank have snared a critical 60 per cent shareholding in their $NZ341 million ($317 million) takeover bid for New Zealand's largest retirement group, Metlifecare, after upping their offer.
Oct 2005 Forrester Kurts and Macquarie buy retirement villages in NZ
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Fewer not-for-profit organisations were in the retirement home industry. "It tends to be more corporatised than in Australia; it's a much cleaner model because of that."
FKP, Macquarie find a home in NZ Australian Financial Review October 20, 2005
The partners have a pre-bid agreement with Private Healthcare and Todd Lifecare to acquire their combined holding of 60 per cent of Metlifecare's shares.
Oct 2005 Buying Metlifecare in New Zealand
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If the deal proceeds as planned, Australian investors, led by Macquarie Bank and its subsidiaries, will have spent almost $1.75 billion on retirement villages, mostly overseas, so far this year.
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The vehicle for the bid is Retirement Villages New Zealand, a 50-50 joint venture between Macquarie and the Brisbane-based FKP.
MacBank and partner mine old gold in NZ The Australian October 20, 2005
In Australia, it (Macquarie) is believed to be acting as adviser to, and potentially joint buyer with, health insurer BUPA, which is looking to acquire parts of Medibank Private if the Australian Government privatizes the entity.
Dec 2005 Interest in buying Medibank with BUPA
Macquarie builds up its health Herald Sun (ABIX abstracts) December 29, 2005
Rival Macquarie Bank last week bought Clinton Casey's Retirement Services Australia for $60 million.
Jun 2006 Buys Retirement Services Australia
Industry sources said that was the first in an expected series of acquisitions that would form the basis of a mega listed trust.
Babcock says ageing 'no cottage industry' Australian Financial Review June 23, 2006
Macquarie’s management style is interesting. We need to ask
about the meaning behind the words used. Is "best practices" really
about care or about financial management? Can you respond to the
personal needs of individuals when you run large numbers of nursing
homes as one unit?
MCAG chief executive Michael Cook says the key to success with aged-care assets is, like in any other business, good management, investing in the future and scale.
Aug 2005 The key to success
"Running a large network of facilities using aged-care best practices gives operational efficiencies," he says.
"We run them as one unit, which gives advantages in procurement and the way we operate the business in terms of staffing, rostering and training."
Having big bucks behind you is also an advantage. "Our plan is to heavily invest in the facilities we've acquired over some years. That will involve development of sites, through rebuilding, expanding or improving," Cook says.
Rich gains mean more care about aged care The Age August 10, 2005
Macquarie does not run the nursing homes itself. Retirement Care for
instance contracts the operation of the homes to Tricare or Moran
Health Care. When we look at their web site we wonder how this
central control operates and what latitude these operators have. The
web site claims that it is Retirement Services which supplies all of
these services and promises so much to residents. Yet this is a
commercial entity and it subcontracts that to others. How do these
commercial arrangements work and how does Retirement Care Australia
enforce and supervise the groups to whom it contracts. I can't see
Doug Moran being told how to run his homes. Are those on site
management teams from Retirement Care Australia or from some other
company? Customers need to know who is directly responsible for what
happens to them and what their track record is.
ABOUT RETIREMENT CARE AUSTRALIA
Jun 2006 Retirement Care Australia
Retirement Care Australia owns and operates 26 aged care centres (retirement villages and nursing homes) located in New South Wales, Victoria, South Australia, Western Australia, Tasmania, Queensland and the Northern Territory.
Through these facilities, Retirement Care Australia offers a wide range of comfortable and secure living options to over 3,500 older Australians comprising Low Care (Hostel) Facilities, High Care (Nursing Home) Facilities and Independent Living Units for active retirees.
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Qualified nursing teams are supported by personal carers, with each staff member committed to ensuring that every resident enjoys a happy and fulfilling life.From nutritious, tasty meals and access to quality health care services, through to stimulating activities and outings, Retirement Care Australia centres provide a home-like environment that promotes independence and dignity for every resident.
