Eastcliffe Retirement Resort is a jointly owned business venture subject to a partnership agreement between Protac Investments Ltd, a wholly owned subsidiary of the proprietors of Taharoa C Block and Ngāti Whatua o Orakei Māori Trust Board.
Taharoa C Block is an Incorporation set up under Te Ture Whenua Māori Act 1993 with its registered office in Hamilton. In 2004 the entity had a total of 1,564 shareholders and a total of 5,341,957 shares. In 2004 the executive committee recommended a dividend of 24.5 cents per share. The Incorporation undertakes its investment activities through Protac Investments Ltd, which has its registered office in Auckland. In 2004 Protaccontributed $1,306, 474 to the group profit of $2,173,719.
Ngāti Whatua o Orakei is a hapū of the wider Ngāti Whatua iwi located in and around the Tamaki isthmus and Auckland city. Hapū autonomy is recognised in Te Runanga o Ngāti Whatua Act 1988 and the Orakei hapū is represented on the tribal Trust Board, Te Runanga o Ngāti Whatua.
The Ngāti Whatua o Orakei Māori Trust Board was originally set up pursuant to the Māori Trust Boards Act 1955. It now has its own separate legislation, namely the Orakei Act 1991. Section 19 of the Orakei Act 1991 provides a mandate for the Orakei Trust Board to act as a sole authority on behalf of Ngāti Whatua o Orakei on any matters that derive from the hapū's customary authority in the Tamaki isthmus.
Protac first became aware of an opportunity to do business with the Orakei Trust Board when an area of land owned by the hapū was up for tender on Kupe St in Auckland. Protac was aware that there were a number of other interested parties in the property and that Orakei Trust Board wanted to develop the land on Bastion Point.
In the mid-1990s Protac approached the Orakei Trust Board with the concept of developing a retirement village on Trust Board owned land. The Orakei Trust Board was excited about the concept and after further discussions agreed to enter into a joint venture arrangement to develop the site with Protac.
Protac had extensive experience in property development and management of large projects. It proposed that the joint venture entity lease the development site from Orakei Trust Board and that Protac be the principal investment backers for the project. The resulting process saw Protac arranging the funding for the project and getting the expertise together to carry the project out.
Protac knew from its commercial experience that locating a retirement village in close proximity to both a large high net worth elderly population in the Eastern suburbs and a good management structure would be key factors for success. The land provided key features for a retirement village proposition site, such as close proximity to high value real estate and an elderly population.
To establish the partnership, Protac and the Orakei Trust Board formed their own wholly owned subsidiary companies, Eastcliffe Retirement Care Ltd and Orakei Retirement Care Ltd respectively. These two companies form the Eastcliffe Retirement Care Partnership (the Eastcliffe Partnership) under an agreement subject to the Partnership Act 1908. This partnership agreement governs all matters relating the Eastcliffe Partnership business between the two parties (ie Eastcliffe Retirement Care and Orakei Retirement Care).
The purpose of the Eastcliffe Partnership is to produce a high-end product providing high quality care in the retirement industry. As a result, the resort is a high quality complex that continues to enjoy a first-rate reputation within Auckland's prestigious Eastern suburbs.
The Eastcliffe Partnership began building the main complex in 1999. It is now completed and comprises 67 serviced apartments and a 28-bed hospital. The retirement village was expanded in 2001, when the Partnership began building an additional 33 independent townhouses and apartments. These are nowcomplete and the Partnership is currently building two apartment blocks comprising 22 independent single and two bedroom apartments along with three penthouses.
Protac's research into the retirement industry began prior to the 1998 Partnership forming. Protac undertook extensive industry research over a two-year period and had collected an array of both qualitative and quantitative information on the sector. This was fundamental in making investment decisions.
The Eastcliffe Partnership relied on the research and due diligence process undertaken by Protac. The Partners canvassed a number of investmentopportunities in the retirement industry before proceeding with the Eastcliffe development. The location of Eastcliffe on such a prominent Auckland site required careful consideration of the target market, management issues and the type of services to be provided. Although the site would be a key success factor in providing a retirement village close in close proximity to local residents in the Eastern suburbs there were a number of hurdles to overcome. These included matching the product, health services and management to a very discerning market and also overcoming prejudices related to both Māori ownership and security of land tenure.
