Retirement Villages Association members, associate members, exhibitors and partners filled flights across the Tasman at the end of June, heading for Brisbane and the 2019 RVA conference. This year the conference programme focused on the operation of retirement villages, and especially how to manage the more challenging aspects of that.
Following the famous golf tournament, trade show opening and welcome function, the formal sessions began with RVA President Graeme Wilkinson noting the value of the previous afternoon’s joint meeting with the Australian Retirement Living Council, emphasising the strong position he believes the New Zealand industry is in, and relating this to the alignment between residents’ and operators’ objectives. He identified slow repayments as a threat to the industry, and concluded by encouraging delegates to enjoy all that conference had to offer, reminding us that, as we know from our residents, “age is no barrier to mischief”.
The opening keynote speaker was Dr Peter Wilton, from UCLA Berkeley, who urged the industry not to be complacent because of its current success. He laid out the imperative for strategic reframing in periods of success, despite the instinctive feeling that fine-tuning is all that’s needed. Citing AirBnB and Uber as examples, he defined reframing as “creating value for a customer in a way that wasn’t recognised before”.
Richard Hinchliffe of the ANZ Bank followed, confirming Wilkinson’s assessment of the state of the industry with his hypothetical question for 2019: “Do we realise how lucky we are?” He instanced the high quality of the retirement village industry new build, and the strong foundations underpinning its operations.
Next, Marc Elliott of UMR Research briefed delegates on the findings of the research the RVA commissioned on public attitudes to retirement villages. In general, views leaned towards the favourable, with people showing awareness of the quality of the facilities, the value of social networks, and the importance of the continuum of care. But retirement villages were also seen as too expensive for most people, and loss of equity was a major deterrent. The research found that word of mouth is the most common and influential source of information; Marc emphasised the need to share residents’ “transformational personal stories”, and suggested the industry should consider new models of tenure such as rental/lease and mixed equity and rental.
Putting ORAs into care
After morning tea, Norah Barlow, CEO of Heritage Group, chaired a panel on putting ORAs into care. Earl Gasparich, CEO Oceania Group, was joined by Michelle Burke from Anthony Harper Lawyers, Richard Hinchliffe, ANZ Bank, Richard Spong, Covenant Trustees, and Michael Gunn from CBRE. Earl began by giving an overview of their eight years’ experience of ORAs in care. Oceania began by converting existing rooms in a North Shore property, then rolled out care suites elsewhere. All care suites are fully certified to deliver rest home and hospital level care. Michelle discussed the legal challenges posed when working with both the Retirement Villages Act and the health legislation. Some key legal difficulties are created by the fact that admittance is often an urgent matter, the
introduction of the HDC complaints process if a complaint is care-focused, and the need to specify whether dementia care is involved.
Richard Hinchliffe’s view was that ORAs in care were positive because they enhanced options for residents. From a banking perspective, the challenges are setting the right price, that the product may not suit all markets throughout New Zealand, the ORA versus the premium room concept, and the potential confusion created by the variety of terminology. Richard Spong confirmed that statutory supervisors were only involved when there is an ORA, as that brings care into the Retirement Villages Act framework. He also noted the issue of inconsistent terminology, and the fact that, in care, residents are usually older and frailer therefore more vulnerable. Michael Gunn stressed that, from a valuation perspective, the 18% rebate is much easier to manage when a resident vacates than a monthly charge.
In response to questions, the panel noted that family expectations understandably increase when a resident’s room is under an ORA, and that the operator can afford to provide a more premium level of care in these cases. Asked whether better definitions should be specified in legislation, Michelle recommended keeping the legislation broad, while Norah noted that it would be helpful if the industry agreed on some common terminology. Michelle also clarified that, as the ORA confers the right to occupy a specific space, it is not currently possible to have a “portable” ORA within a village.
Resolving resident issues
After lunch and further exploration of the trade show, delegates returned for a panel moderated by Jennifer Mahony of Fairway Resolution. Martin Oettli from Real Living Group was flanked by Nigel Matthews, Executive Officer, Retirement Villages Residents’ Association, and Troy Churton from the Commission for Financial Capability. Nigel began by saying that the RVRA was not the “Grumpy Old Men’s Club” people may assume it is. He believes that residents want respectful communication, fair and equitable terms, and peace of mind. Martin opened by inviting delegates to see this discussion as an opportunity to open our minds and hear what our residents want and need, so we can do even better for them. Troy told delegates that the typical resident who contacts him wants the Retirement Commission to be their advocate because they’ve come to an impasse or are unsure what to do next.
The first topic of discussion was resale. Martin began with a theme he returned to repeatedly, that frequent, front-footed communication was key. He stressed the need to fully explain the process and timeframe, and how much work is entailed. Real Living has permanent show units so can start the sale process the moment a unit is handed back. Regarding access to capital, Nigel urged transparency at the outset, while Martin noted that villages can often cooperate with the destination village or care facility so that new payments are deferred till the unit sells.
