Source: Karaka Pines Villages (Group) Ltd
The Ministry of Housing and Urban Development (HUD) has just released its discussion paper on retirement village living.
Adam Yates, CEO of Karaka Pines Villages supports the review of the retirement villages industry.
Karaka Pines operates 7 retirement villages throughout NZ which all offer full capital gain to its residents.
The current regulations in the industry are punitive for full capital gain villages like Karaka Pines and a review is needed to ensure that operators which are being fair to residents are not punished for it.
“The current regulations assume that all operators are being unfair and need to be controlled” says Yates, “the current rules put costs onto residents whenever a situation arises which is not the normal model.”
The proposals set out in the discussion paper have the potential to continue and worsen this situation. An example is where a unit takes more than 6 months to sell and the weekly fees stop, the rest of the residents in the village have to bear the costs of the departing resident.
“There are lots of statements in the discussion paper which show that HUD assume that all villages are of the standard model. This is wrong as there are dozens of villages which operate differently from the norm.” says Yates.
Karaka Pines will be supporting many of the proposals in the discussion paper so that a fair deal is made available for retired people in NZ. At the same time, it will be proposing that any new regulations provide an encouragement for a move to fairer financial models, and that regulations which seek to control presumed excesses do not work against operators like Karaka Pines.
BACKGROUND – DIFFERENTIATING FACTORS
Karaka Pines is developing and operates 7 retirement villages throughout the country, with a total of 778 units planned and 344 units complete.
We have applied for resource consent for another in Tauranga and anticipate one being announced in New Plymouth.
Our retirement villages are different from nearly all the other villages in the country in that we allow the residents to have 100% of the capital gain that might accrue on their unit.
Our fees are also generally lower than other villages with our Deferred Maintenance Fee (DMF) starting at 12.5% but with outgoings fixed for life this increases to 25%. Our motivation for creating this village model is fairness. We have always considered that once a resident has paid for their unit they have the greatest investment in it. Therefore, they ought to get the greatest share of the capital gain – and in our case we think it should be all of it. In return they should pay to us a fair fee for the service we provide in managing the village for them. We’ve concluded that 12.5% of the sale price is a fair exchange of value. We also give them the option of having a fixed outgoings fee for life and a higher DMF of 25%.
Comment on the Industry review:
Karaka Pines welcomes the review of the industry as it sees that there is need to have fairness included in the industry regulation. However, we don’t agree that there needs to be wholesale changes as consumers have considerable choice available to them. A key concern for us that that the regulations need to recognise the range of differing village styles emerging as consumer pressure begins to be felt.
A very important aspect of the review has to include the provisions of the Retirement Villages Act which work against residents under models such as ours (which are based on full capital gain share). In regard to the 10 practices that the Retirement Villages Residents Association are asking to be reviewed we support the need for fairness to be included in the industry standards and agree that residents should not be charged for services that they do not use. We also consider it unfair that a resident which gains no real value from the resale of a unit should bear any of the costs of the sale where they are not the ones making decisions.
Under the Karaka Pines model, residents have all the say in the sale of the unit – they determine the asking price and even who will do the selling.
Scale of Karaka Pines Villages:
The success of this model is not insignificant as we have 2 completed villages under management, 5 villages under development and are applying for the resource consent to develop an eighth.
So far we have 344 completed units and a total of 892 planned.
The following are the villages:
Karaka Lifestyle Estate Karaka, South Auckland. 281
Karaka Pines Rototuna Rototuna, Hamilton 128
Karaka Pines Waihi Beach Wahi Beach 96
Regency Park Estate Rotorua 87
Roseland Park Hillcrest, Hamilton 54
Kempton Park Bethlehem, Tauranga 54
Woodcroft Estate Rolleston, Canterbury 78
The application for resource consent for a new village in Papamoa East, Tauranga has been lodged and will be 114 units.
Adam Yates, the Chief Executive Officer has 25 years of experience in the Aged Care and Retirement Village sector and has led the development of 11 villages in this time.
Karaka Pines Villages is based in Tauranga.
