How Retirement Village Owners Approach a Commercial Mortgage
Many retirement village operators lease their head office, community centre, care suites or the land under the village. Owning those premises turns rent into equity, anchors your brand to a site residents and families already trust, and steadies long-term cash flow. At Ardent Capital Group we speak with operators about this kind of commercial purchase often.
Ardent Capital Group is a specialist in commercial mortgages for retirement village operators across Australia. Our team helps you move from tenant to owner and gives you clear lending advice on structure and strategy. If you are weighing a purchase, our retirement village property loan team is a good place to start.
- Access finance from $100K to $10M+, structured for owner-occupiers and investors.
- Over $500M in funding facilitated across a decade, for more than 1,000 borrowers.
- Coverage across Sydney, Melbourne, Brisbane, Gold Coast, Perth, Adelaide, Canberra, Hobart and surrounding regional towns.
- Experience across freehold going concern, strata title community facilities, and sites with ground leases or long-term management agreements.
Why retirement village owners choose to buy
A retirement village combines real property with an operating business. Your community centre, administration building, care suites, kitchens, laundries, plant and compliance systems represent a material sunk cost. Ownership ties that investment to a title you control and aligns future capital works with an asset on your own balance sheet.
Location connects your resident catchment to the address. Proximity to hospitals, GPs, retail and transport supports enduring demand. Villages typically carry long resident tenure and stable occupancy, which underpins revenue such as recurrent charges and deferred management fee cash flows. Mortgage repayments build an owned asset over time, which can support future expansions or refurbishments.
Key drivers for ownership:
- Control over village presentation and compliance programs, from fire safety systems to kitchen and laundry equipment, without landlord constraints.
- Long-term cost certainty where rent escalations run above revenue growth, so you can plan multi-year capital works.
- The ability to leverage your equity in the premises to fund new independent living units, service apartments or amenity upgrades.
- Stronger value on exit, where the freehold and going concern can sell together.
Where buying may not suit:
- A short remaining head lease or a known relocation in the next few years.
- Capital needed for an imminent stage expansion, clinical upgrades or marketing to lift occupancy.
- An uncertain planning position, for example pending rezoning or density approvals that materially affect site value. The decision sits with you.
How lenders approach a retirement village purchase
Deposit and LVR. Owning the premises is more within reach than many operators expect. For owner-occupiers, the real property component can gear up to around 80 per cent of value with the right lender, which keeps the deposit near 20 per cent and leaves more capital in the business. Retirement village assets carry specialised elements, so some lenders assess the going-concern and care components more conservatively; matching the file to a lender that understands the asset is where the number is set. Where additional security is offered, such as another property in the group, some borrowers reduce the cash deposit further.
Loan term and structure. Bank terms commonly run 10 to 15 years, and non-bank lenders can extend to 25 to 30 years. Structures include principal and interest for steady repayment, or interest only to protect cash flow during refurbishment cycles or new stage releases. Terms can be matched to the asset's economic life and your capital works timeline.
Security and serviceability. The property is the primary security. Lenders assess serviceability on historical and forecast cash flows, including recurrent charges, deferred management fee inflows and the timing of outgoing refunds. They review compliance costs, staffing for any care components, insurance and planned capital works to confirm the debt is covered.
Owner-occupier treatment. Lenders generally view owner-occupied premises favourably, given the alignment of incentives and lower vacancy risk. Within policy this can support sharper pricing and a higher LVR, subject to serviceability, lender appetite and approval.
Ownership structures a lender sees
Many retirement village operators hold the freehold in a separate company or trust, then lease the premises to the trading entity on commercial terms. A lender reads that inter-entity lease as the serviceability line, so the rent needs to be arm's length and at market, with clear responsibility for repairs, compliance, capital works and insurance. Ring-fencing the property this way also keeps a future sale or succession simple, which lenders and valuers view well.
With a background in financial planning, Nick and the Ardent Capital Group team can map an ownership structure that suits the finance, then work with your accountant to confirm the tax and legal detail before anything is locked in.
Holding the freehold in an SMSF. Commercial premises generally qualify as business real property, so a self-managed super fund can hold the freehold under a limited recourse borrowing arrangement and lease it to your operating entity at market rent, usually through a bare (custodian) trust. The appeal is asset protection and the fund's tax settings; the trade-offs are borrowing limits, liquidity for member benefits and strict compliance. Our work is the lending, and the tax, super and ownership questions sit with your accountant and, for a fund purchase, a licensed SMSF adviser to confirm before contracts are signed.
The lender's checklist
- Business financials and cash flows, including occupancy, the deferred management fee collection profile, outgoing repayments, care revenue where relevant, and margin stability.
- Serviceability, stress-tested against interest rate buffers and planned capital works such as fire upgrades, kitchen and laundry equipment, lifts, call systems and solar.
- The property and valuation, covering title, planning approvals, environmental and building compliance, the condition of community facilities, and whether the valuation is freehold going concern or land and buildings.
- Deposit and equity position, including any additional property offered and how you plan to leverage your equity across the group.
