Assignment 2 - Version 4

ENT Assignment 2 - Business plan by????
1
Idea: Setting up a retirement viIIage.

ENT Assignment 2 - Business plan by???? 1
I. Executive summary
i. Description of the business concept and the business
ii. The opportunity and the strategy
iii. The target market and projections
iv. The competitive advantage
v. The team
vi. The offering

ENT Assignment 2 - Business plan by???? i
TabIe of contents

I. The industry and the company and its product(s) or service(s) - WE 1
i. The industry .......................................................................................... 1
ii. The company and the concept ............................................................. 1
iii. The product(s) or service(s).................................................................. 2
iv. Entry and growth strategy ..................................................................... 5

II. Market research and anaIysis - JB ....................................................... 6
i. Customers ............................................................................................ 6
ii. Market size and trends ......................................................................... 6
iii. Competitive and competitive edges ...................................................... 8
iv. Estimated market share and sales ....................................................... 9
v. Ongoing market evaluation ................................................................. 10

III. The economics of the business .......................................................... 12
i. Gross and operating margins ............................................................. 12
ii. Profit potential and durability .............................................................. 12
iii. Fixed, variable, and semivariable costs .............................................. 12
iv. Months to breakeven .......................................................................... 12
v. Months to reach positive cash flow ..................................................... 12

IV. Marketing - FW ..................................................................................... 13
i. Overall marketing strategy .................................................................. 13
ii. Pricing ................................................................................................ 14
iii. Sales tactics ....................................................................................... 15
iv. Service and warranty policies ............................................................. 16
v. Advertising and promotion .................................................................. 16
vi. Distribution.......................................................................................... 17

ENT Assignment 2 - Business plan by???? ii
V. Design and deveIopment pIan - CV .................................................... 17
i. Development status and tasks............................................................ 18
ii. Difficulties and risks ............................................................................ 20
iii. Product improvement and new products ............................................ 20
iv. Costs .................................................................................................. 20

VI. Manufacturing and operations pIan - SP............................................ 23
i. Operating cycle ................................................................................... 23
ii. Geographic location ............................................................................ 23
iii. Facilities and improvements ............................................................... 23
iv. Strategy and plans .............................................................................. 25
v. Regulatory and legal issues................................................................ 25

VII. Management team ................................................................................ 28
i. Organisation ....................................................................................... 28
ii. Key management personnel ............................................................... 29
iii. Management compensation and ownership ....................................... 30
iv. Other investors ................................................................................... 30
v. Employment and other agreements and stock option and bonus plans .
........................................................................................................... 30
vi. Board of directors ............................................................................... 30
vii. Other shareholders, rights and restrictions ......................................... 31
viii. Supporting professional advisors and services................................... 31

VIII. SustainabiIity and impact .................................................................... 32

IX. OveraII scheduIe .................................................................................. 32

X. CriticaI risks, probIems and assumptions ......................................... 32

XI. FinanciaI pIan - DB ............................................................................... 34
i. Actual income statement .................................................................... 34
ii. Pro forma income statement............................................................... 34

ENT Assignment 2 - Business plan by???? iii
iii. Pro forma balance sheets ................................................................... 34
iv. Pro forma cash flow analysis .............................................................. 34
v. Break-even chart ................................................................................ 34
vi. Cost control ........................................................................................ 34
vii. Highlights ............................................................................................ 34

XII. Proposed company offerings.............................................................. 35
i. Desired financing ................................................................................ 35
ii. Offering ............................................................................................... 35
iii. Capitalization ...................................................................................... 35
iv. Use of funds ....................................................................................... 35
v. investors' return .................................................................................. 35

XIII. Appendices ........................................................................................... 35

References ................................................................................................... 35


I. The industry and the company and its product(s)
or service(s) - WE
i. The industry
The aged care sector consist of two major sectors, namely retirement villages,
assisted living, and aged care (Grant Thornton, 2007:4). The retirement
village sector offers retired persons independent living, while the assisted
living includes additional services such as meals, cleaning and personal
services. The aged care sector provides accommodation and care for those
older people who can no longer live independently (Grant Thornton, 2007:4).
Operations in this sector include not-for-profits entities, publicly listed
companies and private operators. lr 0aulerg, lrere are currerl|y 3Z erl|l|es oller|rg
|rdeperderl ||v|rg lo rel|rees (3er|or 3erv|ce, 2010:1).

Competitors?