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FACILITY MANAGEMENTEach Retirement Care Australia Centre is managed by professional, qualified and caring teams of people experienced in the delivery of aged care services.
At each Retirement Care Australia location our on-site management teams provide a secure and supportive environment, catering to the needs of each resident's physical, emotional and social needs.
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Retirement Care Australia’s vision is to be recognised as the aged care provider that continually sets new standards in care and accommodation quality, innovation and the skills and commitment of its staff.As part of this vision we are committed to investing in our people, our systems and the aged care communities we manage. Our aim is to nurture an environment of trust, harmony and mutual respect, where responding to the needs of residents is the priority.
We strive to deliver a strong sense of "home" - where comfort, security, companionship and belonging are the essential ingredients.
Residents enjoy wholesome, appetising meals. They are offered a range of recreational and social activities that are both stimulating and entertaining, and nursing and personal care is delivered by professional staff who are committed to the health and well-being of all residents.
Retirement Care Australia’s web site accessed June 26, 2006
Closing down nursing homes (Update Oct 2007)
Regis has been a fairly responsible organisation in the past. The manner in which it closed a home and dealt with staff is an indication of what we can expect from private equity groups like Macquarie as they bring in their profit focused managers to "turn unprofitable facilities around" and dump those they can't. Macquarie now owns Regis and the nurses allege had no hesitation in using the Howard government's unpopular work choices laws to do so. Nurses were pushed out of their jobs without notice 2 months before the home was supposed to close. If they treat their staff like this, what happens to the residents?
Staff at the Regis Group-owned Preston and District Nursing Home were informed this morning that the facility was closing at noon today and that they were to be sent home. The staff were offered 5 weeks notice with no redundancy provisions and no mention of whether their outstanding entitlements would be paid out.
Oct 2007 Macquarie closes home acquired from Regis
The facility had been earmarked for closure on 14 December and staff had been approached by management with offers of redeployment to other facilities owned by the group. Staff in consultation with the Health Services Union, were in the process of responding to the offers when told of the closure.
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The reason given for the closure was that too much work was required on the facility to bring it up to the standards required by the new federal government certification. In other words it was not cost effective.
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The closure of the facility that is owned by the powerful Regis Group, itself taken over by Macquarie Bank earlier this year, indicates the parlous state of aged care in this country with for profit organisations taking over vital community services and closing them down if they are not profitable.
Macquarie Bank owned Aged Care provider uses Workchoices to dump staff with 90 minutes notice MEDIA RELEASE Health Services Union, Victoria The Age October 19, 2007
ING is a multinational bank operating in Australia. It has invested heavily in aged care and nursing homes. It has also bought globally including the USA. It was the major investor in the struggling Village Life where it invested in the trust owning the facilities. It was forced to renegotiate its leases with Village Life and take a more direct role. It has been looking around for another operator to run these retirement villages.
Village Life is selling seven of its sites under construction to its trust. The trust's manager, ING, has resolved to change the name of Village Life Trust to ING Real Estate Community Living Fund. The occupancy rate in the trust's 17 villages is 79%. It wants to increase that to 95% as soon as possible.
Jun 2005 Buying more of troubled Village Life.
VILLAGE GLEE SOURS BRW June 30, 2005
But that has not deterred big institutions from big deals. ING Real Estate announced on July 19 that it had entered into an agreement to buy a 49% stake in a $US232-million seniors accommodation portfolio in the United States.
Aug 2005 ING buys into US aged care group
A tough old market BRW August 4, 2005
In late September 2005, the Australian-listed group announced the $A28.5 million acquisition of a 49 per cent interest in two properties, one situated in the US state of Michigan and the other on Rhode Island. Meanwhile, the group's joint venture partner, Chartwell REIT, has also acquired a half-stake in the two retirement villages. ING Real Estate Community Living Fund acquired the Village Life retirement village assets in June
Sep 2005 Buying in the USA
ING pays $28m for more US old gold The Australian (ABIX abstracts) September 27, 2005
Westpac worked closely with Doug Moran but burnt its fingers when its got caught up in his lavish hospital ventures in the early 1990s. More recently Westpac formed a trust which owned retirement villages leased and run by Village Life. It was resistant to giving Village Life less onerous leasing arrangements. The trust was purchased by the Gold Coast Group MFS Limited which also took a major holding in Village Life.
