Alternatives Outlook 2024 Report

AGED CARE

In the upcoming year, the increasingly dynamic Australian aged care sector is anticipated to see significant change and increased transactional activity. Operational challenges persisted throughout the aged care industry in 2023, weighing on capital markets activity. However, investors are continuing to re-strategise their approach to the sector noting the substantial increase in government funding outlined in the 2023–24 federal budget. With an increase in financial support of AUD 11.1 billion over four years, the sector is anticipated to see significant improvements geared towards enhancing the quality of care for residents. This financial support is likely to prompt increased market participation, with perception of the sector continuously improving. However, it is important to note that over the past year, transactions in the aged care sector, both in term of value and number were relatively low as the market adjusted to various structural and legislative changes.

A number of vacant-possession (VP) aged care homes have entered the market over the past 12-months with pricing positioned below replacement costs. While this factor has hindered the development site market, VP re-positionings can be viewed as a positive for market dynamics through moderating the net number of new beds entering the market and limiting negative supply driven impacts on pricing. Given the growing prevalence of homecare offerings for lower needs patients, there remains significant opportunity for investors to reposition VP homes to more acute product, reflective of evolving aged care requirements. Sector size estimate: AUD 40 billion Freehold yields: 6.00%-7.50% Going concern yields: 13.00%-15.00%

KEY TRANSACTIONS

Size AUD

Type

Name

Yield

Buyer/Investor

Date

Estia Health CPSM Care

Platform

838m -

Bain Capital

Aug-23

Regis Healthcare Limited

Platform

74.2m -

Nov-23

| AUSTRALIA ALTERNATIVES 9

CUSHMAN & WAKEFIELD