Community Minded Property Management

Ingenia Communities

Ingenia Communities is a stapled property group. It owns, manages and develops a diversified portfolio of 34 seniors housing communities. Formerly under the banner of ING, Ingenia has now branched out on its own and made some changes that have enabled it to excel in a very competitive industry.

Since Simon Owen became CEO in 2009, Ingenia has been charting a course which has made many positive changes making it the number one choice of seniors for housing communities in Australia.

In June of 2012, what was formerly known as the ING Real Estate Community Living Group became Ingenia Communities Group which is a stand-alone Australian Securities Exchange listed seniors living group. ING was looking to exit its indebted global real estate portfolio and with that, CEO Simon Owen saw opportunity. He envisioned the merits of charting a course independent of ING but with its full support. The unitholders of the Group were informed of the new strategy and it was approved unanimously. This, of course, was only the first step in branching out; much more transformation was to follow.

In 2009, the exiting of Ingenia’s overseas investments was undertaken in a patient and disciplined manner in order to repatriate that capital to Australia. Mr Owen explains that the proceeds from the asset sales would be used to grow the Australian portfolio, with plans to make several potential acquisitions. The results, he says, were a significant step forward in transforming the company into an actively managed retirement village operator, developer and owner in Australia. “We have a pipeline of development opportunities ($92 million) attached to our existing villages. We have six villages where we own the adjacent land and plan to expand. In addition to that we are working on about a dozen acquisition opportunities. We probably won’t buy all of them but we are spoiled for choice in the Australian retirement sector at the moment.”

Three to four of these acquisitions will likely take place in the first quarter of 2013 and the Hunter/Newcastle area, New South Wales’ oldest wine growing area, will contain one of them. Ingenia has been specifically targeting areas with a more robust economy. Mr Owen explains, “We like those markets where there is strong employment and a strong local housing market. This allows the incoming residents to sell their home in a quick manner and attain good value before moving into one of the villages.”

In its Australian operations, Ingenia operates under two retirement living business models – Rental and Deferred Management Fee (DMF). In the DMF model, the property title remains with the village operator and the resident lives in the unit under a life lease. The DMF is then paid by the resident when they leave. “Ingenia’s point of differentiation from our competitors is that we have Australia’s largest rental portfolio as well as traditional DMF retirement villages. Our investors are finding our business models very attractive because we have that strong recurrent cash yield from our rental business, supplemented by the high returns of capital offered through development.” The DMF model also allows residents to avoid stamp duty and the responsibility for maintenance or repair fees.

In the last 12 months, the Group has taken a number of measures in order to unlock value; efforts have been made in recruiting and retaining the right people as well as in training and development. Well over 70 per cent of inquiries into the villages come via the internet; it is far and away the primary screening and research tool used by residents and their families. A significant amount of effort has therefore been put into Ingenia’s e-commerce strategy. Instead of spending money on “above the line advertising” (buying advertisements in television, newspapers and radio), a significant movement has been made toward community engagement such as inviting rotary clubs to visit the villages. Ingenia is raising the profile and branding of its business in the local communities that it serves, and its efforts have paid off as occupancy rates are rising.

This can be clearly seen through the success of the Group’s rental portfolio, Garden Villages, which is presently at about 85 per cent occupancy. “When I started in this business three years ago,” says Mr Owen, “our occupancy was in the mid-60s range which was turning the business broke. So we have been able to turn that around.” Initiatives such as free yoga classes are offered to the local community members as a way of getting people in to see the facilities, appreciate the great lifestyle and observe the quality of life that the residents have. “That’s half of the sales process. Nobody moves into one of these communities on a whim. It’s about starting that dialogue. If we can get them to come in without using an overt marketing strategy, enjoy what’s going on in the village, and meet with our residents, then it equates to success down the road.”

Ingenia is also constantly upgrading its village facilities, enabling the Group to offer a very competitive product in comparison with the competition. With long life expectancies and the newer trend of residents moving into retirement housing later in life, Ingenia has had to adapt the villages to make sure the requirements of the elderly market are met; for example, there must be baths and stairs that are accessible to residents who use a cane or a frame to assist them with mobility. The village staff spends time with its existing residents making sure that they are happy. Happy residents then become brand ambassadors for Ingenia within the local community, as people view the opinions of those they know more favourably than a television advertisement.

An additional ambassador for Ingenia is the recently adopted golden retriever puppy named Archer who is a future assistance dog being trained in the Rockhampton Queensland Village. “It is another local marketing initiative that we have trialled, and it’s been very successful,” shares Mr Owen. “We are looking at having more dogs come into other communities next year. Archer has his own Facebook address, and it’s been a highly effective strategy. It is also socially responsible to do it. We don’t do it to make money. We feel it’s the right thing to do in our local community. It’s just good business.”

The quality of food served to residents in the villages has proven to be yet another attraction. While much of the competition prepares its meals off-site in a factory before delivering the food in trucks, for all of the 25 rental villages under Ingenia’s management there is a chef on-site, and for many residents the lunch time meal is one of the highlights of the day. “If we can provide them with a quality nutritional meal, that’s a great selling point for us and equally important for the kids of the parents living in our villages. If the children know that mom and dad are eating well, they are very happy with us!” Ingenia also tries to source local produce and tailors the meals to residents if they have special dietary requirements.

While Ingenia does not run its business solely for the security price, it was recently the recipient of a very prestigious award. It was named as the highest performing Australian real estate investment trust over the past year, with a 74 per cent return on investment for securityholders. “BDO Australia is a prominent accounting and advisory firm who conducts an annual survey of different businesses ranging from big players like Stockland and Westfield Group to a small trust like us, and we were awarded the best performing AREIT (Australia Real Estate Investment Trust) in 2012.” That is certainly good news for the Group and its securityholders.

And what of the outlook for 2013? As the population over the age of 70 is increasing at about three per cent per year, the demand for Ingenia’s product is high. That said, there are not a lot of retirement villages being built. Finding a bank to back a new retirement village is very difficult for most companies. “It did not help that five years ago, some people paid too much for assets and then borrowed too much. They didn’t have the right management in place and so some banks and securityholders lost a lot of money. The industry is still paying the consequences. But on the positive side for Ingenia, we have capital, we have a great relationship with our bank and we are full of opportunity. We can see that the next couple of years (provided we can re-invest capital in a disciplined and prudent manner) there are some great buying opportunities for us.”

It seems that since Simon Owen came on board as CEO in 2009, the company’s security price has been rising in every sense of the term. Ingenia is at the right place at the right time, doing the right things – and this is just the beginning.

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October 20, 2018, 10:48 AM AEDT

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