Real Estate Investor Magazine South Africa May/June 2019 | Page 27

L
ife Rights is an increasingly popular form of ownership
for many potential retirees. What it boils down to is
that you pay a capital amount for an investment in a
retirement village. However, you don’t pay special levies, body
corporates and managing agents for the management and the
upkeep of the estate as a whole. The pay off, is that once your
right is sold, you don’t share in any capital gains. This right is
for the rest of the owner’s life – so it’s like a lease agreement
for life that you pay upfront for. Sectional Title ownership
is better known among the non-retirement crowd and offers
a bricks-and-mortar unit, along with capital gains and levies.
Arthur Case, the Brand Marketing Director at Evergreen
Lifestyle, makes the case for the Life Rights models.
Evergreen Lifestyle only develops Life Rights villages. We
have six villages in operation: Muizenberg, at Lake Michelle,
Noordhoek, Bergvliet, Diep River and Broadacres (Gauteng)
with new villages being established at Val de Vie in Paarl
and Sitari near Somerset West. We also have land holdings
in Umhlanga, Zimbali Lakes, Hilton and Port Elizabeth for
future development. We plan to grow to 10 000 units over the
next ten years. The demand is there.
There are many reasons why life rights are a great solution
for retiring middle and upper middle income South Africans.
Here are just a few:
· This is the premier retirement model in North America,
Australia and New Zealand and is gaining popularity in parts
of Europe. It is therefore tried and tested.
· The life right developer remains committed literally for life
and is incentivised to look after both the asset and his customer,
the life right holder. There are therefore no perverse incentives
in this model. By contrast the sectional title or freehold
developer is usually gone after the last unit sells leaving the
retirees to run (self-manage) the village via an HOA or body
corporate, who in turn must employ a managing agent or run
the estate themselves! This has so many implications that I
could unpack, but in essence, do you wish to run a retirement
estate when you are retired and ageing? This is at the heart
of the attractiveness of the Life Right model. The Life Right
developer manages security, maintenance, garden landscaping,
finance and administration, estate management, food and
beverage, statutory requirements, healthcare and more. At
Evergreen we call this a partnership for life.
· The Life Right model offers the financially strong
developer enormous flexibility e.g. to offer flexible pricing by
reducing the purchase price as well as the return capital to
suit certain purchasers or to liberate emergency capital for the
Life Right holder to fund, say levy arrears or care centre costs
during his tenure. In a Sectional Title village you would need
to sell your home to liberate emergency capital!
· There are no special levies in a Life Right model (it’s
prohibited by the Housing Development Schemes for Retired
Persons Act No 65 of 1988). Will the retiree have free capital
for the inevitable special levies in a sectional tile scheme?
· No VAT or transfer duties.
These and many other financial and individual benefits
make the loss of capital growth on the purchasers property
asset a ‘fair exchange’ for many South African seniors. With
regard to demographics and the economy I believe that the
Life Rights model offers comfort in times of uncertainty.
A Life Right is not a financial investment and we make
that clear to purchasers at the start. It’s an investment in a safe
and secure retirement lifestyle. The value proposition in Nieu-
Zealand and Australia is so strong that they return capital less
a deferred management fee (DMF) which means that the
estate will get back original capital less between 20 – 30%. Life
Right holders and their families in these countries see this as a
fair exchange. Those purchasers who wish to leave more legacy
capital have the freehold or sectional title retirement village
option to select, so purchasing a Life Right is an informed
choice. More and more South Africans are seeing the benefits
of the Life Rights and some developers who previously railed
against the model are now adopting it. South African seniors
can choose between the Life Rights, sectional title, freehold,
share block and rental models and can evaluate the merits
of various commercial developers and NGO’s who offer
retirement accommodation. Informed choice is important.
The Life Rights developer takes a long-term view of the
investment’s Return on Interest. With our shareholders, the
Amdec Group and the PSG Group, we take the long view
which I believe is in the interests of purchasers and provides
them with financial peace of mind.
ARTHUR CASE
Brand Marketing Director at
Evergreen Lifestyle
SA Real Estate Investor Magazine MAY/JUNE 2019
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