The Eastcliffe Partnership currently operates under the Securities Act 1978. This is because residents are not able to purchase a freehold title but own an occupation licence that enables a lifetime interest. The prices for occupation licences vary depending on size and location, but range from $250-850k. The Partnership recently sold a penthouse unit for $1.4 million. This is the most expensive retirement unit sold so far in New Zealand.
In addition to the license fee, the licence holder living in independent units is required to pay a regular (usually weekly) fee of $140 per week to cover such communal costs as rates, insurance, maintenance and repair. Residents receiving extra services such as meals and cleaning pay up to $280 per week. Anthony Wilson, the Executive Director of the Eastcliffe Partnership, says that the venture has exceeded all expectations and has provided a successful business asset for each of the partners. The Partnership is now expanding the venture, with the acquisition of another site at Glen Innes. The aim is for this new project to provide units for the middle income range. When it goes ahead it will be one of the largest retirement villages in New Zealand with approximately 400 units.
Both participants in the Eastcliffe Partnership have other commercial interests, which are successful in their own right. For example, Protac has diversified business interests owning the Carlton Hire Group as well as significant property assets in Australia. Protac is completing a development on the Gold Coast of Australia consisting of 163 apartments in 3 tower blocks.
The Orakei Trust Board has another wholly owned subsidiary company called Ngāti Whatua o Orakei Corporate Limited, which is set up as the business arm that seeks to grow the commercial tribal assets of Ngāti Whatua o Orakei.
The partnership agreement provides for a governance board that comprises four seats. Two are appointed by Protac and two by the Orakei Trust Board. Protac provides both the management and financial expertise to the Eastcliffe Partnership. Ngāti Whatua, through its Chief Executive, Tiwana Tibble, and Board representation, provides ongoing input into the strategic activities and operational issues of the Partnership. The Executive Board member responsible for the day-to-day operations is the Executive Director, Anthony Wilson. It is his job to maintain the business and oversee any project developments being undertaken by the Eastcliffe Partnership. Anthony is responsible for sourcing additional expertise, on a contract basis, such as architects, engineers, town planners and quantity surveyors. Protac's commercial expertise has assisted in structuring the business to provide meaningful business information to the partners.
The Eastcliffe Partnership does not have an induction process for new directors in place. Anthony understands that succession is a key area for further work and when the need arises a process will be created and implemented. The size of the Board with two representatives from both Protac and Ngāti Whatua provides relatively quick decision making and input from both parties. To be on the Eastcliffe Partnership Board, a person must hold a directorship in one of the parent companies.
The Board has one clear objective, of making a profit – and so far Eastcliffe Partnership has generated a substantial profit for its partners. The Board is reviewed on the business success of Eastcliffe Partnership and the profits it has made. At the end of each year, the Eastcliffe Partnership undertakes its own financial reporting for the retirement village and profits and losses are shared equally between the partners. The Board meets quarterly to look at reports relating to the business, especially the development and progress of projects. For meetings the Board is supplied with:
The Village Manager responsible for staffing and sales has delegated authority in respect of capital expenditure and participates in the creation, review and agreement of budgets. The Board holds a half-yearly meeting with all residents to deal with general business and any conflicts that may arise. The residents have an informal body set up which provides a conduit for residents' concerns to be brought to the attention of management. This body meets regularly with the senior manager of the premises.
The Board also values the relationship between the Eastcliffe Partnership and the City Council given the importance of the planning and district rules. The Board's relationship with the City Council is developed on a project-by-project basis, which is fostered by meeting with the Chief Executive of the Council to inform him of, and to receive feedback on, proposed projects. The most recent example is the relationship being built up around the Glenn Innes retirement village site as it goes through its consent process. Eastcliffe village also has many neighbours and it is imperative for the Board to retain good neighbourhood relations by visiting them and keeping them informed of the various stages of development.
With respect to meeting the social and environmental objectives of the Partners, the Eastcliffe Partnership leaves these responsibilities to the parent entities, including their obligations to inform their shareholders on the progress of the business.
