Primelife / Babcock & Brown Communities reveal their income ratios

Published on

Primelife’s ‘parent’, Babcock & Brown Communities, has published on its web site its ‘Annual Results Presentation and Update’, including next year’s profit projections. On the last page are their forward assumptions, which are quite revealing, especially:
• average ILU turnover is 11 years
• average Capital Growth is 5.0%

This compares with the popular industry assumption that ILU’s will turnover on average every 8 years. If 11 years is closer to the mark, then operators will have to wait up to 40% longer for their DMF payout than may have wagered on.

5% compound capital growth however is a very healthy figure compared to other residential real estate. It is also healthy for Primelife. Over 5 years this will increase the price of a $350,000 ILU as follows:
Year 1 $367,500
Year 2 $385,900
Year 3 $405,000
Year 4 $425,400
Year 5 $446,700 An additional $96,700 over 5 years

This equates to a 27.6% increase and one assumes a larger base to calculate the DMF. More interesting is their confirmation that demand for village accommodation will continue to grow in strength compared to the domestic