- Lease and occupancy, whether it is your internal lease to the trading entity or external tenancies on site, and the remaining term with options.
A specialist broker who understands retirement village funding standards, valuation methods and lender appetite reduces friction and surfaces stronger structures.
One way this can play out
This is an illustrative scenario that shows the kind of situation we can assist with, and how the thinking might run.
A regional operator runs a 120-unit village under a long-term management agreement and has the chance to buy the freehold of the community centre, administration building and plant house for $6,800,000. Rent currently sits at $420,000 a year with annual 3 per cent increases.
Options we would map:
- Acquire in a property trust and lease to the operating company at market rent.
- Acquire within an SMSF under a limited recourse borrowing arrangement, leased to the operating company at market rent.
- Acquire in the trading company to keep cash flows simple during a two-year refurbishment cycle.
Structures we would weigh:
- A senior mortgage on the property, a 20-year term, and principal and interest after a 24-month interest only period aligned to staged kitchen, laundry and fire panel upgrades.
- Additional security over a director's investment property to lift the effective gearing and reduce the cash deposit, with a top-up against a medical centre held in the group to help fund the deposit and stamp duty.
How we would approach it: we would size the senior facility on interest cover using recurrent charges plus stable deferred management fee flows, value the asset on a freehold going concern basis, and map the covenants, costs and repayments so you can compare each path. The figures above are illustrative, not confirmed outcomes; the structure and final numbers would be yours to confirm with your accountant.
Other lending we can help with
- Asset finance for retirement village equipment. Fund nurse call and duress systems, commercial kitchens and laundries, backup generators, lifts, mobility vehicles and solar arrays for common areas. We can arrange retirement village equipment finance alongside the property purchase.
- Fit-out and refurbishment finance. Stage upgrades to community centres, fire systems, accessibility works, HVAC and landscaping without disrupting resident services.
- Working capital. Manage deferred management fee timing, outgoing refunds and seasonal cash dips during refurbishment or marketing. Ask us about working capital for a retirement village when fee inflows and refunds fall out of step.
- Business overdraft. Headroom for resident turnover spikes, insurance excess events or short-term utility and maintenance surges.
- Refinancing and debt consolidation. Reset covenants, align repayment with asset life, and consolidate multiple facilities to simplify reporting.
- Construction and renovation. Fund new independent living units or serviced apartments, community facility extensions and essential infrastructure such as roads and lighting.
- Business or premises acquisition finance. Support buying a neighbouring parcel, buying out a partner, or acquiring an established village's freehold or management rights.
Owning the premises can free equity over time, which can support future stages or a refinance to consolidate facilities.
Talk to a retirement village finance specialist
Ardent Capital Group specialises in commercial mortgages for retirement village operators. We arrange and structure finance around how you intend to hold and occupy the property, whether freehold going concern, strata community assets or sites with ground leases. Our team services Sydney, Melbourne, Brisbane, Gold Coast, Perth, Adelaide, Canberra and surrounding metro and regional areas.
This is the kind of purchase where the structure and the strategy matter as much as the rate. We give operators clear advice on both, so the finance supports the wealth you are building and the years ahead, not just this settlement. If you are weighing a retirement village purchase, we would be glad to talk it through.
Questions we're often asked
What deposit do I need to buy retirement village premises?
For owner-occupiers the real property can gear up to around 80 per cent with the right lender, so plan for a deposit near 20 per cent. Specialised going-concern and care elements can be assessed more conservatively, which matching the file to the right lender addresses.
Will lenders count deferred management fee income and outgoing repayments in serviceability?
Yes. Lenders model deferred management fee inflows, outgoing repayments and recurrent charges, then apply buffers to confirm interest cover and headroom for capital works.
Can an SMSF buy the village freehold and lease it to my operating company?
In many cases yes, where the asset qualifies as business real property. The lease must be at market rent and the fund must meet the borrowing and compliance rules. Your accountant confirms the super and tax detail.
Do lenders require a freehold going concern valuation?
Often, for integrated villages. Some purchases assess land and buildings only, especially for strata community facilities or where management rights sit separately.
Can I get interest only while I refurbish community areas?
Many lenders offer an interest only period to protect cash during refurbishments or new stage releases, then switch to principal and interest.
How are ground leases treated?
Long, secure ground leases can be funded with adjusted LVR and valuation settings. Lenders focus on the remaining term, rent review mechanics and consent provisions.
How long does settlement take for a retirement village purchase?
Four to twelve weeks is common, allowing time for valuation, legal due diligence on titles and agreements, and credit approval. Timing depends on the complexity of the purchase.
Written by
Nick Chong
Managing Director, M.AppFin, Dip. Mortgage Mgmt
Nick holds a Bachelor of Agricultural Economics, a Master of Applied Finance and an Advanced Diploma in Financial Planning. He founded Ardent Capital in 2016 after more than a decade in financial planning and mortgage broking. For the past ten years he has led a team of finance specialists, mortgage advisers, brokers and credit analysts, all working to secure optimal outcomes for clients and always acting in their best interests. The team brings both a qualitative and a quantitative approach to every deal.