Westpac has entered into partnership with Craigcare to expand in nursing homes and retirement villages.
One of the latest deals in the industry to be completed is an offering from Westpac. The Village Life Property Trust, the first of its kind in the aged property market, settled fully subscribed.
Apr 2003 Listing Village Life Property Trust
The trust acquired 10 villages and 13 management units across Australia that are managed by Village Life Ltd, one of Australia's largest providers of affordable rental housing for the aged.
Tamara Williams, associate director Westpac Property Advisory and Equities, said investors saw the trust as a chance to join those drawing value from an increasingly important and expanding market.
Property - Commercial Property - Investing in the aged takes a leap. The Sydney Morning Herald April 12, 2003
Suave Enterprises, which settled on the Craigcare deal on Wednesday, was formed 12 months ago by former Moran Health Care Group executive John Gillett as an acquisition vehicle and has secured Westpac-backed Hastings Private Equity Fund as a financial backer.
Sep 2003 Backing Sauve Enterprises
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Mr Gillett said Hastings, which was "effectively an equity partner", was keen to invest in the aged-care sector but would not comment on the amount of funds available for acquisitions.
Suave picks up Craigcare for $25m. The West Australian September 26, 2003
AMP joined with the international group Omega Worldwide to form the investment trust, Principal Healthcare Finance Trust. This owned many of Moran Healthcare’s nursing home which Moran then leased back. When Moran wanted to sell this section of its operations to Ramsay Health Care, AMP and Omega blocked the sale.
In October 2006 Principal bought the leases of its homes from Moran and now plans to operate them itself and compete with DCA in consolidating the industry.
AMP has tapped into the burgeoning aged care market, linking with US-listed Omega Worldwide and the Moran Health Care Group in a $130 million unlisted property trust
Apr 1999 Principal Health Care
AMP's Statutory Fund Number 1 has paid $11.25 million for a 45 per cent stake in the Principal Healthcare Finance Trust and will also provide a sub-debt facility of $40 million to the trust.
AMP is the latest in a spate of funds clamouring for a share of the growing aged care market. APN Funds Management has a $27.7 million unlisted vehicle, while Development Capital of Australia is building a portfolio tipped to grow to $250 million.
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Nursing home giant Omega Worldwide already manages the Principal Healthcare Finance Trust, with the individual properties managed by Moran Health Care Group, Australia's largest private operator of aged care facilities.Omega, which has substantial aged care assets in the United States and United Kingdom, entered the Australian market after Moran's purchase of FAI Insurance's Premier Care Australia in June, 1998.
It paid $68 million for 10 aged care homes and 475 assisted living units in NSW, feeding them into the unlisted trust.
Since then, Omega has snapped up an additional 25 nursing home properties in Victoria, NSW and Western Australia.
Its 35-property portfolio was valued at more than $130 million in December, with all properties held under long-term, triple net leases of 30 years duration.
The trust has also contracted to buy five additional newly-constructed aged care facilities for $20 million and is negotiating investments in other assets, AMP said yesterday.
AMP Looks To The Elderly For Growth Australian Financial Review April 7, 1999
Another rapidly expanding group is Principal Healthcare Finance Trust, a joint venture between US nursing home giant Omega Worldwide and AMP Life.
Mar 2000 Becomes Australia's biggest private owner
The trust has acquired 41 homes with 3000 beds since it was formed in mid-1998, making it the biggest private owner in the country.
Over the next five years it plans to spend $200 million a year buying more nursing homes. This would give it 20,000 nursing home beds, or 15 per cent of the market.
Principal Healthcare has little more than 2 per cent of the market at present, while the 20 largest operators together control only 20 per cent of the beds.