- environmental profile of the industry, energy requirements, supply chain
factors, waste generation, and recycling capability. New green technologies or
trends that may have an impact on this opportunity.

ii. The company and the concept
Company XXXX will provide all the necessary amenities and activities for
active living. Furthermore it will cater to those who are able to live
independently, a person that is capable to live independently without the
assistance of nursing staff. The individual would be expected to still drive,
cook, shop and take care of her/his financial affairs.

orpary XXXX will be a retirement village, offering independent, safe, healthy
and convenient living. Company XXXX will offer health care and lifestyle
services, with an outlook on healthy retirement living.


The mission of Company XXX?

6ompany pr|nc|p|e and va|ues? We at Company XXXX believe in providing
essential services to create a long-term high quality lifestyle to all our clients.
We will strive to create an environment that allows our clients to improve their
health and take responsibility for it.

The primary customer of Company XXXX will be the middle to high income
individuals between the ages of 50 and 79 years who are able to live
independently (un-assisted).

iii. The product(s) or service(s)
- Describe in detail each product or service
The retirement village will offer lifetime leases and full ownership. Clients will
be able to change from a lifetime lease to full ownership at a later stage,
offering clients financial security. The village will consist of approximately
3,000 square meters of land. This land will be dedicated to villas (apartments),
community centres, and a well-being facility. The entire village will be step-
free and ensuring maximum safety.

A nurse will be on duty at all times (24 hours a day), with a doctor on
emergency standby. There will be a positive emphasis on the need for
security, socialising opportunities and convenience.

Each apartment will come standard with:
Fully installed kitchen and bathroom. The kitchen will be open plan to ensure
communication with a partner and friends in the lounge area or watch TV. The
bathroom in the villas will have a spacious shower as older people prefer
having a shower to a bath. Handles will be fitted in the shower as well as in


the bath. The toilet seat will be slightly higher than normal and have handles
as this is also more comfortable. Floor tiles will be non-slip, even when wet.
Flooring in which the client can choose from a variety
Air conditioning with regular servicing
A medical alarm system that provides the maximum level of personal
protection
The garage will be connected to the villas for safety, convenience and
comfort. Spacious garages will be included for ensure additional storage for
items such as golf clubs or tools.
Pleasant views will be available in the form of flower gardens or green
landscapes where residents can sit back and relax.
Ample light in the units will provide the prospective owner with morning light
and warm afternoon sunlight. Furthermore we will assess and ensure that the
sun in winter will flow through north facing windows into the lounge and main
bedroom. A north facing house will also ensure that the house does not
become overheated in summer.
The living area specifically will be spacious as this is where the most time will
be spent.
An under roof outside braai will be part of the entertainment area where
residents can entertain at least four people in the provided space.

To ensure our clients live an active life in a positive environment, we offer a
handyman, counselling, a fully equipped gym, indoor and outdoor swimming
pools, and several clubs such as bowling, golf, power walking, fishing and
cooking.

To maximise the client's enjoyment, several services as available (at a fee)
and includes cleaning, cooking, laundry, personal grooming care and funeral
plan cover.

Company XXXX is perfect for the individual who does not have the luxury of
living with family, or simply, individuals who wants independence and


freedom. Company XXXX will provide the service of caring for all clients,
ultimately delivering peace of mind that loved ones are safe, happy, and
healthy.
What differentiates Company XXXX from competitors is the fact what we
customise our offerings to every individual, which includes layout of the villas.
We will only offer step-less villas, ensuring safety. Our climate will be that of a
community and not individual spaces.

Company XXX will add value to individuals by means of:
Giving residents the opportunity of creating new friendships and opportunities
for sociability arising from shared living spaces and facilities, as well as higher
density living with people at a similar stage of the life cycle;
Proximity of the village to facilities and services in the area;
Appropriateness of the services and facilities within the village;
Proximity to family, especially children and grandchildren;
Maintenance of physical facilities at a high level made possible by a common
sinking fund and professional property management.

Ultimately, we offer a secure, safe, comfortable environment with people of
their own age.

Although the requirements for retirement villages are on the increase, this
trend is not widely accepted by the general population yet. The maintenance
of the village could pose a problem should the correct contractor not be
appointed.

t is estimated that it will take approximately 18 months to complete the
construction and building of the village. The village will include 50 units, where
40 units will be sold, and 10 rented. Provide a summary of the functional
specifications and photographs, if available, of the product


Since Company XXX is a follower in the industry, we will learn from the
mistakes made by the competitors, giving us the competitive advantage.

Future expansion includes extending Company XXX'Xs brand to frail care to
cater for the other part of this market.

iv. Entry and growth strategy
- Key success variables in marketing plan (innovative product, timing
advantage, or marketing approach) and your pricing, channels of distribution,
advertising, and promotional plans.

