LINKS CORPORATE MEDICINE WEB SITE Disclaimer The many extracts on these pages are from copyright material. They are owned by the reference given or its owner. They are reproduced here for educational purposes and to stimulate public debate about the provision of health and aged care. I consider this to be "fair use" in the common interest. They should not be reproduced for commercial purposes. The material is selective and I have not included denials and explanations. I am not claiming that the allegations are true. The intention is to show the general thrust of corporate practices as well as the nature and extent of any allegations made. Any comments made are based on the belief that there is some substance at least to so many allegations. Links to Site Maps Central Initial USA Australian International Corporate Practices (to print) Path to this page Home Australia Markets & aging Retirement Villages Health care Hospital Corporatisation   Entry to Privatisation   Privatisation Background   Australian states Pathology & Radiology Gen. Pract. Corporatisation Aged Care Story of corporatisation   Nonprofit dilemma Aging bonanza Banks Nursing homes Home Care Breadth health corporat. Retirement Villages Ret. Villages a to c Aevum Aus. Ret. Hm. & FKP Community Life Craigcare Retire Villages g to z Gandel Ret. Ent. Milstern Mirvac - Fini Moran Primelife Ret. by Design Ret. Serv. Aus St Ives Grp Tricare Village Life Zig Inge Introductory page This corporate web site addresses the issues of corporate health care within a broad framework. A web page describing this broad context should be considered as an introduction to each page on the web site. If you have not yet read it then CLICK HERE to open it in another tab or web page. Content of this page This is another construction company which owns and operates nursing homes. It too had adverse publicity about the contracts it entered into with residents.  Australian section    Gandel Retirement Enterprises

CONTENTS

• Company history
  • A failed merger
  • The empire
• Contracts - the legal battle

Gandel Retirement Villages is a company which concentrated on the luxury market and employed strata tittle contracts. It is interesting because the residents challenged these contracts.

Property developers seem particularly attracted to retirement villages and Gandel is a good example. It has been in the retirement business since the 1980s and targets the wealthy by building luxury villages. Like FKP it uses strata title contracts with residents to generate its main profits. There is a 7-10 year gap before the large profits are realised. Its other businesses support it during this period and unlike Primelife and other pure retirement village companies it has not had any liquidity problems.

Mar 1990 The luxury market

Gandel, a private property company, moved from shopping centre development into retirement village construction. Its villages are distinctly upmarket and rather flash, expensive enough to justify a sustained hard sell on commercial television featuring the ad man's ideal grey-haired couple beaming their generous praise of a perfect lifestyle.

At Gandel's newest, Fernbank in St Ives, a strata title two-bedroom unit costs $350,000 and a three-bedroom unit more than $500,000, and service charges range from $45 to $70 a week. Not surprisingly there is just a touch of the shopping centre about Fernbank - the artificial waterfall, carefully landscaped grounds and tidily placed ferns all conspire to create an atmosphere of relentless good cheer, though mercifully there is no shopping centre Muzak.

In Fernbank's communal areas there are cocktail parties and dances, indoor bowls and a heated pool, barbecue areas and a billiard room, a restaurant and 24-hour emergency call system. The youngest resident is 59. Most have been retired for five to seven years, and there's not a thing they don't get up to. One elderly woman rides a horse and another old lady regularly parachuted until moving into the hostel. The only limit to living the full life is a sex ratio of 80 women to 20 men, the same for such complexes everywhere.
GREY LIBERATION IN GOD'S WAITING ROOMS Sydney Morning Herald March 31, 1990

Feb 1992 Growth

Hooker, subsequently debauched by the jailed entrepreneur George Herscu, were the first to develop the Fernbank estate, in the mid-1980s, on the site of the Margaret Reid Hospital for Crippled Children. The part-completed village was bought by Gandel in 1987, and the group has rapidly moved to become the biggest (on capitalisation) retirement village company in NSW - 600 to 700 old people live at Fernbank and its three sister Sydney estates, Manors at Mosman, Mosman Grove and Pittwater Palms.
CAUGHT IN THE WEB OF RETIREMENT VILLAGES Sydney Morning Herald February 12, 1992

A failed merger

In 1994 there was a great deal of fanfare about the proposed merger of Gandel, Jennings and Lend Lease retirement villages to form a new giant, but it fell in a heap.

