Challenge for Justine Elliot if Slater and Gordon get onto it
Now SCV, whose shares are trading at one cent and which appears to have cash holdings of just $270,000, is looking for a way out and the way out is to raise management fees – in the case of one investor’s investment at Caboolture, from $90 per week to $170 per week – or walk away from the schemes, the investors and the residents.
Village Life, now Sunnycove, scheme investors have assembled themselves at an online discussion forum and this week need to decide on whether to accept a 70% hike in fees or the possible closure of the retirement homes, and their investments.
“Call me cynical but I just think the money that they want to get from us will just go straight to Sunnycove to prop them up. I don’t really think they’ll fix the problems at the villages at all,” expresses one disgruntled investor. Others believe that the extra money may just keep the business on life support but not turn-around what is a fundamentally low-margin and high-risk business model.
But if investor fees are not raised and SCV cancels its management agreement with the villages, then it is up to scheme unit holders to find new managers – a tall order for non-specialist retail investors.
Neither SCV managing director Andrea Slingsby or chairman Andrew Kemp were available for comment.
SCV is not the only operator to find the Village Life brand a tough business to operate. Unlike many other retirement village operators, seniors who live in Village Life accommodation rent rather than purchase their units. Accommodation tends to be cheaper than offerings from the more lifestyle-orientated developments (think Seinfeld’s Del Boca Vista Active Adult Community), and residents are more reliant on pensions or family members. Recessionary and inflationary pressures can mean the difference between life in a retirement home or a granny flat.
Diane Bates, an aged care activist and coordinator of not-for-profit advocacy organisation Daniel’s Shield, says that there are many cases proving that investing in nursing homes and retirement villages is both ethically dubious and financially flawed. “The model is unworkable from the ground up and it starts with the government. There is no policeman, they’re policemen in name only.” Ms Bates says that not only are profit margins tiny, but incompetent funding and regulation makes operations difficult even for not-for-profit groups.
“The providers are saying they’re not getting enough money from the government, but whether or not that’s the case, the policemen aren’t going in there doing their job. It’s all about ticking boxes and regulation is a paper façade.”
In March 2006, after Village Life shares fell to a low of nine cents from an all-time high of $2.88, Gold Coast property group MFS plus Babcock and Brown, through their interest in the Primelife retirement trust, moved in to purchase shares and trusts off the struggling company. Primelife, founded by controversial former bankrupt Ted Sent, is itself not without a chequered past.
Queensland tycoon Michael Gordon also got ready to move in on Village Life, having sold his Peppercorn child care business to Eddy Groves’ ABC Learning. Mr Gordon purchased retirement village company Sunnycove and a separate holding in Village Life via private vehicle Bydand.
Gordon has since departed Sunnycove, renamed SCV, but remains its largest shareholder. MFS and Babcock have themselves gone to the great sharemarket in the sky, but the mess at Village Life centres remains.
“They’ve stuffed it up so badly,” says one SCV investor. “Do I really want to trust them with more of my money?”
Voting over the future of SCV’s Village Life homes has begun. It is expected that investors, and residents, will know the outcome by the end of the month.