Looking to Exit? Colliers will Lead the Way

Colliers International

It is easy to see why Colliers International springs to mind when one thinks about real estate services. It is, after all, recognised as a leader in the Australian property sector through its outstanding results and achievement of high profile industry awards and accolades. Founded when three independent and well-established professional services firms located across Australia decided to join forces in the mid-60s, Colliers International is today a global success.

Under its strong and visionary leadership, Colliers International continues to build its brand on the foundations of yesteryear – an organisation that is made up of innovative and enterprising people providing world-class local knowledge and expertise.

A little over four months ago, Colliers International showed its prowess again, this time by assisting in what was the largest transaction in the aged care sector since 2008. In December 2012, Colliers International brokered the acquisition of Innovative Care by BUPA, making the British health insurer Australia’s largest private aged care provider. In this exclusive interview, we pick the brains of Philip Smith, National Director – Transaction Services, Healthcare and Retirement Living and Shane Nicholson, Director – Healthcare and Retirement Living as they candidly share their thoughts on the sector.

As one of the first property companies to identify the unequivocal growth in the health, aged care and retirement living sectors in both Australia and globally, Colliers International has been accepted as the lead brand, particularly as it has taken a long term view toward these industries. Recognising the importance of these sectors, the company decided that it was in it for the long haul, forecasting that there would be a boom in health and aged care as Australia and the rest of the developed world tackled ageing population issues. In Australia alone, the number of over 65s is expected to double by 2026; this will have huge implications on economic policy. It also raises the question of how to fund the needs of an older society with a smaller percentage of workers to tax.

So in the last decade, Colliers International started studying the market – who was operating in it, who was buying and selling and where the market was headed. Knowledge is power and Colliers International knew that in order to stay ahead of the curve, managing its talent pool to ensure that the team had a solid understanding of the market, from trends to the asset, had to be a key priority.

“We’ve invested money in getting the right people and the right expertise in,” says Phil, “and in doing so, foreign and local investors can tap into our expertise and knowledge base to identify the right deals and evaluate the feasibility.”

Taking a systematic and focussed approach in building its team, Colliers International began by both recruiting external experts and training people within the organisation. The company’s first move was to build an adept valuations team. At the helm is Paul Moschione, National Director of Valuation and Advisory Services for Healthcare and Retirement Living. He is also one of the most recognised valuers in the sector. “Colliers International is the first point of call as we have a very strong valuations unit,” says Phil. “A lot of our competitors have tried to replicate our model but it is a complicated sector with many nuances and it is not just about property but business service.”

The importance of providing a business service cannot be emphasised enough because these transactions are lengthy and often complex affairs. For instance, the sale of Innovative Care was 12 months in the making and unlike the sale of a residential property where it is advantageous to the property owner, potential buyer and realtor to plant a “for sale” sign in the front yard, aged and healthcare transactions are often not openly marketed.

Shane and Phil reveal that Colliers International sold 12 aged care facilities and six retirement villages in 2012 with few of them being brought to the market in an open basis. “We are very sensitive to the vendor and do not want to disrupt the business or cause any stress to the staff and residents. Ultimately, an aged care facility is in the business of providing care. Care comes from people and good staff are not easy to find. The last thing you want to do, if you have good staff and a good business, is to sell your facility and lose your staff at the same time because a lot of the business’ value is in its workforce.”

In understanding the sensitivities surrounding an acquisition or sale, the team relies heavily on its wealth of knowledge and experience in order to meet client needs. There is also an added benefit of being part of a collaborative network both locally and internationally as this has allowed Colliers International to offer clients a depth and breadth of service excellence.

Shane emphasises that the organisation will keep investing in its people to ensure that clients get the right advice all the time. “We have a company-wide policy that any specialised asset in the health and aged care sectors comes to the right people,” he says. “A lot of our competitors may assign someone who is close to the asset geographically but we believe in using specialist staff to deal with the asset or advice, whatever it is that is required.”

Colliers International is in a good space, even in the current climate brought on by the uncertainties of the aged care reforms and the possibility that we may very well have a new government at the end of the year. Many in the sector are critical of the reforms, particularly as there will be a shortfall in funding. The added challenge lies in the fact that the rules pertaining to the reforms have not been clearly defined. This means that organisations are unable to come up with strategies to facilitate the changes and the banks are hesitant to offer loans as it is still unclear to one and all what accommodation bonds facilities can charge.

That said, Colliers International will continue to transact in this space as there are genuine signs that the market is improving. In fact, Phil is confident that the sector will continue to grow positively as there will always be a demand because of our ageing population. “At the end of the day, society cannot afford to let this sector fall over and will put measures in place, ones that broadly support private investments because with the growth and increased demand, the government will not be able to fund the sector alone. So they will have to support a framework that aids external investments.”

Phil adds that 2013 will see more acquisitions as he believes that this is what the government and the industry want. “It’s fair to say that the market is still very fragmented and there is a huge amount of room for consolidation. That’s what you’ll see BUPA and other groups doing. BUPA is the largest group at present, holding five per cent of the market so there is definitely room for consolidation.”

This signals a number of opportunities for organisations to exit the market. Just last month, Lend Lease sold Primelife, its aged care business, to an entity controlled by private equity firm Archer Capital. And Colliers International is already seeing a number of smaller portfolios coming its way on the back of the Innovative Care – BUPA deal.

As the parameters of the reforms start to become clearer, Phil and Shane are expecting another solid year for transactions and they encourage aged care operators, particularly the smaller groups to take a longer term view with an eye on exit strategies.

Australian aged care operators have a proven track record of running and operating successful facilities, evidenced in the increased interest from their peers in Asia who often visit these facilities to learn how to improve their own organisations. This success is largely due to the operators’ deep understanding of their facilities and homes. However, it is just as important to understand what is happening in the market and to have an exit strategy, even if the business is doing well. Smaller groups including family-run businesses with no succession plan may find that they are left with a business with unsustainable liabilities, inevitably leaving themselves at the mercy of the bigger national operators who may be the only groups with the ability to absorb their businesses. Taking a longer term view will allow operators to position their businesses appropriately in order to get the best value when they eventually exit the market.

Phil urges smaller operators to put some thought into their strategic plans. “Exit strategy needs to be clear and thought through. My exit strategy would NOT be, “Let’s hope for one of the national providers to buy us.’ You don’t want to limit your options. You want to make sure you get the best value and you want to make sure you can exit.”

“I would encourage operators to talk to groups like ourselves,” adds Shane, “because their view of their facilities may not be in line with how they are viewed by the rest in the industry. We have the biggest valuation team in Australia and we are on every bank panel in every state. Thus, we see more transactions, do more valuations and speak to more people so we can tell you how the market is doing and how your property is being viewed by the rest of the sector.”

At the end of the day, Colliers International delivers more than great real estate services; the company has a genuine desire to accelerate the success of everyone with whom it comes into contact.

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July 20, 2018, 12:49 PM AEST

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