Jul 1994 A merger and float collapses

Plans for a $150 million float of the retirement village assets of Jennings, Melbourne's Gandel family, and the Parkland Group, were in a smouldering heap yesterday, thanks to the stockmarket bloodbath of recent weeks.
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Jennings yesterday issued a statement advising that the deal had fallen through, blaming the collapse on recent market volatility.
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Launched with great fanfare in April, Emeritus planned to acquire the retirement home activities of the Gandel, Jennings and Lend Lease Corporation Ltd's Parkland Group through a $150 million stockmarket listing.
RETIREMENT PLAYER RETIRES Australian Financial Review July 4, 1994

The empire

Retirement Villages are only a small part of John Gandel’s primarily shopping centre empire. The difficulty residents had with Gandel contracts during the 1990s probably represents the shopping centre approach to aged care. With a fortune of US $ 1.4 billion he is listed by Forbes as number 562 of the worlds billionaires.

May 2004 The Gandel empire

Twenty-one shopping centres are not nearly enough for John Gandel - he wants more and he wants them bigger.

Shopping centre magnate John Gandel shows little sign of changing his relentless acquisition and expansion strategy. As others complain about the lack of new property in Australia and look to invest overseas, Gandel keeps finding fresh opportunities to increase his $1.4-billion fortune.

It is only 18 months since he oversaw one of Australia's biggest property trust mergers - that of his Gandel retail trust and the Commonwealth Bank's Colonial First State Property Trust to form the $2.5-billion CFS Gandel Retail Trust in September 2002.
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Gandel also has extensive investments in the aged-care sector. His retirement homes business, Gandel Retirement Enterprises, manages aged-care centres in Sydney and the $150-million Applewood development in the Melbourne suburb of Doncaster. Applewood, set on 11.3 hectares, features a restaurant, community centre, billiards room and gymnasium.
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POSITION: Chairman of CFS Gandel Retail Trust

CAREER: In the 1950s, Gandel started managing the Sussan women's clothing chain, which his parents established in 1938. In 1983, he sold Sussan to his brother-in-law, Marc Besen, to buy Chadstone shopping centre from Myer Emporium for a reported $37 million.

Rich 200: Gandel's net wealth was valued at $40 million on the initial BRW Rich 100 list in 1983, primarily from his half-share in Sussan.
The Mall Master Business Review Weekly May 20, 2004

Mar 2006 Wealth

* John Gandel, retirement home and real estate mogul, who ranks 562th, with $US1.4billion
Day in sun for new billionaire The Australian March 11, 2006

What is interesting is that residents of one of Gandel’s richest and most luxurious villages have been the ones who have rebelled against the injustices of these widely used contracts and taken the matter to court. The charge was led by a retired judge.

Residents at most other corporate owned villages would not have had the resources or sufficient active years left to do this. Residents enter luxury villages at a slightly younger age because it is a lifestyle as much as an aging choice.

The resident’s lost the case when the presiding judge found the contracts acceptable because they had been fully explained to the residents. The press report does not indicate whether the mental and emotional state of aged residents signing complex contracts was considered - a can of worms the judge may have avoided. This is the market and not a community service.

Contracts have been a bone of contention at other retirement villages (e.g. Fini villages) and there is more discussion on the Retirement Village overview page.

The extracts tell the story of the residents at Gandel's luxury Fernbank Retirement Village.

