StockTalk

LEK does good job with seeing how Retail and Property stocks are doing

Here's a similar table for Retirement stocks - as of last Thursday

Might need to click to enlarge .... got to work out how to post images properly

https://www.oneroof.co.nz/news/41695

Breathtaking decline in prices happening at the same time as we're seeing unprecedented increases in the cost of construction.. 
Margins must come under serious pressure going forward.

Could be worse to come as home loan affordability becomes even worse and more potential buyers are locked out of the market
https://www.nzherald.co.nz/business/mortgage-rates-predicted-to-rise-to-between-6pc-to-75pc/757XFPKD7LEXSSF5Y6AOHRNZXQ/?ref=readmore

Impact on this sector and its ability to sell its units and get somewhat reasonable development margins ?  Time will tell.

My call on this sector as a whole - All boats go lower on an outgoing tide, especially leaky ones...
Disc:  No holdings in this sector

From Arvida ASM presentation

You lose less money by investing in ARV than others in the sector

They probably proud of that achievement00000arvreturns.JPG00000arvreturns.JPG 

Sorry - sussed how to do images but obviously pressed button twice so you can how good ARV twice

Now need to suss how to delete such stuff

https://www.interest.co.nz/property/116579/average-asking-price-homes-auckland-has-declined-112209-january

Wonder how ARV factored their raise to purchase Arena into those charts.

The whole sector looks like severe punishment being dealt out .. perhaps for earlier fresh air gained,
when no-one understood the extent of the magical 'what revaluation shall we report this period?' stances :)

think I would need to see lower than 50c in the dollar on NTA before becoming slightest bit interested in current climate
on the way these mysterious beasties commercially operate on truer break evens, unless the Swedes develop further taste
for more to add to their stable at a hefty premium  :)

Quote from: nztx on Jul 01, 2022, 04:15 PMThe whole sector looks like severe punishment being dealt out .. perhaps for earlier fresh air gained,
when no-one understood the extent of the magical 'what revaluation shall we report this period?' stances :)

think I would need to see lower than 50c in the dollar on NTA before becoming slightest bit interested in current climate
on the way these mysterious beasties commercially operate on truer break evens, unless the Swedes develop further taste
for more to add to their stable at a hefty premium  :)

But whose doing the selling? another low volume reef fish activity day across the sector, big fish inactive and not wasting energy by getting involved.

Quote from: kasper on Jul 01, 2022, 04:25 PM

Quote from: nztx on Jul 01, 2022, 04:15 PMThe whole sector looks like severe punishment being dealt out .. perhaps for earlier fresh air gained,
when no-one understood the extent of the magical 'what revaluation shall we report this period?' stances :)

think I would need to see lower than 50c in the dollar on NTA before becoming slightest bit interested in current climate
on the way these mysterious beasties commercially operate on truer break evens, unless the Swedes develop further taste
for more to add to their stable at a hefty premium  :)

But whose doing the selling? another low volume reef fish activity day across the sector, big fish inactive and not wasting energy by getting involved.

very true too .. personally I like to see confirmation on improving trend

I dont see that now or short term yet .. as things appear to still be sliding off the earlier peaks

Quote from: nztx on Jul 01, 2022, 04:15 PMThe whole sector looks like severe punishment being dealt out .. perhaps for earlier fresh air gained,
when no-one understood the extent of the magical 'what revaluation shall we report this period?' stances :)

think I would need to see lower than 50c in the dollar on NTA before becoming slightest bit interested in current climate
on the way these mysterious beasties commercially operate on truer break evens, unless the Swedes develop further taste
for more to add to their stable at a hefty premium  :)

Swedes will get hungry before it gets to 50c.

Hefty premium to what? - if someone offered NTA I would jump on it.

Another down week for retirement stocks if you don't count Radius

Might get a few up weeks in a row one day 0000retire.JPG

https://www.interest.co.nz/property/116605/barfoot-thompsons-june-sales-12-year-low-average-price-down-120000-december-peak

Sales volumes and prices collapsing.  Huge supply, low demand only leads to one future outcome...
How will people sell their house to move into a retirement village ?

Quite amazing how much hype and B/S people can spread after a stellar pricehike and a minimal market normalisation after that. Clearly - the sky is falling and the globe will stop turning. It always does if you subscribe to the hype.

How will people sell their house to move into a retirement village?

Well, quite easy - they will do that the same way they did it 12 months ago (when house prices have been despite the incredible hype still lower than today), the year before (when house prices have been much lower than now), two years before (when house prices have been much much lower than now) and all the years before that.

There always will be people around who need houses and will pay for them a reasonable price ... and there always will be people around who need to go into care. Easy as that.

Buying into an OCA unit is something like 1/4 to 1/3 of the average house price depending on the region - i.e. there will be lots of headroom for people to buy into their retirement home if house prices normalise as they should.

Sun will rise tomorrow as well.

we have had many years now whereby it has been easy to sell, what can be a not so liquid asset, residential housing, ave days to sell is a credible indicator to liquidity.
We have also, until recently, lived in times whereby house price increases have been well ahead of build new cost increases.
The retirement sector has benefited from a liquid real estate market as well as those keen to purchase as they have been receiving legendary prices for their own homes compared to buying new.
Today and the foreseeable future you have quite the opposite market place that has underpinned a high performing retirement sector.......watch what happens to the retirement sector (SP values) once slower sales filter through with lower prices and higher build costs (occuring right now I suspect)....perfect storm
Of course you will have those that will say due to the ageing population support for the sector will be fine....I see most retirement companies are still very upbeat, not unusual to see this from any company, that has experienced great times, even if the writing is on the wall for those following the macro environment

QuoteThe market sent a big message out in the days following Arvida's pretty good full year result .... pushing the ARV share price down 12% over a few days

The message was plain and simple - the retirement sector is stuffed - its had it years of good times and now its going to have years of not so good times

Always pays to listen to market messages - especially emphatic ones  Winner OCA thread

Its amazing over so many years how the retirement village segment has tracked the housing sector.  Not completely logical because often people make needs or lifestyle based decisions regardless of where housing is at but the correlation between the two sectors is stunning and undeniable.
I reckon all retirement sector investors have to "look forward to" in the foreseeable future is reading an almost endless series of reports in the media about how the real estate market is in steep decline and watching their shares do much the same.

Some people should check their facts.  Average price of an independent living unit in upmarket villages can be very close to the surrounding real estate price.
Care suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.
Press article I read today said sales of $2m+ houses in Devonport had all but dried up.  Hmmm
RYM said in their recent annual report the average price of their independent living units in the Auckland region is $1.4m but the average house price in Auckland is now $1.1m.     RYM's contention is because their villages are generally in upmarket suburbs there is still  good headroom but is that still the case ?

Not disputing the sun will still rise tomorrow but it could be covered by black clouds just like this sector.

Question.
Nana lives on her own and has just had a fall.Took 5 hours before her neighbour heard her cries.
What are you going to do to protect her future safety, when she comes out of hospital.?
Tell her, as her property is not worth so much today, she can either live at home, or come and live with you until property prices go mad again.
You can not really tell her she should have had her fall a year ago.[or can you?]

Quote from: Basil on Jul 04, 2022, 03:23 PMSome people should check their facts....
Care suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.

Make no money except for the care EBITDA, development margin, resale gains, and pretty much non-stop DMF.
But sure, aside from that almost no money.

A care suite is also a lot smaller than an ILU in Browns Bay and they were full a lot faster.
Square metre for square metre I bet it's a far more profitable venture.

Yeah, I guess some people should should check their facts.

Quote from: Whacc on Jul 04, 2022, 04:49 PM

Quote from: Basil on Jul 04, 2022, 03:23 PMCare suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.

Make no money except for the care EBITDA, development margin, resale gains, and pretty much non-stop DMF.
But sure, aside from that almost no money.

A care suite is also a lot smaller than an ILU in Browns Bay and they were full a lot faster.
Square metre for square metre I bet it's a far more profitable venture.

Yeah, I guess some people should should check their facts.

Exactly but don't expect downramping non holders to do so, its just the same negative repetition dished up on a different plate. PS-In nearly all the areas where OCA have facilities the avg house sale price in the given area easily exceeds the cost of an apartment/villa.

Quote from: lorraina on Jul 04, 2022, 04:22 PMQuestion.
Nana lives on her own and has just had a fall.Took 5 hours before her neighbour heard her cries.
What are you going to do to protect her future safety, when she comes out of hospital.?
Tell her, as her property is not worth so much today, she can either live at home, or come and live with you until property prices go mad again.
You can not really tell her she should have had her fall a year ago.[or can you?]

Step 1 is going to be getting a needs assessment.  Perhaps it was just an isolated trip up and all she needs is a St John medical alarm to wear around her neck ?  If she needs care maybe she qualifies for Govt funded care ?  There's some very nice places with sunny and very spacious premium care rooms for as little as $5 a day.  Could it be that people are asking why bother getting tangled up in a care suite with all the capital losses and lengthy time for the estate to get repaid when premium rooms are so cheap ?

Quote from: Basil on Jul 04, 2022, 03:23 PM

QuoteThe market sent a big message out in the days following Arvida's pretty good full year result .... pushing the ARV share price down 12% over a few days

The message was plain and simple - the retirement sector is stuffed - its had it years of good times and now its going to have years of not so good times

Always pays to listen to market messages - especially emphatic ones  Winner OCA thread

Its amazing over so many years how the retirement village segment has tracked the housing sector.  Not completely logical because often people make needs or lifestyle based decisions regardless of where housing is at but the correlation between the two sectors is stunning and undeniable.
I reckon all retirement sector investors have to "look forward to" in the foreseeable future is reading an almost endless series of reports in the media about how the real estate market is in steep decline and watching their shares do much the same.

Some people should check their facts.  Average price of an independent living unit in upmarket villages can be very close to the surrounding real estate price.
Care suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.
Press article I read today said sales of $2m+ houses in Devonport had all but dried up.  Hmmm
RYM said in their recent annual report the average price of their independent living units in the Auckland region is $1.4m but the average house price in Auckland is now $1.1m.     RYM's contention is because their villages are generally in upmarket suburbs there is still  good headroom but is that still the case ?

Not disputing the sun will still rise tomorrow but it could be covered by black clouds just like this sector.

I love it when people are trying to rise the fear level in the market by comparing pineapples with apples. Tells you so much about human nature.

Sure - OCA sells some large units with sea view north of $1m ... but hey, if you sell a comparable house in Auckland, than it still will pay ways more than that - won't it? No point in comparing the average run of the mill Auckland house price with the price for the top level OCA units.

If you want an intelligent discussion, than please compare pineapples with pineapples. Anything else is just downramping.

Quote from: BlackPeter on Jul 04, 2022, 05:36 PM

Quote from: Basil on Jul 04, 2022, 03:23 PM

QuoteThe market sent a big message out in the days following Arvida's pretty good full year result .... pushing the ARV share price down 12% over a few days

The message was plain and simple - the retirement sector is stuffed - its had it years of good times and now its going to have years of not so good times

Always pays to listen to market messages - especially emphatic ones  Winner OCA thread

Its amazing over so many years how the retirement village segment has tracked the housing sector.  Not completely logical because often people make needs or lifestyle based decisions regardless of where housing is at but the correlation between the two sectors is stunning and undeniable.
I reckon all retirement sector investors have to "look forward to" in the foreseeable future is reading an almost endless series of reports in the media about how the real estate market is in steep decline and watching their shares do much the same.

Some people should check their facts.  Average price of an independent living unit in upmarket villages can be very close to the surrounding real estate price.
Care suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.
Press article I read today said sales of $2m+ houses in Devonport had all but dried up.  Hmmm
RYM said in their recent annual report the average price of their independent living units in the Auckland region is $1.4m but the average house price in Auckland is now $1.1m.     RYM's contention is because their villages are generally in upmarket suburbs there is still  good headroom but is that still the case ?

Not disputing the sun will still rise tomorrow but it could be covered by black clouds just like this sector.

I love it when people are trying to rise the fear level in the market by comparing pineapples with apples. Tells you so much about human nature.

Sure - OCA sells some large units with sea view north of $1m ... but hey, if you sell a comparable house in Auckland, than it still will pay ways more than that - won't it? No point in comparing the average run of the mill Auckland house price with the price for the top level OCA units.

If you want an intelligent discussion, than please compare pineapples with pineapples. Anything else is just downramping.

Re your last line BP, sadly, ramping (whether ramping it up or ramping it down) is just what some posters in these forums specialise in.

https://www.oneroof.co.nz/news/41755 $2m+ Devonport market dries up.
RYM 2 bedroom unit in Devonport $1.9m  https://www.trademe.co.nz/a/property/retirement-villages/auckland/north-shore-city/devonport/listing/3512199774
How are people going to buy the $1.9m RYM unit in Devonport if they can't sell their $2m+ Devonport home ?

Might we see the same thing play out with OCA's premier Waimarie development as St Heliers residents struggle to sell their $2m+ houses to afford a high priced Waimarie independent living unit ?

That said across Auckland at least, RYM appear most exposed to the huge falls and slowdown at the top end of the market because their units are generally priced on an equivalent basis.

Quote from: Basil on Jul 04, 2022, 05:48 PMhttps://www.oneroof.co.nz/news/41755 $2m+ Devonport market dries up.
RYM 2 bedroom unit in Devonport $1.9m  https://www.trademe.co.nz/a/property/retirement-villages/auckland/north-shore-city/devonport/listing/3512199774
How are people going to buy the $1.9m RYM unit in Devonport if they can't sell their $2m+ Devonport home ?

Might we see the same thing play out with OCA's premier Waimarie development as St Heliers residents struggle to sell their $2m+ houses to afford a high priced Waimarie independent living unit ?

That said across Auckland at least, RYM appear most exposed to the huge falls and slowdown at the top end of the market because their units are generally priced on an equivalent basis.

Bula . I sit here on a tropical beach in Fiji reading the posts. The resorts are full and people are happy.

When I reflect on the retirement sector with my "rose tinted glasses" I see increased demand from an aging population and a government who has largely left it to the private sector to provide. Sure they need to come to the party with care costs, and they will 😎.  If they don't operators will reduce services or continue to fund it through other areas.


One thing I have learnt is that economist's and property experts are often wrong. As a general rule property historically has doubled every ten years. Will that continue...who knows.  I personally think it will.

When you look at building costs increasing at such a fast rate and high inflation it is hard to see house prices falling hard and for long.

So with that in mind I see retirement units increasing over time as they have done. What ever happens won't make much difference as far as selling the family home and buying a retirement unit on the same market. It's only one part of the equation, but a large one.

I'm bullish on the retirement sector and own shares in all four of the larger ones. I have been using the current price weakness to increase holdings.  I can't pick the bottom so buy in parcels till I have enough. I'm a long term holder and and have learnt that property is a good proposition if you are in for the long term. Get rich slowly.

Well it's time to take my rose tinted glasses off and have some breakfast.

Housing is already severely unaffordable and most loan applicants are being stress tested by the banks @ 7-8% and failing.  Lack of buyers due to severe unaffordability is the reason sales volumes are drying up.

Housing has now reached a point where a major reset is required and is starting to happen.  The bubble of 2021 (up 25%) was fueled off the back of once in a 100 year low interest rates and the bubble is just starting to pop. https://www.interest.co.nz/property/116632/corelogic-says-property-values-falling-around-country-waiheke-island-had-biggest  Its just starting....a long way to go...

Huge stock level's and sales volumes drying up are your best clue as to where this is going in the short term, (supply and demand disequilibrium surely leads to further substantial falls) .  Longer term where the housing market goes, who knows but the chances of an extended period wherein housing struggles to even keep up with inflation, (continues to gradually fall after the initial reset) look good to me.

Dollar cost averaging into the best of breed in this sector is a great strategy but I think its too early to start.  Leave it 6-9 months and then DCA over the next 12-24 months and stick to companies with the best and most proven business models.

No evidence exists that the Govt will relent on underfunding of care but plenty of evidence from all listed companies the problem is getting worse.  I think Labour are happy to "tax" the retirement sector in this way.  Maybe National will take a different approach and fix this if they get into power, maybe not. Stick to companies with just a modest level of care in their business model looks like the safest strategy.

All companies in this sector are in a confirmed downtrend and buying in such usually results in short term pain.

Chriss Lee putting the boot in too:
TWO groups that will not appreciate rising interest rates are the listed property trusts (indeed all landlords) and the retirement villages.

Rising interest rates drive down capitalisation rates. Lower cap rates lead to lower valuations. Property trusts and retirement villages have to report changes in the annual valuation of their properties.

When interest rates fall, cap rates rise, so valuations rise. The property trusts and retirement villages report the ''profits'' that arise from higher valuations.

Here's how it works.

Property Trust A has a property producing $5 million of rent. If interest rates are 3%, the valuer each year may value the building at, say, 20 times the rent, a ''cap rate'' of 5%, two per cent more than bank rates. The valuer multiplies the $5k rent by 20 and ''values'' the building at $100 million.

If interest rates fell the next year to 2%, the ''cap rate'' might go to 25, effectively calculating that a buyer might buy the building at a yield of 4%. The valuer would argue that the building is worth 25 times the rent - $125m.

Triumphantly, Property Trust A claims a revaluation profit of $25m.

But if rates rise from 3% to 4%, the ''cap rate'' must fall as the mythical buyer would want a 6% yield from the rent. The new cap rate would not be 25, not 20, but 16.67% (16.67 x 6 = 100).

The new valuation would thus be 16.67 x 5m (rent), or $83.55m, a fall of $16.65m. Property Trust A then announces the effect of falling cap rates has decimated its profits.

In recent years, all property trusts and retirement villages have scored huge revaluation gains based on rising cap rates.

We may now be in an era, for some years that highlight the wisdom of knowing when to sell.

If we do reach that point in 2022 and 2023, we may see a replay of the 1980s. That was when all sorts of charlatans claimed to be property gurus and engaged in a race to buy more buildings than their competitors by borrowing gaily from badly-managed banks.

When interest rates were in double figures, and when one could buy government stock at yields of 17%, various dopes were buying properties at yields of as low as 6%, exploiting particularly the BNZ's braindead willingness to achieve growth by lending to property ''gurus''.

I recall a building on Thorndon Quay, bought for $5m, with bank debt of $4m, selling two years later for $1.5m, the new buyer funded by the same bank which was writing off $2.5m of its original loan.

The Westpac building on Lambton Quay sold for $35m, and a few years later sold for little more than half that.

Tough times and rising rates, leading to lower cap rates, will sort out the skilled property people from the wide boys. There may be some areas where demand exceeds supply – like Wellington – but there will be other areas like lower Queen Street, where demand is low.

My guess is that, right now, the banks are pressuring the weaker of their big-time commercial property clients into cancelling dividends and reducing debts.

Some will see this, to use the cliché, as banks removing the umbrellas as rain clouds appear.

I would see such a response as a sane corrective action to previously foolish banking practices – over-lending to over-confident people when markets were over-priced.

Those who have cash, and modest debt, might be mopping up some bargains.

Retail investors, in my opinion, should be attentive, ensuring their portfolios will continue to match their risk tolerance.

https://www.chrislee.co.nz/taking-stock

This weeks update

Really good week on NZX with NZX50 up 3.9% but retirement sector continues to under perform

Average gain 0.6% (if we leave out RAD average was 2.4% - no doubt SUM boosted that number)

0000retiew.JPG

Property prices June

HPI DOWN 1.9% from May

HPI declined 5.4% over last three months.... and now only 0.7% higher than a year ago.

Retirement sector share prices tend to track property prices

Quote from: winner (n) on Jul 13, 2022, 08:37 AMProperty prices June

HPI DOWN 1.9% from May

HPI declined 5.4% over last three months.... and now only 0.7% higher than a year ago.

Retirement sector share prices tend to track property prices

Hmm - something like that.

Retirement sector down roughly 40% from 2021 peak.

Property prices so far down roughly 10% from 2021 peak.

Retirement sector started to drop some months earlier than property sector.

Who is tracking whom?

I guess either retirement sector is an oracle for the real estate (and in this case ... better buckle up) ... or (in my view more likely) is currently impacted by severe hype deflation.

Tide will come in back. It always does ...

BP - UBS says HPI explains 34% of retirement of share price performance .... but you already knew that it wasn't a one to one relationship

Over time the relationship shown in00000reire v hpi.JPG  chart below

If too much 'noise' for ypur liking just ignore it

00000reire v hpi.JPG

Interesting chart ... in some periods it seems to be RV to lead and in others the HPI. As well - offset seems to be quite variable between plus 2 and minus 3 years. As well, even if we ignore the variations in offset - the correlation is clearly ways below 100%, but yes - 1/3rd might well be true in average for the given chart - however i doubt that this is any help in predicting future RV development based on assumptions about the development of the HPI.

Whatever it is - no doubt that the expectations about the development of the HPI do have some impact on the RV ... however, what your chart clearly shows is that it is basically impossible to predict at any given point in time the future development of the RV based on the development of the HPI ... and I guess this is what the posters try to do who try to ramp RV based on HPI horror crash scenarios.

It's very complicated isn't it BP.... a bit like the question of whether a 5 Year CAGR actually means anything eh.

But whatever I suppose we can conclude (with out being precise about it) that if HPI declines then RV share prices will likely decline or may have already declined ,,,,, good summary

Agree to disagree based on my 20+ years boating experience.
Useful article for anyone into paddleboarding  https://watersportspro.co.uk/best-tide-for-paddleboarding/#:~:text=At%20high%20or%20low%20tide%20the%20water%20is,and%20mid-tide%20will%20be%20between%20these%20two%20times.

I guess the point of this analogy is when the real estate market turns it usually turns gradually as it changes from being a sellers market into a buyers market.  Today the Herald reported that there was an unprecedented glut of houses on the market, or words to that effect and not many buyers.  I think we all know what that means going forward.  https://www.nzherald.co.nz/business/nz-awash-with-houses-for-sale-national-inventory-jumps-895pc-auckland-more-than-doubles/VLL4ZWGGWU66SCW7UC6Z2CRMW4/

As for the correlation between house prices and retirement sector stocks, I think its pretty good but obviously there's other factors to consider like for example the unprecedented ~ 20% construction cost inflation hitting the sector's development margins and the extraordinary way the Government are systemically taxing the sector by heavily underfunding care costs.  These issues aren't going away anytime soon.

I wonder if there is useful link between the amount of positive/negative news stories about house prices and retirement stocks. With the degree of retail participation in names like OCA I imagine sentiment in the news would actually have some impact.

I hold OCA, ARV and RYM in this sector and have paid the price for it in recent times. The real questions for me is will any political party solve the care crisis? Are care-less villages less attractive? Is it easy to convert a care facility to independent living? On that last note, will be very interesting to see how many OCA/ARV care rooms are converted to ILUs, especially OCA as they seem to have given up on the care premium dream.

Quote from: kasper on Jul 04, 2022, 04:55 PMPS-In nearly all the areas where OCA have facilities the avg house sale price in the given area easily exceeds the cost of an apartment/villa.

Ahem, I am not so sure about that claim Kasper, any facts to prove it. You're also comparing houses that one owns with an apartment that one has a LTO

Quote from: Retread on Jul 14, 2022, 09:06 PMAhem, I am not so sure about that claim Kasper, any facts to prove it. You're also comparing houses that one owns with an apartment that one has a LTO

This is a well known and documented fact.  For example page 17 of the presentation for the year ended March 2021 states "Average sales prices for Oceania units and care suites are significantly below the median houses in their respective surrounding catchments - this provides some buffer from a cooling housing market".

"Units" refers to villas and apartments per the OCA reports.

Quote from: Ferg on Jul 15, 2022, 09:31 AMThis is a well known and documented fact.  For example page 17 of the presentation for the year ended March 2021 states "Average sales prices for Oceania units and care suites are significantly below the median houses in their respective surrounding catchments - this provides some buffer from a cooling housing market".

"Units" refers to villas and apartments per the OCA reports.

I was a bit slow to answer so thanks for doing so, roughly a 250k difference on avg (As an example avg house price in my area is currently about 850k, OCA 2 bed Apartment goes for about 600k and a similar pattern exists in most other locations.

Quote from: Ferg on Jul 15, 2022, 09:31 AMThis is a well known and documented fact.  For example page 17 of the presentation for the year ended March 2021 states "Average sales prices for Oceania units and care suites are significantly below the median houses in their respective surrounding catchments - this provides some buffer from a cooling housing market".

"Units" refers to villas and apartments per the OCA reports.

Apart from the OCA spin have you got some actual numbers Ferg?

Try this. Awatere apartments in Hamilton. 2 plus study apt 870k. That is higher than the brand new standalone houses I looked at in the city.

In the email from OCA they told me about the weekly charges $125 pw (fixed for life woop de do) and the price of the unit. But said NOTHING about the DMF. For that cost I had to go digging. The DMF is capped at 30 percent after three years. Do those numbers Ferg and Kasper aka couta... 87k per year ie 10 percent of the 870k buy in cost

Yea 870k buy in cost is lower than many villages obviously. Though all you get for the money is a right of occupation not much different to a tenancy. I give my tenants a decent offering that costs them 20k per year not 87k per year. I liken the RV 'purchase price' similar to a bond that a resi tenant would pay except for the fact it's about 400 times higher.

I wont be surprised to get criticized for my views but you have to admit that the retirement industry has done very very well out of the pensioners.

Quote from: Retread on Jul 15, 2022, 09:48 AMApart from the OCA spin have you got some actual numbers Ferg?

Try this. Awatere apartments in Hamilton. 2 plus study apt 870k. That is higher than the brand new standalone houses I looked at in the city.

In the email from OCA they told me about the weekly charges $125 pw (fixed for life woop de do) and the price of the unit. But said NOTHING about the DMF. For that cost I had to go digging. The DMF is capped at 30 percent after three years. Do those numbers Ferg and Kasper aka couta... 87k per year ie 10 percent of the 870k buy in cost

Yea 870k buy in cost is lower than many villages obviously. Though all you get for the money is a right of occupation not much different to a tenancy. I give my tenants a decent offering that costs them 20k per year not 87k per year. I liken the RV 'purchase price' similar to a bond that a resi tenant would pay except for the fact it's about 400 times higher.

I wont be surprised to get criticized for my views but you have to admit that the retirement industry has done very very well out of the pensioners.

And what is your aka Retread? The fact that you highlighted mine for some reason tells me you have an axe to grind.

Quote from: kasper on Jul 15, 2022, 09:55 AMAnd what is your aka Retread? The fact that you highlighted mine for some reason tells me you have an axe to grind.

I love your old name it had plenty of bite. There is more to you than a friendly ghost

Quote from: Retread on Jul 15, 2022, 09:48 AMApart from the OCA spin have you got some actual numbers Ferg?

Try this. Awatere apartments in Hamilton. 2 plus study apt 870k. That is higher than the brand new standalone houses I looked at in the city.

In the email from OCA they told me about the weekly charges $125 pw (fixed for life woop de do) and the price of the unit. But said NOTHING about the DMF. For that cost I had to go digging. The DMF is capped at 30 percent after three years. Do those numbers Ferg and Kasper aka couta... 87k per year ie 10 percent of the 870k buy in cost

Yea 870k buy in cost is lower than many villages obviously. Though all you get for the money is a right of occupation not much different to a tenancy. I give my tenants a decent offering that costs them 20k per year not 87k per year. I liken the RV 'purchase price' similar to a bond that a resi tenant would pay except for the fact it's about 400 times higher.

I wont be surprised to get criticized for my views but you have to admit that the retirement industry has done very very well out of the pensioners.

Oops - just to help us understand - do you offer your tenants for $20k per year for the first three years a lifelong right to stay in your premises and do you stop charging them after three years?

Do you offer your tenants the free use of a bowling green, a gym and a swimming pool in front of their door? Do you offer them social facilities, entertainment and security / protection not just in case of e.g. a pandemic?

I assume the answer to all questions above is no - so, why do you spread this garbish comparison all over this thread? It is not comparing apples with pears, it is comparing the price of a 1 kg dog roll (or Kiwi luncheon) with the price of a licence to eat for the rest of your life in a fine restaurant.

And yes, attacking other posters based on their previous history without even revealing your previous penname tells us a lot about you. Anything you have to be ashamed of?

Retread: anecdotes don't trump facts.  I know nothing about your anecdote and whether you were in the same "catchment" as the Awatere facility and if the property you looked at had the same facilities, neighbourhood and outlook etc.  If you want to see an anecdote that goes the other way, check out the OCA St Heliers development.  Let's put anecdotes aside and I recommend you read the presentations that accompany the periodic reports.  There is a lot of useful information.  OCA have published affordability stats previously and there were often gripes on the other forum about OCA prices being too cheap.

Also, if you think residents have an issue with the DMF then you don't understand why residents choose this option.  I recommend you research it some more.  Yes it might not make financial sense compared to various alternatives, but everyone has their reasons and thousands of such aged residents around the country have chosen this option.  And as you have found out the DMF is a very attractive reason for investing in RV stocks; there is a snowball effect as properties turn over at higher prices on an expanding development base.  This provides an increasing revenue base to cover costs with the added benefit the capital is recycled into new developments.  Yeah not so financially good for the tenant but that is their choice.  RV companies have done well out of these arrangements, but the residents also get something for their money - it is not a one way street.

Quote from: BlackPeter on Jul 15, 2022, 10:12 AMOops - just to help us understand - do you offer your tenants for $20k per year for the first three years a lifelong right to stay in your premises and do you stop charging them after three years?

Do you offer your tenants the free use of a bowling green, a gym and a swimming pool in front of their door? Do you offer them social facilities, entertainment and security / protection not just in case of e.g. a pandemic?

I assume the answer to all questions above is no - so, why do you spread this garbish comparison all over this thread? It is not comparing apples with pears, it is comparing the price of a 1 kg dog roll (or Kiwi luncheon) with the price of a licence to eat for the rest of your life in a fine restaurant.

And yes, attacking other posters based on their previous history without even revealing your previous penname tells us a lot about you. Anything you have to be ashamed of?

"I assume the answer to all questions above is no - so, why do you spread this garbish comparison all over this thread?"

Good morning to you too BP I did not expect so much spite from you.

Does this help?

https://www.trademe.co.nz/property/residential-property-to-rent/auction-3680230334.htm

Perhaps you could back up some of your own assertions

"

^^^^   Looks okay to me except the no pets part.  (Its no deal if I can't have a Beagle).

No question the squeeze has started to happen, (the price difference between what people can sell their homes for after real estate agents commission and legal fees and the cost of an independent living unit in a high quality retirement village.

The squeeze is being fueled by rampant construction cost inflation running at ~ 20% per annum and real estate down by about 10% in the last 7-8 months.  If these trends continue like I think they will this issue will become more of a problem.

RYM with their notoriously high priced units are most exposed in my opinion, see earlier post #21 in this thread.

Quote from: winner (n) on Jul 13, 2022, 12:03 PMBP - UBS says HPI explains 34% of retirement of share price performance .... but you already knew that it wasn't a one to one relationship

Over time the relationship shown in00000reire v hpi.JPG  chart below

If too much 'noise' for ypur liking just ignore it

00000reire v hpi.JPG

Great graph Winner. Similar co-relation to how net migration figures used to track house prices. But influence factors change. Yours now more relevant. After all what we seek is a co-related confirmation that we are tracking in the right direction -unrealistic for both to track exactly the same.. enough for me to say the trend is my friend.

how things went this week00000ret22.JPG

Thanks for your hard work Winner.

Tough sector with them all being down a similar amount year to date, (about twice the NZX50 decline)

Price to book on Arvida is starting to get interesting at 0.76 considering they do have some eps growth but the downtrend is firmly entrenched so could still have quite a way to go and last years NTA may not be a reliable indicator of future year's NTA which could easily decline.

A very warm welcome to the forum Whome. 👍

Good article in todays NBR on funding aged care. Seems the Government has lifted their offer

NZACA and Health New Zealand's funding negotiations are ongoing, with the latest offer on the table a 3.5% increase plus a one-off targeted fund of $17.7m to assist providers whose sustainability is threatened by nursing shortages.

This is far below NZACA's request for a hike in excess of inflation, which is running at around 7%.

Campbell stresses that the organisation can only fund providers on the basis of the funding allocations made to it by Government: "We do not have a 'funding printing' machine.

https://www.nzherald.co.nz/business/retirement-village-share-prices-plummet-after-housing-market-softens/47CFZM435JMXROORHPSXONHF74/?utm_source=newsletter&utm_medium=nzh_email&utm_campaign=Premium_Business_Briefing_Newsletter&uuid=ae2dd95d629344ca8119b12a0d7d7338  Paywalled.
Jarden analysts negative on the sector and cite many of the issues canvassed on this thread already including rapidly falling house prices and rapidly escalating costs of care.  The latest funding round increase of just 3.5% is truly abysmal compared to (for example) OCA's recent escalation in care costs running at low double digits last year after many years of high single digit increases.  Jarden see care cost concerns persisting for the medium term.  I see it as a long term systemic issue which is why I sold out of OCA.

