Projects } TBK Capital

Central Waikato Retirement Village

Last month we sent a Newsletter offering a substantial investor the opportunity to join an experienced developer as an equity participant in the construction of a 68 Unit Retirement Village. It has the resource consent to build License to Occupy units.

Last month we sent a Newsletter offering a substantial investor the opportunity to join an experienced developer as an equity participant in the construction of a 68 Unit Retirement Village. It has the resource consent to build License to Occupy units. 

Since then the owners of this 4.26 Ha property have entered into a Sale and Purchase Agreement to buy an adjacent 8.9 Ha site with a large common boundary. Both titles are zoned residential. This has increased the size of the project, the development profit, and the ongoing revenue from the continuing revolving sales of the licenses to occupy.

The larger size also increases the potential interest from larger investors who would contribute capital to undertake the development and possibly own it for the continuing revenue streams.

The 4.26 Ha property is available to start earthworks in the coming construction season. The owners have a full costing on the earthworks and civils and a heads of agreement with a recognized home builder to construct the units at an attractive price. This will allow the consented title to proceed and be partially completed while awaiting consent on the other residentially zoned land.

The additional 8.9 hectares of land when consented will allow a total of 250 LTO units to be built, plus a 100 bed Aged Care facility.

The entry valuation of both titles and the existing resource consent for 68 units is $7 million which will be supported by a registered valuation. This works out to be a land value per site of only $28,000, or a cost of land in the development of only of 6.2%.

Development Profit

At the entry valuation of $7 million the development profit from the construction of the 250 units (before interest) is $38,815,000. This entry valuation includes the whole project including the Retirement Village consented land, the adjacent 8.9 Ha of residential zoned land, the consents, plans, and professional fees to date. It does not include the profit from the construction of the Aged Care Facility.

Ongoing Revenue Streams

When the purchaser of the LTO dies, leaves, or moves into the Aged Care Facility, the Village owner will purchase the unit back. At that time, under the LTO agreement, the buyback price is less than the original that was paid for it.

Also at that time LTO then might then be worth more than the original price. So the Village owner picks up the pre-agreed profit plus a possible price increase each time a move is made. This revenue stream is estimated to be $6.4 million per annum based on the units turning over every 7 years.

The residents also pay a weekly fee which on a 250 LTO village can be quite large. This covers the cost of insurance, rates, maintenance, gardening, full time manager, and part time staff. Accordingly the Village is effectively self-funding.

There are other significant financial benefits from the LTO model. There is no GST payable in the sale of the units, and reserve contributions, fees and levies to Council are minimized because there are only two titles.

The development of the Aged Care Facility will add real value to the project.

The owners are looking to discuss various options that might suit potential investors. These include the ability to move the assets into an unlisted vehicle for a future compliance listing. For further information email or call me on +64 21 902 901.

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The above investment is not an offer of financial products that requires disclosure under the Financial Markets Conduct Act 2013 (Act) and is available only to wholesale investors as defined by that Act. It is intended for distribution only to selected people to whom, under the relevant laws, it can be lawfully distributed. It cannot be distributed in any other jurisdiction, or to any other people. It is not an offer or solicitations in any jurisdiction in which such offers or solicitations are not authorised, or in which the person making such offers or solicitations are not qualified to do so, or to any person to whom it is unlawful to make such offers or solicitations. Any representation to the contrary would be unlawful. No action has been taken by any person that would permit a public offering in any jurisdiction where action for that purpose would be required.

Cheers

JP

John Paine B.Sc., Dip BIA
TBK Capital Limited
Level 10
120 Albert Street
Auckland 1010, New Zealand
Phone +64 9 307 3257
Fax +64 9 309 4519
Mobile +64 21 902 901
Email john.paine@tbkcapital.co.nz

 

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