- How fast are you intent to grow and to what size in the first 5 years and your
plans for growth beyond your initial product / services
- Show how your growth strategy is derived from the opportunity and value-
added or other competitive advantages, such ad the weakness of competitors

- Discuss the overall environmental and social sustainability of your growth
plan. Consider the effect on the community if the growth strategy involves
offshore manufacturing or outsourced labour.


II. Market research and anaIysis - JB
i. Customers
Armstrong and Kotler (2009:199) describe market segmentation as a process
of dividing the market into smaller groups of similar consumers and selecting
the suitable group to serve. The market for the retirement village will be based
on demographic segmentation, which includes age and income. The age
group targeted will be active individuals between the ages of 50 and 79, with
income of above R500,000 per annum.

ii. Market size and trends
The South African population of the ages 50 to 79, has been growing steadily
over the past few years. n 2010, the estimated population in this age bracket
is 14%, compared to the 11.6% in 1970, equating to a 21% increase over the
period. Figure 1 illustrates the growth rate of the aging population in South
Africa.

Figure 1: South African popuIation statistics


Source: Stats SA

Stats SA (2010:14) indicates that there are over 5.1 million South Africans in
the age brackets of 50 to 79, with a third is living in Gauteng, followed by
KwaZulu-Natal (26%). Research by Aardt and Coetzee (2010:3) indicates
39% of the population of the income group R300,000 to R500,000 lives in
Gauteng. The same report discloses that 40% of the income group R500,000
to R750,000 and 43% of individuals earning above R750,000 lives in
Gauteng. Table 1 illustrates personal income distribution by province and
income group.

TabIe 1: PersonaI income by province and income group (R miIIion),
2009

Source: Aardt, CJ and Coetzee, M (2010): PERSONAL NCOME PATTERNS
AND PROFLES FOR SOUTH AFRCA, 2009, Date of issue: 2010-02-24
rllp://WWW.ur|sa.ac.za/corlerls/lacu|l|es/ers/docs/Press38Z_2010.pdl

Factors that will affect the Company's XXX growth includes the popularity of
this type of accommodation among older and retired people. This trend has
increased significantly over the years compared with the traditional old-age
home (du Toit, 2006:1). According to a Business Day Report, people in the
middle income to higher income brackets tend to retire earlier (Van Eyk,
2007:1). This together with the higher life expectancy of South African (62.8


years) will result in a shortage of retirement accommodation across South
Africa.

The need to release equity through downsizing in accommodation may also
impel the target market toward a greater shift to specialised retirement
housing when the kids have left home.

iii. Competitive and competitive edges
Company XXX's competitive edge will include offering enjoyable, secure,
customised living conditions for the over 50 age bracket. These will include
gated retirement communities or retirement villages in Gauteng which will
provide extra curricular activities such as a golf estate set-up and possibly
trout fishing.

What differentiates Company XXXX from competitors is the fact what we
customise our offerings to every individual, which includes layout of the villas.
We will only offer step-less villas, ensuring safety. Our climate will be that of a
community and not individual spaces. The villas will include self-care units
which enable residents to maintain a comfortable lifestyle within a consistent
community in premises that have architectural appeal and a practical floor
plan.


iv. Estimated market share and saIes


n the first 2 years of Company XXX operations, it is expected that all villas
will be occupied (50 units). And in year 5, two further retirement villages will
be available for occupation. Although difficult to estimate the market share
and sales, it is expected that a minimum of 150 villas will be occupied, where
80% of these villas are sold, and the rest will be rented.

v. Ongoing market evaIuation

Apart from the quality of management, the quality of accommodation is a
major factor in determining value to clients. Factors such as demographics of


the population will continuously be evaluated. Evaluation will include the
growing middle-class sector, the demand for home-ownership, the
population's life cycle and life expectancy. These factors together with the
country's HV/ADS statistics will assist in Company XXX's future growth
strategies.

Based on the 2010 Retirement Housing report (Knight Frank, 2010: page??),
ongoing market evaluation includes:
Over-65s are estimated to spend 80% of their time in the home (90% for over-
85s) and therefore well-designed surroundings are important
Retirement village residents expect to benefit from the social experience,
physical environment and good quality of life
Good call, alarm and access systems are essential and will continuously be
upgraded
ndependence is highly valued by residents including the choice to integrate
with the rest of the village or to remain private so this must be assessed
annually
Care and support must be flexible of a high quality and provided by well-
trained staff
Locating a retirement village within an existing community has many potential
benefits for residents of the retirement village and those living locally. These
include:

For the retirement village residents:
Ease of maintaining existing social networks and opportunities for wider social
interaction
Access to a far greater range of services, facilities and leisure activities than
can be provided within the village itself
Opportunities for inter-generational contact e.g. with local schools.