It seems the Labour Govt are very happy for this sector to be radically underfunded, (i.e. heavily taxed) with its care operations as penance for making untaxed gains on independent living units.   The other day I was listening to National's proposed policies in the healthcare sector and they talked about increases every year in line with inflation.  That's all good but it will provide no relief whatsoever if it starts from an incredibly underfunded position in late 2023 (if they get into power).  If Labour remain in power look out, not only will they bludgeon the care side of retirement village operations even more every year but they might also go after the "loophole" of tax free gains on resales of independent units.  If they do their supporters will lap up this closing of another "loophole" where shareholders (who are perceived as little better than greedy capitalist pigs in the halls of power in Labour offices) finally get their comeuppance.

Jarden see Summerset as best positioned in this sector.  I agree, (especially seeing as they have the lowest exposure to the care sector), but as mentioned before, I believe all boats are highly likely to go lower on a fast outgoing tide and the political risks are clear so I will remain on the sidelines while all sector participants remained in a downtrend.
https://www.interest.co.nz/property/116811/number-residential-properties-being-auctioned-slumped-further-last-week-just-over

Quote from: Shareguy on Jul 19, 2022, 09:59 AMGood article in todays NBR on funding aged care. Seems the Government has lifted their offer

NZACA and Health New Zealand's funding negotiations are ongoing, with the latest offer on the table a 3.5% increase plus a one-off targeted fund of $17.7m to assist providers whose sustainability is threatened by nursing shortages.

This is far below NZACA's request for a hike in excess of inflation, which is running at around 7%.

Campbell stresses that the organisation can only fund providers on the basis of the funding allocations made to it by Government: "We do not have a 'funding printing' machine.

What a joke when they wasted over 300 mill of bribe money to encourage a certain group of people to get vaccinated, the sector is currently over 700 mill underfunded.

Maybe lets all take a vitamin D tablet (what you don't get enough of from sunlight in winter months) to ward off SAD (seasonal affective disorder caused by endless rain and winter conditions) and make a fresh start with being more constructive tomorrow.

Wonder how many old folks in retirement villages understand the benefit of vitamin D tablets ?
My doctor tells me about half the medical profession are on them as the benefits are now so well known.
I get them on prescription, take one tablet a month on the same day, took one last evening.  Even bought some shares today, (first purchase for nearly a whole month) in a known Bear market so they obviously work !

They must be most effective in the day immediately after taking them because I managed to avoid weighing in on this debate about political correctness today which must be a first for me LOL

Regarding aged care, the latest funding increase commencing 1 July 2022 amounted to about 1.8% over last year.  Keep in mind "last year" had an emergency increase of about 2.7% on 1 August 2021 above the previous figures which increased ~4.5% on 1 July 2021.

What does this mean for a business with a 31 March balance date?

Apr/May/Jun 22 has an average increase of 7.2% over last year
Jul 22 has an increase of 4.5% over LY
Aug 22 - Mar 23 has an average increase of 1.8% over LY
Average for year ended March 2023 will be ~3.5%

Source (https://www.health.govt.nz/our-work/life-stages/health-older-people/long-term-residential-care/maximum-contribution)

All good Ferg but the problem is first of all inflation is running at 7.3% so they are reducing funding in real terms by close to 4% this year !   The bigger problem is that the cost of providing care has a proven history of rising at much higher than the rate of inflation over many years now.  For example OCA's human resource costs have been increasing in the late single digits year on year when inflation as ~ 2% and last year @ ~ 12% when inflation was 7%.

The Government seem determined to continue to put the care sector under enormous and ever increasing pressure.  Even if National get in they are just talking about inflation indexing care sector costs but if you start that process from an egregiously low and underfunded base the problem never goes away !  Hopefully it won't get worse if National gets back into power in late 2023.  However there's more time for Labour to inflict further pain on this sector with at least one more annual funding round they're in charge of "managing".  Who knows how the sector will cope if Labour get back into power for a third term ?  Headwinds in the care sector look fierce / (typhoon strength) to me.

The company with the lowest percentage of care beds and units (SUM), is best placed to weather this storm which looks likely to be a really serious and enduring problem driving well below acceptable ROI in the care sector for the foreseeable future.
With houses basically in freefall its hard to like anything in this sector at this point.   

What I don't quite understand, is if there is a shortage of aged care beds why is this not being reflected in the price of care? From memory, OCAs last report screamed of low pricing power as even with inflation roaring away they barely changed their pricing. To me if aged care was a true necessity they would be achieving price increases reflective of the constrained supply. Kind of undermines the whole retirement investment mantra of the impending silver tide. Deeply underwater with this sector, trying to figure out how many holes are in my boat  :-\

Quote from: Plata on Jul 22, 2022, 02:32 PMWhat I don't quite understand, is if there is a shortage of aged care beds why is this not being reflected in the price of care? From memory, OCAs last report screamed of low pricing power as even with inflation roaring away they barely changed their pricing. To me if aged care was a true necessity they would be achieving price increases reflective of the constrained supply. Kind of undermines the whole retirement investment mantra of the impending silver tide. Deeply underwater with this sector, trying to figure out how many holes are in my boat  :-\

Because the funding amount is set by the Govt via the local DHB's, the company can't just increase the care fees other than charging a bit more for a premium room, the base fee that is set must apply to both private paying and subsidised residents even though the private payers are capable of paying more. This is also the reason the Govt hasn't addressed the pay parity issue with DHB nurses, they know if they do they will automatically have to stump up with a funding increase for the sector, the big players are absorbing the extra costs themselves by paying nurses more in many cases but this extra cost comes out of unit sale profits and is ad-hoc in nature.

The first question to ask Plata is has OCA's huge experiment with care suites worked as a strategy ?
I would argue NO as there seems to be a very large pool of unsold care suites and its probably a growing problem.
Why do I think care suites are not attractive as a care option ?
1. Firstly they're inflexible.  You might pay say $350K and you will lose $35,000 if your parent dies the day after they move in, (minimum 1 year charge).
2. Your Estate won't get the residual value of the license to occupy back until they have resold that care suite, that could be a few months or a few years, who knows ?
3. There are plenty of other options, for example we knew our Mum was dying from terminal cancer and we found her a fabulous premium room in a brand new upmarket care facility in Whangaparoa that her specialist recommended and it cost her Estate $45 a day premium accommodation charge PAC...from memory all up it was about $7,000 for the 5 months she was in care before she went to be with God.  She enjoyed a great sea view, great facilities, good care and was very close to her friends and family. 
4. Lots of other villages allow you to have a premium care room for similar or often less money including many of OCA's villages themselves, that's right OCA undermine their own care suite business model !
5. There are other schemes that don't cost anything and your Estate get's all the money back within 30 days, see the RYM refundable deposit scheme here https://www.rymanhealthcare.co.nz/accommodation-premium 
This is what OCA are up against with their care suites.  With RYM's refundable deposit scheme, you lose nothing of the $350,000, you pay zero premium room charge and you enjoy RYM's well regarded standard of care.  To top it all off there's no waiting months or years for your Estate to be paid out.

The question you need to ask with the excellent lower cost and more convenient alternatives is who in their right mind would put say $350,000 into an OCA care suite and see between 10-30% of that gobbled up in license fees and then force the Estate to wait maybe years to be paid out ?  I put it to you and others that most people are not stupid, don't want to tear up money like that and don't want to put their kids through and endless wait for the Estate matters to be cleared up.

The whole care suite thing and its relative attractiveness has really come under serious attack with RYM's far more attractive fully refundable deposit scheme.  That's how I see it and that's why I think OCA, (despite keeping their care suites very cheaply priced and not seeming to have any pricing power with them) are really struggling to sell them.  That's one of the key reasons I sold out of OCA, the other is the huge rate of increase in their wages bill...lots of holes in that boat !

If there really was such a shortage of care beds you would expect that people would have little choice to chose between OCA and other providers, they should all be full! I reckon the only shortages that exist in reality are for base model care beds and nurses...

Quote from: kasper on Jul 22, 2022, 02:52 PMBecause the funding amount is set by the Govt via the local DHB's, the company can't just increase the care fees other than charging a bit more for a premium room, the base fee that is set must apply to both private paying and subsidised residents even though the private payers are capable of paying more. This is also the reason the Govt hasn't addressed the pay parity issue with DHB nurses, they know if they do they will automatically have to stump up with a funding increase for the sector, the big players are absorbing the extra costs themselves by paying nurses more in many cases but this extra cost comes out of unit sale profits and is ad-hoc in nature.

You seem both knowledgeable and very positive about this sector and OCA especially, what gives you such confidence of golden times ahead? Basil has made some good points on the negative side recently, how are your views such polar opposites? I think the downside for OCA and ARV specifically is pretty limited at this point given their low PE ratios, so I'm not willing to sell out just yet but trying to evaluate if I am better served holding these stocks or simply rotating into an ETF/index fund.

Quote from: Plata on Jul 22, 2022, 03:08 PMYou seem both knowledgeable and very positive about this sector and OCA especially, what gives you such confidence of golden times ahead? Basil has made some good points on the negative side recently, how are your views such polar opposites? I think the downside for OCA and ARV specifically is pretty limited at this point given their low PE ratios, so I'm not willing to sell out just yet but trying to evaluate if I am better served holding these stocks or simply rotating into an ETF/index fund.

The difference is i have an inside looking out viewpoint and Basil has an outside looking in one, I am involved in the sector to a small degree now but my wife is still a village manager of a large facility and has been in that role for over 25 yrs for all of the listed companies at some point bar Arvida. I agree with you that the downside is limited and if you have a long term outlook then all is well, I cant offer any advice on the rotation into an ETF but I personally wouldn't.

I confess the naughty dog is a numbers man and just in it for the return...I leave the numbers in and the emotional and ESG stuff out !
Realistically the downside on the companies trading well below NTA (OCA and ARV) is probably limited...maybe another 20-30% is about as bad as its likely to get, (barring some other major exogenous shock to the market) but here's the thing, they could be a value trap for many, many years and the unimputed yield on ARV and OCA is not that flash.  At the end of the day there's so little money in care its absolutely pathetic so the only real money to be made is in property.

I looked at it this way when I made the decision to exit.   Without wishing to overstate the obvious property has a range of different types and is retirement village property likely to outperform or underperform other property types ?  I believe with all the headwinds on care and with house values in steep decline it will underperform commercial and industrial in the foreseeable future.  There were a couple of Real Estate investment trusts (REIT's), trading on bigger discounts to NTA than the retirement village companies e.g. ARG.  The REIT's don't have the headwinds of care to contend with.  All their assets are working for shareholders rather than just some of them and the discount to NTA is bigger and the yields being PIE exempt are therefore worth a lot more in your hand.  As noted above, I'm really just in this for the money.

Even if the REIT's like ARG stay being a value trap for many years like the retirement village companies do at least through the PIE tax structure 33% taxpayers are effectively getting close to 8% so you're being paid really well to wait whereas with the like of ARV and OCA you're being paid at a pretty modest level, (less than 5%) and the care side of their business is really not working for shareholders, hence the much lower yield.

I think your dreaming on your 20-30% down from here Basil but then dreams are free, actually that would be a dream come true and time to unlock more equity from the house to load up the truck once again.

To be fair this is what I said.
"

QuoteRealistically the downside on the companies trading well below NTA (OCA and ARV) is probably limited..maybe another 20-30% is about as bad as its likely to get

"
I see that as likely to be chart datum (the lowest point of the lowest tide) but the tide may not go out that far....time will tell.

What's more concerning for me to be clear, is how much longer is it before the tide starts coming in again ?
I don't think anyone knows that yet...probably better to simply follow the TA and when best of breed eventually breaks back up through the 200 day MA, (I reckon its best to use the 200 day MA because property works in long term cycles), back up the truck and load SUM up then.

Quote from: Plata on Jul 22, 2022, 03:08 PMhow are your views such polar opposites?

There are plenty who take a long term positive outlook but we are ok with dissenting points of view that are based on facts (e.g. values per annual reports & annual trends etc).  The positive outlook is based on understanding the levers other than care within OCA that will drive future profitability, e.g. DMF revenue growing at an exponential rate, premium care revenues increasing, as well as increasing development & resale volumes and margins.

The issue of unsold care suites for OCA is due to facilities being demolished and the patients/clients being transferred to a new facility which counts as unsold until it's first ORA sale.  But in the meantime OCA is still collecting weekly care revenues for these "unsold" suites.

In addition, care suite development margins sit in the village P&L rather than the care P&L which muddies the waters for OCA given such gains could not be achieved without the care model.  The marketing strategy for OCA involves a continuum of care which allows easy transition for clients through various parts of the business.  Increasing care costs need to be volume adjusted and one also needs to consider the one-off impacts of Covid, including subsidy repayments last year.  OCA have also locked in some relatively low interest rates via the 2 bond issues.

The frustration for long term holders is obvious given they were sold on the care model which has not delivered to expectation.  That is being addressed by increased acquisition and development activity, assuming they can deliver on this new strategy.  Patience is required with OCA if one has a view of 2-3 years or more.  But for someone with a short term view who follows TA, I can understand why they would not be so positive about OCA.

Diversity of experience and opinion is a good thing and we should be thankful we are not all in agreement, otherwise there would be nothing of value to discuss.

Quote from: Basil on Jul 22, 2022, 05:32 PMTo be fair this is what I said.
""
I see that as likely to be chart datum (the lowest point of the lowest tide) but the tide may not go out that far....time will tell.

What's more concerning for me to be clear, is how much longer is it before the tide starts coming in again ?
I don't think anyone knows that yet...probably better to simply follow the TA and when best of breed eventually breaks back up through the 200 day MA, (I reckon its best to use the 200 day MA because property works in long term cycles), back up the truck and load SUM up then.

Hiya Bas

Just my opinion, near-term inflation has peaked and therefore int rates are not that far off. Prices and confidence could bounce along the bottom for a while however should stabilise. Do you agree?

Last week generally positive week for sector

00000ret22.JPG

Quote from: Habitz on Jul 22, 2022, 10:32 PMHiya Bas

Just my opinion, near-term inflation has peaked and therefore int rates are not that far off. Prices and confidence could bounce along the bottom for a while however should stabilise. Do you agree?

Hi Habitz,  welcome to the cool people's forum  :)
Agree with your first sentence mate.  In terms of prices, I presume you are referring to real estate prices ?  I think we've got quite some way to go with this housing correction.  I seriously doubt we're anywhere close to half way through.  The major factor in my opinion is the market got grossly inflated based on one in 100 year low interest rates.  Basically you could borrow money for free at some stages in 2021, interest rates were as low as 2% fixed for a year and inflation was the same, (hence it was ostensibly free money in a very rapidly rising housing environment so a lot jumped in thinking what could possibly go wrong ?).

Anyone locking in mortgages in the last 2 years for terms of a similar nature is staring down the barrel of a major shock when their mortgage gets re-fixed.  Affordability, or rather lack of it is driving a radical lowering of demand at first home buyer end of the market and my view is this is caustic to the middle and upper end of the real estate market over time.

I think this is a reset that carries on well into 2023, (at least).

Yes...we are going down to low tide and it might stay close to a low tide situation (scrape along the bottom) for quite some time.  Volumes of sales are dropping badly and supply for sale is ballooning up very sharply.  Supply and demand is badly out of whack and that only ends one way, with meaningfully lower house prices.

Needs based decisions will still be made but as mentioned yesterday I think RYM's deposit scheme for premium care facilities is dramatically better than the terms of a standard care suite.  Lifestyle decisions will still be made too as the average age of residents going into retirement villages is close to 80.
I do believe lifestyle decisions will be based around exactly that, lifestyle and people are generally more inclined towards full feature villages than boutique smaller ones.

Finally on the inflation front, yes I think we have peaked or very close to have peaked.  On the longer term interest rate front I think the recent 10 year Government stock move up to 4.30% was either the peak or very close to it.
For what its worth I've backed that opinion up with buying some high quality 5 year bonds in the high 5% yield range recently. 

P.S. Lack of demand, interesting article here https://www.interest.co.nz/property/116840/builders-report-80-90-slump-new-home-inquiries-and-fear-another-200910-style-bust

I hear regularly that there is a waiting list and queue of people wanting to get into an RV. Yet there are often ads and billboards from competing RV and more frequently. My local Ryman village erected a sign outside that they have villas available right away.

Can't make sense of that

Quote from: Retread on Jul 25, 2022, 01:57 PMI hear regularly that there is a waiting list and queue of people wanting to get into an RV. Yet there are often ads and billboards from competing RV and more frequently. My local Ryman village erected a sign outside that they have villas available right away.

Can't make sense of that

They say that all this marketing and advertising is mainly for 'brand recognition' and does not indicate either over supply nor slower demand.

Ryman Hilda Ross 2 bed 1.5 bath duplex unit renoed with high spec only 685k should fly off the shelves. Nope!

Things going well in sector.

Oceania said sales were ahead of last year a few weeks ago and now Ryman say "We've reviewed progress and we are pleased with where we are at after the first three months of the financial year,

How well are retirement stocks recovering from recent lows?

Gains from 26 week and 4 week lows shown below - on average +9% up on 26 week lows and 5.5% on 4 week lows - so heading in right direction.

Did same exercise for property stocks - they are +11% up on 26 week lows and 7% up on 4 week lows.

So property doing a bit better than retirement. Interest rates might be key driver of property stocks but these numbers could show that other things like house prices / care costs are still a concern for retirement stocks.

Insight - the long standing pecking order of retirement stocks still exists

00000retgains.JPG

How sector stocks went this week - on average up for 2nd week in a row

Looking good v 26 week lows as well

Maybe the worst is behind us - maybe famous last words

00000ret.JPG

Amazing how they are all down about the same this year, (within ~ 2% of each other right across the sector) with the exception of the usual poorly performing laggard.  Nice move by SUM this week, cream starting to rise to the top.

Who am I ?  Scroll down through the Kingfish presentation
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KFL/396473/375929.pdf
Bearing in mind this question could have applied to any NZX stock it took me only 2 seconds to work out the answer.

I posted in here so this should be a really easy question for anyone with reasonable knowledge of this sector. 
Earnings matter !  Disc: I started accumulating a couple of weeks back.

how these stocks went this week

Positive week except for Radius

0000reti.JPG

Quote from: winner (n) on Aug 05, 2022, 06:05 PMhow these stocks went this week

Positive week except for Radius

0000reti.JPG

WOW - Oceania did rise 5.3% in a week. If it keeps rising like that, it will be close to $2 in only three months from now and $4 in half a year! Now, isn't this something to celebrate?  :P

Discl: Sadly, I don't believe in the power of linear extrapolation of random jitter, but happily, some people do.

I see a certain regular promotor on another dreadful site is talking about $2 in 22 months but maybe $3 !  Would you guys like a money back guarantee or a Tui to go with that ? LOL

Yes that's pushing it . I feel though that the tide has turned and it's upwards and onwards from here.

Very good article in Saturdays Herald from Tony Alexander who is saying house prices on way up next year.

A good opportunity for some amalgamation and I think OCA way undervalued and a prime candidate.

I have been buying both Rym and Sum last week and now have enough.

I think its widely acknowledged by all that there is far more money in ILU than care.
If you are buying based on a perception that there is value there because something is cheaper than NTA, (my view is a HUGE discount to NTA is warranted in OCA's case because of the very low profitability of the care part of their business which at last balance date made up 61% of their units) then the choice is stark.
ARV have only 28% of their units as care and OCA have 61%.  Both trade at a significant discount to NTA.
There are a lot of weaknesses in OCA's business model I have talked at great length about already.
ARV at least has a track record of modest eps growth whereas OCA has been an complete failure in that regard despite now being well past the previously much promoted point of inflection.  I think when OCA was floated, investors were sold a PUP !

For mine, discount to NTA is irrelevant as all it does is boost the yield slightly but if you are after yield you are better off in some of the higher yielding REIT's.
I don't think anyone really buys the retirement sector stocks for yield.  Its all about growth and SUM companies are growing extremely well and others...oh dear...just an unmitigated disappointment.

I rising tide (if that happens next year) will lift all boats but there's so many leaks in OCA's business model that boat isn't going anywhere fast, anytime soon.

Here's the current list I have of target prices.

          Craig's     Forbar         Jarden

ARV       Na.         $2.30.         $1.70

OCA       $1.21.      $1.55.         $1.25

RYM       $13.77.     $9.70.         $10.50

SUM       $16.47.     $12.30.        $12.00

Insert from Tony Alexander's latest newsletter.

Property to increase next year.

Things are getting less negative – but they are still very negative. The credit crunch is also still there, but it is less bad. A net 9% of mortgage advisers in a survey I run with mortgages.co.nz say that they feel banks are becoming more willing to lend. A survey of property investors I run with Crockers Property Management shows a net 30% feel banks are making it tough to get credit versus 60% early this year. The proportion of bank lending which involves less than a 20% deposit has lifted from just over 5% early this year to 8.6% in May and 7.8% in June.
Views on interest rates are also shifting. Bank wholesale borrowing costs have fallen 0.5% - 0.7% from peaks in June when inflation worries dominated. Now, in light of weak economic data offshore and central banks moving rates up more rapidly than anticipated, attention has shifted to risks of recession and markets are pricing in monetary policies easing before the end of 2023 in the likes of the United States, Australia, and New Zealand.
We are close to entering the endgame for the downward leg of the house price cycle. For a few months longer the negatives will dominate, including talk of the brain drain and discussions about property over-supplies in some parts of the country.
But with international food, oil, and shipping costs falling alongside rents growth in NZ slowing down, in the middle of October when the next inflation numbers appear we are likely to see the inflation rate falling. That will sharply focus people on how quickly inflation will decline and that will reinforce attention on already falling fixed mortgage interest rates.
Then there are these interesting things people will say to each other. With the stock of property listings already 104% ahead of a year earlier at the end of July and the falling of listings to a record low below 14,000 last year helping propel the late year surge in prices, people will openly wonder if perhaps the time were not right to take advantage of the high number of properties to choose from.
When that happens someone (me) is going to point out that listings are still well below average, and shortages look set to return once the buyers do.
Then we will need to add in people discussing what it means for the prices of existing houses if construction costs keep rising as they have been. The incentive will shift even more strongly back towards buying an existing property than it already has.
Then someone will remember that two months ago the Reserve Bank said it would no longer consider house prices to be unsustainable once they had fallen 15% from November peaks. The decline so far amounts to 9.5%. When we hit a 15% decline the headline somewhere will read "Reserve Bank now considers house prices to be sustainable". When prices have gone down 15%, I expect an easing of LVR regulations to reflect this reduced risk of house price correction to stability of the financial system.
Then let's add in the strong labour market bringing few fears of job losses and we are highly likely to see a situation where before the end of summer, the buyers come out of the shadows again to initially take advantage of tired vendors, then to generally snap up listings.

 The outcome is likely to be that through 2023 as credit flows more freely, interest rates fall, the economy receives a boost from tourism and foreign students returning, a low NZ dollar and good export prices, that house prices will rise.
My expectation is that prices on average will rise between 5% and 10% next year. Barring an outbreak of foot and mouth disease decimating the economy, the incentive for previously frustrated buyers waiting in the shadows to come out and become more active will grow as each month goes by from probably one of the three months of Spring.
Go to www.tonyalexander.nz to subscribe to my free weekly "Tony's View" for easy-to-understand

Didnt he say prices would rise 5% this year?

Not a good look for Ryman  https://www.nzherald.co.nz/business/ryman-healthcare-abandons-95m-mount-martha-plans-selling-australian-site/2TEXQGUGPQ7LW3XFROVMMQSJBI/ Paywalled.

Suspect it is as a result of their no dilution policy. Not a lot of headroom left for developments so they have to pick and choose wisely? I'm sure they will book a handsome profit on the land itself at least ::)

Quote from: Basil on Aug 10, 2022, 04:10 PMNot a good look for Ryman  https://www.nzherald.co.nz/business/ryman-healthcare-abandons-95m-mount-martha-plans-selling-australian-site/2TEXQGUGPQ7LW3XFROVMMQSJBI/ Paywalled.

Which part of the article are you referring to? Pretty sure they will sell on the respective sections with a nice profit :) ;

Quote from: Plata on Aug 10, 2022, 04:35 PMSuspect it is as a result of their no dilution policy. Not a lot of headroom left for developments so they have to pick and choose wisely? I'm sure they will book a handsome profit on the land itself at least ::)

I would have thought if they weren't going to develop it they would have announced a sale at the same time they announced it was a "No Go".
The fact they haven't suggests it may be a hard sell.  Let me put it this way, If RYM bought on the assumption they could build a multi level development there and they can't after many years or trying that probably means nobody else can develop it in a profitable manner consistent with the land's capital value either.  If the extent of any proposed development by another party has to be watered right down for whatever ESG or planning reasons RYM faced I would think on the balance of probabilities they will take a loss when they resell it.

Objectively there is no way you can call this a "Win"  Quite the opposite, there's anecdotal evidence RYM are starting to struggle with their consenting process's in Australia.  Whether that's because of ever increasingly stringent planning and environmental matters, or its a reflection upon RYM's development team or their expert consultants, of some combination of these factors is anyone's guess.

All I am saying is lets just be objective and call the failure of a proposed development what it is, a failure.

Quote from: Basil on Aug 11, 2022, 01:29 PMI would have thought if they weren't going to develop it they would have announced a sale at the same time they announced it was a "No Go".
The fact they haven't suggests it may be a hard sell.  Let me put it this way, If RYM bought on the assumption they could build a multi level development there and they can't after many years or trying that probably means nobody else can develop it in a profitable manner consistent with the land's capital value either.  If the extent of any proposed development by another party has to be watered right down for whatever ESG or planning reasons RYM faced I would think on the balance of probabilities they will take a loss when they resell it.

Objectively there is no way you can call this a "Win"  Quite the opposite, there's anecdotal evidence RYM are starting to struggle with their consenting process's in Australia.  Whether that's because of ever increasingly stringent planning and environmental matters, or its a reflection upon RYM's development team or their expert consultants, of some combination of these factors is anyone's guess.

All I am saying is lets just be objective and call the failure of a proposed development what it is, a failure.

Typically one would wait for the sale and the results before judging.

If they knew that they lost a material amount of money, they would need to disclose that anyway.

Why are you in such a hurry to bag them?

Under Simon Challis they had a stellar development record.  I suspect part of that was he was such a likeable and affable gentleman his charm carried the day.

I think RYM is still priced to some extent on its historical track record of growth and development success based upon among other things exceptional leadership they had in years gone by.  My contention is simply this, I don't think RYM deserves a blue chip premium multiple any longer.  Their average underlying eps growth since Simon Challis left has slowed quite considerably and now they are "enjoying" more patchy development success.

 

Quote from: Plata on Aug 10, 2022, 04:35 PMSuspect it is as a result of their no dilution policy. Not a lot of headroom left for developments so they have to pick and choose wisely? I'm sure they will book a handsome profit on the land itself at least ::)

I agree with Basil it is not a good look but my guess is similar to yours - they have hit some sort of limit and think they can now do something better with the funds.  It would seem a waste having sat on the property for 5 years (*more on that below).  The limit being funding, projected costs or council restrictions etc.

Although a Google news article search had a headline which suggested there was a 5 year battle (article is paywalled), I'm guessing it was with NIMBY neighbours....and I just found this article (https://www.theweeklysource.com.au/vcat-rules-against-rymans-plans-for-mount-martha-retirement-village-and-aged-care-precinct/) which says the local planning tribunal knocked it back in 2021, I'm guessing it was due to NIMBY neighbours and there has been some sort of final nail into the Mount Martha coffin.

I didn't know about Mount Martha until Basil's post, but I have been doing some reading.  Mount Martha is about 51 km south of Melbourne, which is a similar distance from Karaka in South Auckland to Albany on Auckland's North Shore.  IOW not particularly close.

Ryman bought it in 2017 but this post doesn't say how much they paid:
https://www.facebook.com/rymanhealthcare/posts/1914149492180158
Nor does their AR for that period.

*Mount Martha has a median house price of A$1.65m, which is +22% over the past 12 months (apartments are $850k, +19.6%)

Melbourne has a median house price of A$1.2m with annual growth of -33% (apartments are $500k and -2.9% for the year).

Sources:
https://www.realestate.com.au/vic/mount-martha-3934/
https://www.realestate.com.au/vic/melbourne-3000/

Land seems to sell for maybe A$1m per 1000 square metres there. Sources:
https://www.realestate.com.au/buy/property-land-in-mount+martha,+vic+3934/list-1
https://www.domain.com.au/sale/mount-martha-vic-3934/vacant-land/

Ryman has 1.95ha there.  Whether they make or lose on the transaction remains to be seen, but I'm guessing some sort of revaluation reversal is required, assuming there was a revaluation in 2018 and it hasn't been reversed already.

Sorry for the long post, but I see the site is still on the Ryman webpage (https://www.rymanhealthcare.com.au/retirement-villages/mornington-peninsula/mt-martha), and says:

QuoteRyman's proposed retirement village in Mt Martha will be a welcome addition to this sought-after suburb, which is already home to a large number of retirees.

The village is being built in response to a shortage of retirement living options on the Mornington Peninsula, and will be conveniently located a short distance from the Bentons Square Shopping Centre, which includes a pharmacy, medical centre, a supermarket and other retail stores.

In a Ryman village, you can take comfort in the knowledge that if you and your spouse or friends have different health needs you can still be cared for within the same village, and in the same community you know and love.

Mt Martha Village will epitomise what it means to live life to the full in retirement. You'll gain a lifestyle and a community you can thrive in. And for those local to the area, it's the perfect opportunity to enjoy our village within your local village.

Roman don't seem to mind holding land for long periods of time

The old bread factory sire in Newtown they bought off one of the supermarkets years ago is slowly falling down ....and the old teachers college in Karori they bought in 2017 doesn't appear to have much done to it.

Interesting.  It makes me wonder if it is a deliberate strategy or if there are delays in getting the necessary approvals, or maybe something else?  Whilst it does not seem to be a profitable use of funds, very often the profits are made when you buy something, selling it merely confirms what you already knew.  If Ryman acquired these at very good prices, maybe some extra time during the planning stage is neither here nor there in the wider scheme of things......?

Interesting new twist to the interest deductibility rules.
https://www.nzherald.co.nz/business/government-tax-u-turn-landlords-allowed-breaks-back-for-long-term-rentals/SYU2VNIX56C3XHYNS5WWELXXYI/
Might give the sector a much needed shot in the arm.  The catch is you have to offer the tenant a long term tenancy of 10 years.  They can give 56 days notice but the landlord can't.  If the tenant chooses a shorter tenancy then the landlord can still claim interest deductibility.

Good week for sector stocks - average +3% in flat market

RYM the only negative

0000ret.JPG

Quote from: Basil on Aug 12, 2022, 03:07 PMInteresting new twist to the interest deductibility rules.
https://www.nzherald.co.nz/business/government-tax-u-turn-landlords-allowed-breaks-back-for-long-term-rentals/SYU2VNIX56C3XHYNS5WWELXXYI/
Might give the sector a much needed shot in the arm.  The catch is you have to offer the tenant a long term tenancy of 10 years.  They can give 56 days notice but the landlord can't.  If the tenant chooses a shorter tenancy then the landlord can still claim interest deductibility.

I guess a little cash incentive might get the tenant to make the right choice. Checkmate mate :)

anybody want to play villageopoly at Parliament

Seems only one winner

https://www.stuff.co.nz/business/129552111/retirement-villageopoly-mps-shocked-after-playing-fishhooks-game-at-parliament

"At the close of the game of villageopoly, select committee chairperson Angie Warren-Clark, said the playing game had been quite shocking."

Being the chair and not really knowing the subject matter is a  big worry

Quote from: Habitz on Aug 13, 2022, 08:11 PM"At the close of the game of villageopoly, select committee chairperson Angie Warren-Clark, said the playing game had been quite shocking."

Being the chair and not really knowing the subject matter is a  big worry

This senior lady has spark.. From Stuff Article
"She talks about how several years ago, a hospital appointment led to an eventual transfer to a retirement village, but it was not to be for long.

"Anyone would run away," Harwood says.

"Why would I want to live in those places when I can just live here at my own home?"

And Harwood is not joking: She escaped from the young carer who was supervising her on a daily walk"



Edna is 105 and more determined than ever – 'It feels the same as 40' | Stuff.co.nz
https://i.stuff.co.nz/life-style/wellbeing/300662971/edna-is-105-and-more-determined-than-ever--it-feels-the-same-as-40

In answer to how does the accounting work for development margins, I put up this answer on another forum:

QuoteDevelopment margins (and realised resale gains) will not be found in the traditional P&L. This method is used by all RV operators.

Development margin is determined by comparing the value of the ORA sold to the cost of completing the construction of that asset. This happens outside of the P&L and Balance Sheet. Likewise realised resale gains are also not to be found in the traditional P&L and Balance Sheet - these are determined by comparing an ORA sale to the value of the previous ORA sale for that same asset.