The Eastcliffe Partnership has not carried out any significant strategic planning since its inception in 1998. The Executive Director, Anthony Wilson, points out that they are still in the "doing" part of the project. For Anthony, successful strategic planning relies on more than good ideas and plans. He believes that to succeed you must be methodical and experienced with the processes involved as you are not going to get through the process of setting up a business venture by simply reading a text book, it requires experience. Anthony points out that with business there is not much between success and failure so with any business idea you need to have an understanding of all those areas you are dealing with or the ability to source that expertise from specialists to plan effectively.
Resource management issues, financial management and legal expertise were areas Eastcliffe Partnership found challenging. However, the Eastcliffe operations place less reliance on external commercial expertise as it is available within the Partnership. Outside expertise is sought for other areas that tend to be technical, such as design of architecture. New opportunities and ideas are identified and submitted to both the Eastcliffe Partnership and parent entities for consideration. The key areas for discussion and consideration are the financial parameters and profitability. The Board makes final decisions regarding new ventures and changes to existing plans.
Conflicts of interest are declared in the minutes when they arise and the Board makes a decision as to whether the director with the conflict should abstain from the decision-making process. To date there have been no conflicts. The Partnership Agreement also provides a disputes resolution clause. Eastcliffe Partnership appoints an independent statutory advisor to act as a trustee for the licence holders, as provided for in Part II of the Securities Act 1978. In any disputes the statutory advisor will act as the adjudicator.
Eastcliffe Partnership has ensured that it has legal documents in place to provide for everyone's rights on all matters relating to the organisation. For example, there is a management agreement operating between Eastcliffe Management Services Partnership and the Eastcliffe Retirement Care Partnership. The Eastcliffe Management Services Partnership leases the hospital area from the Eastcliffe Retirement Care Partnership. The hospital is required to meet standards of services in its certification under the Health and Disability Act 2001. The hospital is audited on how it meets standards such as the training of staff, the level of care being provided, keeping reports and the dispensing of drugs. Eastcliffe Partnership also undertakes a comprehensive audit for ACC purposes.
The Eastcliffe Partnership has its own health and safety policy and as a condition of any contract, the party providing the services is required toprovide Eastcliffe with a copy of their health and safety policies. Eastcliffe Partnership also has a human resources manual.
Under the Securities Act 1978 the Eastcliffe Partnership has an obligation to disclose to the licence holder all matters of interest that relate to its operations. It was decided that these disclosure provisions would be too onerous for the Eastcliffe Partnership and therefore that it was better to have all employment and hospital matters in a non-disclosure category.
To do this the Eastcliffe Partnership had to separate the management of the premises from the physical premises subject to the licence holding. Therefore, Eastcliffe Partnership has a management contract with Eastcliffe Management Services Partnership to provide these services for a set fee. This partnership arrangement is between two companies, namely Management Services Ltd, which is a wholly owned subsidiary of Protac and Orakei Management Services Ltd, which is a wholly owned subsidiary of Orakei Trust Board.
A further reason for separating the operations from the Eastcliffe Partnership was that managing staff can be a difficult part of the business. Anthony explains that "by contracting out the management services you are bringing in the expertise you don't have, and are minimising business risk when it comes to staffing issues".
The Management Partnership leases the hospital area from the Eastcliffe Partnership and employs staff for maintaining the premises and business of Eastcliffe. There are currently 62 staff, including parttime workers and all staff have an employment contract. The Eastcliffe Management Partnership has a management plan in place, which outlines its key targets.
Accordingly, key objectives are designed and set for senior management. The Management Partnership has an in-house accountant.
The kitchen operations are also contracted out. The Eastcliffe Partnership provides the cooking facilities on site, and the contractor purchases all consumables and the staff.
Since the inception of the business, the village management of Anthony and Cherie Garea, have created a number of business systems. These systems are continually evolving as Anthony and Cherie are always looking for ways to improve the systems they have put in place, especially for accounting and reporting. Anthony finds this is an ongoing process with respect to perfecting their financial reporting ability. The easier it is to account for things, the easier it is to provide the Board with meaningful information in a timely manner. Anthony has found that once you have reporting systems in place you no longer need to rely on any one individual to operate and manage the business. This provides a safety net for when key staff leave the business and it ensures that work can continue.
On the 10th day of each month the Executive Director is provided with details of the income, profits and the costs of operations. This information is used to update operational matters, aid planning of operational activities and provide evidence for requests to the board for new developments.
Last modified: 2/06/2011
