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Why super funds should look at retirement living
(Pictured: Matt Whineray)
By Greg Bright
New Zealand Superannuation Fund, the A$25.7 billion sovereign wealth fund, has staked a big claim in the Australian retirement market. It has bought, through a 50-per-cent-owned vehicle, the fourth-largest retirement village company – RetireAustralia. Australian super funds should take note.
NZ Super has partnered with Infratil Ltd to pay A$640 million for RetireAustralia. The fund paid most of the cash required for the deal – A$429.5 million – with the rest funded by bank debt. It did the deal not to be able to offer its members, who represent all of New Zealanders, a bonus post-retirement option, but, rather, as a standalone thematic investment. Retirement is a big and growing business.
As the graph (below) shows, the Australian market for retirement accommodation is very fragmented. The top five providers account for only about 27 per cent of all units, according to Infratil. In such a market, new investors who are patient should be able to reap considerable rewards. Infratil’s investor presentation puts a compelling case. View here:
For super funds, the additional potential benefit is to be able to offer their members who remain with the fund in retirement a tangible benefit at a time in their lives when their future is fraught with uncertainty. As ME Bank has showed, members like the touchy-feely aspect of additional benefits over important life-time matters, such as where they are going to live and how they pay for it.
According to Matt Whineray, chief investment officer of NZ Super, the Australian, as well as New Zealand, retirement market represented a good long-term investment opportunity.
He said: “We are pleased to be increasing our exposure to the retirement village sector in Australia. The sector’s attractive demographics and future growth opportunities make it a good fit for long-term investors such as the NZ Super Fund.”
Marko Bogoievski, the chief executive of Infratil, said that, with 28 villages across NSW, South Australia and Queensland and over 3,700 independent living units and apartments, the business had the potential to become the market leader in the retirement living sector.
The transaction settled last week.
