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Property Webinar – A look into the future of retirement estates in SA

6 May 2020, Wednesday

Our latest property webinar saw a never-seen-before meet of some of South Africa’s leading and well-informed experts, who shed their honest and transparent professional opinions about the future of retirement estates in South Africa. These webinars have been created to provide you with exclusive insight that you wouldn’t get anywhere else.


Stefan Botha – Director, Rainmaker Marketing (Discussion Host)

Cornel Niewenhuizen – Director, TotalCare People Solutions

Charles Thompson – Director, Devmco Group

Wes Smith – Director, Carmel Properties

Barry Kaganson – Founder, Chief Executive Officer, Auria Senior Living

Murray Collins – CEO, Collins Residential

Sarah Wright – Specialist Guarantees, Lombard Insurance

Greg Arde – Editor, KZN Invest Magazine

1. So we know that the retirement market is driven largely by the Baby Boomers who were born between 1946 and 1964. This is the fastest growing population group and it’s a fact that boomers will live for between 10 and 25 years longer than their parents did. This suggests that we could face an issue in future where a lot more people will require care? How is care for the elderly evolving in line with that?

Cornel Niewenhuizen: We are still so involved with looking after the ‘grey’ generation and the ‘silent’ generation, so we can’t wait for the baby boomers to come on board. In terms of the Baby Boomers, they are definitely a crowd that wants specific luxuries that the silent generation were not so worried about. The Baby Boomers know what they want, and they go after it. That’s why the places that we develop, we’ve focused mainly on the ‘kids’, which are the baby boomers. Most of the people living in assisted living and frail care, are older than the Baby Boomers. A lot of our attention is on the silent generation and grey generation, but we also cater for the Baby Boomers, which is why you will see that our existing facilities look a lot more like a hotel than the original old-age homes. That is our priority – to keep evolving and keep creating great lifestyles and safe spaces, so people can live where they have dignity, security and safety. We are constantly looking at more partnerships, to grow the TotalCare brand; we are already in three provinces and we hope to be in all of the provinces in the next 5 – 10 years.

2Do you see going forward, where there will be a strong hybrid between guys who will be within a traditional facility and those going the home-based care route being serviced by an existing facility?

Cornel Niewenhuizen: There is definitely an array of people who would prefer to be cared for in their own home, but that is very difficult if you do not stay within a proper retirement estate with a big enough frail care centre. You do get nursing agencies that will go to your home in a normal suburb, but those services are not on our level. All our home-based care is within the retirement villages that we have frail care centres in, because then you can have the proper supervision with registered nurses on standby. We have about 20% of our clients who utilise the option to have care within their house and we provide that care; whether it is an hour a day, 12 hours or a full day.

3. The challenges that retirees face when wanting to invest in retirement is that they need to lend against existing assets or stocks which they may not be able to release and that fact that traditional banks won’t provide finance over a certain age. As a business you then went and developed an alternative lending model, over extended period of time, with some very clever people. How has this helped provide a much-needed solution for the retirement market so that they can invest into off-plan retirement estates?

Sarah Wright: About two years ago, we were approached with a need within the market. Traditionally, there were two ways to finance and secure the purchase of a new property development. The first way is to approach a bank and get a bond, where they look at your income and your age. If you are in retirement your income will unlikely justify being able to get a bond and your age precludes you. The other option is to put cash up front, but what we have found is that most people have their cash tied up in a fixed asset and in most instances their fixed asset is their current residence. It is not feasible for a retiree to sell their house upfront in order to put the cash down for an off-plan development, and then find somewhere else to live during that time period while the development is still in an off-plan stage and expected to be developed in 2 years’ time. There was a gap in the market where people were struggling to find a way to secure this type of off-plan purchase. We essentially came up with a product – it is not a financing product, it’s not a bond and we are not loaning money – it is giving a guarantee to the property developer to say we believe the purchaser is good for the money and will be able to afford the money on transfer. It gives the purchaser time to be able to liquidate their assets, stay in their current residence, or liquidate their bond or shares at a better time. We work together with the developer to offer this product.

4. When it came to the trend of new-age, multi-generational retirement living in SA, you were one of the first adopters and Mount Edgecombe Retirement Village is obviously now one of the most integrated retirement estates in the country. What is the story behind identifying this need, and was developing retirement always part of your plan?

Murray Collins: We can’t take all the credit, as we were working with an American who was consulting to us. He mentioned that in South America he worked in retirement and regeneration of cities. Having lived in KZN, he had never seen such a good opportunity with our weather, infrastructure, proximity to the airport, the facilities; he made reference to how Florida became the world of retirees. The research in the states at that time highlighted that if you lived more than 60km from your loved ones, you saw them less than half the amount of time that you would if you lived close by. There are two angles to this, the quality of life retirees now demand, and the desire of being next to their loved ones. There is no point in putting people miles away from where their children live. Our objective was to put people in a centre where they live and don’t have to travel far, while also providing facilities that people demand. The old age home is a thing of the past, in our view, and now it’s about health, wellness, and quality of life. The North of Durban is a great place for retirement, it ticks all the boxes and plays a huge role in our future development in the North Coast.

5The Retire KZN campaign has told us that the 3 primary objectives for retirement are 1) Security, 2) Care and 3) Pets. What does the concept of an integrated retirement estate environment mean for you and what facilities do you think are most important?