This all happens off the books.  This is why the RV companies then present an "underlying earnings" P&L which takes into account these off book values and to reverse out anything else that either is not underlying, or gets in the way of the resale gain/development margin calculation.

The RV then periodically reviews its entire portfolio of assets; some of which were recently sold, most were not resold recently but are still occupied by residents, some may be recently vacated and others are newly built and are unsold. With the help of a valuer, and taking into consideration the subset of properties that had an ORA sale and a bunch of rules around occupation, the RV then revalues it's portfolio.

You might ask why do these realised gains not appear in the P&L?

The RV never actually sells the asset - they sell the right to use it hence you won't see any revenues or gains in the traditional P&L (aka "comprehensive income statement"). If you follow these simplistic journal entries it make sense:

1) Build the asset:
Dr Investment Property (Balance Sheet)
 Cr Bank/Payables/Loans (B/S)

2) Sell the ORA:
Dr Debtors/Bank (B/S)
 Cr ORA Liability (B/S)

Off Book:
Development Margin = ORA Liability - Investment Property Cost for that asset
Realised Resale Gain = Latest ORA Liability - Previous ORA Liability for the same asset

3) Year End Revaluation:
Dr Investment Property (B/S)
 Cr Fair Value Adjustment (P&L)

That is basically it. So the development margins and resale gains are (sort of) a subset of the fair value adjustment . They are actually more of an input into the revaluation process. They are not a transaction that hits the P&L when an ORA is sold. Weird I know. Given the asset was not sold, but the right to use it was, it is actually a financial arrangement and non-taxable. Hence the reason we see profits and dividends from RV's but there are no imputation credits given the low (or no) taxes being paid.

Acronyms used:
RV = Retirement Village
ORA = Occupation Right Agreement
B/S = Balance Sheet
P&L = Profit & Loss Report
Dr/Cr = Debit/Credit

MET made yet another acquisition.
Knocking out one after the other... Other CEOs in the sector who tout their M&A genius could learn a thing.

Rebalancing toward care.

"This acquisition is another significant step in our growth strategy as we expand our geographical footprint and increase our aged care offering"

MET Christchurch Acquisitions - LinkedIn (https://www.linkedin.com/posts/metlifecare_fullpotential-newvillages-retirementliving-activity-6968093509639708672-9me7?utm_source=share&utm_medium=member_android)

(https://www.linkedin.com/posts/metlifecare_fullpotential-newvillages-retirementliving-activity-6968093509639708672-9me7?utm_source=share&utm_medium=member_android)

Weekly update

Not a good week for the retire sector

On average down 1.5% -- exclude RAD average down 3.7% - NZX50 down 0.7%

0000retaug.JPG

Interesting to observe how each of the operators approach the opening of new facilities.

The best case study in this at the moment appears to be the Eastern Bays in Auckland where Ryman, Summerset and Oceania are all under construction at the moment.

Both Ryman and Summerset have pages on their website up and running offering phone numbers to enquire, info packs (SUM) and/or the ability to "register your interest" (RYM)
https://www.summerset.co.nz/find-a-village/auckland/summerset-st-johns/
https://www.rymanhealthcare.co.nz/retirement-villages/auckland/kohimarama

Oceania is the most advanced of the lot in their build, set to open their flagship "The Helier" in March, but you can't find boo about it on their website or even google.
Ryman haven't even broken ground in Kohimarama but are out there hunting enquiry.

Good proof right there of who the smartest operators are.
I see SUM are advertising as one of the village features "communal vegetable garden" tapping into the ESG craze that many are embracing with open arms. 
Very astute marketing in my opinion as many retirees would relish the chance to work alongside their neighbors and help to plant and grow not only vegetables but also good friendships.  Helps with building a good sense of community.  Good stuff !

Quote from: Basil on Aug 30, 2022, 04:21 PMGood proof right there of who the smartest operators are.

Yeah, I don't get it.
Doesn't seem like the hardest thing to get the word out with a page on your website for prospective buyers.

I get the argument that you probably can't sell care this early.
But Oceania apparently have their ILU stock at The Helier coming to market this financial year (around 7 months left to March).
If people want to buy in at opening then they need to be thinking about getting their house ready for sale now/very soon.

Aside from the poor marketing a lot of people are assuming the Helier will be built on time and in the FY23 year.  One thing is for sure, it's been one of the wettest winter's the whole country has had to endure in living memory.  I know for a fact the extraordinary weather this winter has seriously affected some of my client's business's.  I wouldn't be surprised at all if its running behind schedule.

On the other hand I noted the other day despite all the challanges of Omricon and the weather and supply chain issues that when SUM recently reported they said they are on track to deliver approximately 600 units this year and their development margin had increased very nicely !  Deeply impressive! 
It'll be interesting to see how OCA cope.

I was under the impression Oceania set up an interactive display in the local mall.  Why use shotgun marketing when you can use a rifle?

Quote from: Ferg on Aug 30, 2022, 07:27 PMI was under the impression Oceania set up an interactive display in the local mall.  Why use shotgun marketing when you can use a rifle?

I can reliably attest from my younger days working on my Uncle's farm in Southland in the holiday's paying my own way through Uni that we shot a LOT more possums and rabbits with a shotgun than we ever hit with a 22 caliber rifle.

Exactly right - there are not hundreds of units to sell so there is no need for a mass "shotgun" marketing campaign attracting enquiries from all and sundry.  Undertaking a mass marketing campaign will be like feeding strawberries to a donkey.

I would rather use a rifle over a shotgun to shoot a deer and I would rather eat deer than rabbit....so I'm not sure selective animal anecdotes carry much weight here...?

Animal hunting anecdotes aside, "rifle vs shotgun (https://www.radiusbridge.com/are-you-using-a-shotgun-or-a-rifle-to-hit-your-marketing-targets/)" are well entrenched alternative marketing methodologies.  The suburb and surrounds have plenty of wealthy retirees who want to stay local and who shop local.  St Heliers is a destination of itself.  So the marketing and target market will be spot on and highly targeted.

BTW the "mall" is a St Heliers sized mall which is nothing like Syliva Park.  Cripes, the St Heliers mall would fit into the BK carpark outside Sylvia Park!

Yeap, they should be able to round up about one rabbit a week one way or the other.
Had Rabbit pie in an exclusive lodge many years ago.  It was very nice.  Quite like venison too ! 

Whether the Helier is on time and whether the oldies can sell their century old cold and sometimes leaky villa's in St Heliers for a few million in a timely way is another matter ?

My view is that the selldown of the Helier will give them a temporary boost to underlying eps, in much the same way that the Sands gave them years ago.  Unfortunately, the Sands eps gain was temporary and subsequently all future DMF gains have been eaten up every year by staff and management.  Will history repeat ?  I think so.

For this old hound, for the life of me I cannot imagine why any rational investor would back a company with 5 years of history and absolutely no proof of earnings growth whatsoever, (OCA) over a company with a well proven business model with a 10 year track record of average annual growth of 33% (SUM)

The forward metrics are not that dissimilar and I think people backing the dark horse against the proven performer with ten wins in a row are very "brave" indeed.

Disc: Own SUM and nothing else in this sector.

Fair enough and each to their own.  Delivering any build on time and within budget is a challenge currently faced by all property developers - but as we know owning assets is better than owning cash in high inflationary times.  Whilst I own some OCA, I also have my fingers in other RV and property pies so it's not a case of exclusively OCA or SUM.  For example, KPG announced quarterly dividends today which is a bonus of sorts.  And as kasper previously mentioned, I can see OCA doubling in price before SUM doubles in price but I still have a bob each way just in case.  :)  We cannot ignore the past but we must also have an eye on the future.

The past is the very best guide we have to the future.  For anything to double in price you're going to need to see eps approximately double from here because I think the days of PE multiplies growing are over in this higher inflation / higher interest rate environment.  With all due respect to Kasper I don't think he understands this and believes that earnings don;t matter and its mostly about sentiment....but how is sentiment in this sector going to improve anytime in the foreseeable future in a falling real estate market ?

It only takes 3 years for a company growing at 33% per annum to grow earnings 135%.
I'm definitely in the "I'll believe it only when I see it" camp with regard to steady underlying eps growth with OCA.  I think their cost control disciplines are very poor.  Maverick can go on about their growth in DMF gains each year all he likes but if management and staff keep eating shareholders lunch for them and leaving nothing but crumbs...

I also think there are a lot of weaknesses with KPG's business model (as previously fully articulated in another forum), and their long term performance has also been profoundly shocking but at least there you're getting quarterly payment s that are PIE exempt so for 33% taxpayers their dividends amount to quarterly income at 8.50% gross equivalent (based on a $1 share price), so you're getting paid something decent while you wait and hope and pray seemingly endlessly for better times to come.  I guess if you must buy a "pup of a company" buy one that coughs out decent regular dividends.

On the other hand with Govt funding for their care beds and units which make up 69% of OCA's business there is very little risk of default on their corporate bonds and I see them as good buying at approx 6% yield to maturity and I've actioned that.

Quote from: Ferg on Aug 30, 2022, 09:10 PMBTW the "mall" is a St Heliers sized mall which is nothing like Syliva Park.  Cripes, the St Heliers mall would fit into the BK carpark outside Sylvia Park!

If that Ferg, blink while walking "thru" it and you would nearly miss it!

Quote from: Jay on Aug 31, 2022, 09:55 AMIf that Ferg, blink while walking "thru" it and you would nearly miss it!

I'm keen to go to St Heliers mall to check this out now.
I live close by and regularly (i.e. daily) go past it.  I haven't heard or seen mention of anything being there.

If there is something there then how hard would it be having a page on the website to point people to check it out.

The Sands, from memory, attracted a number of residents from outside of Auckland so not sure what the range is like on that immersive experience rifle tucked away in the back of a mall.

Its a very old and established part of Auckland and the huge crane on the hill probably gets tongue's wagging in the community and as its such a small niche development with only five or six dozen ILU's I am pretty sure word of mouth will do most of the marketing work for them and the rabbits will probably gradually line up of their own volition to get fleeced.

Poor marketing is the least of their problems.    Very poor cost control with overheads and staff eating ostensibly all the DMF gains every year is the key issue and may see the share priced anchored in the doldrums for a very long time.

Quote from: Basil on Aug 31, 2022, 04:24 PMIts a very old and established part of Auckland and the huge crane on the hill probably gets tongue's wagging in the community.

I know, I live in that part of Auckland.

The reason I looked into it is because I have a relative in Bucklands Beach who easily fits squarely into The Heliers' target demographic.
He is looking for an upmarket unit but didn't like any of SUM's product at Ellerslie and flat out hated RYM's product

His deck looks squarely at that crane from across the Tāmaki Estuary but he didn't know what it was and had never heard of it despite being actively in the market for an ILU in that price bracket.

So I think it's a bit myopic if the company thinks its **only** target market is St Heliers locals who happen to wander through the mall (it's more like poorly sign-posted arcade).

Slow sell-downs have been a big issue for them, certainly one you make a lot of noise about too.

I agree 100% and see your point.  The bottom line is RYM and SUM's marketing capabilities leaves OCA for dead which is why a lot of RYM and SUM villages are sold out with wait lists.   Pricing of the ILUs at the Helier will be interesting, especially the north facing one's with sea views.    Where does your relative think they will be priced ?  Where do you see them being priced ?

Can't help wondering how long it will take to reach 90% occupancy at the new 113 unit care suite facility they're completing at Lady Allum in Milford this half.
Its needs based and they already have hundreds of unsold care suites so I reckon 2-3 years before they attain decent occupancy there and that's the nub of the weakness in their business model right there !

There's very little money in the care suite part of their business or basic care and that's still the substantial majority of their business.  5 or 6 dozen new ILU's at the Helier isn't going to move the needle very much even when they're eventually all sold.

Tony Alexander says house prices will start increasing soon ....maybe even +10% in 2023

That should help The sectors profits

Quote from: winner (n) on Sep 01, 2022, 08:04 AMTony Alexander says house prices will start increasing soon ....maybe even +10% in 2023

That should help The sectors profits

He hasnt got a clue... He predicted a 5% rise for this year

Quote from: mcdongle on Sep 01, 2022, 09:36 AMHe hasnt got a clue... He predicted a 5% rise for this year

Isn't that true for anybody trying to predict the future? Though statistically seen - anybody who predicts real estate prices to rise is much more likely to be right than anybody predicting them to drop.

This should scare the vultures :) - while nobody has a clue what the future will bring, the odds are not on the side of the pessimists and scaremongers :p.

Quote from: BlackPeter on Sep 01, 2022, 10:53 AMIsn't that true for anybody trying to predict the future?

Particularly in his case though.
He's pretty keen to beat his own drum on things he's picked in the past but very, very, very quiet on all the stuff he's got wrong.

I'm super skeptical of whatever he says because to my mind he's a paid-up shill for the real estate industry.

Best example of it was his October 2021 update.
http://www.ffgl.co.nz/latest-news/tony-alexander-update-october-2021/

One month prior to the market peaking in November 2021 he was berating the Reserve Bank and Treasury for having the temerity to predict that house prices "would *only*[emphasis added] increase by about 1%" for the 12 months to 30 June 2022.

He said "their forecast price gain was achieved in just the first two weeks of July, and since May average NZ house prices have risen by 5.4%."
This simpleton logic fails to acknowledge the entire point of the forecast having another 8 months to run from when he put pen to paper.

What did they increase by in the end?
According to REINZ HPI increased by 0.7% across NZ for the 12 months to 30 June 2022.
https://www.reinz.co.nz/Media/Default/Monthly%20Press%20Release%20Assets/Residential/06%20-%20June/REINZ%20Monthly%20HPI%20Report%20-%20June%202022.pdf

Haven't seen an apology from Tony.

EDIT: the funniest quote in that update from Tony is "predictions get generated and relied on which in hindsight are preposterous."

I like this sector. So applied my Heartland funds yesterday to OCA  at $0.97 and SUM at $10.87.

At some point soon (ie before next election) labourt is going to do something about pay parity. That will help make the labour supply more competitive. Which is good because there's no shortage of aging folk.

Quote from: NZInvestor on Sep 02, 2022, 01:20 PM... Which is good because there's no shortage of aging folk.

This was my view previously.

I have since changed this based on two things. 

1. All cause mortality has spiked over the last year and looks to be accelerating for some reason, and this is mainly affecting the aged sector.  This looks like a headwind to me, especially given we are looking at a demographic cliff, with the crop of baby boomers about to retire...and then what?  That lot will die off and who is going to fill the units up after that?
2. As mentioned above, we are facing a "demographic cliff", and we just have not been replacing ourselves.  Given immigration is volatile, and those folks are clearly happy to shift with the wind to better climates/economies, is this a headwind to the sector also?

Disclaimer, I'm out of the sector entirely at this stage, but not averse to stepping back in should circumstances change.

Quote from: arekaywhy on Sep 02, 2022, 01:43 PMThis was my view previously.

I have since changed this based on two things. 

1. All cause mortality has spiked over the last year and looks to be accelerating for some reason, and this is mainly affecting the aged sector.  This looks like a headwind to me, especially given we are looking at a demographic cliff, with the crop of baby boomers about to retire...and then what?  That lot will die off and who is going to fill the units up after that?
2. As mentioned above, we are facing a "demographic cliff", and we just have not been replacing ourselves.  Given immigration is volatile, and those folks are clearly happy to shift with the wind to better climates/economies, is this a headwind to the sector also?

Disclaimer, I'm out of the sector entirely at this stage, but not averse to stepping back in should circumstances change.

I'm not sure looking at rear view All Cause mortality is very helpful. We have a few extra covid / Flu / RSV deaths.

And if you are worried about dying - what better place to be than in a managed village environment where you are well looked after.

My investments in these companies are part of my retirement strategy. I expect them to be well priced / valued come the time I am ready to hang up my boots. At which time I will sell. And maybe even buy an OCA unit.

I'll be just ashes spread over a pasture by the time the demographics of fewer young ones bites.

Immigration doesn't bother me either. Labours current policy is simply unsustainable. They will either have to open the borders. Or in the alternative we will get a new govt next year who will open the borders.

Our population is way short of people. In the hundreds of thousands. People coming in will need somewhere to live. It won't happen today, but I reckon there is a chance  a govt of the day will encourage people (a retired couple) out of their 4 bedroom home and  into a comfortable and safe retirement village.

Quote from: NZInvestor on Sep 02, 2022, 02:01 PM...
And if you are worried about dying - what better place to be than in a managed village environment where you are well looked after.

... It won't happen today, but I reckon there is a chance  a govt of the day will encourage people (a retired couple) out of their 4 bedroom home and  into a comfortable and safe retirement village.

I know many folks from various ages and backgrounds/nationalities, that think this is a horrible idea.  So, sure, there will be a market for them, but I don't think we can extrapolate numbers from population numbers.

Also, it would be a massive blow to society for gubmint to be meddling in where old folks choose to live.  Sounds very soviet...

Quote from: arekaywhy on Sep 02, 2022, 01:43 PMThis was my view previously.

I have since changed this based on two things. 

1. All cause mortality has spiked over the last year and looks to be accelerating for some reason, and this is mainly affecting the aged sector.  This looks like a headwind to me, especially given we are looking at a demographic cliff, with the crop of baby boomers about to retire...and then what?  That lot will die off and who is going to fill the units up after that?
2. As mentioned above, we are facing a "demographic cliff", and we just have not been replacing ourselves.  Given immigration is volatile, and those folks are clearly happy to shift with the wind to better climates/economies, is this a headwind to the sector also?

Disclaimer, I'm out of the sector entirely at this stage, but not averse to stepping back in should circumstances change.

The baby boomer population bulge has not even hit the age when demand will become supercharged.
The peak of the baby boomer generation was 1961 when more than 50,000 babies were born, ask me how I know LOL and I'm by no means the youngest of the baby boomer generation.  People born in 1961 are now 60/61 and the average entry age to retirement villages is ~ 80.
There's another 20-25 years of tailwinds for this sector.
Your grasp of the demographics looks seriously flawed to me.
In addition, there is a long term trend towards people living in RV's.  The percentage of people 80+ doing so has been steadily rising for years.

Quote from: Basil on Sep 02, 2022, 02:10 PM...
There's another 20-25 years of tailwinds for this sector.
...

I get that, but given the market is forward looking, how long till people start to wonder when the glut will hit?

Quote from: arekaywhy on Sep 02, 2022, 02:24 PMI get that, but given the market is forward looking, how long till people start to wonder when the glut will hit?

The markets are not that forward looking LOL
How I see this is you have one of the best growth stocks on the NZX (SUM) with a CAGR of 33% per annum since it listed over a decade ago on a forward PE of only 13 (by my own analysis), with literally decades of growth to come.   

Penetration rate is a key metric forecasters use to assess future demand for retirement units - it is the number of people living in retirement paces as a %age of over populations over 75

Currently it is 14% - in 2009 it was 9% ---- growing number of people over 75 and increasing penetration rate and hey presto lots of people moving into these places.

You should read this rky
https://www.jll.nz/content/dam/jll-com/documents/pdf/research/jll-research-retirement-villages-whitepaper-190722.pdf

This weeks share price performance update

00000retire.JPG

Quote from: Whacc on Sep 01, 2022, 12:47 PMParticularly in his case though.
He's pretty keen to beat his own drum on things he's picked in the past but very, very, very quiet on all the stuff he's got wrong.

I'm super skeptical of whatever he says because to my mind he's a paid-up shill for the real estate industry.

Best example of it was his October 2021 update.
http://www.ffgl.co.nz/latest-news/tony-alexander-update-october-2021/

One month prior to the market peaking in November 2021 he was berating the Reserve Bank and Treasury for having the temerity to predict that house prices "would *only*[emphasis added] increase by about 1%" for the 12 months to 30 June 2022.

He said "their forecast price gain was achieved in just the first two weeks of July, and since May average NZ house prices have risen by 5.4%."
This simpleton logic fails to acknowledge the entire point of the forecast having another 8 months to run from when he put pen to paper.

What did they increase by in the end?
According to REINZ HPI increased by 0.7% across NZ for the 12 months to 30 June 2022.
https://www.reinz.co.nz/Media/Default/Monthly%20Press%20Release%20Assets/Residential/06%20-%20June/REINZ%20Monthly%20HPI%20Report%20-%20June%202022.pdf

Haven't seen an apology from Tony.

EDIT: the funniest quote in that update from Tony is "predictions get generated and relied on which in hindsight are preposterous."

You mightn't have to put up with as much from Tony ... he's going to spend a lot of time in Oz. N become oppressive and degraded. From BusinessDesk-



Tony Alexander to spend more time with 'brash racists' 

 Independent economist Tony Alexander gave a surprising answer to a question on Sharesies' Shared Lunch webinar this week.   When asked if there was anything he'd changed his mind about in the past 12 months, the commentator revealed he was planning to spend more time in Australia.

Alexander has lived on a nearly five-hectare lot for the past 30 years but has decided he wants to spend more time somewhere sunnier – namely his Broadbeach apartment.   "I'm going to be spending about a quarter of my time, going forward, in Australia on the Gold Coast," he said.   But it isn't just the weather that is drawing him offshore. He also said NZ was becoming "more oppressive" than he was accustomed to.   "My view of New Zealand has degraded – I'm sorry – a little bit over the past 12 months, and for me that manifests as spending quite a bit of time with those brash, slightly racist, Aussies on the Gold Coast," he said.

I think its probably fair to say that Tony Alexander maintained better connections when he was BNZ's head economist.

I also think its fair to say economists in general have a very poor track record when it comes to forward predictions of house price movements.  Who can forget how every one of them got it so badly wrong in 2020 after the onset of Covid, all predicting serious falls and we got the exact opposite LOL

Quote from: Whacc on Aug 30, 2022, 04:14 PMInteresting to observe how each of the operators approach the opening of new facilities.

The best case study in this at the moment appears to be the Eastern Bays in Auckland where Ryman, Summerset and Oceania are all under construction at the moment.

Both Ryman and Summerset have pages on their website up and running offering phone numbers to enquire, info packs (SUM) and/or the ability to "register your interest" (RYM)
https://www.summerset.co.nz/find-a-village/auckland/summerset-st-johns/
https://www.rymanhealthcare.co.nz/retirement-villages/auckland/kohimarama

Oceania is the most advanced of the lot in their build, set to open their flagship "The Helier" in March, but you can't find boo about it on their website or even google.
Ryman haven't even broken ground in Kohimarama but are out there hunting enquiry.

heh, looks like someone is listening (/reading):
https://thehelier.co.nz/

This weeks update

Sector still out of favour?

0000retire.JPG

Quote from: winner (n) on Sep 10, 2022, 09:41 AMThis weeks update

Sector still out of favour?

0000retire.JPG

Interesting chart - cheers.

Sector still out of favour?

Well, yes - looks like, but isn't this the best time to buy?

Quote"Well, yes - looks like, but isn't this the best time to buy? BP"

For what its worth I have recently got back into SUM in a meaningful way.  SUM has an extraordinary track record of earnings growth since it listed in late 2011 and is trading on only ~ 13 times FY22 earnings based on my own estimate of ~ $200m underlying earnings.  I believe they deserve blue chip growth status and we will see both meaningful earnings growth and multiple expansion in the years ahead as we emerge out the back of this housing correction.

Comparing their track record with other RV companies I see no need to have a stake in the others as I believe such a strategy will simply dilute my capital appreciation prospects considerably.  Happy to accumulate more on any further untoward weakness.  SUM is a vastly underrated growth stock in my opinion.

All share prices down this week .... but on average outperformed the NZ50

0000ret.JPG

Sector been savaged lately eh - on average down 27% YTD and down 37% from recent highs (table in previous post)

I've come to the conclusion that we won't be seeing those recent highs again for several years .... if we are lucky maybe 2025 .... maybe the Dec 2021 prices might be seen in 2024

We are stuck in a secular bear market that started about 5 years ago


But then again most would be happy if say OCA got to $1.10 by Christas next year

I am happy to hold best of breed SUM for its well proven growth and its compelling forward metrics but wouldn't touch the others for love nor money in this market.

That said if OCA get down to a full 50% discount to NTA, about 66 cents it could be worth a punt getting a few at that price again purely in the hope that someone makes a takeover play and puts everyone out of their no growth misery for about a buck.   

Lot of worry about the possibility of a takeover elsewhere.  I reckon people need not bother worrying about that happening because I can't see any reason why anyone would actually want to take over OCA ?  Why would you bother when half their assets are returning peanuts and there's no growth ?  30% discount to NTA is not enough, its simply a "hospital pass".  Any party would be much better off taking over Arvida.  21% discount to book but the vast majority of their units are ILU's so they're getting a proper return on equity employed and they're actually growing underlying earnings unlike OCA.

OCA is only a takeover prospect in my opinion if the share price gets down and stays down at around 50% discount to book and someone offers 35% discount to put everyone out of their multi year misery and then radically overhauls the company to get a decent return on equity.

I reckon OCA's cost control processes and disciplines, (if any), are an absolute disgrace.  I don't rate the CFO and I think she has an enormous amount to prove to the market that she's in charge of controlling costs and increasing return on equity.  Good luck with that when you're doing battle with and incompetent, antagonistic Govt who's controlling the ever increasing problem of  badly underfunded basic care.   

Quote from: Basil on Sep 25, 2022, 09:36 PMI reckon OCA's cost control processes and disciplines, (if any), are an absolute disgrace.  I don't rate the CFO and I think she has an enormous amount to prove to the market that she's in charge of controlling costs and increasing return on equity.  Good luck with that when you're doing battle with and incompetent, antagonistic Govt who's controlling the ever increasing problem of  badly underfunded basic care.

That's rough and uncalled for Beagle.  We both know a CFO is not in control of pay rates in light of this high inflation environment.  If one wants to penny pinch on a cost, there is a risk of non-delivery of volume which risks a larger loss.

Yes care margins are falling (when you look at just care revenues less care costs) but this fall in margin has been more than offset by the increase in DMF revenues for care per Maverick's graph on Share Trader.

Putting aside resale gains and focusing on just banked revenues (being care, PAC, DMF, village & other), employee costs as a % of revenues for the past 3 years is 65.2%, 65.2% and 65.9%.  This is after removing $1.8m for the COVID subsidy repayment in FY22.  Operational staff make up the largest proportion of staff at OCA.  The CFO is not in charge of hiring or firing operational staff, nor setting their pay.

Further, if you look at the average number of residents per average number of employees for the past 3 years has improved from 1.31 -> 1.30 -> 1.35 in FY22. You cannot look at a number in isolation without indexing it back through something else such as volumes - well you can but then you only see half the picture.

Corporate costs have increased as a percentage of revenue (from 9.7% -> 10.1% -> 11.4% in FY22) but OCA are building capacity for growth and there have been one-off acquisition costs.  That rate of growth will not continue and I'm sure you are aware the CFO is not in charge of those costs either - that falls under the Board and CEO.  "Other" costs are falling when looking at these as percentage of revenue over the past 3 years.

If the symptom is a flat EPS, then the issue is not a hyperbolic statement such as "cost control processes and disciplines...are an absolute disgrace" without providing supporting evidence or research.  There are other factors that come into the EPS equation.  I freely admit EPS growth has been lacking and the Government are not helping by squeezing contributions while inflation runs rampant.  Lack of EPS growth has been for a number of reasons including having gone through a pandemic for the past 2 years (that should not be ignored!) and the disruption caused by brownfield developments to name just 2.

There's a ton of posts I've made elsewhere outlining my concerns about costs being out of control and not just wages.  I think its a culture issue that starts right at the top with the new CEO taking on board a vastly higher pay rate than Earl Gasparich got.

I think my beef with costs started when Earl said in an analysts call after the half year FY21 result that we can expect costs to increase in line with Government funding going forward.  Obviously that forecast has turned out to be grossly inaccurate.

At the end of the day, people have choices about which company to invest in and all earnings evidence to date since OCA listed compared to SUM (who have the lightest care component to their business model) shows there's very little money in care.  You can slice and dice it endlessly if you like Ferg as does Mav.  I'd rather zoom out and take the helicopter view that SUM's business model is vastly more rewarding for shareholders than OCA's because of their proven ability over the long run and including during Covid, to grow earnings very strongly over time.

OCA's shareholders are on a hiding to nothing trying to get more money out of this Government and all National have agreed to do is increase funding in line with inflation (if they get into power), so this won't fix the underfunding of care per se, it will simply stop it getting any worse, (provided, and this is a huge proviso because OCA have a multi year track record of costs going up much faster than inflation), OCA can contain costs at the inflation rate.  ALL the evidence to date suggests they can't do this.

Others can forecast out all the increases in DMF fees they like.  What I have seen over time is ostensibly all increases in DMF fees are eaten up by management and staff.  The market is telling you their business model doesn't work for shareholders and is highly likely to give bottom quartile sector performance going forward.    If you like them, fill your boots mate and good luck.

Quote from: Basil on Sep 26, 2022, 01:35 PMI think my beef with costs started when Earl said in an analysts call after the half year FY21 result that we can expect costs to increase in line with Government funding going forward.  Obviously that forecast has turned out to be grossly inaccurate.

Fair call regarding the forecast. All I can say about the last 2 years is that forecasting anything for clients in this environment has been an act of futility.  That goes for costs and revenues.  It sounds like Earl did not foresee the inflationary impact of upcoming Government policy around printing money with gay abandon.

Quote from: Basil on Sep 26, 2022, 01:35 PMOCA's shareholders are on a hiding to nothing trying to get more money out of this Government and all National have agreed to do is increase funding in line with inflation (if they get into power), so this won't fix the underfunding of care per se, it will simply stop it getting any worse, (provided, and this is a huge proviso because OCA have a multi year track record of costs going up much faster than inflation), OCA can contain costs at the inflation rate.  ALL the evidence to date suggests they can't do this.

Granted the Government mandated increases will stop the position getting any worse (rather than improve it), but DMFs are increasing very nicely which cannot be ignored.  Keep in mind the Government only subsidises those who qualify; the rest of us have to pay the mandated value if we want minimum care.  But for an extra DMF or PAC fee one can get a better end of life experience.

I am happy to share my findings, so here are my workings:

Here is a high level view of the OCA P&L restated to show a traditional P&L with underlying earnings:

OCA_PL - Copy.JPG

And here are some KPIs so we have some numbers to talk to:

OCA_KPIs - Copy.JPG

Note: the small red triangles indicate where a KPI has been modified to reflect 12 months activity instead of 10 for the change in year end.  Some rows calculating the average number of residences, ILUs, beds etc have been hidden to stay within the limit of image sizes for this website but they can be easily provided and/or back-solved.

The biggest red flag for me is the average cost of each employee - everything else can either be explained or is expected.  But even in the environment of high employee costs, OCA has increased revenues, increased trading profit, increased realised gains, increased EBITDA and increased underlying profit.

But what about EPS you might ask.  EPS grew in 2022 and WILL grow again in 2023.

I liken OCA to a growing teenage boy.  Teenage boys typically grow out (they get fat), then the grow up (they get taller), then out, then up and so on.  OCA has been going through the growing out stage and is entering the growing up stage.  There were share placements in 2017 and 2021 that were used to fund acquisitions and development ("growing out").  Plus there have been shares issued under the DRIP which helps cash flows but not EPS.  Now is the time for Management to provide the earnings - we already know DMF will be at least $57m - an increase of $10m before accounting for the Remuera and Bream Bay acquisitions.

Nice work Ferg and thank you for sharing.
Fair comment about forecasting anything during Covid but I would note he made that comment well into the Covid crisis so I would have thought he would have had some idea ?  I guess this simply highlights the extent to which most CEO's have had very limited foresight throughout this pandemic.

My beef with the new team starts with the repayment of the $1.8m Covid subsidy.  Repaid despite the egregious underfunding of the care sector.
I know this was taken at a CEO level.  (I would prefer not to disclose how I believe this to be the case).
To me this kind of sets a new tone...his salary is notably higher than Earl's and he starts by handing back $1.8m to the same Government that's increasingly putting the screws on the care sector.  Go figure on how this was in shareholders' best interests ?  It looks like he indulged his own personal opinion on this matter onto shareholders.  But wait there's more:-
Note the significant uptick in corporate costs as a percentage of revenue in FY22, 11.4% v 10.1% the year before but perhaps more interesting is the trend over the last 4 years wherein they've increased from 8.7% of revenue to 11.4%, a 31% increase in line with staff costs per average employee.

Perhaps its helpful if I highlight how eps has declined in real terms over the last 4 years.  I jumped onto the Reserve Bank inflation calculator and a company earnings 8.5 cps in FY18 if it had of maintained earnings per share, (no growth), in real terms earnings should have been FY19 8.64 cps, FY20 8.77 cps, FY21 9.06 cps, FY22 9.72 cps, (rather than the 8.0 cps they were in FY22), so in real terms eps has fallen 17.7% in the last 4 years...so much for the increasing DMF fees.    I think its fair to say the Covid pandemic has been most harsh on retirement villages with a high care to ILU ratio.  Perhaps without the pandemic and all the extra costs involved and pressure on caregiver wage rates they would have been able to maintain underlying eps in inflation adjusted terms.

