From the outset, LDK has invested heavily in specialist staff and governance, otherwise you can forget private aged care, says CEO Byron Cannon, as Anglicare Sydney acquires 50%.

Private aged care is not a business model for the timid. Four years ago, LDK began its journey with four staff and a whiteboard. Founder and Director Paul Browne and ex-lawyer, now CEO, Byron Cannon, knew there were key elements they had to invest in heavily from the outset to make the model work: strong care governance and people.

Byron recently told our DCM/Health Metrics webinar ‘New Models of Aged Care’, “The operational burden is a lot heavier in those first few years as you grow.”

They seriously overinvested in strong leadership from the first month.

“We took the position very early on that we needed to have the full deck of care and, also, a full deck of hospitality for residents.

“If we couldn’t deliver quality care outcomes and an amazing hospitality experience, we could forget about it,” Byron said.

“We knew we had to subsidise that to deliver the quality that we needed.”

Because LDK was establishing a new model of seniors living, systems had to be built from scratch, requiring substantial investment, and there was a commitment to hiring “the best [people] in the business”.

Today, the business’s “corporate overheads are disproportionate to the villages that we are operating,” Byron said. “The business needs scale and needs to continue to grow, and we’ll incrementally grow the corporate overhead.

“We need to build base camp first.”

Investing heavily in people who will create the right culture is “critical” to the success of the business, said Byron.

“In testing times, like Covid, that’s when you see a strong culture amplify through the staff, but also with residents.

“It’s ridiculously important. We invest a lot of time and energy in our people,” Byron said.

Care staff report to non-clinical and experienced leaders recruited from outside the sector, allowing clinicians to deliver “the best quality of care” without having to worry about leading a team or operational distractions.

This focus on staff at the outset meant that within the first six months of the group’s operation, LDK had established a team of around 20 with the experience and skills one would not normally associate with a start-up.

In less than three years LDK built, operates Greenway Views in Canberra (which is nearly sold out), purchased The Landings on Sydney’s leafy North Shore, and has another village underway in Canberra – Amberfield, with over 80% of Stage 1 sold down already before construction has commenced. The operator is in advanced discussions on a further site in Canberra, and is canvassing opportunities in Sydney and South East Queensland.

The investment has been validated with very high satisfaction scores from both residents and staff, with sales rates and pricing significantly above market average.

Greenway currently has around 320 residents and 200 staff delivering more than 5,300 hours of scheduled care per month, along with a strong focus on hospitality and vibrancy. By comparison, a traditional retirement village with that number of residents might have three staff.

The Private Care Model

LDK’s communities operate under the Retirement Villages Act. With its ‘One Move Promise’, LDK residents can receive home care services in their apartment which means they can remain in their apartment until the end of their lives.

“A very large majority of our residents will receive palliative care and pass away in their own home,” said Byron.

If a resident’s circumstances change, for example due to memory or mobility issues, they can downsize into an on-site ‘care hub’ at Greenway Views and future Villages, which is a more concentrated area of care with more staff, but still studios, one or two-bedroom apartments.

LDK uses a ‘money in, money out’ model for the property side of the transaction – if residents pay $1 million to buy their apartment, they receive $1 million when they leave. Residents then commit to a village membership fee per apartment where they receive a number of benefits, which replaces a DMF. Weekly fees are capped for life.

Membership fees, approximately $200,000 up front at Greenway Views, can be paid up front, over time or deferred and paid on exit. At Greenway, 40% pay up front, while at The Landings, 75% choose to pay up front.

LDK provides meals and care at cost. Residents can use home care packages or other government funding to offset costs where appropriate.

“Bringing forward the cash flows is particularly helpful in growing a village, where the operational burden is a lot heavier in those first few years,” Byron said.

Membership fee revenue, increasing capital growth, and development profit from sell down are the cash flow drivers for the business model and allow LDK to invest in the delivery of its strong value proposition, driving consumer demand.

15 Minute Care

LDK operates under a “strict and disciplined regime as far as the delivery of care is concerned… clinical case managers will meet with the residents and regularly review their care plans”, Byron said.

Care is delivered in 15-minute increments, which requires careful rostering but is more efficient than a lot of home care services; for example there is minimal travel time and 24/7 care can be delivered.

When care is required, residents can pay for it, either privately or through a home care package, at cost. It can also be paid out of their equity on exit.

In future, the government has indicated that home care support may increase from the current high of a Level 4 package of $53,000 to as much as $90,000, it has been predicted.

Depending on their care needs, new entrants to LDK’s villages may use fewer of the care services, but as needs change, usage ramps up. When LDK took over The Landings, no residents were receiving care and services from LDK. Today, that figure is about 33%, but numbers are increasing with nearly 50% of residents over the age of 85. At Greenway Views, 62% of residents receive care and services.

LDK has found a ready market for its private aged care model in Canberra. It is educated and affluent.

The Greenway building was originally a government office block of about 45,000 square metres. LDK repurposed it into 327 apartments.

“We looked at purchasing that from the previous owner, which was Cromwell Property Group. They liked our model and that actually led us into going into business with them. They've just only recently exited,” Byron said.

LDK is also in discussions on a third Canberra site, hoping to capitalise on its strong brand in that market. This brand does not only extend to customers, but also to workforce. “We've got good workforce branding and capability (in Canberra). It’s an ideal opportunity for us to capitalise on that,” Byron said.

Because Canberra is considered a regional area from a visa holder perspective, labour supply is an advantage there too.

Regardless of the caution LDK took in the early days, Byron said the team has made mistakes along the way. An attitude of “embrace change and fail fast” has been called for at times. This is a significant enabler for our innovation.

“I am certain that we have made more mistakes than probably any other operator,” Byron said. “I’ve learnt more in the last five years than I have in my lifetime.”

As a new model of aged care, Byron said it’s been necessary to have a “very strong experimental mindset and a very fundamental belief in your purpose, passion and values.” LDK is proud of its ‘Love, Decency and Kindness’ values.

The minute you stray outside your values, “that is where you start to run into trouble,” Byron said.

“Make mistakes but come back to your values. Have the resident first and make decisions based on that, and you’ll be fine.”

What is private aged care?

Private aged care is aged care delivered under a retirement village contract supplemented with the use of home care services to deliver a ‘continuum of care’ through the resident’s life.

It’s a concept that has been developed and championed by Paul Browne. Across Australia, operators, particularly in the Not For Profit sector, are looking at assisted living as a form of private aged care, offering apartments in a retirement village setting and a continuum of care through home care services, including palliative care.

In October, NSW’s largest village operator, Anglicare Sydney, purchased 50% of LDK, committing to keep the operator independent but wanting to fast track its own private aged care learnings.

LDK to grow 3,000 RV homes

As it targets growth, LDK hopes to reach 3,000 apartments in the medium term. Site selection is based on demographics, rather than geography.

“PwC were engaged to provide us with hotspot locations (based on our model) in the Greater Sydney, ACT and South East Queensland regions so if appropriate projects pop up, we will know relatively quickly if they will work for our model or not.

“We apply a rigorous lens over the identified criteria when selecting sites to give each project the best opportunity to succeed with our model. It also helps us to weed out any sites that won’t work, very quickly.

“We will focus on Canberra and Greater Sydney first to leverage off our brand presence from a consumer/employee perspective, and to provide economies of scale. Then, as opportunities arise in SEQ, will also look at that.”