For the local community:


having retirement accommodation nearby provides the opportunity to remain
near to family and friends rather than leaving the area
the retirement village provides jobs for the local community
the retirement village residents can make local shops and services financially
viable
access to facilities and specialist health services in the retirement village

III. The economics of the business
i. Gross and operating margins
ii. Profit potentiaI and durabiIity
iii. Fixed, variabIe, and semivariabIe costs
iv. Months to breakeven
v. Months to reach positive cash fIow


IV. Marketing - FW
i. OveraII marketing strategy
Company XXX will market the retirement village in the Gauteng suburbs
within central, north and southern area initially. Marketing to the rest of the
country will commence as the company expands.
nitial target customers will be the retirees between the ages of 50 and 79
Specific features of the service that will be extensively promoted are safety,
quality, financial security (investment), tailored services and convenience.
%re rar|el|rg ressage W||| oe a solution to individuals, and not one size fits all.
Example of this would be the type of accommodation available which includes
studio apartments, one or two bedrooms, and custom build units.
Company XXX will promote a program of care and service that falls between
independent living and long-term care.


The marketing program will clarify the concept of assisted living for elderly, to
reduce the potential confusion among customer and consumers.
Timing of the marketing message is essential. f too early then potential client
would say wait and if late then customer could need high caring facility.
Company XXX marketing strategy will include high-impact advertising through
various channels which includes print media, radio, and television.
Company XXX will also introduce marketing program in stages, such as the
initial launch program, months prior to opening program, launch program, and
continuous marketing effort.
The ultimate goal of Company XXX is to educate the market by building
awareness, show how assisted care is an attractive alternative, and
demonstrate why Company XXX offer is different to others

ii. Pricing
The pricing policy would be structured based on individual requirements. The
pricing for the individual villas to be sold will be based on the type of villa.
Table 2 indicates the suggested selling price for standard units:

TabIe 2: Recommended price for units (for saIes)
Villa type Cost Selling Price
1 Bedroom
2 Bedroom
3 Bedroom

Competitor prices?

n the case of rental villas, there would be base price for basic
accommodation. Table 3 displays the recommenced rental prices per villa.

TabIe 3: Recommended base price for rentaI
Villa type Rental costs


1 Bedroom
2 Bedroom
3 Bedroom

Competitor prices?

The pricing policy for the additional services includes:

TabIe 4: Pricing structure for additionaI services and cIub fees
Villa type Monthly costs
Housekeeping
Meals
Laundry service
Scheduled transportation
Personal Grooming
Funeral plan cover
Bowling
Golf
Power walking
Fishing

Competitor prices?

iii. SaIes tactics
Company XXX sales tactics will include targeting the influencers, with the
following profile:
Adult child of prospective customer
Age between 50 70
Currently provides care and or assistance to parents
Search for facility is prompted by an incident or recommended by health care
professional


The need of the influencer will be targeted, and includes:
Peace of mind
Remove guilt feeling
Quality of offering. Home away from home
Value for money
Location / convenience

iv. Service and warranty poIicies
The services and offering would comply and exceed all legal requirements.
The facility would be staff by highly trained and qualified staff. Facility rules
and regulations would be made available and communicated to all.
ndependent audits will be used to verify compliances

v. Advertising and promotion


vi. Distribution

References
http://www.retirementvillages.org.nz/Site/RVA_Villages/Default.aspx
http://home.pacifier.com/~clatcare/crvintro.htm
http://www.scribd.com/doc/31906841/Retirement-Village-Association-
Australia-Yearbook-2009
http://www.greenrouteprop.com/rheebok/rheebok.html

V. Design and deveIopment pIan - CV
The old age home serves patients who require a save and comfortable place
to stay. The aged who need treatment beyond that can be offered by XXX will
be obtained outside the old age home. The residents are frail and aged so
design and development will have to consider those individuals who make use
of canes, walkers, and wheelchairs.

ntermediate-care facilities need to built to provide the elderly with quality
medical aid when needed.


Those elderly who are impaired will be housed separately in Alzheimer
Related Dementia (ASD) units.
The challenge is to design a nursing home that is sensitive and responsive to
long-term human needs and well-being, both physical and emotional.
Company XXX will need to determine what time, money and competencies
are necessary to proceed with the old age home.

i. DeveIopment status and tasks

The development status of the old age home must hold one thought in mind,
and that is that the old age home operates primarily in a patient-care mode
rather than a medical mode. Also the facility must focus on the general well-
being of its residents rather than high-tech considerations.

Tasks must take into consideration what an Old Age Home is like and what is
its purpose of construction. This will give XXX a clear idea of what to actually
consider in the design of the building, apartments and facilities.