The immediate near term prospects still look really challenging to me with serious headwinds.  The recent funding round increase of three point something percent is egregiously lower than the inflation rate and even worse so compared to the rate at which are costs are rapidly escalating.  From where I sit the underfunding in FY23 is a lot worse than last year which in my opinion will probably eat up the vast majority if not all of the extra DMF fees, as is the history with this company for many years now.   You still then have another year with this radical socialist bunch setting the next funding round for July 2023 so FY24 is heavily impacted as well and then if all a National lead coalition do with the funding round adjustment in July 2024 is match inflation all that does is cement in underfunding at its most chronic ever level going forward from there..  It does nothing whatsoever to fix the deep systemic issue.

The answer is they need about 15 developments like the Helier where they completely ignore Govt funding in their care facilities and charge whatever they like to give a decent return on capital employed.  15 Heliers would move the needle, one won't, That's how I see it.

More concerning is the extremely slow sales of care suites that I've talked at length about before.  To me their business model isn't really working.

I'll pass on the teenage boy analogy, seeing as we raised girls but will raise you a good horse racing analogy instead.
Comparing OCA with its track record of declining eps in real terms over many years to SUM with its 10 year CAGR of 31% is like comparing a horse that can't show any form at the trials and keeps getting soundly beaten by every other horse there to a thoroughbred that keeps winning the Melbourne Cup year after year after year.  Only very brave people would keep punting on a losing horse with no form to speak of hoping it would somehow outperform a proven thoroughbred.

The metrics (odds) on those two horses are not that different, I have SUM on a forward underlying PE of just 13 which is extraordinary considering their long-proven growth rate and I think OCA are on about 10-5 - 11.  SUM look very, very cheap to me and OCA probably deserve to be a bit lower until they can prove they can grow eps.

Quote from: Basil on Sep 26, 2022, 09:24 PMNice work Ferg and thank you for sharing.
Fair comment about forecasting anything during Covid but I would note he made that comment well into the Covid crisis so I would have thought he would have had some idea ?  I guess this simply highlights the extent to which most CEO's have had very limited foresight throughout this pandemic.

My beef with the new team starts with the repayment of the $1.8m Covid subsidy.  Repaid despite the egregious underfunding of the care sector.
I know this was taken at a CEO level.  (I would prefer not to disclose how I believe this to be the case).
To me this kind of sets a new tone...his salary is notably higher than Earl's and he starts by handing back $1.8m to the same Government that's increasingly putting the screws on the care sector.  Go figure on how this was in shareholders' best interests ?  It looks like he indulged his own personal opinion on this matter onto shareholders.  But wait there's more:-
Note the significant uptick in corporate costs as a percentage of revenue in FY22, 11.4% v 10.1% the year before but perhaps more interesting is the trend over the last 4 years wherein they've increased from 8.7% of revenue to 11.4%, a 31% increase in line with staff costs per average employee.

Perhaps its helpful if I highlight how eps has declined in real terms over the last 4 years.  I jumped onto the Reserve Bank inflation calculator and a company earnings 8.5 cps in FY18 if it had of maintained earnings per share, (no growth), in real terms earnings should have been FY19 8.64 cps, FY20 8.77 cps, FY21 9.06 cps, FY22 9.72 cps, (rather than the 8.0 cps they were in FY22), so in real terms eps has fallen 17.7% in the last 4 years...so much for the increasing DMF fees.    I think its fair to say the Covid pandemic has been most harsh on retirement villages with a high care to ILU ratio.  Perhaps without the pandemic and all the extra costs involved and pressure on caregiver wage rates they would have been able to maintain underlying eps in inflation adjusted terms.

The immediate near term prospects still look really challenging to me with serious headwinds.  The recent funding round increase of three point something percent is egregiously lower than the inflation rate and even worse so compared to the rate at which are costs are rapidly escalating.  From where I sit the underfunding in FY23 is a lot worse than last year which in my opinion will probably eat up the vast majority if not all of the extra DMF fees, as is the history with this company for many years now.   You still then have another year with this radical socialist bunch setting the next funding round for July 2023 so FY24 is heavily impacted as well and then if all a National lead coalition do with the funding round adjustment in July 2024 is match inflation all that does is cement in underfunding at its most chronic ever level going forward from there..  It does nothing whatsoever to fix the deep systemic issue.

The answer is they need about 15 developments like the Helier where they completely ignore Govt funding in their care facilities and charge whatever they like to give a decent return on capital employed.  15 Heliers would move the needle, one won't, That's how I see it.

More concerning is the extremely slow sales of care suites that I've talked at length about before.  To me their business model isn't really working.

I'll pass on the teenage boy analogy, seeing as we raised girls but will raise you a good horse racing analogy instead.
Comparing OCA with its track record of declining eps in real terms over many years to SUM with its 10 year CAGR of 31% is like comparing a horse that can't show any form at the trials and keeps getting soundly beaten by every other horse there to a thoroughbred that keeps winning the Melbourne Cup year after year after year.  Only very brave people would keep punting on a losing horse with no form to speak of hoping it would somehow outperform a proven thoroughbred.

The metrics (odds) on those two horses are not that different, I have SUM on a forward underlying PE of just 13 which is extraordinary considering their long-proven growth rate and I think OCA are on about 10-5 - 11.  SUM look very, very cheap to me and OCA probably deserve to be a bit lower until they can prove they can grow eps.

Feels like deja vu. History is repeating itself. The beagle did bite, does not let go and clearly sees his side of the arguments. Difficult though to see the full picture if you need to keep your teeth in one leg without letting it go :) ;

No point in repeating the same arguments again and again and again. I guess everybody can read them on sharetrader - including Mav's outstanding responses. Here is a great summary: https://www.sharetrader.co.nz/showthread.php?9856-OCA-Oceania-Group-retirement-villages&p=976417#post976417

Just correcting one of your repeated complaints about the "slow" sales of the care suites:

You realize that they are not empty, do you? I guess Mav explained more than once to you that OCA uses them to "park" residents which they moved from the previous facilities to allow them to either tear them down (the old units, not the residents :) ) and build higher quality facilities instead or renovate them. While they are not sold (because not vacant), OCA is still making money with them.

Old saying in real estate is "buy the worst house in the best street". In real estate only location matters. That's basically what buying into OCA used to be. They used to be a collection of rundown old peoples homes in prime locations. Now they decommission the old places and build new high quality units in prime locations.

This does cost money (some bean counters would call this investment), and good on them for still making money during this phase.

OK - if you think it all takes too long for you, fair enough. Traders have frequently a lesser tolerance for waiting, and I think you told us the same about beagles. Just find a better investment and tell us about it. However - consistently cr*pping in any forum of your avail at the management team doing a - I think - quite good job does not feel like a very sensible or useful occupation.

Do you have a personal vendetta against Brent or Earl?

Each to their own and the answer to your question is no.
From memory there's about 70-80 that were let out as PAC rooms and the other 300 or so are empty and unsold.  (See previous posts).

Quote from: Basil on Sep 27, 2022, 04:20 PM...

From memory there's about 70-80 that were let out as PAC rooms and the other 300 or so are empty and unsold.  (See previous posts).

Just curious where these number are coming from and how they compare, given that OCA's overall occupation numbers are in the same ball park than their competitors (95% +).

So - if I correctly understand your numbers, than they must have some new and fully commissioned buildings with roughly 20% occupants and the reminder of the rooms is empty. This is what you are saying?

Sounds eary. Just curious ... can you give us some examples? I'd love to look through some of these fully equipped but basically empty buildings.

If they really can't sell them, maybe they could offer them to the government for emergency housing ... I understand the government loves to pay 5 star accommodation for the homeless?

Info came from the last analysis call.  If you want to drill down into it give the CFO a call.  You're mate on ST didn't even bother to tune in apparently.
Some eyebrow raising stuff was discussed in that call but I've probably mentioned it before so won't bother elaborating again, I am sure you'll be relieved   😜

Quote from: Basil on Sep 27, 2022, 08:14 PMInfo came from the last analysis call.  If you want to drill down into it give the CFO a call.  You're mate on ST didn't even bother to tune in apparently.
Some eyebrow raising stuff was discussed in that call but I've probably mentioned it before so won't bother elaborating again, I am sure you'll be relieved   😜

OK - I checked the latest AR.

At 31. 3. 2022 OCA had a total of 4204 villas and units in operation, and promised to add at least 300 annually.

They sold as well over the last year 450 units (some old, some new).

So - even if the number of 300 unsold units and only 80 of them rented out to long term residents was at some stage correct (other people remember a higher number than 80 for ) :) - we are still only talking 5% of the total building stock being vacant (which would be consistent with the 95% occupation rate I remember).

I don't really see what the drama is ... you can't achieve 100%, given that apartments need to be renovated (and re-sold) after the departure of one resident, and when we assume for OCA an average occupation time of say 3 years, than 5% empty would give you in average less than 2 months for renovation and resell of any unit.

I've posted the actual numbers already in the other place.
If I repeat them then you'll accuse me of being repetitive.

Last weeks share price update

Another down week

00000ret.JPG

https://www.stuff.co.nz/national/health/300701065/whangrei-hospital-dangerously-understaffed-as-shift-incentive-scheme-ends

I have a few guesses why ARVs costs have risen  :o

arv.pngoca.pngsum.png

Some interesting charts.

rym.png

Ryman hasn't been this cheap on a price to tangible book since listing according to this. Now 1.27x, and was 1.3x at the 2003 market bottom and 1.57x at the 2009 bottom. Guess that means something.

Some double and some triple bottoms? If confirmed this would be bullish ...

Nice charts Gerald

Secular bull / bear markets are defined by cyclical changes in valuation múltiples (like from peak PE to low PE) - price has nothing to do with it.

Your charts show the retirement sector on NZX has been in a secular bear market for the last 9 years. Over that time the sector's Price/Book ratio on average has steadily fallen from mid 3's to its current 1.0.

I feel that this hasn't ended yet but at best it's hard to see Price/Book ratios going up much in next year or so.

So share prices in the next year or two are reliant on changes in Book Values (essentially NTA). The drivers of this are basically realised gains on sales plus/minus other fair value adjustments (revaluations)

With a decent fall in property prices future growth in Book Values is likely to be subdued - maybe even go backwards if multiples don't improve

Hard to see much improvement in the share prices of the stocks in this segmenting next year or so.

OCA at $1.60 or SUM at $16 again — many years away I fear.

https://www.nzherald.co.nz/business/auckland-median-house-sale-price-plunges-180000-in-10-months-barfoot-thompson/PG6O2U6G76AAZE2HOQ5YDZ7QVM/
Tide is well and truly going out on real estate.  Just as well SUM said this is not affecting them.

job ads.PNG

OCA OTHER NOTES:
Other is mostly cleaners and kitchen staff
ARV OTHER NOTES:
Other seems balanced among admin, management and kitchen/cleaning staff
SUM OTHER NOTES:
Other is varied, many "recreational/diversional therapist" roles though

I am assuming that a job advertisement = 1 role unless specified as more (a pretty terrible assumption but alas). This makes the data pretty low quality but I already counted them so making the graph anyway.

Based on the roles being advertised on seek in the last month, there are no obvious similarities between companies. All 3 companies had roughly equal number of job postings/roles available. I was surprised that OCA has an apparent focus on hiring nurses compared to carers, which is not reflected to the same extent by the other two companies. I think that bodes poorly for OCA as I believe nurse pay/costs are escalating faster than other roles like kitchen staff or carers. Sadly I don't think this data is useful to apply learnings from ARVs investor update to guess if the others are facing the same problems. Although, if ARV has had to close some wings temporarily due to lack of staff I imagine OCA has had to do the same given how many critical roles they are trying to fill (nurses + carers + cleaners + kitchen). Anyone got any opinions? Waste of time or is there something interesting in this?

Kiwi nurse triples her pay moving to Australia - paywalled
https://www.nzherald.co.nz/nz/the-brain-drain-kiwi-nurse-triples-her-pay-by-moving-to-australia/CWLVEWPLGRP77FL7AWQLRVXTBA/
Housten, I think we have a problem!

Another head wind for retirement villages

An interview this morning on RNZ with the National President of the Retirement Villages Residents Assn who (amongst others) are calling for a Commerce Commission Dept review of the 22 year old legislation relating to Residents Occupancy Agreements (ORA's) and specifically asking for:

1.) A review of the time taken for repayment after a residence is vacated.....28 days requested.  (Examples of 21 months before payment made was mentioned.)
2.) A review of charges for refurbishing residences.

Here's the link. https://www.rnz.co.nz/audio/player?audio_id=2018861685

GLH's......... tho' I expect this will take years before any review is actioned.

https://www.nzherald.co.nz/business/metlifecares-100m-plans-to-add-aged-care-hospital-services-to-10-existing-villages/7KHFR52NSWBOTJNO5VB7VH4LLY/
Paywalled.  Metlifecare in major care focused expansion, (focus on care suites) well north of $100m to be spent.  My thoughts.  Best wishes finding the staff to run these new facilities.

This weeks share price update

ARV and SUM big losers and OCA the star

0000ret.JPG

This fascination with retirement stocks is a peculiar thing.  They garner more posting space than other sectors but are basically a solid but unsexy stock type.    It probably says something about the Kiwi psyche, and a whole lot more about the limitations of the NZX.

House prices continue to fall (september REINZ report)

Now down 11% from peak late last year (HPI) ..... with the optimistic commentators forecasting a 15% to 20% decline

But still up heaps from the where prices were in 2020

Today's news probably won't help stocks in this sector .... so expect a down day

Tide's going out on this sector at a fair rate of knots.  I find it hard to imagine what the catalyst is for a tidal change...certainly nothing I can foresee on the horizon.
https://www.nzherald.co.nz/business/market-close-evidence-of-housing-downturn-sends-retirement-village-stocks-lower/S3XYPFZAHYNSBZDGUMXZL26UQ4/ Paywalled. 

Quote from: Basil on Oct 12, 2022, 08:05 PMTide's going out on this sector at a fair rate of knots.  I find it hard to imagine what the catalyst is for a tidal change...certainly nothing I can foresee on the horizon.
https://www.nzherald.co.nz/business/market-close-evidence-of-housing-downturn-sends-retirement-village-stocks-lower/S3XYPFZAHYNSBZDGUMXZL26UQ4/ Paywalled. 

Well, when the tidal streams are the strongest, you know things will calm down from here :) ;

Picking the bottom (no matter how disgusting this is) might be a thing for traders ... at least for making up stories around the camp fire.

However - fundamentally look in the meantime all retirement stocks I follow quite appealing ... though admittedly, SUM look good, others (ARV) look better and with some (OCA and RYM) its really hard to resist to buy even more of them :) ;

Easier swimming with the tide.  I'll watch TA to see when the tide changes.

Quote from: Basil on Oct 13, 2022, 11:59 AMEasier swimming with the tide.  I'll watch TA to see when the tide changes.

Fair enough - I guess as trader I probably would do that as well. Increases your chances for a quick (but smaller) gain.

If you think long term, than I find it often better to start buying while the tide still goes out (obviously only when the fundamentals look right) - sure, you pay a bit more for the early parcels, but you get as well the benefits of buying at the bottom. This is something the people buying only during the incoming high tide are missing when they just join the crowd to chase the SP up.

Obviously it would be easier if the tides at the share market are as easy to time as the tides on the shore ... in latter case I would follow your recommendation ;):

Quote from: BlackPeter on Oct 13, 2022, 02:20 PMFair enough - I guess as trader I probably would do that as well. Increases your chances for a quick (but smaller) gain.

If you think long term, than I find it often better to start buying while the tide still goes out (obviously only when the fundamentals look right) - sure, you pay a bit more for the early parcels, but you get as well the benefits of buying at the bottom. This is something the people buying only during the incoming high tide are missing when they just join the crowd to chase the SP up.

Obviously it would be easier if the tides at the share market are as easy to time as the tides on the shore ... in latter case I would follow your recommendation ;):

I'd wait to see what happens at the next full moon .....big drop in sector share prices during this weeks full moon as the tide went out fast

Next full moon nov 9th .....see what happens then

weekly update

.
0000ret.JPG

https://www.nzherald.co.nz/nz/tom-parsons-lets-hear-from-the-retirement-village-people/NUZ4E4OQABBJDGZVFBL6V7SB2E/

Cool story.  Sorry, paywalled.    I think huge numbers of people who move into villages are really surprised how much they enjoy the community and camaraderie of fellow residents.  Lots of good friendships to be enjoyed.  I think it's kind of cool all being on the same "cruise ship" together.

I've got plenty of time to convince Mrs Beagle of the merits.

RYM to cut care bed facilities in new facilities by over 60% citing lack of Govt funding....

https://businessdesk.co.nz/article/policy/ryman-to-cut-care-beds-in-new-villages-by-up-to-two-thirds-1

Paywalled, but you get the gist.

So we've now had both Arvida and now Ryman warn about the appalling economics of care.  Hmmm 
https://www.nzherald.co.nz/business/aged-care-crisis-ryman-healthcare-downsizes-new-hospital-bed-numbers/GASAJYL54IKH5LCOSHCQKY256M/

When the oldest and biggest player in the care industry radically cuts back their new care offering due to the truly appalling underfunding by the Govt, you know that there's a very serious issue.

https://www.nzherald.co.nz/business/the-front-page-recession-mortgage-shock-inflation-how-hard-will-economic-storm-hit-kiwi-families/NDPYNZLNXCV67C3JC7PV4643NY/

2023 could be very "interesting" times in the property market.  I'm pleased to be out of this sector.

Quote from: Basil on Oct 19, 2022, 09:38 AMhttps://www.nzherald.co.nz/business/the-front-page-recession-mortgage-shock-inflation-how-hard-will-economic-storm-hit-kiwi-families/NDPYNZLNXCV67C3JC7PV4643NY/

2023 could be very "interesting" times in the property market.  I'm pleased to be out of this sector.

Well, I don't know ...

What I do know is that families in Germany felt both after WW I as well as after WW II very lucky holding property rather than cash ... and I do know of examples from both categories :) ;.

Property (no matter whether this was the house they lived in, a farm, shares of property funds or shares of companies making useful stuff) still existed (true - sometimes damaged) and could be used to live in or to produce wealth.

Cash was annihilated after both wars. Some used it to plaster the walls of their homes, if they still had a home. Not sure we could do even that after the next big crash and inflation - who wants to plaster their walls with plastic and how would you plaster them with electronic funds anyway?

It feels good to be invested in property as well as in companies providing essential services and goods ...

Main point at the moment is to conserve a great basis for growth when the crisis is over ...

I doubt that badly deflated cash will be the best seedling for your next fortune :) ;

I started the year with about 70% in cash.  Almost every decision i have made to deploy some of that, (currently 40%) has cost me money.  Cash has been the best performing asset class of my portfolio this year by miles.  Both shares and bonds have had a really tough year here and in almost all markets globally.
Property is going down at a fair rate of knots too as Mrs B is finding out.

We're not in the second world war in Germany, that has no bearing on what we're going through at present.
We're in a war of MUCH higher interest rates and inflation and asset bubbles fueled by one in a 100 year low interest rates, (free money), are steadily popping and reality is starting to bite pretty hard for almost all asset classes.

I think the rest of 2022 and all of 2023 is going to be an absolute shocker in the property market and its effect on this sector will be substantial.  Even the best players like SUM cannot make headway when the tide is going out at 100 miles an hour.  This is a game of who loses the least is best positioned for when the next up cycle commences.

Not that I wish for this to happen but If Nato get's dragged into the war in Ukraine for any reason such as, among other possibilities, Putin using tactical nuke's then we will see what your relatives' properties in Germany are really worth in a war.  "Decimated" is the adjective that springs to mind.

Quote from: Basil on Oct 19, 2022, 10:35 AMI started the year with about 70% in cash.  Almost every decision i have made to deploy some of that, (currently 40%) has cost me money.  Cash has been the best performing asset class of my portfolio this year by miles.  Both shares and bonds have had a really tough year here and in almost all markets globally.
Property is going down at a fair rate of knots too as Mrs B is finding out.

We're not in the second world war in Germany, that has no bearing on what we're going through at present.
We're in a war of MUCH higher interest rates and inflation and asset bubbles fueled by one in a 100 year low interest rates, (free money), are steadily popping and reality is starting to bite pretty hard for almost all asset classes.

I think the rest of 2022 and all of 2023 is going to be an absolute shocker in the property market and its effect on this sector will be substantial.  Even the best players like SUM cannot make headway when the tide is going out at 100 miles an hour.  This is a game of who loses the least is best positioned for when the next up cycle commences.

Not that I wish for this to happen but If Nato get's dragged into the war in Ukraine for any reason such as, among other possibilities, Putin using tactical nuke's then we will see what your relatives' properties in Germany are really worth in a war.  "Decimated" is the adjective that springs to mind.

So the option value of cash is a real thing ....a concept often rubbished and overlooked

Yeap Winner, Cash also acts like a good shock absorber to your portfolio returns in turbulent times not to mention the feel good factor of having readily available reserves for a rainy day.  Gosh hasn't it been raining a lot this year in more ways than one !

Quote from: Basil on Oct 19, 2022, 10:35 AMI started the year with about 70% in cash.  Almost every decision i have made to deploy some of that, (currently 40%) has cost me money.  Cash has been the best performing asset class of my portfolio this year by miles.  Both shares and bonds have had a really tough year here and in almost all markets globally.
Property is going down at a fair rate of knots too as Mrs B is finding out.

We're not in the second world war in Germany, that has no bearing on what we're going through at present.
We're in a war of MUCH higher interest rates and inflation and asset bubbles fueled by one in a 100 year low interest rates, (free money), are steadily popping and reality is starting to bite pretty hard for almost all asset classes.

I think the rest of 2022 and all of 2023 is going to be an absolute shocker in the property market and its effect on this sector will be substantial.  Even the best players like SUM cannot make headway when the tide is going out at 100 miles an hour.  This is a game of who loses the least is best positioned for when the next up cycle commences.

Not that I wish for this to happen but If Nato get's dragged into the war in Ukraine for any reason such as, among other possibilities, Putin using tactical nuke's then we will see what your relatives' properties in Germany are really worth in a war.  "Decimated" is the adjective that springs to mind.

I note that you are using quite short termed measurements (since begin of this year) when comparing property to cash ... and you seem to imply that past performance is a predictor for future performance.

Of course is the price dropping unless you manage to buy at the bottom.

My point was that in times of crisis (and make no mistake, globally this might well turn into WW III) it is important to own stuff which keeps its value long term, and no, this well might not be the not so mighty dollar anymore.

Your remarks re my family in Germany are rather tasteless, but hey - who knows what happens here in NZ when the Chinese start their fireworks? But point taken - diversification is as well an important consideration. Holding lots of cash in my view is not. While cash might have done ok over the last 12 months (well, 7% down or so ...) - there is no guarantee at all how its value will develop in the future.

Was it Argentina which features currently 80 % inflation? Guess whether its better for them to own the farm (or good shares) or the money in the bank?

Tony Alexander thinks property market won't get too dire

That's good

https://www.oneroof.co.nz/news/tony-alexander-interest-rate-rises-will-they-weaken-the-housing-market-42434

Cash is down 5% in real inflation adjusted dollars (after interest earned) but if everything you are looking at buying, (shares, bonds, property) has fallen 15-20% your purchasing power in terms of portfolio reallocation has actually gone up 10-15% in real terms.
Noone in their right mind would hold a large allocation to cash indefinitely but it's been a great idea during a bear market, and I don't see the bear hibernating anytime soon.

Inflation here was announced yesterday at 7.2%.  What it is in other countries is something for people in those countries to worry about.  I am hopeful it will decline to about 5% in New Zealand in 2023.

Economists' predictions about property have been "super reliable" since Covid started eh Winner 😉

Sector taking a real beating the last few days

On average down 3.2% - NZX50 up 2.2%

ARV and OCA trading at .68 and .65 of Book Value respectively  - not liked by market at all (wonder whY) - RYM, SUM and even RAD trading above Book Value

Methinks it's going to take something really special to stop this down trend - the 7 year secular bear market still play

Very pleased I made the decision to exit the sector completely which was a VERY difficult call considering what high regard I hold SUM in.
I'm just going to follow the chart and wait for a confirmed bottom in SUM.  Fighting TA just costs you money in this market...its too much hard work.
ARV would need to be dirt cheap and a confirmed bottom in (new uptrend on the chart) before I'd consider them again.  I think their update was really very disappointing indeed. 

RYM and even SUM might even end up at a discount to NTA the way this sector is going.    Who knows where the one that specializes in care will end up....that could get very ugly.

Is this disaster of a stock the result of a wider problem in the economy...

 ..flap flap Flop Flop FLOOOP.

SUM could be a buy if the snap election occurs and WP holds the balance of power...love horse racing and all things retirement.

Off topic: once upon a time he was consider an outlier but these days he sound postively a traditional conservative with main stream early 2000 policies...

He could make a big come back...

Carnage in retirement sector last week ... the rout continues

0000ret.JPG

Market really starting to worry about earnings going forward as house prices and sales volumes, (affecting people's ability to buy units), continue their steep decline and construction costs continue their ominously steep ascent, (according to CPI statistics up 17% in the last year after a similar increase the year before).  Throw into the mix as well the ever-increasing vice like pressure returns in the care sector are under and one wonders if we don't have the perfect storm ?

It occurred to me this morning that ARV have a very poor track record with pretty skinny development margins and given the above market dynamics maybe that's what's putting the acid on their share price ? (Why OCA is at a discount to NTA has been discussed already at great length).

All boats go lower in a rapidly outgoing tide, especially the really leaky ones with deep systemic issues referred to above.
Food for thought.  If the tide goes out far enough, might we even see RYM and SUM trading at a discount to NTA ?

Quote from: Basil on Oct 22, 2022, 09:37 AMMarket really starting to worry about earnings going forward as house prices and sales volumes, (affecting people's ability to buy units), continue their steep decline and construction costs continue their ominously steep ascent, (according to CPI statistics up 17% in the last year after a similar increase the year before).  Throw into the mix as well the ever-increasing vice like pressure returns in the care sector are under and one wonders if we don't have the perfect storm ?

It occurred to me this morning that ARV have a very poor track record with pretty skinny development margins and given the above market dynamics maybe that's what's putting the acid on their share price ? (Why OCA is at a discount to NTA has been discussed already at great length).

All boats go lower in a rapidly outgoing tide, especially the really leaky ones with deep systemic issues referred to above.
Food for thought.  If the tide goes out far enough, might we even see RYM and SUM trading at a discount to NTA ?

Just to stay with your example ... if the tide goes out too far, be prepared for this tsunami to come in fast and strong :p ;

Quote from: BlackPeter on Oct 23, 2022, 11:21 AMJust to stay with your example ... if the tide goes out too far, be prepared for this tsunami to come in fast and strong :p ;

According to the Washington Post, the U.S. economy is likely rebounding just before the midterms, despite inflation.
GDP, the broadest measure of economic activity, is expected to have risen roughly 2.9 percent between July and September, according to a tracker from the Federal Reserve Bank of Atlanta.

Interesting times!

I don't trust the bounce that's going on in the US market.  Just another Bear market rally and we're pretty close to the top of the trading range.

"Carnage in retirement sector last week ."

crikey.......lucky this stuff isnt being posted on that other forum... completly ruin a lovely spring day for them all...

May as well keep doing these updates while the carnage continues .... and maybe when things turn for the better when we can say yep retire stocks on a roll

NZX50 up 3.2% last week but retirement stocks on average down 1.2% - now that is real carnage

At least SUM didn't go down - even in the age of carnage still outperforms on a relative basis

Maybe soon this multi-year secular bear market will come to an end and times will be better ..... but to be 'rerated' financial performance will need to get better

0000ret.JPG

Many thanks Winner, your work on this is much appreciated.
WOW, second week in a row this sector has underperformed the NZX50 by more than 4%.  Wonder if we'll get another 4%+ underperformance next week as the market comes to terms with the rapidly deteriorating outlook for this sector ?
Almost beggars' belief that RYM is now lower than it was eight and a half years ago when two prominent posters called it radically overpriced and likely to underperform for many many  years.  Can't help wondering if that underperformance extends to a full decade ?  Its not like the foreseeable outlook over at least the next 18 months is any good so maybe it will ?  Just goes to show what happens when a former market darling with extremely elevated multiples falls completely out of favour with the market and reality bites in a big way !  The result can play out poorly for investors for a VERY long time.  Might we see the same for ATM which still trades on very demanding multiples but just like Ryman now has pretty modest growth ?

Speaking of the potential for shares to be stuck in the doldrums for a whole decade maybe OCA with its five and a half-year record of underperformance with follow RYM's lead ?  Surely, we won't have two retirement companies badly underperforming for a whole decade, or maybe that's exactly what might happen ?   Probably foolish trying to forecast out as far as the next 4.5 years but I can't for the life of me see how the truly pitiful returns on assets employed in care services is going to change any year soon ?  Any company with the majority of its assets in care looks like they're on a road to nowhere.

Price/Book Value multiples best valuations of retirement sector stocks in my opinion (essentially Book Value is NTA)

Price Book multiples have been declining since 2014 - yes, the market been rerating these stocks down for that long. This is known as a secular bear market (long term multiple contraction)

This is what has happened to P?B multiples since March 2014 -

RYM   from 4.72 to  1.21 from March 2014
SUM   from 2.50 to  1.13 from March 2014
ARV   from 1.02 to  0.69 from March 2015
OCA   from 1.08 to  0.63 from March 2017


Pretty dramatic eh

This trend might still continue - who knows

Even increases in Book Value (profits) might not lead to increased share prices if the multiple contraction continues, and you don't really want to think about the possibility of lower book values and lower still multiples.

Sort of says the market love affair in this sector has been on the wane for some time and they were beginning to doubt the long term viability of the model.

(Note - ARV and OCA Book Value increases have had the benefit of those capital raises)

Interesting chart that actually somehow tells a story

00000retpb.JPG

Very dramatic, many thanks for that excellent synopsis so well represented in that image you posted.  The tide has most certainly been going out for a very long time on this sector and yet SUM have weathered that storm very well with a huge percentage increase in profits over that timeframe.

The others...oh dear...      I find it highly improbable we'll see a tide change anytime soon.  Maybe SUM can continue to weather the storm, (I rate the chances of the rest of them at slim to none) but I think the market is right to be currently spooked by the fastest decline in real estate prices in many decades.  The headwinds definitely appear to be rising in intensity.

It could be interesting to compare the P/B of retirement stocks to those of the listed property stocks. From memory the assets of retirement companies produce more underlying NPAT than those of the listed property stocks, so effectively have a higher cap rate? I suppose that would support the idea that either the market misunderstands these stocks and/or is anticipating the underlying NPAT to fall. Much to ponder. For what it is worth, I think the next results of the listed players will probably make or break the downtrends.

Quote from: winner (n) on Oct 29, 2022, 01:18 PMPrice/Book Value multiples best valuations of retirement sector stocks in my opinion (essentially Book Value is NTA)

Price Book multiples have been declining since 2014 - yes, the market been rerating these stocks down for that long. This is known as a secular bear market (long term multiple contraction)

This is what has happened to P?B multiples since March 2014 -

RYM   from 4.72 to  1.21 from March 2014
SUM   from 2.50 to  1.13 from March 2014
ARV   from 1.02 to  0.69 from March 2015
OCA   from 1.08 to  0.63 from March 2017


Pretty dramatic eh

This trend might still continue - who knows

Even increases in Book Value (profits) might not lead to increased share prices if the multiple contraction continues, and you don't really want to think about the possibility of lower book values and lower still multiples.

Sort of says the market love affair in this sector has been on the wane for some time and they were beginning to doubt the long term viability of the model.

(Note - ARV and OCA Book Value increases have had the benefit of those capital raises)

Interesting chart that actually somehow tells a story

00000retpb.JPG

Interesting ... but I guess what's sort of missing is the analysis where we could go from here.

So - you are telling us, that it was so far not a flash investment to buy Ryman in March 2014. I recon anybody would happily agree (though buying it in March 2020 was much worse for the portfolio - Ouch), but this is just looking into the rear mirror.

The real question is - when will it be a good idea to buy into Ryman and OCA (to name just the most downtrodden of the big four). Is this a question of following TA, waiting for MA100, MA200, the golden cross and hope its not just a BEAR trap?

Obviously - all these indicators / events above are just measuring the markets mood (i.e. the psychological component of the share market, the voting component), but what about the weighing?

