Investing In Specialist Disability Accommodation (SDA)

Our next speaker is Mr James Bruker, CEO of Social Impact Funds Management.

James has more than 20 years of experience in multinational publicly listed companies and has a history of navigating complex regulatory environments and negotiating financial outcomes that benefit all parties.

James has been responsible for negotiating commercial agreements between large global corporations, including reinventing global procurement strategies.

Now, the SIFM Disability Homes High Yielding Growth Fund number two has a target return of 10 to 15% rents paid by the NDIS and index net annually by CPI.

Units in a fund represent beneficial ownership of the underlying assets of that fund.

The unit trusts will own a combination of SDA apartments and houses throughout Queensland.

The presentation title today is Investing in Specialist Disability Accommodation, SDA.

Welcome, James.

Thank you.

Who is SIFM?

We're a social impact investment fund, which is about making investments intended to have a definable and measurable social impact on the community.

We basically focus on sophisticated and institutional investors, which fund purpose-built SDA houses, units of apartments, villas for participants in the National Disability Insurance Scheme that have extreme functional impairment or very high support needs.

SIFM is vertically integrated with our SDA provider, NDISP, who's the largest provider in Australia.

We have a diverse management team across multiple facets, and the SIFM fund is targeting over 1.1 billion of investment over the next three years.

Our SIFM Real Estate Investment Trust, which will be the largest national group of SDA properties, is expected to list on the ASX early 2026.

What is an SDA property?

Well, it's estimated that 28,000 people will require a specialist disability housing to be built and it's growing every year.

As a result of the high demand and the under supply of SDA, SDA eligible persons are forced into inappropriate housing and aged care facilities, hospitals, hostels, boarding houses until SDA's are available.

The federal government is committed to 700 million annually in payments to SDA property investors for the next 20 years, which is CPO annually.

Last year, only 250 million in SDA funding was spent on rental payments for SDA property investors, which is only 0.6% of the NDIS expenditure.

The SDA market is widely considered the largest social impact investment opportunity in Australia, and estimated at five to 12 billions needed to be invested.

The SDA market asset class has quickly grown to be worth over 2.5 billion since its inception since 2016.

Demand being greater than supply and rental funding being provided by the government, SEA investments are risk adjusted in a sustainable investment opportunity that has a measurable impact on our lives for people with disabilities.

Who is NDISP?

Well, they're the largest private SEA provider who takes lease over the property for 20 years.

Participants in the NDIS receive funding to pay for their accommodation as part of their plan, which is typically managed by a plan manager.

The funding is paid to the SDA provider for the cost of accommodation.

NDISP works with plan managers, other NDIS providers, as well as directly with NDIS participants to provide high quality properties, which participants are happy to call home.

They have a team of architects, town planners, and relationship managers as well.

So their pipeline, they've constructed over 160 properties, over 240 registered participants,

and another 400 rooms are currently under construction.

NDISP SDA properties are built above the minimum standard with platinum plus inclusions with full smart home automation and key central locations to ensure quick lease up and minimal vacancy.

Now SDA properties are built like a home and not built like an institution.

They also run two other parts of their business called yellow card helpers and yellow card technology.

So that's running and looking after the maintenance of all the properties and also the tech that comes with all of our houses and apartments and so forth.

This has just been an example of how the money flow works from investors investing into the SIFM fund, then to the SDA provider, NDISP, and how the money flows from the NDIS.

So simply investors invest into the investment fund, which then

purchases land, builds the property, raises debt from banks if it's required.

The cash flows from the NDIS into NDISP.

So they're registered with the NDIS.

They design, they construct the property, they take lease over the property, they operate and maintain the property, deals with property management and maintenance issues.

So from an investor's perspective, there's nothing else to do.

So the money flows back to the investor.

So this is just an example of one of the many sort of assets that we develop.

So we call them, it's a freedom apartment.

So we generally do, well, we always do two bedroom apartments, two bathrooms.

So in this example, a two bedroom apartment, high physical support with an onsite overnight assistance, the estimated land and build costs is $4 million.

And that's depending on location.

So to give you an example of that,

is $138,000 per participant.

So that's around about $553,000 per year gross income received to investors.

So generally we sort of say a net income of around about 10 to 15% plus capital gain.

And a further example is a six unit complex we're currently developing in Rockhampton has a valuation of 7.1 million.

The government funding allows the CPI for the next 20 years, so that will continue to increase.

This is just an example of one of our unit complexes in Brisbane.

So as you can see, it does look like just a normal apartment.

Obviously we put rails in and hoists and so forth, but this just gives you an example of how important it is to ensure that everything gets developed as it looks like a home.

So the number one is to ensure that everything that's developed has got to be fit for purpose.

And we always use a slogan that the participant must be happy to call home.

So our two bedroom apartments are all 120 square metres.

The doors are 1,200 millimetres wide, where the standard's only 800.

1,500 millimetre hallways, tucked with entry, massive bedrooms and bathrooms, auto doors inside and out, auto lift lights, blinds, fans, air con, ceiling hoists across the bed into en suite.

Within 500 metres to a shopping centre and never on a main road.

So here are also just some truths with SDA as well.

So SDA income is not guaranteed.

The property is enrolled.

Not hard based on the minimum standard, but we know that minimum standard doesn't work.

The provider must be compliant.

It's very easy to register, but hard to make compliance.

The property requires an improved participant.

If the minimum standard, most likely the participant will leave.

So the tenants can leave within 60 days notice.

And over 13% living in SDA want to move.

And this is really comes down to the importance of building something that's fit for purpose that they are happy to call home.

So the minimum standard does not work.

Meeting the SDA design standards is not enough.

Wondery apartments do not work.

Shared bathrooms don't work.

The cashflow sometimes can be lumpy, but we all know that the best property and the best locations and the best inclusions is what works for the participant.

Thank you.

Thanks, James.

I've got a couple of questions for you.

The first one is, the NDIA conducted a pricing review, effectively.

1 July 2023 this year.

Now, can you elaborate on the key findings and changes for us?

Yeah, sure, thank you.

So, in conjunction with Ernst & Young late last year, conducted an investigation with the NDIA and reviewed, and this price review happens every five years, so as we all know that building costs have gone up, land costs have gone up, so

the NDIA made some major adjustments to the income payments from the NDIS.

So generally there's about an 18% uplift across the board.

And a lot of those areas have brought fully accessible and independent living in line with HPS payments.

So that just sort of a larger pond, I suppose, of participants and also making it more attractive, I suppose, as well for investors.

and also things like two bedroom houses, which generally was around about $45,000 per participant.

per year is now up to around about 85,000 as well.

So it has certainly increased a lot.

So that was, as I mentioned earlier, that the payments paid out by the government's only reached around 250 million per year where they've actually budgeted 700 million.

So it really shows that under supply of SDA that's coming through.

So this pricing review, which took effect from the 1st of July this year is very exciting for investors, but also us in the industry.

And we also have heard a lot of news, not all positive news, news about cost blowouts with the NDIS budget.

How does SDA fit into this?

Yeah, as I mentioned a bit earlier as well, that the SDA budget, I suppose, of 700 million a year is only 0.6% of the overall NDIS expenditure.

And this will highlight it as well, that obviously that hasn't been met and it hasn't come to that level yet.

Yeah, obviously that negativity with regards to the over expendor in the NDIS certainly hasn't reflected through to SDA and still makes it a very viable investment opportunity for all investors.

Well, thanks James.

So great to see you.

Take care.