Expect lower returns from aged-care sector, says Graeme Prior

Covid has been a major challenge for aged care.

Investors in the aged-care industry have to accept long-term lower returns as compliance costs rise, even well after the Covid pandemic eases, one of the industry’s most successful owners claims.

Graeme Prior, the chief executive of Perth’s privately-owned Hall & Prior Health & Aged Care Group, is on the expansion trail having last week opened the company’s 13th aged care facility in NSW, a $70m 111-bed property at Penshurst.

Hall & Prior has about $650m worth of aged care properties and employs about 2400 specialist staff who care for 1500 elderly Australians at residential aged care homes, and another 1000 people through its home care program in WA.

Privately owned by Mr Prior’s family and his co-founders the Hall family, the business has 30 facilities, having been established in 1994 and operates in WA and NSW only.

The Penshurst facility is designed to be part of its wider community, with the general public able to access amenities that include a wellness centre providing physiotherapy, restorative care and exercise rehabilitation, and a specialist health clinic with a swimming pool and gym.

Mr Prior said Hall & Prior would like to build or acquire more facilities to expand the business in the future, as operators exit the industry after it was the subject of a two-year royal commission.

“There will be consolidation in the sector. You will see less players and a lot of homes close down. How we go about this is going to be key. These are vulnerable people and all of a sudden their home is closing. It can be terrifying.”

As a result of this and an increasing demand for care at home for longer rather than moving to aged care homes, Mr Prior said investors in the sector would face lower returns over longer-term periods.

“There needs to be the right metrics around investment for the long-term, it needs to be highly ethical and investing for the right reason in care as opposed to speculation in property.

“You’re talking the length of the horizon across two, three or four decades and really focused on the people in your care, not just the return.”

He said the aged care sector had “reached the crossroads” and that in France, Britain and parts of Europe a wider care sector had emerged across “aged, clinically based home and community (care), mental health and disability. It is fairly siloed in Australia but hopefully we will harmonise and let the federal government manage the whole thing.”

This would mean bigger players becoming involved across the entire industry, Mr Prior said.

He described Covid as “the biggest challenge we have faced in 30 years” and that his sector was only halfway through having to deal with its effects, including a reputational hit in Victoria where there were hundreds of deaths last year due to Covid outbreaks in homes.

“Worldwide, the sector has lost a lot of its credibility. The death rate in the long-term care has been unacceptable. In Australia we have the 3rd to 5th best record for fatalities in aged care due to Covid. The Victorian experience tells you if you lose your vigilance for one day, then people can die on your hands. ”