I do see OCA with a 6% dividend yield (Ok, based on analysts predictions of this years dividend), a forward PE of 6.8 and a forward earnings CAGR of 8.3 as an outstanding investment. Could it get cheaper? Sure, but waiting for it in my view would be pure greed - and in the long term fate tends to punish the too greedy.

Just to compare:

Ryman has a 2.6% dividend yield (not that flash ...) a forward PE of 7.5 (great, but not as good as OCA) and a forward earnings CAGR of 8.2 (quite similar to OCA).

Summerset on the other hand have a dividend yield of 2.3%, a forward PE of 9.8 (still not bad, but worse than the two others) and a forward earning CAGR of 2.1 ... yeah right.

So - interesting to see all this backwards looking navel gazing, but at least for me - I prefer to invest looking into the future :) ;

Anyway - interesting you hold your finger on the markets pulse ... now we just need to guess whether the patient is dying or coming back.

Here's some numbers to show the impact of that market rerating / multiple contraction since March 2017

In that time the four companies have increased their Book Value (mainly retained profits and from capital raises in OCA/ARV case). The growth rate for each company is shown - the line CAGR Book Value pa. I think the varying rates are very relevant if one is looking to the future profit forecasts.

There's also a line 'Share Price Now if not rerated' which leads into the line 'Impact of Rerated'. In SUM's case the share price now would be $15.81 but the rerating has reduced that by $6.11.

The impact of the rerating over the last five years has been about $7 billion - that's what the market cap of these companies has been reduced by the rerating down.

I haven't allowed for dividends - to me they are a red herring

Interesting numbers

0000retchq.JPG

BP -where could we go from here?

Over time each company will continue to grow as measured by Book Value (mainly Retained Earnings), Growth may be subdued next 2 years due to downward revaluations but over next 5 years they will grow at a reasonable rate.
I reckon SUM and RYM will continue to grow the Book Value (profits) faster than ARV and OCA. I come to that conclusion not just based on past performance but for a raft of other reasons.
I reckon that the downward rerating has a bit further to run but could turn late 2023 or 2024
I reckon that the current pecking order will remain in place - in other words RYM and SUM will continue to command higher multiples than ARV / OCA (who have a lot of hard work to do to prove they are worthy of higher relative multiples)

So that is how I see this sector. Probably means not much of a return for a year or two but possibly getting better in 2024 and beyond. But whatever (and no doubt you'll disagree) I see SUM returns better than the others, RYM doing OK and ARV/OCA bring up the rear (albeit returns will be positive)

Key is when multiples stop contracting and start expanding - otherwise for the likes of yourself dividends might be all you get over the next year before you start seeing any real gains

But we can't predict the future can we - although you might do a better a better job of that than mw ;)

No back to the other form of punting .... quite profitable at the moment

I reckon the 200 day MA is the one to watch in terms of leaving enough room to ensure the tide has changed.
There's no mileage in trying to swim against the tide especially when its going out this quickly !

Some great posts. Quality is a good place to be at the moment so Sum and Rym are my preferred retirement stocks. Have been buying both over several months. Also have a good position in Oca which I'm slightly in the red with.

I have stoped buying though, waiting for a confirmed uptrend. Still positive on the sector and property.

Also have a long term time frame so happy to wait it out.

Have a small holding in Arv which I purchased at the last cap raise. My plan is to wait till next result to determine if I sell out and take the loss.

Diversification is the key and time will tell how things plan out. 

I'm pretty much fully invested. There are many times that I have been tempted to sell down and have a good holding of cash. Questioning one's self and strategy I think is a good thing. 

I feel with this sector that the risk of to much more on the downside is limited. There is signs that inflation may of peaked. On the other hand I have never seen so many clouds on the horizon. There is a lot that could go wrong. Interesting times

"Quality is a good place to be at the moment so Sum and Rym are my preferred retirement stocks" Shareguy
 I agree 100% and those two companies are the only two in this sector that have earned my respect.  After 8.5 years of no capital gains I can finally foresee RYM potentially getting down to fair value at some stage over the next year or two and I may be happy to take a modest stake at close to NTA if they do but I believe SUM have better cost disciplines, are already quite close to NTA and their business model (for a wide variety of reasons) will drive the best returns going forward in this sector.  My view is holding the other two doesn't add meaningful diversification and will simply lead to lower portfolio performance over the long run but each to their own strategy and good luck mate. 

According to latest annual report RYM nta is $6.76. If if goes down to that level Basil then we really are in trouble. Yes it could happen, but no one really no's what's going to happen in the future.

I agree with your comment re ARV and OCA as far as diversification. I just like the sector and property has been good to me.  I feel that OCA will come right. At the current level it's a buy in my opinion. I have enough but hard to resist at these levels.

My current feel is that NZ and Australia will skip a recession, USA 50/50. UK and some countries in Europe won't be so lucky. I realise that a lot of people won't agree which is fine.

The Dow has been up for several weeks, and yes could be a Clayton's rally, but I'm picking the worst of its over. As long as you are truly invested for the long term (I'm looking 10 years) then based on history we should be laughing.

I for one think these clouds will disappear but new ones will arrive as they always do.

Why I think the tide continues to go out on this sector.
1. The real estate market, prices and volumes are in the steepest decline for decades.
2. McMansions, the typical third or fourth home retiree's own appear to be slowing and falling more quickly than the rest of the market from the anecdotal evidence I have read making it harder for retiree;s to sell their homes and buy a retirement unit.
3. Home affordability for first home buyers has reached an unprecedented "crisis" level and in my view this undermines the entire property market from the bottom up.
4. The affordability of retirement units, (margin between the RV unit and hours prices) is closing rapidly, this is especially potentially problematic for higher end units that RYM and ARV and to some extent SUM are trying to sell.
5. Construction costs continue their rapid ascent at the fastest rate in several decades undermining development margins
6. Funding costs are rising fast and when this sector rolls over much of its debt which was raised cheaply in recent years at 2-3% they will find 6-7% funding the norm, (which matters when we're talking hundreds of millions in debt)
7. The extent to which the Govt are now underfunding care is at unprecedented crisis level's as are staff shortages and pressure on wages and other operational costs, (high inflation)  There's nothing even on the horizon to suggest the vice like pressure on the care sector will change.

In regard to Ryman.  I think the investment community had great respect for Simon Challis and its clear the  company achieved market darling status for all of the first decade of this century and the early part of the 2010's.  Its really unfortunate for shareholders that he got Parkinson's so early because subsequent leadership has really been a pale shadow of his incredible talent.
My thoughts is that the current premium to NTA of 23% on Friday is not justified based on recent growth rates and the unproven current leadership skills.
The fact of the matter is since SUM listed 10 years ago they have grown faster in that decade than RYM have and the culture and cost disciplines than Julian Cook deeply embedded in the company have been embraced by Scott Scoullar having worked with Julian for many years.  SUM closed on Friday at just under a 9% premium to NTA.  I think both SUM and especially RYM are highly likely to move to a lower premium to NTA than currently exists.
If any company deserves a premium to NTA on the market the only one who does in my opinion is SUM.
For the reason that I still think RYM's premium to NTA is excessive and the real estate market is falling fast and RYM's units are generally the most expensive in the market by quite some margin, I think RYM continues its 8.5 year track record of market underperformance probably out to a full decade.

You know I don't think there's any real money in care and the problem has never been worse.  There's so much about OCA's business model that going to compromise returns going forward, unless it goes to about a 50% discount to theoretical NTA I'm very reluctant to ever invest there again.

Although no one can predict the future there are enough indicators out there to suggest to me there's a very high probability the whole sector underperforms for the foreseeable future and when the tide finally turns SUM will shine the best.  The very modest yield in this sector is not sufficient to give me confidence i can swim against an outgoing tide and make progress.  At least with KPG for instance there's the effective 10% gross yield which together with its similar discount to NTA as ARV and OCA gives me enough incentive to hold despite clear headwinds in that sector. 

Great post Basil. Your argument is very compelling. Just hope your wrong this time...

I've decided to purchase some more OCA shares tomorrow and here's why:
- they have a point of difference with their care suits (sorry beagle, I know that will annoy u...)
- medium/upper real estate is still ticking along nicely. It's just lower end of the market that's declined a lot. Retirement homes are mid-high.
- long term, the boomers are going to need to be housed somewhere. This isn't going to change.
- last point. Nothing in the world makes sense at the moment, so doing the opposite on this one. Also won $23 on a lotto ticket last night and taking it as a sign...

Quote from: Ricky Bobby on Oct 30, 2022, 08:23 PMNothing in the world makes sense at the moment, so doing the opposite on this one. Also won $23 on a lotto ticket last night and taking it as a sign...

Welcome to the forum mate, maybe if you dollar cost average those winnings investing over 23 months you might come out okay  :P ...sorry, this morning I am feeling like a mischievous Beagle and couldn't resist.

Quote from: Basil on Oct 30, 2022, 01:57 PMWhy I think the tide continues to go out on this sector.
1. The real estate market, prices and volumes are in the steepest decline for decades.
2. McMansions, the typical third or fourth home retiree's own appear to be slowing and falling more quickly than the rest of the market from the anecdotal evidence I have read making it harder for retiree;s to sell their homes and buy a retirement unit.
3. Home affordability for first home buyers has reached an unprecedented "crisis" level and in my view this undermines the entire property market from the bottom up.
4. The affordability of retirement units, (margin between the RV unit and hours prices) is closing rapidly, this is especially potentially problematic for higher end units that RYM and ARV and to some extent SUM are trying to sell.
5. Construction costs continue their rapid ascent at the fastest rate in several decades undermining development margins
6. Funding costs are rising fast and when this sector rolls over much of its debt which was raised cheaply in recent years at 2-3% they will find 6-7% funding the norm, (which matters when we're talking hundreds of millions in debt)
7. The extent to which the Govt are now underfunding care is at unprecedented crisis level's as are staff shortages and pressure on wages and other operational costs, (high inflation)  There's nothing even on the horizon to suggest the vice like pressure on the care sector will change.

In regard to Ryman.  I think the investment community had great respect for Simon Challis and its clear the  company achieved market darling status for all of the first decade of this century and the early part of the 2010's.  Its really unfortunate for shareholders that he got Parkinson's so early because subsequent leadership has really been a pale shadow of his incredible talent.
My thoughts is that the current premium to NTA of 23% on Friday is not justified based on recent growth rates and the unproven current leadership skills.
The fact of the matter is since SUM listed 10 years ago they have grown faster in that decade than RYM have and the culture and cost disciplines than Julian Cook deeply embedded in the company have been embraced by Scott Scoullar having worked with Julian for many years.  SUM closed on Friday at just under a 9% premium to NTA.  I think both SUM and especially RYM are highly likely to move to a lower premium to NTA than currently exists.
If any company deserves a premium to NTA on the market the only one who does in my opinion is SUM.
For the reason that I still think RYM's premium to NTA is excessive and the real estate market is falling fast and RYM's units are generally the most expensive in the market by quite some margin, I think RYM continues its 8.5 year track record of market underperformance probably out to a full decade.

You know I don't think there's any real money in care and the problem has never been worse.  There's so much about OCA's business model that going to compromise returns going forward, unless it goes to about a 50% discount to theoretical NTA I'm very reluctant to ever invest there again.

Although no one can predict the future there are enough indicators out there to suggest to me there's a very high probability the whole sector underperforms for the foreseeable future and when the tide finally turns SUM will shine the best.  The very modest yield in this sector is not sufficient to give me confidence i can swim against an outgoing tide and make progress.  At least with KPG for instance there's the effective 10% gross yield which together with its similar discount to NTA as ARV and OCA gives me enough incentive to hold despite clear headwinds in that sector. 

Fair enough. For any investment there are always opportunities as well as risks, and with the retirement industry you are recently an outstanding oracle to get a full and complete list of all the risks painted in black ... but no, you are right, could all happen.

However - given that life is not black and black, allow me to add some colour:

Real Estate currently comes down due to dropping demand (I guess our skilful government somehow managed to completely kill immigration and at the same time drive Kiwis in droves out of the country. This does improve the empty housing stock. However - I don't expect this situation to stick around for long. Even the current government started to realise that they went ways too far on their trip into isolation - and are currently changing the policies in the ministry of anti immigration. As well - if Putin and Xi extend their respective wars, there are millions of Kiwis out there who might want to come back ... and some rich foreigners will look as well for a safe haven and buy our passport or residency. Think Peter Thiel - plenty of other rich pricks around the world who want to buy themselves out of trouble.

Just to compare: Real estate in Switzerland is really expensive, and was so as well during WW II. I think we have the potential to turn NZ during the coming uncertain times into the Switzerland of the South Pacific (well, maybe not with this government, but elections are not that far away).   

While you are right that the standard Kiwi house might still be out of reach for many ... there are other ways to reduce the cost of housing, just by a smarter ways of building and using an expensive resource. Our way to build and house people is just brain dead. Ever tried to get in Singapore a standalone house on a quarter of an acre? Well, you might find that difficult as well (even with your funds), but it still is  possible there for everybody to get a good unit in a high rise, and people can live there (with an average income like NZ) quite well.

In summary - I do see real estate prices in NZ picking up again with a bottom sometimes in 2023.


Cost of care is basically irrelevant for any care provider looking after the better off as long as their competition faces the same cost. I guess, what option do people have if they need care? Sure - some might find better and cheaper care overseas, but this would remove them very far from their families. Otherwise - they either choose to die unattended under a bridge or they bite the lemon and pay?

I am as well sure that any future government (and even the current government, even if they are clearly blindsided by populism and ideology) will re-open the gates for health professionals including nurses and age carers. Problem solved.

Ah yes - and the grey tsunami is still rolling on, making the worry for tides in the market pretty meaningless. More people getting older, heavier and less active ... sad (the latter part) but clearly good to fill care facilities.


I think the future is bright for retirement housing - increased need and a higher proportion of well off pushing into NZ and into the best of our retirement homes.

Some 2,884 consents issued for retirement units in year to September

Highest Sept year for a while (maybe ever)

Was only 1,876 in September 2017 year

Quote from: winner (n) on Nov 02, 2022, 09:35 AMSome 2,884 consents issued for retirement units in year to September

Highest Sept year for a while (maybe ever)

Was only 1,876 in September 2017 year

I've been wondering for a while now if we're getting into an oversupply situation in the near term ?
Everyone knows the long term demographic tailwinds for this sector but a lot of baby boomers are nowhere near 80 years old yet which seems to be about the average age of entry.  Maybe for the next few years we are oversupplied (judging by all the extensive advertising these companies are currently doing.

Quote from: Basil on Nov 02, 2022, 10:30 AMI've been wondering for a while now if we're getting into an oversupply situation in the near term ?

We're only currently at, what, 12%-13% market penetration?

StatsNZ projections show the 85+ population increasing 26% in the next 5 years (96k to 121k from 2023-2028). 
https://www.stats.govt.nz/information-releases/national-population-projections-2020base2073

Just maintaining a penetration rate of 12% would require another 3,000 units in that 5 year period.

They don't split 80+ separately, but the increase in 85+ from 2028-2033 is 32% (121k - 160k).  Those are people that will be turning 80+ in the earlier period 2023-2028 (and there will be some mortality assumption incorporated for that cohort).  So if 80+ is your gauge then the requirement, assuming penetration remains flat, is even larger at 4,500 to 5,000 additional units.

Also, resource consent issued today is still ~4 years away from the delivery of the finished product.
And some of the consents will be brownfield redevelopment of current sites - replacing old stock, so not all increasing capacity.

Quote from: Whacc on Nov 02, 2022, 11:52 AMWe're only currently at, what, 12%-13% market penetration?

StatsNZ projections show the 85+ population increasing 26% in the next 5 years (96k to 121k from 2023-2028). 
https://www.stats.govt.nz/information-releases/national-population-projections-2020base2073

Just maintaining a penetration rate of 12% would require another 3,000 units in that 5 year period.

They don't split 80+ separately, but the increase in 85+ from 2028-2033 is 32% (121k - 160k).  Those are people that will be turning 80+ in the earlier period 2023-2028 (and there will be some mortality assumption incorporated for that cohort).  So if 80+ is your gauge then the requirement, assuming penetration remains flat, is even larger at 4,500 to 5,000 additional units.

Also, resource consent issued today is still ~4 years away from the delivery of the finished product.
And some of the consents will be brownfield redevelopment of current sites - replacing old stock, so not all increasing capacity.

Accepting your math's at face value that's 600 units a year required for the next 5 years.  Not a lot !

Summerset are delivering 600 units this year in New Zealand.
Then there's RYM, from memory about 1,000 new units (some of which are in Australia)
ARV about 300 units,
Oceania, from memory about 220 units...just what I know is over 2,000 new units this year from listed companies.
Then there's Metlifecare who have $5 billion in assets and who seem to have huge aspirations for growth.
Then there's what Bupa are delivering, Hopper developments, Fletchers getting into this field of endeavor and all the other non listed companies and it seems all and sundry have ever increased goals of increasing their build and growth rate going forward every year from here and this at a time when people are facing the steepest decline in real estate prices in many decades and sales volumes are declining at real pace as well.

Sure...the penetration rate is likely to increase but its going to NEED to increase a heck of a lot to soak up thousands of new units supplied every year.

As I suggested, I think there are reasons for genuine concern regarding over-supply in the foreseeable future.

Quote from: Basil on Nov 02, 2022, 12:49 PMAccepting your math's at face value that's 600 units a year required for the next 5 years.  Not a lot !

Summerset are delivering 600 units this year in New Zealand.
Then there's RYM, from memory about 1,000 new units (some of which are in Australia)
ARV about 300 units,
Oceania, from memory about 220 units...just what I know is over 2,000 new units this year from listed companies.
Then there's Metlifecare who have $5 billion in assets and who seem to have huge aspirations for growth.
Then there's what Bupa are delivering, Hopper developments, Fletchers getting into this field of endeavor and all the other non listed companies and it seems all and sundry have ever increased goals of increasing their build and growth rate going forward every year from here and this at a time when people are facing the steepest decline in real estate prices in many decades and sales volumes are declining at real pace as well.

Sure...the penetration rate is likely to increase but its going to NEED to increase a heck of a lot to soak up thousands of new units supplied every year.

As I suggested, I think there are reasons for genuine concern regarding over-supply in the foreseeable future.

Realistically it's more like the 4,500 - 5,000 I mentioned if you're using 80+ - so 1,000 p.a.
Most operators are probably using 75+ as a proxy for the RV demographic so the base demographic will be higher again.

My numbers will be off as the penetration rate is based on 75+ and it's 14%.
So that's a higher base and a higher penetration rate.
https://thespinoff.co.nz/business/09-06-2021/how-residents-get-trapped-in-the-retirement-village-paradox

For every % increase in penetration that's another ~300 based on the lower ~80+ value (i.e. (160k * 1%) divided by 5 years).

So to get to 2,000 is natural growth in the demographic at 12% + 3-4% increase in penetration.  The penetration rate increased from 9.4% to 14% (~50% increase) in the last 10 years.
Who knows, that probably aligns with flat penetration for 75+.

MET aside, Fletchers and other non-listeds are targeting a larger and younger 'lifestyle' demographic, 65+ (good luck with that strategy and zero turnovers for ~15 years).

It's feasible the penetration rate might increase another 3-5% over the next decade but I am skeptical that's enough demand to soak up the hugely ambitious growth plans for all companies in this sector.   Massive increases in the build rate going forward seems to be modus operandi de jour for all these companies.
Interesting times for this industry if real estate values and volumes sold keep tanking.

https://www.newshub.co.nz/home/money/2022/11/house-prices-fall-again-in-october-official-cash-rate-forecasts-could-prolong-downturn-corelogic.html?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Wednesday+2+November+2022

https://www.interest.co.nz/property/118272/barfoot-thompsons-october-sales-figures-suggest-auckland-housing-market-could-be

Just expanding on post #201 a bit more regarding RYM.
First relatively speaking its clear OCA and ARV are trading at deep discounts to NTA for reasons fully discussed already and SUM at a very modest premium to NTA.

RYM with their 23% share price premium to NTA look increasingly vulnerable to me here.  They are known for their very expensive prices and most fair 20% DMF fees, (but their unit prices are VERY high so these lower DMF fees are not a free lunch), and high end facilities...the full land based cruise ship experience but they are very pricey with their units and I believe with real estate tanking at its fastest rate in decades with volumes also declining badly their ability to sell their high end units is looking increasingly compromised by this market.

Probably good if I give examples to illustrate my point.  There are multiple listings on trade me for their two bedroom apartments in Devonport Auckland with views for $1,900,000.  These asking prices are unchanged all year despite the huge fall in real estate prices.  https://www.trademe.co.nz/a/property/retirement-villages/auckland/north-shore-city/devonport/listing/3732160700

On the other hand by way of comaprison we have Oceania with their premium Sands development in Browns bay advertising 2 bedroom apartments in a top location right across form the beach for nearly half the price, see here https://www.trademe.co.nz/a/property/retirement-villages/auckland/north-shore-city/browns-bay/listing/3778708295

Okay, I accept they're different villages and one apartment may have nice views and the other may not but which do you think is easier to sell in a rapidly declining property market ?

Also, if people want the full land based cruise ship experience aren't they going to be able to more easily afford a similar SUM unit at around 70% of the RYM's price ?

Is RYM worth a premium to NTA at all given their quite checkered track record of fairly modest growth in underlying earnings in the last 5 years ?  Is it headed back towards NTA of about $6.76 ?...i.e. the last "General" to fall in this sector.

I think the housing market continues to tank badly from the bottom up.  First home buyers can't get finance so property developers discount heavily, second home buyers really struggle to sell their first home and get a lot less for it than they thought and are price compromised on what they pay for their second home and so on and so on.  Who really want to borrow money at 6-7% when you know rates are headed even higher ?  How does Grandad and Grandma sell their $3 Devonport home to but that fancy high priced apartment RYM is trying to sell ?

I would say RYM is now in a very close contest with OCA for being the most vulnerable to further declines from here.

Lst weeks share price movements

Do I see a pecking order here

0000ret.JPG

That graph is interesting, thanks for posting Winner.  Quality has held up slightly better. Looking forward to OCA result which I'm picking will be better than what the market thinks.

This weeks share price update  :'(

The secular bear that started in this sector 7 years ago continues with the average P/B ratio now well below 1

0000ret.JPG

Latest REINZ data out for October this morning is not too shabby, certainly better than I expected.
I remain of the opinion the correction in house prices is unlikely to end anytime soon.
https://static1.squarespace.com/static/5ce1fd700bf20400017d3a30/t/6371ad252e48b62de9ca6273/1668394332460/REINZ+Monthly+Property+Report_October_2022.pdf

SUM remains on my watchlist and my strong preference in this sector.  My view is the real estate sector is characterized by long term trends so the 200 day moving average is the TA indicator I'm watching.   In my view, fundamentally SUM is very good buying but I am not going to fight TA.  Very slowly dollar cost averaging in over the next 12-24 months may be another strategy worth considering at this point now we are about a year into the housing decline.

boy I'm glad I got out at the right time...complete fluke, but I'll take it

Quote from: Basil on Nov 15, 2022, 10:07 AMLatest REINZ data out for October this morning is not too shabby, certainly better than I expected.

Jeez basil - what were you were expecting ...esp if this Stuff headline is what happened

House price fall 'biggest since REINZ records began'

National median price in the month of October 2022 was up 1.9% on September 2022.
I was expecting October would be down month on month by about that amount.
One swallow does not a summer make and therefore this is not nearly enough to suggest a tide change.

Weekly share price update

RYM led the way in another down week for the sector - the rerating continues

Changed Ryman's Book Value so P/B now only 1.1

0000ret.JPG

Jeepers the year to date sector carnage of -35.9% v the NZX50 -12.7% tells a story in 2022 !  More than 23% NZX50 underperformance, WOW, and the year is not over yet by any means with both ARV and OCA to report next week !
I'm expecting this sector underperformance to be repeated in 2023 and for all RV companies to go below NTA in due course.
Keep up your good work mate, it's very informative and helpful.
P.S. Westpac economists now predict a much bigger decline in house prices, 30% !  https://www.goodreturns.co.nz/article/976521029/much-bigger-drop-than-predicted-for-house-prices.html?utm_source=GR&utm_medium=email&utm_campaign=How+to+get+the+best+value+for+your+book
Anyone notice in the RYM presentation that their 2 bedroom independent living units are getting quite close to the average house value ?
Much closer than I have ever seen them before.  Will it reach a point where RYM struggle to sell their more expensive units ?

No wonder retirement sector in doldrums

Relatively new CEOs .....RYM has a grocer/retailer and Oceania an accountant

RYM share price fallen below Book Value of $7.26

Only SUM and RAD to go as this 7 year secular bear market continues

With the current doom over the retirement sector decided to spend some time looking at demand. Demand is a key part of the picture.

https://www.jll.com.au/en/trends-and-insights/research/outlook-on-nz-retirement-village-sector

I can't find any reports that contradict the view that this industry is going to be under supplied in the longer term.

For long term holders I see this as a great opportunity to increase/add holdings on weakness.

 

Orr to throw the kitchen sink at the OCR this afternoon?
Next RBNZ cash rate review not until February 2023 so I think he will hit the market with a 75 bps increase.
Won't be helpful for the housing market or the RV sector.
I expect high interest rates to prevail right through 2023 and we might see some relief coming in mid-late 2024.
P.S. 75 bps confirmed https://tmmonline.nz/article/976521066/biggest-ocr-rise-ever-here-s-what-the-governor-said?utm_source=GR&utm_medium=email&utm_campaign=Ouch%21+OCR+up+75+basis+points

https://www.msn.com/en-nz/news/national/recession-warning-as-reserve-bank-delivers-record-interest-rate-hike-forecasts-5-5-pct-ocr/ar-AA14rakU?ocid=msedgdhp&pc=U531&cvid=77de873a19cd4e82b3eaab95b43cdbd1

Strap yourselves in folks...turbulence ahead!

They're all trading under NTA now, as previously warned.
No rush to get back into this sector, in my opinion.  This property downcycle could last for years.
There is no doubt whatsoever in my mind that with recent interest rate increases N.Z. housing is the least affordable it has ever been.
This surely slows through into fueling an ongoing downturn and slowdown in housing sales and values that inevitably flows though into this sector.
Disc: No holding in any retirement company and not looking for an entry point anytime soon.

Quote from: Basil on Nov 24, 2022, 11:56 AMThey're all trading under NTA now, as previously warned.
No rush to get back into this sector, in my opinion.  This property downcycle could last for years.
There is no doubt whatsoever in my mind that with recent interest rate increases N.Z. housing is the least affordable it has ever been.
This surely slows through into fueling an ongoing downturn and slowdown in housing sales and values that inevitably flows though into this sector.
Disc: No holding in any retirement company and not looking for an entry point anytime soon.

The 7 year SECULAR BEAR market is relentless

Yes 7 years the average Price/Book multiple in this sector has been trending down .... the definition of secular bear market

These don't turn overnight .... but one day the rerating down might end but not soon I reckon

Surely with the RBNZ now telling the country to put there wallets away including the biggest single spender of all (GOVT) the country and business will now pay the price.

Why continue to invest in a country going no where......

Not just this sector...

Sorry we got it wrong... STOP SPENDING!!! and no tax cuts......

change of government coming?

PM fly's out to UN ?

Nurses flee to higher wages in AUS?

Results to date -

SUM Half Year June +9.2%
RYM Half Year Sept +44.8%
OCA Half Year Sept +1.1%

Seems the more you make the more the share price goes down .....so 'disappointing' numbers might be good

RAD tomorrow and ARV next week

Wonder what market reaction to their reports will be....or has ARV in particular suffered enough

As they say earnings don't matter ...it's all about the story ...and market sentiment.

Sound like the government is planning on pay parity for nurses in retirement villages amongst others. If they are already paying more to retain nurses could be helpful for their bottom line.

Quote from: winner (n) on Nov 24, 2022, 07:43 PMResults to date -

SUM Half Year June +9.2%
RYM Half Year Sept +44.8%
OCA Half Year Sept +1.1%

Seems the more you make the more the share price goes down .....so 'disappointing' numbers might be good

RAD tomorrow and ARV next week

Wonder what market reaction to their reports will be....or has ARV in particular suffered enough

As they say earnings don't matter ...it's all about the story ...and market sentiment.

Update

RAD Half Year June -18.8%

That should send share price up - rocket like?

This week's share price update

strong recovery today from depths of despair ..... but average is 5.7% down for week

0000ret.JPG

cant get any worse AY WR(<>)

or s**t cant it!!!

see that back bay door opening in the ospray WR() ? and the stream of GI JOES bailing out the back of the plane?

https://www.youtube.com/watch?v=GfOcigzj5pE

its a S**t show cluster  ....

Final summary of H1 results

Underlying Profit

ARV +48%
RYM +45%
SUM +9%
OCA +1%

SUM was June / others September

Ranked by growth highest to lowest

Would be good if you could also please in brackets put underlying eps growth.
I believe that puts ARV at 10% and OCA at 0%.
My observation is that despite RYM's underlying eps growth being the best of the sector by quite a long way in this period that's not the be all and end all of this as it seems clear that their debt level appears to be worrying the market.  (Not much of a bounce back in RYM's share price since Andrew Little's healthcare funding announcement).   The market appears to be looking hard at the cash flow and companies that are suffering in that respect are also suffering on the market.

basil - underlying eps growth 6 months september

RYM +48%
ARV +12%
OCA -0.4%

Could have said -0% for OCA but some might not have got what negative zero is

OCA paid back $1.8m wage subsidy in the previous corresponding period, so 1HFY22 was impacted by 0.252 cps as a one-off so I can't help myself wondering what that makes their underlying eps decline this half if we normalize last year's result ?  Would you please be so kind as to crunch the numbers for that ?  Thanks in advance.

Quote from: Basil on Nov 30, 2022, 11:50 AMOCA paid back $1.8m wage subsidy in the previous corresponding period, so 1HFY22 was impacted by 0.252 cps as a one-off so I can't help myself wondering what that makes their underlying eps decline this half if we normalize last year's result ?  Would you please be so kind as to crunch the numbers for that ?  Thanks in advance.

Interim report noted they excluded that $1.8m in underlying (and restated last years numbers) .....the numbers referred are the ones I used to get the -0.4%
Think I read it correctly but you never know with Oceania stuff what it really says

Thanks for clarifying that mate.  I get a migraine headache every time I try and read an OCA report so these days I just try and skim through the presentation materials instead...but they only tell you what they want you to hear in there.  Frankly when you compare OCA and ARV (in terms of bottom fishing this sector), I think its crystal clear which is the better investment proposition.  For the life of me I can't see why so many people are fixated with OCA being "apparently" cheap when it's so clear there's a much better option that is actually successfully growing earnings, rather than telling B.S. stories about future growth that never seems to happen.  Go figure ?

This week's www.chrislee.co.nz taking stock is a sensible read.

Quote from: lorraina on Dec 01, 2022, 12:32 PMThis week's www.chrislee.co.nz taking stock is a sensible read.

Yes, an excellent review of the sector.

Big week for NZX but huge week for retirement stocks (except Ryman)

The winds have changed -- when the Brokers start putting these cheap as stocks in the Brokers Picks for 2023 the share prices will take off over Christmas and into the new year

0000retire.JPG

You could be right Winner.  Brokers might use the "Dog's of the Dow" theory to pick their 2023 winners.
Sector has underperformed by a whopping 27% to the NZX so maybe its a good strategy ?
One broker is known to think RYM is the best value share on the whole NZX and I read another report wherein a different broker more or less said the same thing about ARV.

The fly in the ointment appears to be Mr Orr who is determined to send us into a recession and housing affordability with interest rates where they are currently has surely reached an all time low ?...with yet more interest rate increases to "look forward" too in 2023 as well!

Interesting to note that the margin of safety between 2 bedroom ILU's and average house prices based on the reports I have read appears to have reduced to the tightest level I've ever seen before. I expect headwinds in the housing sector to persist for the majority of 2023, (at least).  It begs the question of whether the current depressed share prices have already factored the expected headwinds for 2023 into their share prices already ?

I think one of the companies in your table could see its share price springboard back quicker than the others once we see house prices stabilize so that one might find its way into my 5 stock picks as a "dark horse" selection but whether that recovery is a 2023 or 2024 story is an unanswerable question in my mind.  Time will tell.

Only ARV is interesting to me at this point (SUMs cool but ARVs cheaper). Interested to buy back in but other than the brokers picks thing, don't really see anything on the horizon near term to boost share price. Pretty tough environment for a property+healthcare staff related company, need to have a more in depth look at them all especially on staff per resident and similar metrics.

Very latest auction data from Barfoots this week is interesting and may be a concerning lead indicator for the impact of the most recent interest rate increases on sales this summer.  https://www.interest.co.nz/property/118726/overall-sales-rate-barfoot-thompsons-latest-auctions-dropped-below-10 
Only a 10% auction clearance rate well down from the 25% prevailing for some time now.

