15 September 2015

It’s reasonable to assume there aren’t many business people thinking about how they can improve the lives of pensioners. But Robin Levison isn’t your run of the mill businessperson.

In 2012, Levison received a tidy payout after General Electric paid $700 million for ASX-listed Industrea Limited, the mine-equipment manufacturer he headed up. Levison wanted to put his money into “areas with solid fundamentals that would stand the test of time and remain profitable and the retirement sector stood out”.

Of course, it’s no great insight that the retirement sector is a good bet given the baby boomer population bulge is heading into its dotage. What’s exceptional about Levison is he decided to target retirees on low incomes.

“I did my research and discovered two statistics I found exciting,” Levison explains. “Firstly, there were around 2000 retirement villages in Australia but only 50 owned by corporate entities. Secondly, of the people who were retiring, the fastest-growing segment was those totally or primarily reliant on government funding in the form of the pension and rent assistance.”

The demographic Levison honed in on don’t have many options. Many were – and are – ending up in caravan parks or camping grounds, with minimal support and few age-appropriate facilities or activities available.

“Those able to pay $200,000-$500,000 for a deferred management fee or to buy a unit in a retirement village are catered to,” Levison notes. “The issue is many Australian are retiring with little to no savings or super and no chance of getting into those places.”

Eureka’s moment

Levison was a shareholder in Eureka, a company that had been developing and managing retirement villages for almost a decade. He approached the company’s leadership and argued they do something that would both benefit the retiree community and bring some corporate nous, particularly in terms of economies of scale and back-end administration, to a sector largely functioning as a cottage industry.

Levison’s vision was soon embraced and in 2013 Eureka began buying retirement villages below replacement cost from operators, often not-for-profits, that had been unable to run them in an economically sustainable way. Levison, by now Eureka’s Chairman, brought the experience gained in senior corporate roles to keeping costs under strict control. This allowed Eureka to provide an excellent product at an affordable price.

Eureka will soon own 12 retirement villages, comprising 714 units. It plans to continue acquiring up to 10 villages a year. Depending on the location, the well-appointed units in these villages can be rented from $175 to $250 a week with no entry or exit fee charged. There’s also a charge for food, for those who wish to dine communally. Residents have access to regular entertainment and social activities. It’s not an option for all retirees – residents need to be in reasonably good health – but it’s a big step up from a caravan park. Occupancy rates run in excess of 90 per cent in most villages, and village managers’ remuneration is structured to incentivise them to keep residents as happy as possible.

Providing social value

Levison describes Eureka as a ‘shared value’ enterprise – one that aims to combine the best of capitalism and social activism by creating business value while addressing social problems.

“Eureka stands for Empathy, Understanding, Respect, Experience, Kindness and Affordability,” says Levison. “I believe we’re the best option for the less well-off pensioner. When I visit our villages, people come up and tell me it’s the best place they’ve ever lived and serves up the best food they’ve ever eaten. We treat our residents with a degree of respect they often don’t get elsewhere. And we’re helping address a serious problem by providing quality, affordable housing for seniors.”

That noted, Eureka now has a $100 million market capitalisation. Levison, who owns 7 per cent of the company, is motivated to deliver a good return to shareholders. And delivering he is; Eureka recently posted a net profit after tax of $3.1 million, a 369 per cent increase on the previous financial year.

“We’re on a growth trajectory. We’ve got an experienced, dedicated team in place. We’re pursuing a winning strategy. And we’re cashed up thanks to a healthy balance sheet and the availability of debt funding,” Levison says.

“The vision of being the largest owner/operator of regional seniors’ rental retirement villages in Australia is now within reach.”

Key takeouts

  • After selling ASX-listed mine-equipment manufacturer Industrea Limited to General Electric for an enterprise value of $700 million, Robin Levison invested part of his share of the proceeds in the aged care/retirement sector focusing on the low-income sector.
  • Eureka will soon own 12 retirement villages, comprising 714 units, while managing another 800. It plans to acquire up to 10 villages a year. The units rent from $175 to $250 a week with no entry or exit fee charged.
  • Occupancy rates run in excess of 90 per cent in most villages, and village managers’ remuneration is structured to incentivise them to keep residents as happy as possible.
  • Eureka operates as a ‘shared value’ enterprise, aiming to combine the best of capitalism and social activism by creating business value while addressing social problems.
  • With a $100 million market capitalisation, Eureka recently posted a net profit after tax of $3.1 million, a 369 per cent increase on the previous financial year and has a clear and determined growth strategy.

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