Grace Mutual

The Challenge

The Australian system for the care of ageing comprises several components:

  • Community Care – Care delivered in recipient’s own home, or in specially built homes such as retirement communities or serviced apartments, with or without a resident carer. Care levels progress from domestic help to palliative care.
  • Residential Care – Care delivered in Government accredited, sub-acute residential environments.

Care provided ranges from assistance with daily functions of life, through to complex medical care.

Although the Commonwealth Government contributes the lion’s share of the costs, resident contributions are controlled, and operators are experiencing pressure on margins. Raising capital in this environment has been very difficult.

Demand

There are approximately 200,000 licensed aged care “places” (beds in approved facilities) in Australia. About 60% are managed by not-for-profit approved providers.

It is estimated that an additional 100,000 beds will be required by 2020. Each bed costs, at a minimum $200,000 including a component for the cost of land. This represents a capital commitment of $20 billion in today’s dollars.

In addition, we believe about 50% of the existing beds will require complete redevelopment in the next 5 years, representing at least another $10 billion.

It is unclear where this capital will come from.

Our Response

Since 2008 capital has been scarce within the aged care industry in general with tight operating margins and rationed bank debt.

In the NFP sector, capital is even more scarce, as there are fewer options for attracting third party investment funds.

Grace Mutual has designed a mechanism for releasing capital which enables major industry players to continue to develop and redevelop.

Once the regulatory impact of the new government is clear, Grace Mutual will re-launch this initiative.