Quote from: Basil on Dec 03, 2022, 01:10 PMVery latest auction data from Barfoots this week is interesting and may be a concerning lead indicator for the impact of the most recent interest rate increases on sales this summer.  https://www.interest.co.nz/property/118726/overall-sales-rate-barfoot-thompsons-latest-auctions-dropped-below-10 
Only a 10% auction clearance rate well down from the 25% prevailing for some time now.

Jeez, somebody added a comment 'A quick perusal of the results for this week show that 111 properties were passed in. 29 received some sort of bid while 82 got no bid at all. So close to 75% of properties that get passed in do not get any bids'

That's a pretty telling stat if true

Guy on radio yesterday was saying that (in Auckland) there's a definite additional demand for town house / units and that selling 3 /  bedroom stand alone homes is becoming a bit of a struggle.

Aren't stand alone homes the type that oldies live in before they decide to move into a retirement / care place

Maybe another headwind for the sector

Housing affordability at crisis level's now in my opinion and its starting to show up in auction clearance rates, (to bid you need cash or a confirmed mortgage commitment from the bank).
Spring last year mortgages were circa 3% and bank were stress testing applicants at about 5%. 
Mortgage rates have doubled, (banks probably now stress testing applicants at ~ 9%) but the market house price median has only fallen on average across N.Z. by a pretty modest 7.5%,  https://www.reinz.co.nz/Media/Default/Monthly%20Press%20Release%20Assets/Residential/10%20-%20October/REINZ%20Monthly%20Property%20Report%20-%20October%202022.pdf

I think this very low auction clearance rate this week (which was actually only 9%) is a very important lead indicator of an absolute crisis of lack of affordability of the housing market.  The vast majority of young people trying to get mortgages do not qualify based on lack of income at the current interest rate and pricing settings.  It gets worse in 2023 with even higher interest rates and the RBNZ deliberately orchestrating a recession.

I think the last year is just the beginning of a significant decline in the real estate market which, (all the crazy gains since Covid started though to November 2021, circa 30%, fueled by free money must surely be unwound) will fall from the bottom upwards as first home buyers cannot afford to enter the market and the effect of that permeates right through the entire market.

Interesting to note Winner's observations from the other place posted 1 December as to which companies' sales are holding up the best.

QuoteMuch been said about OCA big downturn v last year in new sales, Lots of causes etc given for this

Whatever its a 'problem' for all in the sector. All reported less sales -

SUM -40 -15%
OCA -40 -40%
RYM -41 -29%
ARV -15 -13%

One thing - they'll all sell one day

Yes they will all sell one day but that day might be a long way off for some companies with product that's not especially desirable.

Number of property sales been declining for a few years

Current level of sales are now only 60% of what they were 7 years ago ...chart thanks to interest.co.nz

Must be a story behind these numbers as to how they affect the retirement sector

0000house.JPG

Very Interesting chart, thanks for sharing.
Didn't you mention the premium to NTA, (now discount for most) has been in a bear market for 7 years?
Coincidence with the chart above or not?  If it's not a coincidence, doesn't that suggest with the decline in sales looking to potentially get worse in 2023 the bear market for these stocks could continue and get worse?  Maybe the Dogs of the Dow strategy won't work for retirement stocks in 2023?

Interesting noting ARV and OCA's share prices have moved up through both their 20 day and 30 moving averages,while RYM and SUM have not.
New trend.? Relative strength of each ARV 53...OCA..54......RYM 31....SUM....49. 

Had a good chat about the importance of embedded value to cash flow and underlying profit at yesterday's meeting.  Here's the guts of it.
Disc: I have opened up a very modest position in ARV and may slowly dollar cost average into it a bit more in the foreseeable future.
I would add that these forums seem to be overly fixated on OCA being cheap whereas I observed there are at least 4 other property companies trading at a similar discount to NTA including ARV, KPG, ARG and IPL. 

What is embedded value ?

Let's have a look at an extract from SUM's recent presentation

Quote▪ Total embedded value now $1.5b, having increased
from $1.1b at 1H21, a 29% uplift
▪ Embedded value comprised of:
▪ $1.04b resale gains
▪ $0.43b deferred management fees

Embedded value is the sum total of the difference between what current residents paid for their units many years ago and the current prices as assessed by valuers, (unrealised resale gains) plus the deferred management fees realisable in cash when the resident moves out or passes on, (deferred management fees).
Embedded value as the name implies is value that's in the balance sheet already and will be realised in cash as units are resold.  This means the sales rate is a real factor in the equation of releasing embedded value.  One company stood out as having significantly better sales rate than the others in the last half.
I am sure winner won't mind me quoting his figures.
Posted 1 December 2022 in the other place

QuoteMuch been said about OCA big downturn v last year in new sales, Lots of causes etc given for this

Whatever its a 'problem' for all in the sector. All reported less sales -

SUM -40 -15%
OCA -40 -40%
RYM -41 -29%
ARV -15 -13%

One thing - they'll all sell one day

Note that ARV sales held up best in a slowing real estate market.  Remember to release embedded value and turn it into cash you need to sell the units.

Why is embedded value important to the business and cash flow in tougher economic times ?

The beauty of embedded value is that it already exists, (hence unsurprisingly the term embedded), and doesn't take a lot to release it other than selling an existing unit.
A worked example might be useful.  A friend, Elizabeth lives in a nice 2 bedroom brick duplex unit in the Peninsula Club near where my Mum's unit used to be.  Its north facing with a nice sunroom, and she paid $500K when she bought it some years ago.  I would think when she passes, they will take a couple of weeks to fit new carpet and drapes and a few other little things, perhaps for a cost of about $20K and resell it for somewhere about $1m.  This releases $650K* cash and underlying profit to ARV, all embedded value that goes to underlying, (realised), profit (after paying out the estate $350K), and the process of refurbishment and resale might only take a couple of months.   * ($500K resale profit and 30% deferred management fees, $150K)

Compare that to a Greenfield development wherein it might take a company 5-6 years from the time of land acquisition to getting consents, to building the village and selling it down.  $700K- $750K invested over 5-6 years generates $250-300K profit when that unit is sold for $1m but you're carrying all that debt for all that time to fund this new village and debt is very expensive now and it takes many years to complete a greenfield development.

The examples I have shared illustrate why Julian Cook once told me you don't make the real money out of retirement villages until you've owned them for a decade, (the approximate churn rate for a typical retirement village)  i.e. There's far more and much quicker cash flow and profit in resales than there is in new builds.

Embedded value is a very important indicator of future underlying realised profit and cash flow generation capability, which we know is important in tougher economic times when units are harder to sell.

If Embedded value is so important how do the four companies compare in this regard ?

Based on my analysis the situation is as follows:-
SUM have embedded value per share of $6.46 which is 67% of their share price.
OCA have embedded value per share of $0.63 which is 75% of their share price.
RYM have embedded value per share of $5.14 which is 77% of their share price.
ARV have embedded value per share of $1.53 which is 121% of their share price.

If the average churn at an ARV village is every ten years they will release about 10% of that $1.53 (about 15 cps) every year without doing anything other than refurbishing and reselling existing units.  Recall above from Winners post which company's sales are holding up the best.
ARV also has the lowest gearing in the sector at 28%.  RYM have the highest gearing in the sector and OCA the second worst.
I think embedded value is going to be very important in terms of cash flow generation in the years ahead.

So the best buy on that metric is ARV.
Worst is SUM.
In fact not a lot of difference between SUM,OCA and RYM.
Looks to me the sector is over sold and is great buying at current prices.

Disc.Recently bought ARV and OCA.
Trust I am a trustee of holds OCA,RYM and SUM.Held for years,and will continue to hold for years.

Stress testing the sector the lowest risk is ARV with its huge embedded value, lowest gearing and its sales are holding up the best in a soggy market.

Stress test a 25% decline in the real estate market from here.  New builds will struggle to get much margin or cash flow, resales with deep embedded value will still generate excellent cash flow and realized profit.

Assessing "what if it turns to custard" risk is just one way of comparing the four companies but I think it's important to know which has the lowest risk in this environment.  The fact that ARV also have the roughly equal biggest discount to NTA is well worth noting too.

I think SUM is a fine company with excellent management and they have the second lowest gearing in the sector, but they are a little more reliant on new builds and everything ticking along in the real estate sector in a reasonably orderly manner.  What happens if the real estate market gets disorderly? (AKA goes into freefall)  That's why I looked at the whole embedded value thing a lot more closely.

RYM have too much debt for my liking and their units are notoriously expensive. I believe you know what I think of OCA already lol

To be honest I don't especially like the prospects for the sector at this point.  I think the fall in real estate has a long way to go based on the fact it got ridiculously overpriced based on a one in one-hundred-year bubble of "free" money.  (Being able to borrow at ~ 2% when inflation was 2% meant the cost to borrow money was ostensibly "free").

I've only started with a tiny 2% portfolio allocation to ARV because I think there's deep value there for the low risk involved.  2% portfolio allocation is really my way of saying with almost no real TA support this is just a "cheap punt" that it's too cheap for the modest risk involved.  My intention is to only very very slowly build on that over the next year or three.  In terms of deep value to NTA I prefer the REIT's, ARG and KPG where you get paid 8-9% gross yield (inclusive of the value of the PIE structure for 33% taxpayers) to hold.  At least with them you're getting paid properly for the risk and challenges ahead.
With retirement sector yield you're really banking on capital gains to compensate for the poor yield.  I think those capital gains are going to be very hard to come by in the near term.

We must always keep in mind inflation.
Building a building whether it is a retail building,warehouse or retirement unit is costing a lot more today than it did two years ago.
i can not see building being any cheaper in two years time.
What does this mean.?
Well to me I do not see retirement village units being any cheaper in two years time.
OCA with a good stock of new units built at this year's cost, is most probably the company "best positioned."
 

Good point about inflation and cost of construction.
https://www.interest.co.nz/property/118747/barfoot-thompsons-sales-12-year-low-november-stock-11-year-high

We certainly live in interesting times with sales volumes plumbing lows not seen since the GFC and more than a decade high in stock level's which suggests very clearly the momentum to the downside in the market will remain unabated.  The biggest risk I foresee is to the very high priced full bells and whistles Ryman villages.  At this stage ARV reported and I am quoting from the call when asked about sales momentum after period end "Sales momentum is still very strong" "We experienced strong trading in October and November"  They said there are no sales incentives in the market for any of their villages
Results call recording is here https://www.arvida.co.nz/investors/results-and-reports (scroll down a bit)

Certainly it is notable that OCA's units have the widest margin of comfort of their peer group between their asking prices and surrounding area real estate prices.  At this stage their sales are very poor with people clearly preferring full bells and whistles villages their peer group provide.
Who really knows what the future holds ?  Maybe people getting a lot less for their houses will force them to reconsider boutique villages with less facilities like OCA generally provide ?

You could argue that OCA are therefore well positioned going forward but I prefer rather than to theorize about one possible aspect of the future, to look at the recent sales evidence to see how the different brands are holding up in the last 6 months and ARV are head and shoulders above the rest.
I have always maintained that while nobody can predict the future with any real degree of accuracy, the best guide to the near future we have is the very recent past.  It also comes back to the risk.  OCA have notably higher gearing than ARV and far less embedded value per share as a percentage of the share price.

I do not see too much risk with ARV,OCA,RYM or SUM.
All have good reputations.
All have good directors and management.OCA is the stand out with Chair Liz Coutts, and director major shareholder Gregg Tomlinson.
All are building on land they have owned for a number of years [in most cases]
All have a good land bank, financed at very modest interest rates.[which will be profitable when developed]
All have a great number of units built at pre this year's building costs.Resales are ongoing.
All will benefit from the tsunami of an aging population.
All will benefit from Governments knowing private ownership is the only viable option, to house a great number of the aged.

Interesting that ARV, SUM and OCA have all broken up through their 30 day moving average but RYM have not and are  a long way from doing so.  Ended the day on the devil's number 666 too. :o   All will face a testing time in 2023 and some are better placed to weather the storm than others.

I think SUM is an excellent and well managed company and is fairly valued.
I've had a good look and comparison between OCA and ARV's latest report and I think they are chalk and cheese.  Forbar are overlooking the fact ARV's units are selling well in a soggy market and OCA had an absolute shocker.  My key forecast is I believe it's going to get a lot harder to sell units in 2023 and sales volumes and prices of real estate come under really serious pressure from the extremly hawkish stance of the Reserve Bank.  I note in ARV's call (after a very solid sales result for the 6 months to September 2022) they commented in regard to October and November 2022 that "sales momentum is still very strong with strong trading in October and November"  You also need to consider that ARV's gearing is only 28% whereas OCA's gearing is 38%.  That's not a small difference.

Disc 2% portfolio allocation to ARV and I am inclined to add a little as opportunistic share pricing allows in 2023.

IFRS profit v Underlying Profit

I should opine on this seeing as I have been an accountant for over 40 years.
My position.  The international financial reporting standards (IFRS) that require all property companies to annually revalue their assets and treat any gain or reduction thereon as income or loss are really a bit of a nonsense and we're dreamed up in some ivory tower by overpaid "experts" with too little to do.

Since the very beginning of time when the process of recording one's profit for the year commenced there has been a clear distinction between realised profit, (profit you've made) and unrealised gains, (increases in the value of assets).

My view is that the concept of underlying profit which was pioneered by Ryman far more accurately encapsulates the realised profit made during the year.

Why is realised profit more important than unrealisded profit ?
Simply put its about measuring the actual profit made and realsied in cash during the year.
To call an increase in unit values that may not be realised for 10 years or even more when a resident eventually moves out, as "a profit" made this year is clearly nonsense as the value of that unit could move alarmingly one way or the other at any stage in the future.

So if the IFRS system is a bit on a nonsense is there anything else other than underlying profit I should be interested in ?
Yes, embedded value.  See my post very recently about that.  Embedded value is a very important lead indicator of a companies ability to generate realised profit in the future.

Finally, If you are going to use total comprehensive change in NTA of a company as your yardstick for income, (and to be frank with the complexity of OCA's accounts I have found this method useful for OCA as its saved me some very bad migraine headaches), then it should be noted that every other company in this sector increased their NTA quite nicely in the recent reporting period and OCA's NAV went backwards by 2 cents per share.   Arguably, with the type of units OCA provide and the quicker churn rate this quick-fire change in NAV profit measurement methodology is more appropriate yardstick for them than for any other company in this sector.

Whatever yardstick you choose never forget that cash flow is the lifeblood of business and some companies reported pretty miserable cash flow this period.
It should be noted that all companies in this sector base their dividends on the level of underlying profit because to try and payout a share of unrealised future profit as per the IFRS number would be to place too great a burden on their cash flow.

Lot of challenges for this sector to try and navigate in the year ahead. 

I still reckon in this sector how Book Values (per share) are tracking is one of the more robust measures of performance. Essentially NTA anyway

Updated this chart to include september results

RYM seemed to have the best in recent times - but the market rerating has been brutal.

All players are now 'valuable' than 6 months ago ....some more than others

00000retirebv.JPG

That's one way to look at it and certainly with OCA that saves a LOT of time lol.  Need to consider return on assets too.  SUM yet to have their NTA rerating for the Dec 2022 end of year.

There is an old wifes tale (or was it a fable) that sort of goes along the line of the laggards eventually catch up with fast ones

Quote from: winner (n) on Dec 09, 2022, 09:13 AMI still reckon in this sector how Book Values (per share) are tracking is one of the more robust measures of performance. Essentially NTA anyway

Updated this chart to include september results

RYM seemed to have the best in recent times - but the market rerating has been brutal.

All players are now 'valuable' than 6 months ago ....some more than others

[url="https://stocktalk.co.nz/index.php?action=dlattach;attach=452;type=preview;file"]00000retirebv.JPG[/url]

Perhaps another chart showing book value to current share price would be of interest,if you could find time to do it.
To me ARV and OCA stand out as the best value in the sector.

Quote from: winner (n) on Dec 09, 2022, 09:51 AMThere is an old wifes tale (or was it a fable) that sort of goes along the line of the laggards eventually catch up with fast ones

I remember my Mum reading me stories about the tortoise and the hare but my favorite was "The Pokey Little Puppy" https://www.fruugo.co.nz/the-poky-little-puppy-by-janette-sebring-lowrey-illustrated-by-gustaf-tenggren/p-58986797-119608593?language=en&ac=bing&msclkid=5549b36078bf19a1e95fd0f22ac8dd57&utm_source=bing&utm_medium=cpc&utm_campaign=Fruugo_NZ&utm_term=4574999179326031&utm_content=Ad%20group%20%231

One thing is for sure, you're not going to become a pokey little puppy on the dividends from this sector. Plenty of REIT's with great quarterly tax free PIE feeds trading on similar discounts to NTA as ARV and OCA.  You can definitely get fat on those feeds, ask me how I know lol
With this sector you are counting on capital gains to make up the difference and I think they are going to be AWOL in 2023.  Wait until the valuers start their NTA assessments in 2023 using higher discount rates and more discounts for more unsold stock and then we will see the direction of NTA !
Then consider where house prices are going and their lack of affordability, great article here from Harbour https://www.harbourasset.co.nz/research-and-commentary/harbour-navigator-despite-significant-falls-nz-houses-are-expensive-relative-to-incomes/

"In the long run the market is a weighing machine not a voting machine".  Earnings really matter, don't let anyone tell you different!
To me NTA is one thing, but what really matters is what you can earn off those assets.

Quote from: Basil on Dec 09, 2022, 10:11 AMI remember my Mum reading me stories about the tortoise and the hare but my favorite was "The Pokey Little Puppy" https://www.fruugo.co.nz/the-poky-little-puppy-by-janette-sebring-lowrey-illustrated-by-gustaf-tenggren/p-58986797-119608593?language=en&ac=bing&msclkid=5549b36078bf19a1e95fd0f22ac8dd57&utm_source=bing&utm_medium=cpc&utm_campaign=Fruugo_NZ&utm_term=4574999179326031&utm_content=Ad%20group%20%231

One thing is for sure, you're not going to become a pokey little puppy on the dividends from this sector. Plenty of REIT's with great quarterly tax free PIE feeds trading on similar discounts to NTA as ARV and OCA.  You can definitely get fat on those feeds, ask me how I know lol
With this sector you are counting on capital gains to make up the difference and I think they are going to be AWOL in 2023.  Wait until the valuers start their NTA assessments in 2023 using higher discount rates and more discounts for more unsold stock and then we will see the direction of NTA !
Then consider where house prices are going and their lack of affordability, great article here from Harbour https://www.harbourasset.co.nz/research-and-commentary/harbour-navigator-despite-significant-falls-nz-houses-are-expensive-relative-to-incomes/

"In the long run the market is a weighing machine not a voting machine".  Earnings really matter, don't let anyone tell you different!
To me NTA is one thing, but what really matters is what you can earn off those assets.

Mr Beagle just wanted to say a big thanks for your efforts, over many years, to teach the nieve and unwary of how the system and investing works in the real world, many would have saved many $ for taking onboard your thoughts.......by the way my dud pick is Napier ports......think it will under perform medium to long term.

basil - you mention what matters is what you earn of those assets

Something from my database

Gives you some idea as to the comparative returns of each


00000retire roa.JPG

Quote from: snapiti on Dec 09, 2022, 10:51 AMMr Beagle just wanted to say a big thanks for your efforts, over many years, to teach the nieve and unwary of how the system and investing works in the real world, many would have saved many $ for taking onboard your thoughts.......by the way my dud pick is Napier ports......think it will under perform medium to long term.

Thank you for your kind words Snapiti.  I remember when NPH got added to the NZX50 in 2020.  There was a bit of excitement then and I recall making a few quid from that.  You know that one well so if you reckon it's a dud, I'll stay well clear!
Cheers

Winner, thanks but from my read, NAV to NAV, (total comprehensive income inclusive of their developments in progress) OCA dropped 2 cents in the latest reporting period so you could say total comprehensive return for them this year has been negative.   It's hard not to notice that despite a soft real estate market in 2022 every other company in this sector made NTA gains. 

Market back to its old tricks this week

Sector shares take a tumble (except RAD)

Seven year secular bear market in this sector continues ... average P/B now 0.86

0000ret.JPG

Makes mne wonder if one or two of them might get down to half their asset backing ?, already at ~ 40% discount !
ARV look dirt cheap to me but that's unlikely to improve much in the short term.

Quote from: winner (n) on Dec 09, 2022, 09:13 AMI still reckon in this sector how Book Values (per share) are tracking is one of the more robust measures of performance. Essentially NTA anyway

Updated this chart to include september results

RYM seemed to have the best in recent times - but the market rerating has been brutal.

All players are now 'valuable' than 6 months ago ....some more than others

00000retirebv.JPG

Interesting chart - and too lazy to check, i.e. I just take it on face value.

Just wondering what the fact that SUM NTA tripled over the last 5 years ARV or OCA increased it in the same time by "only" 75% might tell us?

It might indicate that the two laggards started with a large number of crappy (i.e. low value) sites and are still in the rebuilding process towards premium sites. Work in progress is normally not that highly valued.

It might indicate that SUM managed now to fully realize its potential in premium sites and will grow from here on slower (like RYM, who was first - law of diminishing returns)

But anyway, following the principle of linear extrapolation and that the future always looks like the past, it clearly shows that SUM's NTA will keep tripling every five years, while OCA and ARG will keep crawling up by only another 75% ...

QuoteIt might indicate that the two laggards started with a large number of crappy (i.e. low value) sites and are still in the rebuilding process towards premium sites. Work in progress is normally not that highly valued. BlackPeter

I haven't followed ARV as closely as I should have over the years but to the best of my knowledge, they didn't start with what you've suggested.  On the other hand its clear Macquarie sold OCA shareholders a large number of villages as part of the float that had little or no real potential.  This could be because as Earl once explained to me the roots of OCA go right back to a significant number of small not for profit villages that were run by the Presbyterian Support Services as a charity.

To the best of my knowledge OCA have already cleaned out 5 of these "no potential" villages some time back when market conditions for a sale were far more favorable but just recently, (see note 3.3 to the financial statements) put another 10 on the market.  That's 15 dog's out of a portfolio of ~ 50 villages when they floated, so yes, I believe you can legitimately say OCA started with a "large number of crappy, (low value) sites" which has been an enduring handicap.  The problem is cleansing the company of all these problem sites is far easier said than done.

Who is the likely buyer for the 10 remaining high care low value small retirement village sites which OCA have identified as having no potential when all companies in this sector are struggling with lack of return on basic care beds ?  Do these facilities have any value at all in the current market conditions ?
With OCA themselves, (and ARV for that matter), as an amalgam of all their villages being assessed by the market at being worth not more than 60% of book value this suggests the real market price of third rate villages, if they can find a buyer at all, is potentially a long way south of 50% of book NTA.

I see from note 3.3 to their accounts the book value of these villages held for sale is $64.78m. That's 9 cents a share in NTA that might be worth just a fraction of that, if anything in this market. The problem with legacy issues is that more often than not they confer an enduring handicap upon performance.

Quote from: Basil on Dec 11, 2022, 11:46 AMI haven't followed ARV as closely as I should have over the years but to the best of my knowledge, they didn't start with what you've suggested.  On the other hand its clear Macquarie sold OCA shareholders a large number of villages as part of the float that had little or no real potential.  This could be because as Earl once explained to me the roots of OCA go right back to a significant number of small not for profit villages that were run by the Presbyterian Support Services as a charity.

To the best of my knowledge OCA have already cleaned out 5 of these "no potential" villages some time back when market conditions for a sale were far more favorable but just recently, (see note 3.3 to the financial statements) put another 10 on the market.  That's 15 dog's out of a portfolio of ~ 50 villages when they floated, so yes, I believe you can legitimately say OCA started with a "large number of crappy, (low value) sites" which has been an enduring handicap.  The problem is cleansing the company of all these problem sites is far easier said than done.

Who is the likely buyer for the 10 remaining high care low value small retirement village sites which OCA have identified as having no potential when all companies in this sector are struggling with lack of return on basic care beds ?  Do these facilities have any value at all in the current market conditions ?

With OCA themselves, (and ARV for that matter), as an amalgam of all their villages being assessed by the market at being worth not more than 60% of book value this suggests the real market price of third rate villages, if they can find a buyer at all, is potentially a long way south of 50% of book NTA.

I see from note 3.3 to their accounts the book value of these villages held for sale is $64.78m.
That's 9 cents a share in NTA that might be worth just a fraction of that if anything in this market.
It will be interesting to see if they can sell them at some point in the future and what the size of the haircut is.
Many will choose to ignore such considerations from their spreadsheets on the basis that any such loss will be recorded below the line as an extraordinary item so no worries eh 😉  NAV already went backwards by 2 cents in the recent period, no worries, let's just get rid of these dog's, who cares about another 4-9 cent reduction in NTA ?

No need to switch on cynicism - and yes, it appears you are not that aware of Arvida's history :) ; Just check though the Arvida thread in the other forum - interesting reading and lots of Christmas colours :) ;

Anyway - some people are quite good in amplifying the markets movements ... if stocks goes up they praise them over the top and if stocks goes down they beat them up. Always make sure they stay with the crowd :) ; If they are invested, they are typically trading, and yes, some might be successful.

Other people are quite good in identifying hidden value and realizing it over time. This is what investors do, and some of them can be quite successful either.

Quite pointless to fuel fears based on absolutely baseless allegations what individual properties you can neither name nor value might be worth in tomorrows (or next years or next decades) market, isn't it?

We do know that residential property went down for the last 9 months or so, but still is around where it used to be 15 months ago, and some areas are better than others.

We do know as well that real estate analysts (including the from you highly valued Tony Alexander) call a bottom for the Real Estate Market around mid 2023.

We do know as well that immigration is increasing despite the huge effort of our anti immigration government to starve our industries (including agriculture and tourism) of resources and to de-staff our health system. More future need for housing.

So - what exactly is your point of riding on this silly point of OCA intending to sell some of its villages? OCA identified that some of their villages don't fit into their growth strategy. However - they do not need to sell them if they don't get a reasonable price for it - and if bad comes to worse, they can move any remaining residents into all the empty units you always tell us about in any of the other villages, close them down and sell the sections to TRA to start the next successful car yard, couldn't they? Or they could do an INA and turn them into holiday villages or sell them to the government as social housing. So many options.

The best is yet to come ...

Hey BP, fancy bringing up holiday camps

Really sad the death of Ruth Madoc. She was fantastic as Gladys in Hi-de-Hi!

QuoteThe best is yet to come BP.

I hope so for OCA shareholders sake.  It must be psychologically very tough on shareholders seeing the share price back to where it floated five and half years ago.
I hope its a bit better than that in another five and a half years.
Mind you after a stellar start RYM shareholders must be licking their wounds seeing the shares down ~ 25% in the last eight and a half years.

I'm already down a bit on my recent foray into a very small stake in ARV.  Started nibbling too early ?  Looks like it.

I think Tony lost his mojo quite a while back and have said as much previously.

I think the whole sector will underperform the NZX again next year just as it has this year. Can't help wondering if RYM with all its debt might join the 40-50% off NTA club with ARV and OCA ? I don't think past reputations count for much, if anything in this market.

Only reason I have ridden the 10 village sell down a bit is the cunning way they bury such a significant issue deep in the notes to the accounts and never one mention of such a significant thing in the presentation materials.  OCA always seem to find crafty ways to highlight the positives while still disappointing those that do thorough analysis, when they report, and I am simply highlighting that I think this is the next way they will disappoint shareholders.

Basil - you are overlooking that Oceania has managed their borrows wonderfully - like long term debt including bonds at very low interest rates for next 5 to 7 years .... and that current [next two years] builds are at fixed prices.

That'll make them OUTPERFORM

Was their low cost borrowing any better than the other retirement / property companies such that it confers them a competitive advantage?

Not intended to be an exhaustive list but here are some examples of other ~ 5-6 year corporate bonds / low-cost borrowing by others in the retirement / property sector

ARV 010 raised $125m @ 2.87%
RYM 010 raised $150m @ 2.55%
SYM 030 raised $150m @ 2.30%
MET 010 raised $100m @ 3.00%
IPL 020 raised $125m @ 2.40%
ARG 020 raised $100m @ 2.90%
ARG 030 raised $125m @ 2.20%

Concede their fixed cost building program confers a competitive advantage for a short while longer but their very slow new unit sales and gearing @ 38% is starting to concern the market.  OCA long bonds trade in the late 6% range, higher than any of the other bonds apart from Synlait.  Disc I have some OCA bonds, not many, bought in the late 6% yield range.  Not buying any more after their very poor new sales report.  Also hold quite a few ARV bonds bought recently at over 6% yield to maturity.

Curious how much lower you think RYM will go ?  If they went down to a similar discount to NTA as OCA and ARV (40%) that's only $4.27  :o  ...but things often overshoot to the downside so maybe we will see a 3 handle at some point  :o   

basil - Brent seems rather chuffed they are making a few million bucks every year from their credit swaps as well

I think in his previous role as a director of investment banking at Jarden he may have had a hand in those debt placements and interest rate swap arrangements so he's probably entitled to feel he's done a good job on the finance side of things and to be fair I think the Hobsonville and Pukekohe acquisitions were good as was the other recent acquisitions in Bream Bay and Newmarket.  Not his fault the company is saddled with more than a few legacy issues from Macquarie's days of owning it and subsequent care funding has been so problematic and Covid so challenging with care operations.  He certainly speaks well with the presentations too but some things he says I simply don't buy, like the market went to sleep in the second quarter, or words close to that effect.  ARV seemed to be selling their units well in the most recent half so did the market go to sleep, or did the sales team lose direction and motivation or does the market simply prefer full feature competitor villages instead of the boutique ones OCA is trying to sell ?  Lots of unanswered questions with their most recent half year sales performance.  Do you really "buy" the recent statement that things have come right since then  or is there some "recency bias" with that statement and they have come right relative to woeful underperformance in recent months but in the context of things overall are still slow ?  I guess time will tell but the market is set to take another big step down in sales prices and volumes next year in my opinion, so I am VERY cautious on this sector.

now could be a good time to start building even more units .... and save the building industry from collapsing

Building industry downturn could cost 45,000 jobs as construction halves - expert
https://www.newshub.co.nz/home/money/2022/12/building-industry-downturn-could-cost-45-000-jobs-as-construction-halves-expert.html?utm_source=dlvr.it&utm_medium=twitter

Think RYM are delivering a record number of units this summer just in time for the real estate market to be the weakest and slowest since the GFC.  OCA, ARV and SUM all have their deliveries skewed to the back half of their financial years too.  I think we are headed for a serious glut of units in 2023 and this could be the year we see some price capitulation to shift stock.  How effective that will be remains to be seen because the vast majority of new residents have to have the sale of their house settled before they can pay for their new unit.

ASB Comment latest property data -  last month's 1.9% mom fall was the largest monthly fall in house prices since December 2000. Rather than getting closer to a floor, the present housing market downturn may be increasing in pace,

Blimey heck

Quote from: winner (n) on Dec 13, 2022, 04:13 PMASB Comment latest property data -  last month's 1.9% mom fall was the largest monthly fall in house prices since December 2000. Rather than getting closer to a floor, the present housing market downturn may be increasing in pace,

Blimey heck

Latest REINZ data you posted in the OCA thread was very sobering.  Auckland down 18% YOY and sales down 45% YOY.  ASB are probably right as Adrian Orr didn't slam the brakes on until very late in November and added in commentary about a recession.  Auction data since then has been a horror show for vendor's which is a lead indicator for December's sales data.
People en-masse simply won't qualify for mortgage finance where house prices and interest rates are now.
Another 15-25% to come of house prices in 2023 is my call with the biggest falls in the most expensive places like Auckland.  Volumes of sales will also come under intense pressure as the number of buyers eligible for mortgage finance dries up.
 

Carnage continues

On average sector down more than 50% from recent highs

0000retire.JPG

https://www.nzherald.co.nz/business/300m-auckland-retirement-village-plans-stall-falling-house-values-rising-building-costs/HBEB5FENAVCFBI6JBCEPNZUZDI/ Paywalled.  Summerset puts ~ $300m Parnell retirement village plans under review citing rising construction costs and falling property values.  No other developments are affected. 

Extract "Scott Scoullar, chief executive of Summerset Group with a $2 billion market capitalisation and $5.4b in assets, said plans to build the scheme announced two years ago were delayed due to changing circumstances.  "Following a new construction cost estimate for the Parnell village, we have decided to put it on hold while we undertake a review," he said."Construction cost pressures coinciding with a declining property market make for a relatively complex project. We consider it prudent to just pause in this environment while we do the review," Scoullar said.

Comment.  A lot to like about how SUM and ARV are prudently managing their expansion plans.  One wonders if others in the sector with significantly higher gearing and a more gung-ho approach of build it and they will come will have to tap the market for fresh capital in 2023 on deeply discounted terms. 