Nursing home beds a licence for profit. The Australian March 27, 2000
NURSING home magnate Doug Moran will sell the bulk of his $300 million empire to competitors in a move that could have massive implications for the aged care sector
May 2003 Moran plans to sell the homes he no longer owns
Moran to sell off aged care empire. The Australian May 15, 2003
It is understood that Moran and Ramsay have reached an agreement on a minimum price for the business but cannot proceed without the blessing of AMP, which holds the leases to the 39 properties.
Nov 2004 Principal Healthcare won't let him.
AMP holds up nursing home bid The Australian November 26, 2004
THE AMP-controlled Principal Aged Care group concluded a $129.3 million deal yesterday to take over the leases and operation of aged-care homes from Moran Health Care Group.
Oct 2006 Principal buys from Moran and will run homes
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AMP Capital Investors head of infrastructure, Australia, Greg Roder said: "We saw it as an opportunity for an element of consolidation in this sector which we think is a growth sector in Australia." He said aged care offered further opportunities for consolidation and growth.The fund manager also believes it has the right structure in place to take on rival Amity. "There's some advantage in being an integrated owner-operator," Dr Roder said. "There can alway be some synergies," he said.
Principal takes up Moran's leases The Australian October 31, 2006
Babcock and Brown are a relatively new and very aggressive set of financiers. They have been investing aggressively and seem to have done very well. Their Australian interest has centred on Primelife, a company whose performance and conduct leave much to be desired. Without Babcock and Brown’s support Primelife would very probably have entered bankruptcy. They have formed a number of alliances and trusts centred around Primelife which operates the facilities. Their PrimeLiving Trust is expanding aggressively in Australia and New Zealand. It joined with Primelife in buying into Aevum.
"Retirement villages have higher than average development margins because of its niche nature. It is also a sector with long-term cash flows which have been undervalued by the industry in the past."
Jun 2005 B&B's interest
Hence B&B has teamed with Multiplex and Prime Life last December to undertake large subdivisions for the future development of lifestyle residential projects. B&B was less interested in investing in nursing homes/aged care because it is government funded and a "tougher business to be in".
Pitch for retiring types The Australian June 25, 2005
Aged care has emerged as the latest battleground for cashed-up investment banks, with Babcock &Brown announcing a $500 million private investment trust a week after competitor Macquarie Bank made a similar strategic aged-care foray.
Oct 2005 Forming PrimeLiving Trust with Primelife and MFS
Demonstrating imitation is the greatest form of flattery for the MacBank mini-me, Babcock has joined fellow investment bank MFS Limited and aged-care operator Primelife to form the PrimeLiving Trust. The trust will seek to raise $500 million to buy aged care facilities in Australia and New Zealand.
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"The PrimeLiving Trust is expected to be a major player in the consolidation of the fragmented Australian and New Zealand retirement village markets."
Babcock & Brown dives into aged care The Sydney Morning Herald October 13, 2005
Babcock & Brown has a close relationship with the two firms, holding 19.9 per cent of PrimeLife and 5.2 per cent of MFS.
Oct 2005 Relationships
Babcock & Brown launches joint retirement living trust Australian Associated Press Financial News Wire October 12, 2005
Last week, the unlisted PrimeLiving Trust, owned and managed by Babcock & Brown, MFS and Prime Life, announced it had snapped up $170 million in NZ retirement properties as part of a bullish acquisition spree.
Oct 2005 PrimeLiving Trust goes global into New Zealand
FKP, Macquarie find a home in NZ Australian Financial Review October 20, 2005
Investment bank Babcock & Brown -- which through its investment in Primelife has a stake in Aevum -- has signalled its interest in establishing a managed vehicle for retirement assets of at least $500 million.
Jul 2006 A stake in Aevum
Aevum raises $20m The Australian July 13, 2006
Australian Property Network (APN) is a Melbourne company with a collection of subsidiaries including APN Retirement Properties Fund. Its main focus has been on property. It has recently listed on the share market and has expanded globally.
In 1999 APN Retirement Properties Fund enthusiastically raised $18 million from the market to buy five of Ted Stent’s Primelife villages as the first step into this sector. Primelife continued to run the villages. APN’s experience with Primelife may have blunted their enthusiasm as they have done little in the sector since The investment was to run for 10 years when the villages would be sold. I don’t have further details. Babcock and Brown have become the principle supporters of Primelife.
