The residential aged care sector will need to build in excess of 83,000 additional places over the next decade in order to meet estimated demand. Annual capital investment to construct new aged care places required over the next decade will need to ramp up by 50%, from $2.8 billion per annum to $4.2 billion per annum. In addition, older existing residential aged care facilities are in need of refurbishment to meet changing community expectations.
Where is the capital to fund this investment requirement going to come from?
Refundable Accommodation Deposits (RADs) and bank finance are the traditional sources of funding for the sector. However, there is growing uncertainty over the future collection of RADs and commercial banks appetite for funding is ultimately limited.
Operators will need to find new ways to attract capital.
One solution is to liberate the trapped value in your land and buildings. External investors can provide money today for expansion, development and acquisition opportunities by buying the land and buildings. Operators retain full operational and identity control by entering into long leases with the right to reacquire the freehold in the future.
How does a sale & leaseback agreement work? What are the key features? What is the typical profile of an external investor? Which operators would a sale & leaseback model work best for? When does the sale & leaseback model not work?
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