Next, the panel discussed the (often grey) area of chattels. Again, Martin stressed the need to be specific and clear, while Nigel reminded delegates that residents are seeking peace of mind. Jennifer urged operators to provide a comprehensive and standardised list of chattels and who is responsible for what. Then the panel moved onto the impact of weekly fees continuing while a unit is for sale. Troy noted the increasing variation of practice in response to consumer concern, including shortening the term till pay out. Nigel reminded delegates this issue can compound resale dissatisfaction and make residents and families feel they’re being taken advantage of. Martin
responded that the running costs of the village continue, and most villages subsidise aspects of this. Once again, it’s crucial to be transparent about the weekly fee and what it covers. He stressed that operators are “strongly incentivised” to relicense units as soon as possible.
M-L Macdonald, President of the Retirement Living Council then gave an overview of the Australian industry’s strategic response to a maelstrom of negative media coverage during 2017 and 2018.
After afternoon tea, Raelene Castle shared her thoughts and experience on a related theme: silencing the critics. She believes that culture is the representation of the leaders in the business, not mission or vision statements.
The second day of the 2019 RVA conference got off to a slightly later start, in recognition of the great evening had by all at the Crombie Lockwood dinner the night before. Keynote speaker David Plank, Head of Economics, ANZ Australia, gave a whistle-stop tour of the New Zealand and Australian economies.
Theresa Wells of Corelogic turned discussions to the impact of automation. She predicted that the future will be characterised by more interactive voice-based monitoring, robotics, fractionalisation, augmenting reality, data sovereignty and privacy, and smart environments enabled by AI. Theresa believes technology is becoming more intuitive and easier for older people to use, although the significant drop off in technology usage by over 65s is likely to continue.
After morning tea delegates chose one of two breakout sessions: one on negotiating the RMA and other council processes, the other on long-term maintenance planning.
After that, delegates reconvened en masse to hear Jill Somerfield and Chris Hedley of PwC share some tools and techniques for navigating any stormy weather ahead. Jill began by noting that the global economic outlook was deteriorating at an increasing rate, and global interest rates were low. NZ economic activity is also moderating and credit becoming tighter. In order to navigate a downturn successfully, one must be proactive, prudent and prepared. Some key ways to do this include proactive management of lending, slowing down development, incentivising sales, developing a strategy for managing repayments for exiting residents, providing bridging loans for new residents, adjusting dividend policies and raising new equity.
A panel of Australian operators followed: Tony Randello (MD Retirement Living, Lend Lease), Natalie Kwok (GM Acquisitions, Ingenia Communities), Kingsley Andrew (GM New Business, Stockland), and Stuart Lummis (CEO, Brisbane Housing Company). Tony Randello began by explaining that Lend Lease offers four buying options (prepaid plan, refundable contribution, DMF or pay as you go) and can do so because of its scale and diversification.
The Australian theme continued with the next speaker, Stephen Gook, GM Marketing of Aveo. Stephen gave another view of weathering the storm, in this case the media maelstrom of negative publicity Aveo experienced in the recent years. Aveo made some crucial product changes, introducing a money back guarantee, a buy-back guarantee, and a certainty contract ensuring transfer to higher level care when needed. Business improvements included changes to their complaint handling procedures, the introduction of values (kindness, care, respect), a restructure to become more resident-focused (previously they were more property-focused) and increasing provision of care. Indications that Aveo is “bouncing back” include improving resident satisfaction
scores, a higher rate of sale (but this still needs to increase more), and strong interest in two new developments.
Rev Tim Costello wrapped up the conference with his presentation on retaining a strong social licence. Tim believes that community and consumer trust in institutions has collapsed, creating “a profound trust deficit” – unfortunate, given that high-trust, equitable societies are more productive, have higher levels of civil liberties, more open government, and lower rates of inequality. Turning to the retirement industry, Tim raised the implications for the current financial and ownership model of the increasing proportions of baby boomers who are life-long renters.
In closing, MC Michéle A’Court pulled together some of the key themes of the past two days:
· the importance of avoiding complacency
· talk to people who aren’t currently your customers to hear their needs
· negative perceptions can be trumped by personal stories
· people want to live well rather than die rich
· open communication with residents is crucial
· the importance of being brave enough to believe the impossible is possible, as quoted by Raelene Castle
· technological innovation should be used to free us up to strengthen human connections
· the importance of the unwritten social contract, and the need to know your why/purpose
She finished by reminding us all that our industry builds and nurtures communities, and it’s vitally important to share those stories.
This article has been adapted from a full conference report authored by Janet Brown of Head and Heart, and published here with the kind permission of the author and the RVA.