Long term this is a great sector but me thinks the downturn has just begun, although the SP of all stocks have already substancailly changed to reflect this down turn I believe we are nowhere near the bottom

Bored and did a bit of cursory online research.
For $420K you can have this, judge for yourself the standard of fitout and have a look at what's available to do in the village in the narrative of the advertisement i.e. a full feature retirement village with lots of things to enjoy with fellow community residents https://www.trademe.co.nz/a/property/retirement-villages/auckland/north-shore-city/devonport/listing/3917732453

Or for $375K you can have this, again, make your own assessment and look at the very limited facilities to enjoy in the village. https://www.trademe.co.nz/a/property/retirement-villages/auckland/north-shore-city/milford/listing/3873475821

Does that partially explain why OCA care suites are not selling well?... you be the judge.

Yes I realise one is a serviced apartment and the other a care suite but nevertheless what I think we have here is pretty much chalk and cheese for similar money in similar value suburbs on Auckland's North Shore.  Did the market "go to sleep" as Brent the CEO of OCA suggested or is it turning its nose up at what OCA are bringing to the market ?

First bit of news as how retire sector is going to in F23 will be SUMs quarterly sales update in a couple of weeks

I expect a further decline in new sales v pcp .....and the comments will probably refer to a slowing market .....again

If Q4 decline is greater than Q2 and Q3 reported declines I'd say the other players will 'suffering' as well

Year end update

A year of carnage - on average 44% down - and over 50% off highs of 2021

As BP would say prices need to double to get back to their former glory


0000retdec30.JPG

Crikey!, what a year it's been for this sector  :o  :o
Who would have ever thought the former market darling RYM that could do no wrong would lose two thirds of its value in about 16 months!

Quote from: Basil on Dec 30, 2022, 03:21 PMCrikey!, what a year it's been for this sector  :o  :o
Who would have ever thought the former market darling RYM that could do no wrong would lose two thirds of its value in about 16 months!

Don Trow professor of financial accounting Victoria University of Wellington, since at least 1977, invested in the Ryman ipo among many others.
By the time he retired (about 2007)
those shares had made him quite wealthy!

Quote from: Clearasmud on Dec 30, 2022, 03:33 PMDon Trow professor of financial accounting Victoria University of Wellington, since at least 1977, invested in the Ryman ipo among many others.
By the time he retired (about 2007)
those shares had made him quite wealthy!

...that was then, this is now.

Quote from: Clearasmud on Dec 30, 2022, 03:33 PMDon Trow professor of financial accounting Victoria University of Wellington, since at least 1977, invested in the Ryman ipo among many others.
By the time he retired (about 2007)
those shares had made him quite wealthy!

Does he still have his 185k shares?

Quote from: winner (n) on Dec 30, 2022, 04:50 PMDoes he still have his 185k shares?

Don't know Winner.
We'll 2022 wasn't a great year, similar to 2018.
2019 wasn't great either so I  suppose 2023 won't be that great.
So that leaves 2024...

Nobody should invest in Ryman incase property does keep dropping then Rymans nta will plummet, possibly below 0, as it's debt obligations won't.
(debt/equity approximately 70%)
Agreed?

Quote from: Clearasmud on Dec 30, 2022, 10:54 PMNobody should invest in Ryman incase property does keep dropping then Rymans nta will plummet, possibly below 0, as it's debt obligations won't.
(debt/equity approximately 70%)
Agreed?

Yes we live in very interesting times mate.  My concerns are noted in post #55 in the RYM thread
https://stocktalk.co.nz/index.php?topic=146.45
I hold very similar concerns for OCA with its similarly high gearing.

OCA funding.
Low interest funding for several years.
Currently $60 mil head room.
Approx $60mil of assets marked for sale.
Good stock of new units for sale.
519 units and care units under construction.
These would be part of the fixed cost they have in place for the next two years.
When I was over stocked in the book trade I stopped buying and concentrated on selling.Worked a treat.
I think the retirement sector is much the same.ie Move what you are building,and slow down new developments.
I would expect that the sector would quickly become a cash cow.
Remember if they did not build any more units the resales would continue.
I would think replacement cost of any village would be something to keep in mind.
Doubt it would be any cheaper today.?
`

Yes, marked to market OCA are enjoying a circa ~ $10m per annum tailwind from ultra-low interest rates locked in a couple of years ago on their corporate bonds OCA010 and OCA 020 but it's not showing up in their no growth underlying eps financials so represents a potential new ~ $10m per annum headwind emerging in 2027/8.  Likewise, their much more limited life (2 years), fixed cost construction program is not generating underlying eps growth either so that's another headwind on the horizon I hope some are factoring into their spreadsheets.

The above would be less of a concern if their sales were chugging along well, but alas, that's not the case either.  Further, anyone who thinks they are going to get anywhere near book value for the 10 third rate care villages they have on the market is clearly not cognisant of current market conditions.

I think in terms of potential NTA decline in 2023 they are just as much at risk as RYM and I note the asset value decline has already started with NAV down 2 cps in the last half whereas all other in the sector that recently reported showed an NTA increase.  Surely that's a worrying indicator.  Wait until year end when the valuers start using much higher interest rates in their DCF valuation and we'll see how they go.

I believe 2023 is highly likely to be another very grim year for this sector.  Best positioned to withstand the headwinds are those with the lowest gearing who are selling their units relatively well, ARV and then SUM.

2023.
Should the property market over take aging as the main driver for retirement unit sales,[which I doubt],then going on property sales in our area the RV sector will do well.
All homes that were for sale in our area have SOLD stickers on them.
What is left for sale are a few sections.
Looks to me as though the tail winds for the sector remain in tact,.ie aging population is not getting any younger..

ps.I like some RYM,SUM,OCA and ARV villages.
pps.I dislike some RYM,SUM,OCA and ARV villages.

I think the higher priced cities Auckland and Wellington have felt the worst effects of the property downturn.  Walking our new dog around the neighborhood in recent weeks there's a mixture of for sale, under contract and Auction signs around and most of the auctions appear to have failed.
(Auction clearance rate in Auckland in December has been shocking).
Perhaps the biggest issue for OCA is that while the baby boomer population bulge is certainly creating demand in full feature retirement villages where the entry age is 70, (baby boomers are generally considered to have started at the end of the second world war in 1946), the first of the boomers will only be 77 next year and OCA are generally targeting 85+ years with their care suites so that boomer demand tsunami won't generally be felt for care suites for nearly another decade.
Certainly, based on my analysis of both ARV and especially OCA's disappointing care suite sales there appears to be a serious glut of care suite stock and a woefully inadequate level of demand, perhaps exacerbated by RYM's vastly more commercially friendly fully refundable deposit scheme.
Sure, OCA can let out their care suites on a premium room basis but that's not going to generate the sort of returns we were all hoping for when they listed.
The biggest risk to RYM is that their units are consistently the most expensive in the market, (there are no free lunches and although they have the best DMF rate at 20%) you pay for it in the price up front but will people be able to afford their units going forward if their house value falls say another 20% ?

Affordability of a decent unit at a RYM village in Orewa was an issue for my parents over a decade ago and is an issue today for KW's Dad by the sounds of things.  I can only see the affordability barrier becoming more and more of an issue going forward.  Average 2 bedroom ILU unit for RYM is ~ $1.4m but the average Auckland house price is nothing like that.  The old days of RYM's ILU units being ~70% of surrounding suburbs house prices are long gone.
You can see here at page 16 in this presentation for most of N.Z. the margin between RYM's ILU and surrounding house prices is now very little. 
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/RYM/402597/383713.pdf
On the positive side, affordability is very good in Melbourne.

 Mr Pattison said "It is pleasing to see a broader
acceptance of our care suite model by families looking for premium care options for their loved ones.
We are now starting to observe a level of presales for our new care suite developments, including at
Lady Allum which opened recently."
"while development
and resale margins both increased,". s

He spins a good yarn, like a marvelous fairy tale...like the three little pigs will always get away from the big bad wolf...unfortunately the numbers tell a very different story.  Care suite sales for the last half were in the low 30's from a stock of more than 400.
At the rate of care suite sales last half and taking into account more than a hundred added since then they currently have ~ 8 years of care suite stock....but they keep building them...what could possibly go wrong lol.

Notice how they deliberately conceal unsold stock numbers while every other company in the sector is happy to fully disclose full details.  Hmmm  Just as well going forward it's all going to come right...or at least that's the fairy tale some on the other site keep telling us. 

I reckon if you must own something in this sector in 2023, (probably best if you don't own any of them for the first half of 2023), ARV's sector leading metrics of lowest gearing, best recent sales rate and equal biggest discount to NTA with OCA, along with a reasonable history of modest underlying eps growth is probably the best positioned to weather the headwinds going forward but I am keeping it really small and dollar cost averaging in incredibly slowly in 2023 and 2024.

With Chair Liz Coutts and director major shareholder Gregg Tomlinson no body spins a good yarn.

Quote from: winner (n) on Dec 30, 2022, 02:51 PMYear end update

A year of carnage - on average 44% down - and over 50% off highs of 2021

As BP would say prices need to double to get back to their former glory


0000retdec30.JPG

Not sure above wisdom is mine - but must be good you are already dreaming of me - though, is it? :p;

But anyway ... they say best time to buy is when there is blood on the floor.

There is a lot of red colour in your spread sheet, wondering whether this is an indicator ...

Reflecting on the past just makes one depressive - so, the important question is - how does the future look for retirement stocks?

Option 1: People stop ageing and just disappear. No need for retirement villages and the remaining villas must be sold as tourism accommodation;

Option 2: The current population pyramid follows its natural path. More and more people get older and need support in their old days. Demand for support outstrips supply. Market follows its natural course.

Option 3: Society turns to often cited but never achieved humanistic values and society looks after all old people and cares for them for free providing really high care standards. The necessary money is provided by a NZ version of Liz Truss. No need anymore for anybody to use a commercial retirement village - paradise!

I go with option 2, but each to their own.

Discl: some money on the sidelines earmarked to go (depending on market movements) next year into the retirement industry, most likely into RYM and OCA.

Quote from: BlackPeter on Dec 31, 2022, 01:40 PMNot sure above wisdom is mine - but must be good you are already dreaming of me - though, is it? :p;

But anyway ... they say best time to buy is when there is blood on the floor.

There is a lot of red colour in your spread sheet, wondering whether this is an indicator ...

Reflecting on the past just makes one depressive - so, the important question is - how does the future look for retirement stocks?

Option 1: People stop ageing and just disappear. No need for retirement villages and the remaining villas must be sold as tourism accommodation;

Option 2: The current population pyramid follows its natural path. More and more people get older and need support in their old days. Demand for support outstrips supply. Market follows its natural course.

Option 3: Society turns to often cited but never achieved humanistic values and society looks after all old people and cares for them for free providing really high care standards. The necessary money is provided by a NZ version of Liz Truss. No need anymore for anybody to use a commercial retirement village - paradise!

I go with option 2, but each to their own.

Discl: some money on the sidelines earmarked to go (depending on market movements) next year into the retirement industry, most likely into RYM and OCA.

Might be a tsunami of oldies coming up

But some studies show the an increasing proportion of oldies are getting poorer

Is this a headwind for the sector .... like the perceived huge market for new clients might not be as big as they think.

Perhaps but I doubt it.
Most of the people I know at my age [74 next month] own their own mortgage free home.
RV units in their areas are well below their house value.
Again in most cases all are putting off the decision for a few more years.
Then it will be a lifestyle choice.
In my own case I think it will depend on wife and my health,security and companionship.

Quote from: lorraina on Dec 31, 2022, 12:34 PM2023.
Should the property market over take aging as the main driver for retirement unit sales,[which I doubt],then going on property sales in our area the RV sector will do well.
All homes that were for sale in our area have SOLD stickers on them.
What is left for sale are a few sections.
Looks to me as though the tail winds for the sector remain in tact,.ie aging population is not getting any younger..

ps.I like some RYM,SUM,OCA and ARV villages.
pps.I dislike some RYM,SUM,OCA and ARV villages.

If I remember rightly, you're a Christchurch resident?  This Link (https://www.stuff.co.nz/life-style/homed/real-estate/130801152/heres-why-christchurch-house-prices-are-not-in-freefall) explains why your observations don't extrapolate out to other urban centres. 

the retirement sector is a good test of ones own ability to join the dots early and choose to sell even at a loss.
So many heads winds in the last 12 months, right now and into the foreseeable future.
Those new build margins are gonna collapse, probably have already and yet to flow onto the books.
No surprise to see many in the sector upping the marketing spend.
So 2-3 years ago you could purchase and generally have a nest egg left over from your own home sale, things have drastically changed...I predict another lashing this year for sector SP

Quote from: Hectorplains on Dec 31, 2022, 09:55 PMIf I remember rightly, you're a Christchurch resident?  This Link (https://www.stuff.co.nz/life-style/homed/real-estate/130801152/heres-why-christchurch-house-prices-are-not-in-freefall) explains why your observations don't extrapolate out to other urban centres. 

Thanks for the link.Yes I live in Christchurch.
Must admit I was rather surprised to see all the homes for sale on my walks  now had sold signs. 

No need to worry about house prices going down more and impacting retirement sector sales / profits

Decline in values appears to be over. No need to panic

From media-

CoreLogic's House Price Index (HPI) shows property values fell -0.2% in December, a further reduction in the pace of price declines from previous months (-0.6% in November and -1.3% in October).

December's fall means values were down -5.0% nationally over the calendar year,

Quote from: winner (n) on Jan 05, 2023, 09:05 AMNo need to worry about house prices going down more and impacting retirement sector sales / profits

Decline in values appears to be over. No need to panic

From media-

CoreLogic's House Price Index (HPI) shows property values fell -0.2% in December, a further reduction in the pace of price declines from previous months (-0.6% in November and -1.3% in October).

December's fall means values were down -5.0% nationally over the calendar year,

Yeah right, I've just opened a Tui.  Let's see how the year unfolds with nationwide median house prices as recorded by the REINZ.
P.S.  This morning I had a look at the long term chart for all 4 major players and they're all firmly stuck in a long term downtrend.
You'd have to be very "brave" to apply fresh capital to any of them in this sector at this point.

Tudor Jones says , Dump ESG reporting.....

Inflation report in the US tomorrow and used car prices have tumbled 15 percent...

Lower inflation will impact on US retail.

Looking forward to the first update of the year from Winner.
At this stage of the day from what I can see OCA with all its well known issues is trading at a 40% discount to NTA.
On the other hand we have ARV with its best in sector gearing and a reasonable track record of underlying eps growth and its ~ 80% independent living units, (recently reported units have been selling very well even over the winter when OCA said the market "went to sleep"), trading at a 40.5% discount to NTA.
Go figure?

Quote from: Basil on Jan 13, 2023, 12:07 PMLooking forward to the first update of the year from Winner.
At this stage of the day from what I can see OCA with all its well known issues is trading at a 40% discount to NTA.
On the other hand we have ARV with its best in sector gearing and a reasonable track record of underlying eps growth and its ~ 80% independent living units, (recently reported units have been selling very well even over the winter when OCA said the market "went to sleep"), trading at a 40.5% discount to NTA.
Go figure?

What's interesting / fascinating is at their share price both ARV and OCA were trading at 1.25 times Book Value. Both are now at about .6 Book Value

So the market has 'punished' / rerated both to the same degree ..... so in market eyes they are to seen as having the same sort of attributes / outlook

Or maybe unloved because of poorly times cap raises / acquisitions.

Quote from: winner (n) on Jan 13, 2023, 02:34 PMWhat's interesting / fascinating is at their share price both ARV and OCA were trading at 1.25 times Book Value. Both are now at about .6 Book Value

So the market has 'punished' / rerated both to the same degree ..... so in market eyes they are to seen as having the same sort of attributes / outlook

Or maybe unloved because of poorly times cap raises / acquisitions.

One could say those raises were quite fortuitous if you held either and didn't participate. Nothing like a rare opportunity for the dogs to raise money at a premium to asset value. If I recall OCA raised at like $1.30 when the punters were going crazy and when NTA was just over $1.00.

Funny now you mention it how they both raised within a year of each other. Isn't it finance theory that managers should sell equity when it looks overpriced and buy it back when it looks underpriced?

Maybe RV management thought things were getting a little overcooked back then, but they clearly don't think things have got cheap enough otherwise we would see some buybacks or atleast some insider buying.

Latest REINZ report just came out today https://static1.squarespace.com/static/5ce1fd700bf20400017d3a30/t/63c61e20be88d72ba3815f43/1673928270262/REINZ+Monthly+Property+Report+-+December.pdf

I note a 2.2% fall (annualised rate of decline 26.4%), in the national median house price from November to December 2022 and a substantial fall in the number of executed sales, (down 39%) compared to the same month last year.  Looks like the tide is still going out on housing at a very serious pace.

How its being reported in the media https://www.nzherald.co.nz/business/home-prices-tumble-almost-everywhere-auckland-and-wellington-property-prices-take-big-hits/G6QQZ4G5PBC5TK3LS2QHBHVO74/

I take issue with this "The median sale price has decreased nationally over the year by 12.2 per cent to $790,000".
"But REINZ chief executive Jen Baird said the pace of the decline was slowing and the market had settled at its new pace".
It fell 12.2% in the year but 2.2% of that, (annualised rate noted above) was in December.  I call complete B.S. that the pace of the decline is slowing.
Obviously, Jen Baird is not very good at basic arithmetic or is desperately trying to put a positive spin on a very gloomy situation, or maybe she has some other creative way to spin the numbers that the dog hasn't sniffed out yet..

That Jan's arithmetic is OK - she was talking 'pace of change' eh...and that pace is declining and one could say
that the decline has turned

November median down 12.4% from year prior
December median down 12.2% from year prior

So December seems 'better' than November

Arithmetic is a funny thing

Numbers from their pressreleases

The big number when considering retirement sector is that sales were 39% less than December 2021

Would imply that retirement operators might be struggling to see decent sales (or settlements) ....even though buying one is apparently needs based

Well, yes, you can twist statistics any way you like.  To me if the current month decline is twice the average monthly rate of the last year the decline is gathering pace.  That's how I see it.  If others think the pace of the decline is slowing, good luck with that.
Prospects for any sort of early and meaningful recovery in any of these stocks look very, very slim to me.
Headwinds are too strong.  Yield is too low.  I've had enough so I'm completely out of this sector now.
8% gross yield filter goes on everything going forward, no exceptions! 

Only hold Radius in this sector.Got in recently and willing to hold.Growth sector for sure.

Quote from: notmaurice on Jan 18, 2023, 01:57 PMOnly hold Radius in this sector.Got in recently and willing to hold.Growth sector for sure.

If I recall correctly Brian Cree said (pre IPO) words to the effect that making a profit wasn't important. It was care of residents that was top of mind.

An admirable sentiment. But not one I am looking for when investing.

'Pace of decline slowing' re median house prices

Appears so

0000medprice.JPG

You get the prize for the most creative looking red curve posted in 2023 year to date  :P

I reckon the national median price is headed back to whence it came before the madness of one in a hundred year low interest rates of Covid, kicked house prices up to ludicrous level's.

National median price has another 25% to fall and headed back to $600K is my call.  If the very latest speed of decline continues (2.2% per month) it'll be back to about $600K very early next year.

The thing is these cycles seldom stop at fair value so the prospect of it falling right back to level's of about $500K prevailing some 5-6 years ago shouldn't be overlooked.  Be good for the young ones to have a chance at those sort of far more rational prices to own their own home.  The current, still vastly inflated level's can't last because they're simply not affordable with interest rates where they are.  Here's a look at how unaffordable housing is for young families.
https://www.nzherald.co.nz/nz/embattled-homeowners-get-creative-as-monthly-interest-payment-up-2000/PU5CLVOCZNFVRIAH4KYLEPLEY4/

Plenty of 'brand awareness' advertising going at the moment in this sector

Got to keep up that awareness eh

Probably have marketing metrics like SOV to meet

https://www.msn.com/en-nz/news/national/worryingly-high-economists-politicians-react-after-annual-inflation-remains-steady/ar-AA16HPgu?ocid=msedgntp&cvid=1eb84d87f30444df9550a8562e317fc7
Inflation remains very sticky so it's a given that the RBNZ has a huge fight on its hands to get this back down to its target zone of 1-3%.  It's a shame they have only one real instrument which is a blunt one at that, but I expect they will have no choice but to move interest rates up a lot more and keep them there for quite a protracted period of time. I remain firmly in the camp that the effect of this will see the national average house price revert to its pre covid level of ~ $600K, which is 25% down from here and a lot more than any economist is predicting.  The core basis of my thesis is that the numbers simply don't work for first home buyers, (completely unaffordable other than for high earning two income families) where interest rates and property prices are now, let along with even higher interest rates.  The effect of this as I see it, is the property market has its foundations undermined from the bottom (first home buyer level) and this flows right through the market.

Quote from: Basil on Jan 26, 2023, 09:54 AMhttps://www.msn.com/en-nz/news/national/worryingly-high-economists-politicians-react-after-annual-inflation-remains-steady/ar-AA16HPgu?ocid=msedgntp&cvid=1eb84d87f30444df9550a8562e317fc7
Inflation remains very sticky so it's a given that the RBNZ has a huge fight on its hands to get this back down to its target zone of 1-3%.  It's a shame they have only one real instrument which is a blunt one at that, but I expect they will have no choice but to move interest rates up a lot more and keep them there for quite a protracted period of time. I remain firmly in the camp that the effect of this will see the national average house price revert to its pre covid level of ~ $600K, which is 25% down from here and a lot more than any economist is predicting.  The core basis of my thesis is that the numbers simply don't work for first home buyers, (completely unaffordable other than for high earning two income families) where interest rates and property prices are now, let along with even higher interest rates.  The effect of this as I see it, is the property market has its foundations undermined from the bottom (first home buyer level) and this flows right through the market.

I'm glad you see prices dropping as I want to buy one but I see them botteming this winter and increasing next year as interest rates drop again.
Hopefully we see another 10% drop.

Quote from: Clearasmud on Jan 26, 2023, 11:52 AMI'm glad you see prices dropping as I want to buy one but I see them botteming this winter and increasing next year as interest rates drop again.
Hopefully we see another 10% drop.

Interesting article out today and highly supportive of my thesis.
https://www.interest.co.nz/property/119373/decline-house-prices-has-been-more-offset-rising-interest-rates-pushing-home
extract:- According to the Home Loan Affordability Report, housing is now the most unaffordable it has been for first home buyers since interest.co.nz began compiling the report in January 2004.

Quote from: Basil on Jan 26, 2023, 01:15 PMInteresting article out today and highly supportive of my thesis.
https://www.interest.co.nz/property/119373/decline-house-prices-has-been-more-offset-rising-interest-rates-pushing-home
extract:- According to the Home Loan Affordability Report, housing is now the most unaffordable it has been for first home buyers since interest.co.nz began compiling the report in January 2004.

Wonder if anybody has compiled a Retirement Unit Affordability report ....in 5 to 10 years time they could be saying 'retirement units are now the most unaffordable since being measured'

Things not too looking bad in property market

Article said CoreLogic's House Price Index (HPI) recording a 0.3% fall in January,

That's less than an annualised fall of 4%



https://www.corelogic.co.nz/news-research/news/2023/no-reprieve-for-persistent-property-price-falls?utm_medium=email&utm_source=email&utm_campaign=nz-res-hpi-2023-feb

https://www.landlords.co.nz/article/976521300/slow-2023-start-to-residential-market

https://www.stuff.co.nz/business/property/300770425/honestly-i-just-dont-know-why-i-did-it-our-oldest-population-is-losing-money-by-buying-into-retirement-villages?

Reinz median house price down 3.5% month on month and 13.3% year on year

But good news Jen says the decline is easing .....REINZ Chief Executive, Jen Baird says prices continue to ease but the pace of the decline is steadying, and the market has glimpses of a new life as January's seasonally adjusted data shows.

So pretty close to bottom as far as prices go

Key number from REINZ Jan data re retirement sector is that there were only 2759 reported sales in Jan v 3761 last year .......lowest number ever except for lockdown months.

Not much activity in market overall often signals lower sales than anticipated in retire sector

No wonder some allow residents to shift in before they sell there own property

Quote from: winner (n) on Feb 14, 2023, 09:47 AMReinz median house price down 3.5% month on month and 13.3% year on year

But good news Jen says the decline is easing .....REINZ Chief Executive, Jen Baird says prices continue to ease but the pace of the decline is steadying, and the market has glimpses of a new life as January's seasonally adjusted data shows.

So pretty close to bottom as far as prices go

A number of analysts predicted the real estate market to bottom out mid of the year - and if you think about it, this makes sense ... When the weather starts brightening up again and the first green shoots arrive people open as well their wallets to pay for their next set of own four walls ... and of course swapping their old cold and moist home against somebody else's previous cold and moist home. 

Real Estate Marry go round might be ready to relaunch in late winter / early spring ... with the most experienced house swappers (the elderlies) leaving he carousel after say 10 rounds (average NZ house changes hands every four years) and instead moving into a nice, well insulated and cared for retirement home.

Maybe time to acquire the right retirement stocks now ... while the markets still sleeping.

Auckland median house price back to March 2020 levels and about the same as mid 2017

Interesting times for RYM holders........ chasing that elusive 'fortress balance sheet.'

https://www.nzx.com/announcements/406679

Ryman Healthcare Limited (Ryman) is raising $902 million through a 1 for 2.81 accelerated pro rata entitlement offer of new ordinary shares (New Shares), with trading of retail entitlements on the NZX

Big falls in the first 30 minutes today for OCA and SUM. The market initial react not liking the RYM news much.

Quote from: Onemootpoint on Feb 15, 2023, 10:55 AMBig falls in the first 30 minutes today for OCA and SUM. The market initial react not liking the RYM news much.

The RYM announcement smacks of poor management decision making. The signs been apparent for a long time and IMO they should have raised  capital when their SP was nearer its height.

Glad I'm not exposed to this sector - GLH's.

Such panic merchants. I prefer to focus on the company/business, not the fickle market. Good buying opportunity.

Quote from: Onemootpoint on Feb 15, 2023, 10:55 AMBig falls in the first 30 minutes today for OCA and SUM. The market initial react not liking the RYM news much.

Really pleased to be out of this sector. Headwinds are fierce!

Really pleased to be in it. I have zero doubt that those of us who have patience, will have no regrets. Providers may find they need to adjust their business models a little, along the way, but they are all long term holds, and given the current (and future) situation with Aged Care, they simply cannot fail.

Quote from: Basil on Feb 15, 2023, 03:55 PMReally pleased to be out of this sector. Headwinds are fierce!

Quote from: Untamed on Feb 15, 2023, 04:01 PMReally pleased to be in it. I have zero doubt that those of us who have patience, will have no regrets. Providers may find they need to adjust their business models a little, along the way, but they are all long term holds that given the current (and future) situation with Aged Care, simply cannot fail.

Good luck.  I think it's very clear the tide is going out in this sector at a very fast pace and has quite some way to go.
Much easier to make progress with one's portfolio on an incoming tide!

Quote from: Basil on Feb 15, 2023, 04:05 PMGood luck.  I think it's very clear the tide is going out in this sector at a very fast pace and has quite some way to go.
Much easier to make progress with one's portfolio on an incoming tide!

Swimming with the current rather than against it is MUCH more fun. Sorry this was meant to be part of the earlier post.  Posting from phone not as easy.

Quote from: Basil on Feb 15, 2023, 03:55 PMReally pleased to be out of this sector. Headwinds are fierce!

But surely your favoured ARG faces the same headwinds Basil?

After all you sold ARV and reinvested into ARG...so effectively you moved from one part of the property sector to another.

How much risk do you thinks ARG faces when half their

portfolio is retail and offices and they did their last valuations internally on a napkin.

If a recession is coming demand for shopping malls and offices is pretty risky...occupancy's could be going down, rent's could be going down, cost to operate is going up,  cost of debt is going up and all of that leads to pressure on the balance sheets. So be very interesting to see the next Arg portfolio revaluations and I m picking the valuations of property will go against them. Arg has pretty much same gearing as ARV , SUM or OCA so maybe not inconceivable some of these REITs might get the begging bowl out or sell some assets.

I think  the retirement sector has similar risks to all listed property stocks.
You pay your money and take your chances on any property stock at present stage of cycle. Personally I prefer the long term demand for the retirement stocks.

It better for the retirement sector if you stay away.  8)

Quote from: Perky on Feb 15, 2023, 04:30 PMBut surely your favoured ARG faces the same headwinds Basil?

After all you sold ARV and reinvested into ARG...so effectively you moved from one part of the property sector to another.

How much risk do you thinks ARG faces when half their

portfolio is retail and offices and they did their last valuations internally on a napkin.

If a recession is coming demand for shopping malls and offices is pretty risky...occupancy's could be going down, rent's could be going down, cost to operate is going up,  cost of debt is going up and all of that leads to pressure on the balance sheets. So be very interesting to see the next Arg portfolio revaluations and I m picking the valuations of property will go against them. Arg has pretty much same gearing as ARV , SUM or OCA so maybe not inconceivable some of these REITs might get the begging bowl out or sell some assets.

I think  the retirement sector has similar risks to all listed property stocks.
You pay your money and take your chances on any property stock at present stage of cycle. Personally I prefer the long term demand for retirement stocks .

It better for the retirement sector if you stay away.  8)

Retirement stocks are more closely aligned to what is happening in the residential real estate market, whereas Argosy is impacted by commercial property trends and issues.  ARG's portfolio of properties includes a mix of industrial, office and retail.

You position a recession as the key driver for concern.  If this does come to bear then all real estate asset classes will potentially face reduced demand. However; this will not be apportioned equally.

You highlight shopping malls as a recession risk.  ARG has only 4 retail properties - of which just one is a mall.  This is an "A" class mall servicing a dense population base (Albany) with most of the 25 tenants being long established brands (Warehouse, Mega, Briscoes, Hallensteins, Kathmandu etc.) Two of the others are let to The Warehouse and one to Toyota.  They are 100% let with a weighted average lease term of 3.4 years.  These are about as recession proof an investment as you can get!  Assuming we don't dump into a full depression, rents won't "be going down" and while the cost to operate may be "going up" this would only be marginally. 

Similarly you say that, "offices is pretty risky." Argosy has greater exposure here with 15 properties.  They have 97.8% occupancy and a WALT of 5.9 years.  Maybe not recession proof but they're very comfortably placed to ride one out.

ARG's debt to assets ratio is 32.5%.   OCA's gearing is well north of that. 
ARG carries an interest cover ratio vs banking covenant of two times.  Their balance sheet is solid.  It has, "gearing comfortably at the bottom end of target range."  The interim result notes, "cap rate headwinds but rental growth delivers."  So if valuations are soggy (equally they may not be) they're not likely to place "pressure" on ARG's balance sheet.  Your concerns are overstated. 
 
ARG may not be any better bet than ARV but you're comparing apples and oranges.  You're oversimplifying the situation to say, "I think  the retirement sector has similar risks to all listed property stocks."   Residential  (https://www.stuff.co.nz/life-style/homed/real-estate/131212656/house-prices-nationwide-down-162-from-market-peak) property is much more of a recession risk.  It is actually a greater risk on most metrics. 

Your argument gets further confused when having banged on about what you see as short term issues ("the next Arg portfolio revaluations") you end with reference to the long term ("long term demand.")  Any long term demand for retirement stocks over commercial property has nothing to do with the possibilities of a recession. 

Haven't updated this for a while so here goes and referenced to Dec 30 22.

• If you ignored ARV the sector has outperformed NZX50 this year ...but still on average 50% off 2 year highs
• ARV is an extreme outlier
• RYM cap raise affected remaining stocks last week - on average down 8%

Will be interesting to see what happens next week or so

0000retire.JPG

Quote from: Hectorplains on Feb 19, 2023, 09:56 AMRetirement stocks are more closely aligned to what is happening in the residential real estate market, whereas Argosy is impacted by commercial property trends and issues.  ARG's portfolio of properties includes a mix of industrial, office and retail.

You position a recession as the key driver for concern.  If this does come to bear then all real estate asset classes will potentially face reduced demand. However; this will not be apportioned equally.

You highlight shopping malls as a recession risk.  ARG has only 4 retail properties - of which just one is a mall.  This is an "A" class mall servicing a dense population base (Albany) with most of the 25 tenants being long established brands (Warehouse, Mega, Briscoes, Hallensteins, Kathmandu etc.) Two of the others are let to The Warehouse and one to Toyota.  They are 100% let with a weighted average lease term of 3.4 years.  These are about as recession proof an investment as you can get!  Assuming we don't dump into a full depression, rents won't "be going down" and while the cost to operate may be "going up" this would only be marginally. 

Similarly you say that, "offices is pretty risky." Argosy has greater exposure here with 15 properties.  They have 97.8% occupancy and a WALT of 5.9 years.  Maybe not recession proof but they're very comfortably placed to ride one out.