Feb 1992 Unconscionable contracts

At the age of 89 the flesh grows weak, but there's nothing wrong with the spirit of Fred Myers, retired these many years from his job as a Supreme Court judge and now leading a campaign for justice for his fellow residents at the Fernbank retirement village at St Ives on Sydney's North Shore.

"If I was trying a case based on this contract," he says, brandishing a thick bundle of legal documents, "I would set it aside as unconscionable. Unconscionable." He rolls the word around on his palate, as if savouring the memory of judgments past.
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Fred Myers has been trying for more than a year to sell his unit at Fernbank so that he can move closer to relatives in the country. But he finds himself trapped in a web of contracts that he - and many other Fernbank residents - believe are unconscionable.
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For many months these elderly agitators have been lobbying to have an investigation into their complaints. They have written to the Government, to the Commissioner for Consumer Affairs, even as a last resort to the Independent Commission Against Corruption. All to no avail. So, finally, they decided to try their case in the media.

It is, at first glance, surprising that these issues should come to the boil at Fernbank, which is one of the showcases of the retirement village industry - exclusive, expensive, the Vaucluse of old folks' home units. A brick-paved road (Angina Hill to some of the residents) winds down through 4.5 hectares of immaculately landscaped grounds overlooking the Ku-ring-gai wildflower park.
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"We are not selling real estate, we are selling a life style," says Reid, operations manager for Gandel Retirement Enterprises Ltd, a company owned by the wealthy Toorak entrepreneur Aaron Jonna Gandel, himself approaching 60, and his family.
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The crux of the complaint by people like Fred Myers is that the contracts people are required to sign when they move into these villages effectively do away with many of their rights under the Strata Titles Act. In fact, a submission by the Australian Consumers' Association and the United Retirement Village Residents' Association to a government committee currently reviewing the legislation, argues that as well as being unconscionable these contracts may be illegal.

First, retirees who buy into the villages believing they have normal freehold title soon discover that in fact they have little or no control over the "body corporate" which is supposed to run the public areas of the villages-or the hefty fees, currently about $50 a week. At Fernbank, the management of the estate is in the hands of Fernbank Management Pty Ltd (another Gandel company) in perpetuity. It can never be sacked.

The second serious drawback in buying into a retirement village is that, unlike ordinary strata units, the owners do not have the right to sell to whom they want, when they want, for the price they want. In many villages the sale process is controlled by the management company which (according to the submission) may delay the sale for years by setting an unrealistically high price.

The third and most intractable problem involves what are known as "deferred management fees". When a unit is sold, the management company extracts a fee of between 2.5 and 3.5 per cent per annum of the sale price - in the example used (see graph), based on a very conservative guess of 5 per cent inflation, a unit would cost $15,000 a year, and after 10 years would be worth less than half in real terms what it cost. And these fees apply every time every unit is sold forever.

The gloomy conclusion of the submission is that Golden Pond very often finishes up as Turbid Tank. "Because they have entered into such (oppressive) contracts, many sick and elderly people find their (units) to be virtually unsalable. They are thus captive in their (units) for extended periods, irrespective of their health or financial circumstances, because the terms of the contract are weighted in favour of the owner/developer," it says.

One of the people who helped write this report is Ray McKenzie, an energetic 69-year-old who lives with his wife Jean in a leased unit on Lutanda Manor estate at Pennant Hills. Although he still believes Lutanda is one of the best retirement villages in the State, he says: "I was a naive little lad when I signed that contract. If I'd known then what I know now - that it's costing me $10,000 a year - I never would have signed."
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McKenzie says that many of the development companies which have moved into retirement village management in the past few years are "get rich quick operators" who see old people as "ripe for plucking". He says that many people sign contracts without understanding that "they are virtually signing away all their rights for ever more." In a survey of nearly 1,000 residents for the submission, 65 per cent said they had been tricked by "misleading and/or ambiguous advertising".
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"I could name you at least 100 people who have serious complaints," says Ray McKenzie "But they won't come forward because they are intimidated, they are afraid there will be reprisals, harassment, victimisation by the developers. They don't have the money to take a case to court, and even if they did it wouldn't be much good because they'd probably be dead before they got a decision."
CAUGHT IN THE WEB OF RETIREMENT VILLAGES Sydney Morning Herald February 12, 1992