Design of the retirement village must consider the following concept:
The social and economic status of the people who are going to live there
t must be considered whether the living areas will be 1, 2 or 3 bedroom villad
The rooms should be well-ventilated with air-conditioning.
Villas will be one level (step-less)


Toilets and bathrooms should have rough flooring so that the elders do not
slip.
Suitable railings should be provided for support.
Recreation rooms and rooms for medical care should be built.
Design to address security and safety concerns, which includes:
Control the access to hazardous spaces
Control of exits to avoid residents leaving and becoming lost or injured
Provision of secure spaces to safeguard facility supplies and personal
property of residents and staff

With the complex purchased and now owned by XXX, plans need to be drawn
up by a draughtsman and approved by local authorities. Quotes will be
required by contractors in order to complete tasks which include the
upgrading of toilet facilities, building alterations, plumbing requirements and
painting. Tasks would also include the erecting of appropriate fencing and
security systems. The installation of fire hydrants and evacuation areas need
to be included in the design. Other basic requirements would include:
Single and Double Bedrooms
Pantry in every Bedroom
Main Kitchen
Dining Area
Television Area
Reading room
Praying room
Computer room
Offices for the staff
Common Toilets
Sports Facilities for Tennis, Badminton etc.


ii. DifficuIties and risks

Difficulties which XXX may encounter with constructing the retirement village
include:
Unreliable contractors
Late completion
Flaw in the design
Death of construction workers
Financial (underestimating the budget)

iii. Product improvement and new products
XXX may extend its service to the elderly by developing facilities for terminally
ill people (ADS victims), as well as introducing a frail care facility in the future.

iv. Costs

The retirement village design should make efficient use of space. Table 5
gives an indication of the building and construction rates XXX can expect to
pay per square meter and a range of basic materials not included in the
building cost. These rates are approximate and vary according to the


specifications of the project. Professional fees and finance costs are
excluded. ShouId we not get a quote from a contractor for 50 new units?.

TabIe 5: Estimated BuiIding costs
Description Size Cost
Building Per Square Meter R 2500 R 3000
Plumbing Per point R 350
Electrical Per point R 450
Granite slabs 1500mm x 600mm x 30mm

2100mm x 600mm x 30mm
R 765

R 1080
Hanging Doors Per door R 350
Skirting's Per meter R 150 R 300
Ceilings Per Square Meter R 120 R 450
Tiling Per Square Meter R 35 R 120
Painting Per Square Meter R 35 R 45
Casual Labour Per day R 80 R 150

Budgeted Expenses
Hard Construction Costs (8,000Sqm @ R 2500)
Foundation, Framing, Drywall, Flooring, Roofing R 581,000
Plumbing, Electrical, Security System R 80,000
Fixtures, Furnishings and Equipment R 50,000
Landscaping R 19,000
Site Work R 18,000


Sub-total Hard Costs R
748,000

Land Acquisition R 875,000

Soft Construction Costs
Architect and Engineers R 31,000
Fees R 4,000
Sub-total Soft Construction Costs R 35,000

Total Expenses R 1,658,000


VI. Manufacturing and operations pIan - SP
Operating cycIe
O Buslc servlces wlll be provlded lurgely by externul vendors munuged by un

lnternul munugement teum
O ddltlonul servlces thut requlre u fee wlll be consldered, revlewed, und
evuluuted.
O euse ugreements wlll follow u 12 month cycle
O

ii. Geographic Iocation

LOCATION
The XXXX area is a visually stunning area with the magniIicent views and a
backdrop, winding down to the picturesque XXXX. It is known as a popular tourist
destination and a photographer`s paradise. Situated a mere 45 km Irom XXXX, the
XXXX is made up oI towns and is within a easy driving distance oI basic Iacilities
and the International Airport and all other major tourist attractions.
XXXX oIIers residents amongst others a shopping centre with associated small
businesses, two yacht clubs, angling club, bowling greens, squash courts, golI
courses, water sports, whale watching, deep sea Iishing, navel sports grounds, lovely
beaches, horse riding, numerous restaurants and bars, etc.
It is important to note that XXX LiIestyle and Retirement Village is located next to
the biggest neighbourhood shopping center in XXXX. A secure pedestrian walkway
leads residents directly to this very convenient Ieature.

