Cape Town - PSG Alpha Investments, a subsidiary of PSG Group [JSE:PSG], has acquired a 50% stake in property developer Amdec Group's Evergreen Lifestyle division, a provider of retirement living.
The investment is by means of a R675m subscription for new shares. It is one of the largest initial cash investments by the group to date.
PSG already has investments in retail banking (Capitec) and private education (Curro). It therefore sees the latest investment as a new focus area for the group, namely the retirement property sector.
Amdec Group’s portfolio includes Melrose Arch in Johannesburg, The Yacht Club in Cape Town, Westbrook in Port Elizabeth and Val de Vie and Pearl Valley in the Cape Winelands. The group also has a partnership with Marriott International to develop five new hotels in SA, and will shortly launch Harbour Arch, a R10bn project at the gateway to Cape Town's CBD.
The aim of the new partnership with PSG Alpha is to make use of opportunities in the growing demand for retirement lifestyle products in SA, with its increasing number of middle and upper income people reaching retirement age.
The deal will accelerate the growth of the Evergreen Lifestyle brand and allow for the rapid development of the many other retirement villages currently in the planning stages - from the current 500 homes, to about 3 000 homes over the next three years.
Nico de Waal, CEO of PSG Alpha, told Fin24 at the launch announcement on Tuesday that the company is always on the lookout for investments with excellent long-term prospects which would likely deliver satisfactory returns for shareholders.
"Everyone always asks PSG what the next big thing is. We believe this (retirement property) could be a significant opportunity. It also shows PSG and Amdec's commitment to SA," said De Waal.
"There are changes in consumer demographics and significant population growth in those over 60 years of age. Their preferences are showing that the shift is to a more refined consumer. This market sector is frequently under-served with not enough of the right product."
Trusted national brand
In his view, the new partnership with Amdec's Evergreen Lifestyle brings an opportunity to build a trusted national retirement brand. This is because Evergreen Lifestyle has the necessary competitive advantage, intellectual capital and expertise in the retirement property development sector, according to De Waal.
The deal is still subject to normal regulatory approvals, but De Waal is confident these will be obtained in due course.
James Wilson, CEO of Amdec Group, told Fin24 that the issue of affordability is addressed by Evergreen's use of the so-called life right purchase model for retirement accommodation – as opposed to the traditional method of sectional title or freehold.
The life right purchase model means Evergreen Lifestyle remains vested in the scheme and ensures that every aspect of the retirement village is taken care of. It comes with flexible payment structures and a range of accommodation options.
"The benefit of a life right for the retirees is that Evergreen remains invested. We can then discount the selling price of the life right to one that is acceptable to fit the pocket of the retiree as well as in terms of the monthly costs of occupation. It avoids things like special levies for occupants as well," explained Wilson.
"We then rather use the capital growth of the property in our business, for instance to put in more infrastructure in a retirement village, or security, things that will actually benefit the retirees during their lifetime."
He added that retirees are often marginalised and a "forgotten group".
"We are going to excite retirees. Evergreen developments are always fresh and always interesting. We bring this aspect to how people's retirement changes," said Wilson.
De Waal also feels the life right model benefits the occupant in terms of costs for things like maintenance. He sees it not as per se as a financial investment by the occupier, but rather as a choice of lifestyle - a model prevalent in Europe and the US, for instance.
Both De Waal and Wilson told Fin24 the new partnership could eventually lead to it being listed on the JSE.
"PSG is known for listing companies in the right circumstances," said De Waal.
He added that the geographic footprint of the retirement developments will be in SA's major metropoles, like Johannesburg, Cape Town and Port Elizabeth.
Arthur Case, CEO of Evergreen Retirement Holdings, explained that its offering stretches far beyond the stereotypical old-age home with its "hospital-like" atmosphere.
"Instead, ours is a hospitality-based approach, with resort-style facilities and amenities in all our villages, where you’ll find vibrant communities of residents enjoying an active, independent retirement lifestyle. And when the need arises we are able to match lifestyle to life stage with a range of care offerings to respond to the challenges of ageing,” said Case.
"More and more retirees find their families are not there when they are old. Many of their family members had moved overseas, for instance."
He said concerns about security, loneliness and inflation worry many retirees.
"We believe we have the solution to the changes in SA's retirement industry. Therefore, scale is important in order to keep levies in check, for instance," said Case.
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