Jun 1995 The battle about contracts

THE control of retirement villages in NSW could be in for a major shake-up because of an action in the Supreme Court by residents of the North Shore's premier retirement village.
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Yet the residents at Fernbank believe they are getting a raw deal. The contract signed between residents and the village, the residents say, has entrenched Fernbank Management in the village and has denied residents their right under the Strata Title Act to replace it, regardless of the company's performance.

The residents argue that the deferred management fees, the amount which residents must pay the village when they sell their unit, are "excessive, onerous and unjustifiable" and the arrangements with both the Fernbank companies have "unreasonably restrained" their capacity to sell or lease their property.
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The crisis at Fernbank has been a long time coming. Residents began lobbying the NSW Department of Consumer Affairs for an investigation in late 1990. After two years of failed negotiations with the village, Gillett and Woodhill were granted legal assistance from the department. The body corporate was also granted assistance in May 1994.
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At the centre of the row are the contracts signed between Fernbank Developments and the residents. These specify:

* Residents request that Fernbank Management be the manager of the village and agree to pay for support services by contributing to levies made by the body corporate.

* Residents can only resell or lease their unit to a buyer who will adhere to the same service agreement with Fernbank Management.

* Fernbank Developments is granted proxy power to vote on behalf of residents in decisions of the body corporate relating to the management agreement.

* Through their ownership of two lots in the village, Fernbank Management and Fernbank Developments have restrictive covenants over the other units. This affects, among other things, the right of the unit owners to deal with their units.

* If a resident dies, Fernbank Developments has a power of attorney to sell the property. Selling or leasing of units can only be done with the written permission of Fernbank Management or Fernbank Developments.

* The management company has an irrevocable charge over the title to the unit which entitles it to deduct a deferred management fee from the proceeds of the resale.
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TARS is an advocacy centre for older residents and the complexity of contracts within all types of retirement villages is a common source of complaints.

"There are a lot of aspects to this case which are relevant to all retirement villages," Ms Sykiotis said. "People sign these lengthy, complex documents which they don't understand. People are paying a deferred fee and they don't even know what it is for. And often they don't appreciate the impact it's had until some time down the track."
Retirement Village Row Goes To Supreme Court Sydney Morning Herald June 8, 1995

July 1995 The court battle is lost

THE retirement village industry is heaving a collective sigh of relief following a decision by the NSW Supreme Court which confirmed a manager's right to deduct a deferred fee from the sale proceeds of a resident's unit.
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Miss Brenda Gillett and Mrs Patricia Woodhill, who is now deceased, brought their claims as a test case with the support of the NSW Department of Consumer Affairs. They claimed the documentation of the purchase agreements was unconscionable because it imposed obligations on them which they did not understand and which, by their very nature, were onerous.

They also argued they were in a position of special disadvantage due to their age and relied on the village manager to provide accommodation and services on a just and fair basis.

Justice Rolfe found that "no exception" could be taken to the deferred management fee. The fee was "comparable" with those charged by other villages and was "independently explained to Miss Gillett and Mrs Woodhill".

The arrangements for Fernbank were reasonable for a large retirement village and there was evidence other Fernbank residents were content with the village's method of operation, he said.
Retirement Village Wins Management Fee Test Case Australian Financial Review July 28, 1995

For Updates:- A good way to check for recent developments in aged care is to go to the aged care crisis group's search page and enter the name of the company, nursing home or key words relating to any other matter in the search box. Most significant press reports are flagged there. The aged care crisis web site has recently been restructured and some of the older links used from this site may not work.

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Web Page History This page created Sept 2006 by Michael Wynne