FaciIities and improvements

FaciIities
In order to enhance community living and a hands Iree liIestyle, XXXX LiIestyle and
Retirement village boasts a variety oI communal Iacilities, including:
- Restaurant with dining room, lounge, ladies bar, library and boardroom, with cozy


Iireplace;
- Clubhouse with braai-area;
- Laundry area with washing and ironing Iacilities;
- 24 hour medical area

n-home skilled nursing care
Handyman services or computer repair
Day Trips and Tours
Transportation around town within a limited range
n-home assistance with personal care
Fitness, computer and art classes
Walking groups, chess instruction, support groups

mportant Services

1. Specialized transportation services.
2. n-home caregivers provided through the membership
3. Skilled care services.
4. Meals delivered
5. Care manager
6. Home repair program
7. Housecleaning services

Security
SaIety and security has become a very pertinent issue in our daily lives. In this regard
XXXX LiIestyle and Retirement Village is not lacking. The entire development is
Ienced with a 1.8m high wall and/or palisade Iencing and is Iurther secured with
electriIied Iencing. A single manned entrance/exit gate with remote controlled access
Iurther enhances and ensures the saIety oI XXX LiIestyle and Retirement Village
residents.


iv. Strategy and pIans
ABOUT

XXX LiIestyle and Retirement Village is a saIe haven in XXXX. The idyllic town oI
XXX oIIers today`s retirees a saIe haven and quality living in the Iorm oI XXXx
LiIestyle and Retirement Village located in XXXX Road
XXX LiIestyle and Retirement Village provides the ideal platIorm Ior retirees to
access the excellent amenities and liIestyle that the XXxx has to oIIer; an area
abundant Iine dining, great recreational inIrastructure and access to world class
medical care.
XXXX LiIestyle and Retirement Village is the only Iully Iledged retirement Iacility
in XXXX, oIIering all the amenities and services commensurate with quality living
during the retirement years.

ousing

50 units for sale. These units consist oI own title houses which are sold on a plot and
plan basis. A variety oI well designed homes is available, ranging Irom two bedroom
units with single garages to three bedroom units with double garages. Each
purchaser`s individual preIerences are incorporated in the Iinal design oI the unit,
including a choice oI various Iinishes.
It is important to note that these units oIIer maintenance Iree liIestyle since only the
best Corobrick Iace bricks are used Ior construction. The interior design is modern,
yet incorporates the needs oI retirees. Purchasers become Iull owners oI their unit and
as such have unIettered capital growth on their respective unit.
Designs can be personalized to suite each individual purchaser. Quality Iinishes and
the use oI Corobrick Iace bricks ensures that minimal maintenance is required to the
property

v. ReguIatory and IegaI issues

THE LEGAL NATURE OF RETREMENT VLLAGES

When people decide to invest in retirement villages, they consciously or
subconsciously intend to buy a lifestyle and not just a roof to live under, and


developers to their marketing with this in mind. The term retirement village
entails more than just mere accommodation.

The physical lay-out of a retirement village is obvious upon inspection but the
underlying legal nature of the scheme is not easily ascertained. There are a
number of legal structures on which retirement villages can be based, and can
be divided into the following three categories:
1. Schemes where purchasers acquires housing interests in the form of
ownership of the particular unit.
2. Schemes where the housing interests on offer amount to something less
than ownership.
3. Mixed schemes where the developer alienates both rights of ownership and
lesser rights in the form of life rights.

Regardless of the fact of whether a retired person acquires ownership of the
particular housing unit in the retirement village or a right of occupation with
regards thereto, he/she will also obtain the right to the use and enjoyment of
the communal facilities as well as the right to participate in the management
of the particular retirement scheme.

There are measures to minimize risks and to protect retired persons who
decide to invest in retirement schemes, for example financial loss and this is
contained in The Housing Schemes for Retired Persons Act 65 of
1988(hereafter referred to as the Act). The purpose of the Act is to protect the
interests of retired persons in retirement schemes.

The social and economical consequences of an elderly person losing his/her
life savings in an ill-conceived property development scheme are dire, thus
the need for legislative intervention in the retirement housing development
scheme.

The aim of the Act can be summarised as follows:


To provide measures in order to protect retired persons to whom housing
interest in housing developments schemes as alienated. The Act defines a
"retired person" as someone who is fifty years of age or older. t is important
to note that the purchaser of the housing interest need not be a retired
person. This in effect means that any person, regardless of their age can
invest in a retirement scheme. Section 7 of the Act however states that no
person other than a retired person or his/her spouse (except with the written
consent of all the other holders of housing interests in the scheme) may
reside in a retirement scheme. The Act defines a "developer" as to include a
sectional title developer and also includes in relation to a housing interest, any
person or his/her agent, or successor in title, who alienates the interest for the
first time.

