Stantons Research

Retirement Village Valuation Metrics October 2012

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The owner/operator of a village receives their return at the end of residents’ tenure, therefore the value of this return can only be estimated based on projections including the length of tenure of the current and future residents, increase in sale price of units and future demand for units.

 

This difficulty in projecting future returns results in an opaque market for investors , financiers and residents alike which has been cited as a contributing factor for the lack of enthusiasm by institutional investors in the sector. This paper presents original research into valuation metrics including the length of resident tenure (Duration) and the proportion of units which transact per annum (Turnovers) component parts used in the Monte Carlo simulation that is being applied to the DCF analysis that is increasingly being used in the sector.