Alternatives Outlook 2024 Report

RETIREMENT

In 2023, capital markets activity in the retirement sector was relatively subdued following a record year of investment in 2022. Although transaction volumes were low in 2023, investor inquiry has remained particularly elevated over the past 12-18 months. Structurally higher discount rates compared to core sectors continue to attract a variety of investors however operational complexities remain a hurdle for many groups assessing the sector. Despite these challenges, scale exposure to operational living assets is anticipated to be a key motivator for investors to consider senior living sectors going forward. On an operational level, the anticipated rebound in residential sales activity post cash rate stabilisation and/or compression in late 2024, coupled with limited new village supply, is expected to drive robust retirement unit price growth over the medium term. Consequently, this is projected to flow through to

deferred management fee (DMF) income streams, supporting elevated return levels across the sector. Over recent years, there has been significant institutional investment in the sector by groups such as Aware Super, EQT and Brookfield into major operational platforms. Additionally, several smaller operators have continued to evolve and expand through recapitalisations and accretive acquisitions. Looking ahead to 2024, investment activity is projected to increase as incumbent operators re-ignite strategies including portfolio refinement, development and expansion. Cushman & Wakefield believe the unique tailwinds which support the retirement living sector will continue to attract a wide range of global investors, driving an acceleration in capital markets activity in 2024.

Figure 4: RETIREMENT UNITS REQUIRED FROM 2022 TO 2061

0 100,000 200,000 300,000 400,000 500,000 600,000

495,400

6,300 p.a.

241,500

2022

2061

KEY TRANSACTIONS

Buyer/ Investor

Type

Name

Size AUD Yield

Date

Oak Tree Portfolio (30%) Ingenia Seniors Housing Portfolio*

Direct

Undisclosed

-

Aware Super Aug-23

Sector size estimate: AUD 35 billion Prime discount rates: 11.50% -13.00%

Eureka Group

Direct

44m

8.4%

Nov-23

*Note: Rental accommodation – not under Retirement Villages Act

| AUSTRALIA ALTERNATIVES 12

CUSHMAN & WAKEFIELD