Wes Smith: The criteria that you have made mention of are critical. We want to create peace of mind for the retiree as well as their family. Pets are critical, we find that a lot of people bond with their pets and they become companions later on in life. We have always considered four pillars, providing the utmost care onsite, security which is a non-negotiable, sustainability and lifestyle. The really successful retirement estates that we have seen around, have a great aspect of community and a social-ness around the residents. We have tried to create these resorts where that community is easy to develop. We have libraries, bars, restaurants, walking trails. We also have to cater for the younger retiree who wants active ageing; so there are gyms, access to beach, walkways… there are many aspects that are essential to make it work, but at the top of that list is security, care, pets and sustainability.

6. I obviously walked around your San Sereno project in Bryanston and one of the things that really still out for me was the specialised equipment in the gym. There was one machine that just treats hip-flexors which are often the first to weaken when you age. I know that this machine was the only one of its kind in SA. So, it brings me to the point of much of what you guys implement is driven by international trends and innovations?

Barry Kaganson: The senior living industry overseas is about 30 years ahead of us, they have been doing this a lot longer than we have and on much greater scale. We do regular trips to various different countries, meeting with various operator and see what aspects they have embraced and the lessons they have learnt. We look at trends in design, hospitality, staff training, resident engagement, care, marketing and financial aspects. One of the aspects we have implemented immediately was the dementia care, as there is a huge need and gap in what SA offers. Dementia care is a key aspect we are focusing on, and we have learnt a lot from our interactions offshore, both from a design perspective and the operations involved.

This is not a bricks and mortar business, this is a business about people primarily and the bricks and mortar are purely a vehicle to satisfy the needs and requirements of the retiree.

7. I know that in some of your recent live weekly talks you have spoken about how the lower interest rate is great for lending but not necessarily for those with money sitting in the bank. You did a return comparison of putting money into a deposit for an off-plan property purchase as opposed to leaving it in a call account with a bank. Can you elaborate here and could this same model apply to retirement?

Charles Thompson: With the interest rates dropping, and the possibility of further cuts expected in the near future, those with a fixed deposit will already be experiencing  a tangible decrease in their returns. Your income from money sitting in a fixed deposit is diminishing and sitting at 4 – 5% returns. What we are seeing is significant return on good location, good facilities, good security; that is running on a 8 – 9 % return per annum. If we talk about a R3 million property, it is secured money in the bank, and your investing in a key; after 10 years an asset is worth R5,250 million and approximately seeing R300 000 return on cash in the bank.  There is a significant increase. For those looking to find a good investment, the question on their minds is what to do with it and where to invest.

8. We all know that retirement demand is high but many people watching this are naturally going to be asking how they can retire – within a strategically located estate – if they only have a limited budget. As a developer you know that the selling price of a product is generally linked to high land acquisition cost that you would pay, for premium locations. How does one go about making retirement living more affordable for the greater market in future?

Charles Thompson: I can only really talk for the KZN North Coast, as that is where we are invested in. Large tracks of land from Umhlanga all the way to Ballito, which is high yielding in terms of access, location, convenience. The ability to acquire land with such high value on coastlines – with all the convenience and facilities an estate provides, within a really reasonably price point is seriously unique for the KZN coast. You don’t typically find high-end, good value land on coastal belts at affordable prices. For developers to acquire these large tracks of land allows them to create many units, and in doing so, they need to also create a standard model which will also help lower the cost.

9. Internationally the number of 80-year plus households increased by 71% between 1990 and 2016 and its predicted that by 2024 – 25% of the work-force will be over the age of 55. Also 9 out of 10 retirees are doing work of some sort to supplement their retirement living need. Do we not need to increase the retirement age within the corporate world so that people can afford to live longer?

Greg Arde: We definitely need to do something. The research I have come across and the stories I have done, show there is a global move with governments increasing the retirement age. I saw a fascinating interview with an economist, that spoke of the massive global retirement deficit; people are living way longer than they can afford to and there is a massive retirement saving shortfall. Due to people living longer, with the advances in medical technology, they have to support it. In 2017, the average age was 72, therefore the move for government to lengthen the age of retirement is to reduce the strain on the fiscus. A pragmatic approach will be adopted in the corporate world, unfortunately there is the notion of businesses retiring older people to make room for fresh blood, but there is also the need to retain insight, knowledge, experience and talent. We can expect to see businesses and individuals evolve this space to accommodate the need.

10. What’s the difference between life rights and sectional title? Can you give us more insight into Life Rights?

Barry Kaganson: We need to take a step back and identify what people are looking for. The top two things they are looking for is health and security, and financial peace of mind. Then we need to understand the different senior community living, in other words sectional title or Life Rights. It is also important to understand the cost difference in creating a normal lifestyle estate and a retirement community. A good retirement estate has a good amount of communal areas, from recreation to wellness to care. This is an integral part of a senior community and are non-saleable. It is very challenging from a sectional title prospective as they are not incentivised to build those areas. We are life rights operators, not developers, we take a long-term view and we generate margin of resale of life rights over a long period of time. From a resident perspective, one of the reasons life rights is so successful is that the interest of the retiree and the operator are completely aligned. The operator derives their benefit over the long-term, and as a resident moving into these communities you want to know that the operator is incentivised to run this incredibly well and that they can benefit.

To learn more about life rights and sectional titles and listen to the full webinar, be sure to click through to the video and gain exclusive insight from our top professionals.

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