Report
The path to profitability
Although retirement villages can be profitable, this study has revealed it can take more than 20 years before an owner of an average village fully recovers their investment. It explores the commonly held belief about the retirement village business model disproportionately benefiting operators financially. The path to profitability: Separating fact from fiction in New Zealand’s retirement village sector, is based on a discounted cashflow financial model of two retirement villages that represent a cross section of the sector: Rural villas in Canterbury and urban apartments in Auckland. It covers a 25-year period comprising the key stages of a retirement village development from sourcing land and construction, to project completion and revenue generation. It then takes into account the sector-specific sensitivities that impact a village’s profitability, some of which include occupancy lags, ORA (occupation right agreement) sale prices and construction costs.