The Act defines a "housing development" as any scheme, arrangement or
undertaking:
(a) in terms of which housing interests are alienated for occupation
contemplated in section7, whether the scheme is operated pursuant to or in
connection with a sectional title
development scheme or a share block scheme of or participation in any club,
association, organization or ant other body, or the issue of shares, or
otherwise, but notexcluding a property timesharing scheme or,
(b) declared a housing development scheme by the Minister by notice in the
Gazette for the purposes of the Act
The Act defines a "housing interest" as follows:
Housing interest in relation to a housing development scheme means any
right to claimtransfer of the land to which the scheme relates, or to use the or
occupy that land.
There exist to legal structures underpinning the investment in retirement
schemes. A developer will either sell outright ownership of the particular
housing unit in a retirement scheme to an investor or he/she will offer
something less than ownership , thus namely the right to occupy the relevant
housing unit.


The "right to occupation" means the right of a purchaser of a housing interest:
(a) which is subject to the payment of a fixed or determinable sum of money
by way of a loan or otherwise, payable in one amount or in instalments, in
addition to or in lieu of alevy, and whether or not such a sum of money is in
whole or in part refundable to thepurchaser or any other person or in the
estate of the purchaser or of such persons; and
(b) which confers the power to occupy a portion in a housing scheme for the
duration of the lifetime of the purchaser, but without conferring the power to
claim transfer of the ownership of the portion to which the housing interest
relates.
The "right to occupation" is a misnomer, as it has a wider content than what it
implies. n addition to occupying the relevant housing unit in the scheme, the
retired person also has the right to use and enjoy the common property in the
scheme as well as participate in the management structure of the retirement
village.
http://ctcaa.co.za/data/uploads/papers/15/the%20legal%20nature%20of%20r
etirement%20villages.pdf

VII. Management team
i. Organisation

The responsibilities of

O Appoint and supervise paid staff
O Approve and manage relationships with other organizations and third-
party service providers
O Manage finances with the assistance of the Treasurer
O Manage legal affairs


O Manage relations
O Oversee communications, public relations, and marketing
O Oversee the membership program
O Give direction to technology issues and systems.

ii. Key management personneI
The personnel needed for the XXXX Retirement Village are the following:
O Manager (1)
O Assistant manager (1)
O Village Staff Staff (7)
- Gardener (1)
- General Maintenance (1)
- Plumbing and Electrical (1)
- Security (2)
- Cleaning Services (2)

PersonneI PIan

Year 1 Year 2 Year 3
Manager R36,000 R39,000 R42,000


Assistant Manager R42,000 R45,000 R48,000
Village Staff R110,000 R120,000 R126,000
Total People 9 9 9
Total Payroll R188,000 R214,000 R238,000

iii. Management compensation and ownership
iv. Other investors
None
v. EmpIoyment and other agreements and stock option and
bonus pIans
None
vi. Board of directors
The first Board of Directors will be established in the spring of 2011. The first
Executive Committee will recommend procedures for selecting the
O The 5-member Executive Committee
O Neighbourhood members of the Board.
O The Treasurer.

The size of the board will be at least 6 members.


The first Board of Directors will define its responsibilities, the future
responsibilities of the Executive Committee, and procedures for selecting
future Executive Committees.

The Board of Directors will meet at least 6 times each year.

vii. Other sharehoIders, rights and restrictions
viii. Supporting professionaI advisors and services
The first Board of Directors will invite participation to an Advisory Council
which will be in place to meet by early 2011. Among the organizations and
professions from which the Board of Directors could draw are:
Citizens Association
Advisory Neighborhood Commission
Office of the Ward City Council Member
XXXX Clinic
Jewish Community Center
Neighbourhood Churches
Council on Aging
Senior Services
Gerontologist
Professionals or academics focusing on aging-in-place issues.


VIII. SustainabiIity and impact

IX. OveraII scheduIe

X. CriticaI risks, probIems and assumptions
Retirement village sector
The retirement village sector has been hit by significant adverse publicity
and some controversy in recent years. Some operators have suffered
financial difficulties and have been forced to pursue restructuring options. The
alternative of company failure is often unpalatable to financiers and other
stakeholders due to the significant adverse publicity that would arise.
Some of the more successful operators in the sector have significant
operations in other markets, notably property development activities.

