Tax paid returns of 150% over the village development period of 6-7 years are common. Once the development is complete investors receive an ongoing return of around 8% p.a. Returns rank well above the average return of the top quartile of the Australasian Private Equity companies.
The forecast returns will vary between villages. As an example we might expect:
• Interest on capital contributed paid from year 3 through 6 at 4.5%.
• Tax paid dividends paid from years 4-7 totalling approximately 150% of capital contributed.
• An ongoing dividend of around 8% p.a. of capital.
Because of the License to Occupy structure of a retirement village the development portion of the returns do not incur tax.
Ultimately you could sell your shareholding. There is no formal secondary market but KPV can pass on the offer to shareholders in this or other villages.
As with any development and business venture there are risks which you should be aware of. For example:
• There may be issues with the land which were not apparent during due diligence.
• Additional costs may arise which were not predicted.
• Costs may rise more than predicted.
• Sales prices could fall more than predicted.
• Sales may not occur as rapidly as predicted, delaying returns
KPV take a high equity/low debt approach, where the bank borrowing for the village will be no more than 50% of the equity available. The bank would require a statement of position and a proportional guarantee from each investor.
KPV will always prepare a feasibility study for each investment and take a conservative approach with costs and sale prices.
Within the feasibility study KPV does allow for a downturn in the market by reducing sale prices. Should a downturn occur the investors can also choose to delay development. The speed of development is always driven by sales of the units.
What’s in it for KPV?
As with all managed investments, KPV charge a series of fees:
• A brokerage fee covering the initial proposal.
• A development management fee.
• A village management fee. This is normally charged to the residents.
In addition, KPV retains a 10% ownership stake in each village.