APN, which was established two years ago by former Grocon executives Mr Chris Aylward and Mr Andrew Cruickshank, has brought in Mr Rod Keown and Mr Howard Brenchley to form the new venture, to be called APN Funds Management.
Mar 1998 APN
Funds Management Move By APN Australian Financial Review March 27, 1998
APN Funds Management is involved in due diligence on a $25 million retirement village portfolio spread through Victoria and NSW. - - - - .
Aug 1998 Entering aged care
"The bulge in the demographic has captured our interest and we've been doing a lot of research into the retirement village market," said Mr Keown. "According to the demographic and the trends we've seen in markets in North America and Canada, the retirement village market is going to be a fairly fertile field for property owners."
APN plans a passive involvement in the industry: buying and holding the properties and leasing them on to professional operators.
Developers See A Fortune Coming Out Of Retirement Australian Financial Review August 24, 1998
APN Funds Management is poised to launch a $27.7 million retirement village trust, in the latest sign of investor interest in the fast growing aged care market.
Mar 1999 Launching a trust with Primelife to operate facilities
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The trust prospectus was finalised this week, with APN seeking to raise $18.2 million through a public issue, supplemented by $9.5 million in debt.
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The unlisted APN trust will own five Victorian retirement villages at Altona, Williamstown, Pakenham and Mt Martha. Prime Life will retain the management rights to the properties, which include 670 retirement units.
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The fund has an expected life of 10 years, after which the villages will be sold. It is a closed fund, however APN has lodged an application with the ASIC to establish an Approved Stock Market like that operated by Austock Management for MCS Property.
APN To Launch Retirement Village Trust Australian Financial Review March 27, 1999
Retirement villages, nursing homes, hospitals and crematoriums all require buildings. The aging population is a bonanza for the big builders. They form close associations with the banks and other corporate owners. Some form retirement village sections which operate the retirement villages they have built.
The health-care sector is considered one of the most dynamic for the property industry because accommodation and hospitals will become more important as the population lives longer.
Jul 2000 Builders into aged care
Demand for aged-care homes, nursing homes, private hospitals and retirement homes and villages is rising.
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"The emergence of the affluent older generation has catalysed the migration of the population to areas more conducive to relaxation,'' Nixon (property developer) said.
Aged Care A Healthy Place To Invest Sydney Morning Herald July 22, 2000
More and more large financial groups are entering the market and staking a claim to nursing homes and retirement villages. I suspect that these groups see consolidation coming rapidly and are acquiring ownership of as many facilities as possible so that they can profit from the mergers and takeovers on the horizon. One wonders about any long term commitment to the sector by all these players and what the bidder who eventually buys all these homes will do in order to recoup what it pays for them from the care of citizens. Ultimately it is the citizens who will be paying for it.
GLOBAL finance giant GE, Queensland-based property group Meridien and Stockland are believed to be among the final bidders on almost $700 million of retirement-village assets as the sector continues to boil.
Sep 2006 Multiple groups targeting the sector
GE's bids for the $500 million-plus Australian Retirement Communities portfolio and the Glen Group, tipped to fetch as much as $180 million, come as the group launches an aged-care platform with the view to becoming one of the biggest owners of Australian aged-care assets within two years.
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The shortlisted bidders for the ARC portfolio are understood to include Babcock & Brown, Macquarie Bank, Stockland, and GE.AMP is also rumoured to be on the shortlist.
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Also on the market is the Gannon Estates aged-care portfolio of nine facilities, predominantly based in South Australia, with Queensland property group FKP understood to be conducting due diligence on the assets.
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Queensland property developer Meridien, a new player in the aged-care sector, is believed to be negotiating to purchase the Glen Group portfolio, but the group would not comment on the deal.
Big players eyeing aged-care The Australian September 21, 2006
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This page created Sept 2006 by
Michael
Wynne
Updated Oct 2007