Some of the main legislation that is applicable to the development and sale of
retirement villages / units
The Older Persons Act - Act 13 of 2006 (And the regulations not yet enacted)
The Act on Share Holdings - Act 59 of 1980
The Sectional Title Act - Act 95 of 1986
Development of Housing Schemes for Retired Persons - Act 65 of 1988
Arbitration Act - Act 42 of 1965
http://www.seniorservice.co.za/the-retirement-village-
decisionhtml.html?index_php?view=article&print=1&tmpl=component

How does one define a Retirement village?
Retirement villages are defined as complexes of residential units or a number
of separate complexes of residential units on common land. There are
however special sets of legislation that govern these complexes. n South


Africa, we have different legislation, different legal rights and different forms of
ownership. A common South African generic definition would be that it is an
area of residence or a complex reserved for people who have reached a
certain age and who want to live their lives in a semi-sheltered environment
with like-minded people. This is fine initially. f this were to be the only
"definition of what defines a retirement village, then what is there to stop re-
sales or rentals of units to young family people who live in a different way?
Often you may assume those special facilities like health-care, frail care,
qualified medical assistance, assisted lifestyle or other forms of geriatric
support form part of the package. Although you may not require any of these
facilities currently, no-one is getting any younger and there is a possibility that
you may need them in the future. Are such facilities available?
Possibly an issue which is less often considered is whether the facility can
cater for your partner if he / she is the first one who is confronted with
difficulties requiring special attention or support. Can the village you are
considering cater for this possibility on an achievable financial level? f it has
facilities in co-operation with, for instance, a hospital, how far is the hospital
removed geographically?
Does the village have facilities which enable you to procure meals without
having to cook for yourself?
Does it have a social structure in the form of a social club, recreational
facilities and the like? s there a residents' committee which provides the
possibility of interaction and communication with management?
s overall security within the village / development of an adequate standard,
and are such services included in the levy? s the levy fixed for life or does it
rise annually? f annually reviewable what does the history tell you?
http://www.seniorservice.co.za/the-retirement-village-
decisionhtml.html?index_php?view=article&print=1&tmpl=component

Newer retirement villages are likely to be larger, incorporating upwards of 100
independent living units, hospitals, entertainment facilities, retail and leisure.
With the trend of retirees seeking specially designed housing and lifestyle


environments that offer affordability and security, demand is skyrocketing for
the "six-star retirement village.
All those with a stake in the development of retirement communities and
lifestyles will be participating.
http://www.terrapinn.com/2007/rcmza/

These considerations might make the difference between living in a happy
retirement home or merely passing time in a somber structure formed by up
market materials but with no imbedded soul.

XI. FinanciaI pIan - DB
i. ActuaI income statement
ii. Pro forma income statement
iii. Pro forma baIance sheets
iv. Pro forma cash fIow anaIysis
v. Break-even chart
vi. Cost controI
vii. ighIights


XII. Proposed company offerings
i. Desired financing
ii. Offering
iii. CapitaIization
iv. Use of funds
v. investors' return

XIII. Appendices

References
Source: StatsSA 1996
http://www.statssa.gov.za/census01/census96/html/metadata/Docs/fertility_ud
jo.htm

Stats SA 2007: http://www.statssa.gov.za/publications/P0302/P03022007.pdf

Stats SA: 2010
http://www.statssa.gov.za/PublicationsHTML/P03022010/html/P03022010.ht
ml

Grant Thornton, 2007:4. ndustry ntelligence Unit - Aged Care


rllp://WWW.grarllrorrlor.cor.au/l||es/|rduslry-|rle|||gerce-ur|l-apr||-200Z.pdl

Senior Service, 2010
rllp://WWW.ser|orserv|ce.co.za/|rdex.prp?opl|or=cor_crsrea|ly&crsrea|ly=user&ller|d=13&
acl|or=searcrresu|ls&prov|rce=0aulerg&lypes_ol_care[|=lrdeperderl20||v|rg&pc|ass[|=1,

Van Eyk, R (2007): South Africa: Retirement Homes are becoming Dearer, 9
November 2007, http://allafrica.com/stories/200711090783.html

Aardt, CJ and Coetzee, M (2010): PERSONAL NCOME PATTERNS AND
PROFLES FOR SOUTH AFRCA, 2009, Date of issue: 2010-02-24
rllp://WWW.ur|sa.ac.za/corlerls/lacu|l|es/ers/docs/Press38Z_2010.pdl
rof C! van AardL
8ureau of MarkeL 8esearch
unlverslLy of SouLh Afrlca
C 8ox 392
unlSA
0003
1el (012) 429 2940
lax (012) 429 3170
Lmall vaardc[[unlsaacza
rofess|ona| enqu|r|es
Mrs M CoeLzee

Article By Jacques du Toit 06 Jul 2006
Changing Trends in ResidentiaI Living
(http://www.privateproperty.co.za/news/industry-news/changing-trends-in-
residential-living.htm?id=18, p.1, 2 October 2010)

2010 RETREMENT Housing Report, by Knight Frank,
http://www.knightfrank.co.uk/residential/institutional/documents/pdfRetirement
Report.pdf)

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