ARG's debt to assets ratio is 32.5%.   OCA's gearing is well north of that. 
ARG carries an interest cover ratio vs banking covenant of two times.  Their balance sheet is solid.  It has, "gearing comfortably at the bottom end of target range."  The interim result notes, "cap rate headwinds but rental growth delivers."  So if valuations are soggy (equally they may not be) they're not likely to place "pressure" on ARG's balance sheet.  Your concerns are overstated. 
 
ARG may not be any better bet than ARV but you're comparing apples and oranges.  You're oversimplifying the situation to say, "I think  the retirement sector has similar risks to all listed property stocks."   Residential  (https://www.stuff.co.nz/life-style/homed/real-estate/131212656/house-prices-nationwide-down-162-from-market-peak) property is much more of a recession risk.  It is actually a greater risk on most metrics. 

Your argument gets further confused when having banged on about what you see as short term issues ("the next Arg portfolio revaluations") you end with reference to the long term ("long term demand.")  Any long term demand for retirement stocks over commercial property has nothing to do with the possibilities of a recession. 

Great post thanks. Sums things up very well.
All that's left for me to note is ARG already trades at a huge discount to NTA and yields close to 9% equivalent for 33% taxpayers.

One stuff up - OCA's gearing is actually about equal to ARGs.  I should wear my glasses when using the calculator.  Apologies for any confusion my error may have caused.

Hec said 'Retirement stocks are more closely aligned to what is happening in the residential real estate market,'

A couple of years old the chart from UBS below but it shows there's sector share prices to some extent residential property prices. Going from memory I think they said that property prices explain just under 40% of sector share price movements

0000retirevhpi.JPG

Quote from: Hectorplains on Feb 19, 2023, 03:49 PMOne stuff up - OCA's gearing is actually about equal to ARGs.  I should wear my glasses when using the calculator.  Apologies for any confusion my error may have caused.

The main difference between the REITS and the retirement sector regarding gearing is with the former the stated gearing is accurate whereas with retirement sector stocks such as OCA the true gearing when including residents interest free loans is dramatically higher. This works increbily badly against retirement sector stocks in a protracted downturn.

The other key difference is with REITS as much as 100% of the assets are employed earning full commercial returns whereas on the other hand returns on OCA care assets which make up about 69% of their portfolio have nearly halved since they listed due to all the reasons I've previously mentioned.  I think that's really important when it comes to debt servicing.

It's going to be interesting seeing OCA manage it's debt going forward.

The property sector in my area remains active.
House around the road had 60 people look at it, and seven offers were made.
Sold for higher than expected.

A country that pays to higher price for its housing is a country that is either wealthy or a country under investing in commerce...

and than decades later if nothing changes....

yep its "get the hell out of Dodge"

REINZ reports tell the real story.
Lowest number of January sales since 1992!

Some in this sector have been doing well with their sales, whereas OCA have not.

My opinion...Only a matter of time before concealing  vast numbers of unsold care suites under a mountain of debt becomes really concerning to the market.

Up until about 2021 the retirement Reits clearly outperformed the other listed property Reits.


According to this businesdesk article from 2021...it was a 25% return for retirement sector stocks  vs 13% for other listed Reits  from 2011 to 2021.

https://businessdesk.co.nz/article/property/is-this-the-best-investment-on-the-nzx

since 2021 this performance has clearly flipped.At some stage it will likely turn again. Who knows when and there is some risk it might not.


I bought some ARV for the first time on Friday. I plan to DCA over the next 12months with a plan to hold long term.

I'm a little contrarian but seems not a bad time to start building a stake as everyone else is so gloomy on sector. Hopefully I'm buying long term assets cheaply.

In the short term Arv might go lower still  with volatility in the sector but over the long term I pick the retirement sector to outperform Other reits on total returns and especially capital returns when the market conditions are in its favour.

I still think all property stocks hold quite some risk

For example of risk i see in particular Reits...
How is kiwi property group going to fund Drury with assets value falling and it's gearing was up around 35% last year but this reduces a bit now as they sold a couple of assets I think.
how much cost escalation risk is there in a large scale green fields development?


Also kpg build to rent seems to have similar problems to what got ryman and oca in a bit of trouble.
Building vertically so need to complete total build before occupation and any revenue start flowing and they planning to rent them not even selling to recycle funds.

Probably why the market seems to have their share price pegged back?

We dont know the future but there is a growing ground swell for capital gains on RV companies to be brought in.

And therefore if interest on capital is returned on property investments under certain circumstances and no capital gains are imposed on this sector than it may well return to the good times...

otherwise dont see this sector outperforming commercial as it costs go sky high.

All building construction is going up and incomes are not....

Good times arnt going to come from that...

If Metlife half year result typical it's hard to see decent financial results this year from the others in the sector

SUM up soon

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/407101/389050.pdf

Quote from: winner (n) on Feb 22, 2023, 08:45 AMIf Metlife half year result typical it's hard to see decent financial results this year from the others in the sector

SUM up soon

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/407101/389050.pdf

Thanks for posting Winner. Agree the sector is in for a tough year. Then we have the government review to be reveled later this year.

 A licence to occupy is simply pre-paid rent.  Its not buying the property, so I dont see how you would be entitled to capital gains any more than a normal tenant in a long term rental is not entitled to claim capital gains from their landlords.

How long you live there is what determines whether its a good deal or not.  Village operators benefit if you only stay a few years (hence the rising entry age) but occupants benefit if they stay longer than 4 years.  As an example, say you bought a $1M retirement unit.  Lets say an appropriate rent for that property would be 5% yield so $50k per year.  You pay a deferred management fee of $200k (20% of $1M) or the equivalent of 4 years of rent.  If you live there for 10 years you end up paying $20k a year in "rent" plus you still get $800k back.  Pretty good deal if you ask me. 

So what would happen if retirement villages switched to a rent only model, charging 5% yield on the value of the property each year in rent, starting at $50k a year and then going up as unit prices go up.  A person would sell their $1M home and put the cash in the bank, and then pay rent over time.  Lets say property prices double in 10 years, so at the end of 10 years you would be paying 5% on a $2M unit, or $100k a year.  Your $1M in the bank is almost gone, so where are you going to get the money to continue to rent the unit from?  What is worse, missing out on a capital gain but still retaining the majority of your original funds while living there until you die, or being turfed out of your unit when the money runs out and having nothing left of your original investment? 

Speaking of renting retirement villages, INA in Australia just reported.  Share price got hammered after the outlook was revised from 30% EBIT growth to 0-10% growth.  

"The Group anticipates settling 370-420 homes in FY23, as new homes complete in the second half. This compares to expected settlements of 460-485 announced on 10 November 2022.
The Group is building approximately 500 new homes in FY23 and now expects homes previously anticipated to settle in FY23 to drift into FY24"

Things seem to be changing quickly, could be a warning for the NZ operators.

 capital gains momentum is from many sections of society including ..https://www.stuff.co.nz/business/124545751/retirement-village-residents-and-owners-square-off-over-who-gets-the-capital-gains

The facts of the case outlined by KW may not be something any of them are familar with as KW states above or even want to know...

this GOVT wants money and where it get it from it may not care as long as it can say it Taxed a capital gain even it it wasnt actually there.

Sobering stuff from AUS posted by KW.

In fact it appears the NZ operators woke up to slowing sales over 6 months ago.
Again in this sector they are most probably well ahead of their Aussie cousins,even INA's very experienced Simon Owen.

ps.I well remember you tipped INA to me many many years ago.
I had held share in the retirement company Simon Owen ran before INA.

More pressure on housing which will flow through to slower house sales and then to slower retirement unit sales.  https://www.nzherald.co.nz/business/reserve-bank-bumps-ocr-up-to-475pc-despite-cyclone-gabrielles-economic-blow/EEAT7LCJJJGIDE2PK2KYWUVHTU/

Immigration in AUS commented today on CNBC at 300,000.

Housing stock pressure to come back in 12 months according to the Analyst..

China trade restarting with AUS in and might be "full ON" 12 months or more could look a lot different again.

AUSS might just be being careful in forward guidance.

NZ might look the opposite as Tourism complains yesterday about the NZ GOVT being idee, ideooology  driven...

Someone forgot to tell these guys to avoid ARV.
Was not me..lol.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/407154/389133.pdf

Quote from: lorraina on Feb 22, 2023, 03:52 PMSomeone forgot to tell these guys to avoid ARV.
Was not me..lol.

Me neither.  :D Maybe they know something we don't.

More likely just in it for the long haul as they do.

Quote from: lorraina on Feb 19, 2023, 05:24 PMThe property sector in my area remains active.
House around the road had 60 people look at it, and seven offers were made.
Sold for higher than expected.

Christchurch is the only major town in NZ where property prices hardly went down so far ... and while it used to feature once under the big three in NZ the lowest residential prices ... it isn't anymore.

If people want to buy a cheap townhouse, they now need to go to Wellington.

I suppose the floods in the North Island might have even further increased the attractiveness of the South Island ...

Good points.
Retirement Villages in Christchurch should be doing very well.
ARV,OCA,RYM and SUM all have great villages  here.

RYM a thing of wonderment...

Not sure it's widely understood that Auckland's median house price is down a whopping 21.7% since the peak!   WOW, that was certainly news to me.
 https://www.stuff.co.nz/life-style/homed/real-estate/131212656/house-prices-nationwide-down-162-from-market-peak
Leverage that decline by about three times (RYM and OCA have extraordinary gearing when you combine external debt with resident interest free debt), and it becomes clear why their share prices have been hammered the worst although ARV with lower debt level's isn't far behind when it comes to its share price getting whacked.

Thought for the day, what happens if there's another 21.7% decline to come?  Hmmm.

Winner() could chart that...

who hasnt read .... wher it all began... required reading when it came out... got a copy lost under a computer...or stored in a bike shed.

https://en.wikipedia.org/wiki/Liar%27s_Poker

Thats the point that MR B is making. Most investors have seen the GFC but have forgotten it and think something similar cant happen again. Of course it will be different but right now China is just hiding what it doesnt know about its local bank balance sheets..

Imagine those bank balance sheets all over the world ... and you get the picture.

The system is as ricky tiki as its always been...

https://www.youtube.com/watch?v=XUwUp-D_VV0

The New PM knows as much about GDP as the last PM...

Global Domestic Procrastination...

Quote from: Basil on Feb 23, 2023, 10:27 AMNot sure it's widely understood that Auckland's median house price is down a whopping 21.7% since the peak!   WOW, that was certainly news to me.
 https://www.stuff.co.nz/life-style/homed/real-estate/131212656/house-prices-nationwide-down-162-from-market-peak
Leverage that decline by about three times (RYM and OCA have extraordinary gearing when you combine external debt with resident interest free debt), and it becomes clear why their share prices have been hammered the worst although ARV with lower debt level's isn't far behind when it comes to its share price getting whacked.

Thought for the day, what happens if there's another 21.7% decline to come?  Hmmm.

Further decline in house prices a certainty with yesterday's RB 50 bps rise in the OCR and flow-on increase in mortgage rates. Orr really can do little else other than follow the interest rate trends after US similar recent increase in rates, 'cos if NZ gets behind in the interest rates paid then millions of $'s can be moved out of the country at short notice seeking better returns elsewhere, and causing a cash crisis here in NZ.

Aaron posted a question and/or his thoughts on the treatment of ORA payments to outgoing residents on ShareTrader:

QuoteLooking at operating cashflow in the 2022 accounts they include the full sale proceeds of units as well as the full redemption so over a number of years the difference will be the management fee. I would have thought splitting the unit holders portion out and putting this through the financing portion of the cashflow statement would make more sense as during the years they are building and selling lots of units, operating cashflow gets overstated and if building slows down and in years more units are sold operating cashflow will be understated.

My reply:
An interesting thought about the cash flow treatment of the ORAs and I agree. IMO it should be split between operating and financing for the ORA payments made to outgoing residents. The financing part of the CF should be the initial ORA receipts less the gross ORA payments. The difference between gross and nett ORA payments (which is retained management fees and expense reimbursements) should go through the operating part of the cash flow given those funds are used to pay for operating expenses.

For example: incoming resident pays $1m. Previous resident paid $800k, but the RV keeps say $250k out of the $800k and repays $550k to the outgoing resident's estate.

Cashflow would show:

• operating cash flows: DMF received/realised +$250k
• financing cash flows: ORA receipts $+1m
• financing cash flows: ORA payments -$800k
• Nett cash flow = +$450k

As opposed to showing:

• ORA receipts +$1m
• ORA payments -$550k
• Nett cash flow +$450k

By providing greater transparency we can then see if dividends are being funded from realised or unrealised DMF and/or if they are being funded from operating cash flows or financing cash flows. Two very different things, although dividends funded from financing cashflows could be from the unrealised portions of DMF rather than loans. The unrealised DMF will eventually end up in the P&L of the RV, but jut not right now. We could probably back solve this for each RV.

But asking for more transparency might be asking too much of the industry.....

Quote from: Basil on Feb 23, 2023, 10:27 AMLeverage that decline by about three times (RYM and OCA have extraordinary gearing when you combine external debt with resident interest free debt), and it becomes clear why their share prices have been hammered the worst although ARV with lower debt level's isn't far behind when it comes to its share price getting whacked.

Thought for the day, what happens if there's another 21.7% decline to come?  Hmmm.

ARV probably affected 'by association' with the general RV sector and what's happening with the bigs boys within it.

Quote"But asking for more transparency might be asking too much of the industry....."

In no particular order I find ARV and SUM's reports very easily comprehensible and transparent.
OCA engage in what is in my opinion deliberate obfuscation on a level I have never seen before and there are clearly real questions about RYM's disclosure with the NZX investigating them.  https://www.nzx.com/announcements/407192

In this market, run for the hills with any company that is not completely transparent with the number of unsold units and in fact engages in deliberate concealment of highly relevant information...I'm looking at you OCA.

https://www.nzherald.co.nz/nz/million-dollar-loss-auckland-house-bought-for-23m-sells-for-13m-a-year-later/3SG4C6OTKZHUNNKCUKLQZYCQ5Q/

Interesting insight into how the market has changed.

Is that a sign of things to come or a one off...

Imagine if that started becoming the norm....

Has the RBNZ modelled that?

Quote from: Waltzing on Feb 23, 2023, 01:47 PMIs that a sign of things to come or a one off...

Imagine if that started becoming the norm....

Has the RBNZ modelled that?

That as they say, is the $64,000 question.    I think its symptomatic of a very weak Auckland market that's going to get a lot weaker still.

"$64,000 question. "

upon seeing the sale price ... is that the "Million dollar question"

if that became the norm then a lof of damage is coming to certain parts of the economy...

Could impairments be increasing in the NZ banking sector for instance.

 This is becoming a stock pickers market with some really big gain possible in 2 years time from beaten down prices.

Noting the bigger VOL in the COMP PROPS with even GMT moving back into a trading tight range and ARG having some very big days..

Perhaps the rushed nature of the sale create an outlier...

One shudders to think...

But that becomes the norm than equity for a lot stock bought over the last 12 months or more is now well under water by a large margin...

That listing is the birdie in the coal mine...

Not

Quote from: Basil on Feb 23, 2023, 01:27 PMhttps://www.nzherald.co.nz/nz/million-dollar-loss-auckland-house-bought-for-23m-sells-for-13m-a-year-later/3SG4C6OTKZHUNNKCUKLQZYCQ5Q/

Interesting insight into how the market has changed.

really.

Just one example what hype can do to peoples minds. Buyer paid at the height of the property bubble nearly a million over valuation. Anybody surprised that todays market is not prepared to share this FOMO premium with him?

QuoteThe Herald is unsure why the owners paid $2.3m for the house in 2021 when its council valuation was $1.425m at the time.

It is quite ridiculous to use this blib as example for where markets are going. But I guess same as this buyer was blindsided by his / her FOMO and paid ways over the top at the peak of the housing bubble so are today some people ways exaggerating the downside risks for the housing market.

Such is human nature. Better learn to put doom and gloom posts and articles into perspective.

Okay, maybe a one-off and let's forget the fascinating anecdotal stories circulating but let's not forget the facts shall we.  REINZ reporting Auckland median price down a whopping 21.7% in the last year.  What happens to the value of the equity in your OCA and RYM shares with their vast level of debts if the median price falls another 21.7%?  Nah...that couldn't happen...or could it?

Quote from: Waltzing on Feb 23, 2023, 09:22 PM"$64,000 question. "

upon seeing the sale price ... is that the "Million dollar question"

if that became the norm then a lof of damage is coming to certain parts of the economy...

Could impairments be increasing in the NZ banking sector for instance.

 This is becoming a stock pickers market with some really big gain possible in 2 years time from beaten down prices.

Noting the bigger VOL in the COMP PROPS with even GMT moving back into a trading tight range and ARG having some very big days..

Perhaps the rushed nature of the sale create an outlier...

One shudders to think...

But that becomes the norm than equity for a lot stock bought over the last 12 months or more is now well under water by a large margin...

That listing is the birdie in the coal mine...

The house down the road from me sold in 2020 for $1.6M then was resold a year later for $2.4M.  A cool $800k gain in 12 months.  Online valuation showed a peak estimate of $2.8M in 2022.  Should anyone be surprised if it drops back to $1.6-$1.8M this year?  Not really.  

The question then becomes are losses real....

Ledgers tend to have debit and credits....

To many losses and you have problems in the banking sector as M1 M2 contracts.

T1 is supposed to go at 17 at some point.

Once a contraction starts its hard to slow down as the panic spreads.

Only a small percentage of houses have changed hands therefore a sudden large drop in prices might be a good thing but it will hit the broader stock market as sentiment turns to herd behaviour..

Quote from: KW on Feb 24, 2023, 11:18 AMThe house down the road from me sold in 2020 for $1.6M then was resold a year later for $2.4M.  A cool $800k gain in 12 months.  Online valuation showed a peak estimate of $2.8M in 2022.  Should anyone be surprised if it drops back to $1.6-$1.8M this year?  Not really. 

Yeap, FOMO has turned into FOPT (Fear of paying too much).

At some point all those upward property revaluations that have contributed the majority of their profits to date will turn to downwards property revaluations, this is likely to crash both their P/Es and their NTA.  So take any current fundamental metrics with a grain of salt.

Has the price for the unit your dad was looking at Rymans Kevin Hickman village come down in price.?

Quote from: KW on Feb 24, 2023, 02:09 PMAt some point all those upward property revaluations that have contributed the majority of their profits to date will turn to downwards property revaluations, this is likely to crash both their P/Es and their NTA.  So take any current fundamental metrics with a grain of salt.

Objectively, credit where its due, I was surprised in a rapidly falling and very slow real estate market SUM were able to sell a record number of units and their development margin increased by half a dozen percent or so to ~ 30%.  That against a backdrop of construction costs up about 17% for the year (sector info from CPI data).  Impressive performance any way you slice and dice it.  Maybe they can also impress going forward?  The management teams in the various companies in this sector are not all of equal talent, far from it.

Helicopter ben.... "House prices never go down..."

plenty of gamblers out there happy to pay up .if there is a change of GOVT to one that knows what GDP is and immigration takes off... well house price inflation could kick in again.

that RYM unit may not come down.

And SUM might come to mean Support Upper Medium...
 

Quote from: Waltzing on Feb 24, 2023, 02:26 PMHelicopter ben.... "House prices never go down..."

plenty of gamblers out there happy to pay up .if there is a change of GOVT to one that knows what GDP is and immigration takes off... well house price inflation could kick in again.

that RYM unit may not come down.

And SUM might come to mean Support Upper Medium...
 

Not just gamblers, there are plenty of ordinary folks out there with a house to sell before they can buy an RV unit, who not so long ago had house prices that were 21.7% higher than they are today dangled in front of them. If those people can afford to wait until we see who will be in govt, and if the successful electoral candidates have the easing of immigration to improve our chronic labour shortages as a policy, then yes we could conceivably see higher house prices or at least a levelling off of prices. For the sake of a few months delay, that demographic has the time to wait, and meanwhile the RV unit sales will continue to languish.
May not have to wait too long - I'm still taking $10 bets on an August snap election!

Quote from: Whome on Feb 24, 2023, 02:51 PMNot just gamblers, there are plenty of ordinary folks out there with a house to sell before they can buy an RV unit, who not so long ago had house prices that were 21.7% higher than they are today dangled in front of them. 

The wider the gap between house prices and RV units, the smaller the buyer market becomes. And probably fussier - someone who still has a $1.5M house now probably has higher housing standards than when the average old state house in a so-so area was suddenly worth $1.5M last year.   Its never a good idea to be expanding supply in an industry while demand is shrinking. Its all very well and good if the number of old people who would like to live in a RV is increasing, if none of them can afford to do so.  As they say, dreams are free.  Soon the RV operators will all be fighting over the same niche high end market, while the mass market can't afford to buy anything. The only solution to that problem is to cut prices - back to the "70% of median price in the area" proposition. 

" I'm still taking $10 bets on an August snap election!"

GOSH..... GOSH!!!

https://www.nzherald.co.nz/business/slowest-auckland-house-sales-in-month-for-quarter-century-barfoot-thompson/NOBPSS4SCFFWTN7RZXDL5C2PJQ/

My wife is currently employed going around helping people fill in their census forms. Part of her territory includes a large SUM RV. She said as they have the time, the residents love to talk about what it's like living in the RV and are overwhelmingly positive. Their comments however vary on money matters and the costs according to how long they have been there.

They all know and accept they will lose roughly 1/3 when they 'depart'.

Those who have been there 10 - 15 years are peeved they don't get the capital gain eg sold their house for $300k and will lose 1/3 to SUM ie $100k on departure. (I presume it's their family who are more peeved than they are, as they must be in their 90's).

Then there are those more recent purchasers who came from a similar part of town except the houses are now in the $1.5mil bracket who are peeved that SUM would take $500k from them on departure. Further they site that as a reason why their friends have delayed buying into the village as that is a huge sum of money for older people to get their heads around and it takes time to adjust to the new valuations.

Appears they are more concerned at eventually handing over $500k and not really processing where current house prices sit. Then there is the 20%+ drop in house prices over the last year to contend with and confuse further - so no wonder decisions to buy and sell are put off.

While the comments are very generalised it was an opportunity to hear directly what a cross section of residents think.

The main point wifey said they were all very happy to be in the SUM RV.

Appears you pays your money and makes your choice and if you buy and sell in the same market all should be well.

Hey Waltz, have you got $10! Do you think it's time for a betting book new thread 'Which month will they hold the snap election'. Sorry all, Will get off the Retirement Sector thread now!

I Posted on MR B politics thread cause did not want to get told off..

Column in the NZ Herald today list of 10 unfair practices. https://www.nzherald.co.nz/business/ Comments from the big 5 and I am happy with their response. So I am not worried about Govt Review.

And a Stuff article which provides an alternative perspective:

https://www.stuff.co.nz/business/300804068/life-in-a-retirement-village--are-they-a-haven-or-a-prison?fbclid=IwAR1VP_JukA2eWZ7wDrwHtefIZMlf-jbjJXHqCdL5Pl_7MT37t5urPoIE_Zw

Quote from: Untamed on Mar 10, 2023, 03:00 PMAnd a Stuff article which provides an alternative perspective:

https://www.stuff.co.nz/business/300804068/life-in-a-retirement-village--are-they-a-haven-or-a-prison?fbclid=IwAR1VP_JukA2eWZ7wDrwHtefIZMlf-jbjJXHqCdL5Pl_7MT37t5urPoIE_Zw

I read it when it came out and did they look at what the big players are doing no. Smoke and mirrors. This is more aimed at the smaller players. Check the big 5 response and make up your own mind

Quote from: Greekwatchdog on Mar 10, 2023, 03:06 PMI read it when it came out and did they look at what the big players are doing no. Smoke and mirrors. This is more aimed at the smaller players. Check the big 5 response and make up your own mind

The Govt is on a hiding to nothing if they interfere in the sector beyond a token gesture or so, they know they have seriously underfunded things for years now and the elephant in the room is beyond their capability to deal with should they get too involved.

REINZ figures for February out today.
Volumes up nicely on February 2022 ~ 40% but days to sell up from 42 to 60 which I think is a little concerning for the sector.  The decline continues with the national median price down 13.9% year on year and 0.2% month on month.
Too early to say the pace of the decline is slowing in my opinion.  Let's see how we go over the next few months.

Quote from: Basil on Mar 14, 2023, 10:32 AMREINZ figures for February out today.
Volumes up nicely on February 2022 ~ 40% but days to sell up from 42 to 60 which I think is a little concerning for the sector.  The decline continues with the national median price down 13.9% year on year and 0.2% month on month.
Too early to say the pace of the decline is slowing in my opinion.  Let's see how we go over the next few months.

ave days to sell is a good indicator, they say 48 days to sell indicates a good balance between supply and demand......when I first started in the real estate industry (late 90's) ave days to sell was 90........current 60 shows a weak market and I suspect it won't improve for at least the rest of the year

Quote from: snapiti on Mar 14, 2023, 08:33 PMave days to sell is a good indicator, they say 48 days to sell indicates a good balance between supply and demand......when I first started in the real estate industry (late 90's) ave days to sell was 90........current 60 shows a weak market and I suspect it won't improve for at least the rest of the year

I agree especially with your sentiment of "at least" the rest of this year.  Just noticed RYM down 20 cps today to just $5.05.  Really these are just property developers who offer varying level's of facilities and care with the smartest operators offering just the right amount of care without being too much so people believe they offer the full continuum of care.

I think we all know what the prospects are for the near future with property developers and OCA keeps reminding us every time it reports there's very little money in care.  Drilling down into any of the reports in this sector shows there's little if any money in running the villages themselves.
Property has always been the main driver of profits in this sector and it always will be.

I got to reflecting this evening that property moves in long term cycles and we're definitely in a down cycle at present so staying out until the cycle changes makes profound common sense.  I also couldn't help reflecting earlier today that there's probably far too much time wasted on fundamental analysis with stocks in this sector.  Really simple TA strategies seem to work much better.  Because property moves in long term cycles, choose a long-term indicator like the 200 day moving average and stay out no matter how cheap stocks appear to be until there's a clear break back up through this indicator.

Food for thought.  A simple sell when they break down through the 200 day MA and stay out until there's a new uptrend  would have got people out (and more importantly kept them out all this time), at the following prices:-
RYM ~ $12.00  (Wow that's food for thought with the share price at $5.05 now isn't it!)
SUM ~ $13.80
OCA ~ $1.40
ARV ~ $1.90
Thought for the day - It seems its a complete waste of time, effort, research, energy and most importantly capital, trying to swim against the tide of the property market.   

Warnes, who has been working in financial markets since 1968, said bear markets don't end until there is a credit issue in the tightening cycle of central banks.

"The tightening cycle causes a credit issue and then that usually is the last part of a bear market – in other words, you go back in history and you'll find that is the case," Warnes said.


Some analyst guy yesterday 🤔


We gonna be all good 👍👍👍👍

Quote from: Basil on Mar 14, 2023, 08:51 PMI agree especially with your sentiment of "at least" the rest of this year.  Just noticed RYM down 20 cps today to just $5.05.  Really these are just property developers who offer varying level's of facilities and care with the smartest operators offering just the right amount of care without being too much so people believe they offer the full continuum of care.

I think we all know what the prospects are for the near future with property developers and OCA keeps reminding us every time it reports there's very little money in care.  Drilling down into any of the reports in this sector shows there's little if any money in running the villages themselves.
Property has always been the main driver of profits in this sector and it always will be.

I got to reflecting this evening that property moves in long term cycles and we're definitely in a down cycle at present so staying out until the cycle changes makes profound common sense.  I also couldn't help reflecting earlier today that there's probably far too much time wasted on fundamental analysis with stocks in this sector.  Really simple TA strategies seem to work much better.  Because property moves in long term cycles, choose a long-term indicator like the 200 day moving average and stay out no matter how cheap stocks appear to be until there's a clear break back up through this indicator.

Food for thought.  A simple sell when they break down through the 200 day MA and stay out until there's a new uptrend  would have got people out (and more importantly kept them out all this time), at the following prices:-
RYM ~ $12.00  (Wow that's food for thought with the share price at $5.05 now isn't it!)
SUM ~ $13.80
OCA ~ $1.40
ARV ~ $1.90
Thought for the day - It seems its a complete waste of time, effort, research, energy and most importantly capital, trying to swim against the tide of the property market.   

very simple but sound advice.
However I have a slight spin on it.....I gave up picking bottoms many years ago so your wait till the 200 day breaks on the way up is profound advice however nothing wrong with putting some cash to work when prices become attractive enough that the investor believes in the long run they are investing in the right place for the right reasons.......me thinks some stocks are looking attractive but one has to be very very choosy in this market. 

Quote from: snapiti on Mar 14, 2023, 09:38 PMvery simple but sound advice.
However I have a slight spin on it.....I gave up picking bottoms many years ago so your wait till the 200 day breaks on the way up is profound advice however nothing wrong with putting some cash to work when prices become attractive enough that the investor believes in the long run they are investing in the right place for the right reasons.......me thinks some stocks are looking attractive but one has to be very very choosy in this market. 

I always imagine you as Yoda Snapiti -this is what I got


Choosy in this market one must be  8)

From The Darkside.
Forbar.
Thanks for posting Greekwatchdog.Very interesting.
A lot of possible upside in this sector.
I have put the % upside from current share price for each company.
OCA = $1.30............78%
ARV = $1.80.............74.75%
SUM = $11.10...........29.06%
RYM = $7.85.............55.44%

Quote from: snapiti on Mar 14, 2023, 09:38 PMvery simple but sound advice.
However I have a slight spin on it.....I gave up picking bottoms many years ago so your wait till the 200 day breaks on the way up is profound advice however nothing wrong with putting some cash to work when prices become attractive enough that the investor believes in the long run they are investing in the right place for the right reasons.......me thinks some stocks are looking attractive but one has to be very very choosy in this market. 

Yes Yoda but I have another spin on this.  No matter how good the boat you are in, they all go lower on an outgoing tide.  Ask me how I know  ;)   Just wait for the tide to change and jump on best of breed by miles (SUM) and have a punt on dirt cheap ARV as well.  Disc: Keeping powder dry waiting for the tide to change.

big chance the greens will form a government this year.....watch out for them using leverage to put in a capital gains tax......property stocks will get hammered

Id take a cap gains tax well before a wealth tax.

Quote from: snapiti on Mar 19, 2023, 06:03 PMbig chance the greens will form a government this year.....watch out for them using leverage to put in a capital gains tax......property stocks will get hammered

I wouldn't agree, they have already been hammered well below fair value.

Quote from: Breezy on Mar 19, 2023, 11:21 PMI wouldn't agree, they have already been hammered well below fair value.

wishful thinking on your part...... I suspect you will be very wrong if a capital gains tax is announced

Quote from: snapiti on Mar 20, 2023, 04:54 PMwishful thinking on your part...... I suspect you will be very wrong if a capital gains tax is announced

Well yes but just speculation on your part so nothing to see here.

Quote from: Breezy on Mar 20, 2023, 05:05 PMWell yes but just speculation on your part so nothing to see here.

all one can do is join the dots and make a calculated assessment.....I guess poeple that don't trust their own judgement could consider this "speculation"

Quote from: snapiti on Mar 19, 2023, 06:03 PMbig chance the greens will form a government this year.....watch out for them using leverage to put in a capital gains tax......property stocks will get hammered

Capital gains tax might well be in the cards (and , if implemented in a sensible way even might be fair and sensible) .... but I guess what you are talking would be a capital gains tax on unrealized gains. Remember - retirement villages might gain in value due to properties rising, but they don't realize this value unless they sell their property, which - of course they normally don't do. They only sell a right to occupy, and they pay anyway taxes (as they should) on their income derived from these sales.

Do you have any credible link or evidence that any of the parties currently in parliament is proposing to tax unrealised capital gains? - or are you just scaremongering?

Quote from: BlackPeter on Mar 21, 2023, 09:37 AMCapital gains tax might well be in the cards (and , if implemented in a sensible way even might be fair and sensible) 

Fair and sensible? LOL.  Have a look at the 10 year Brightline, its basically a tax on inflation as there is no adjustment or discount for inflation over a long period so tax is levied at the full marginal rate which is now up to 39%.  Unlike the Australian CGT where there is a 50% tax discount (so maximum rate of 22.5%) on assets held longer for one year, or the Americans where the tax is levied at 0-20% for long term gains (vs 10-37% for short term gains).  

Quote from: KW on Mar 21, 2023, 09:56 AMFair and sensible? LOL.  Have a look at the 10 year Brightline, its basically a tax on inflation as there is no adjustment or discount for inflation over a long period so tax is levied at the full marginal rate which is now up to 39%.  Unlike the Australian CGT where there is a 50% tax discount (so maximum rate of 22.5%) on assets held longer for one year, or the Americans where the tax is levied at 0-20% for long term gains (vs 10-37% for short term gains). 

I didn't say that the current implementation of a CGT in NZ is fair and sensible, didn't I?

Quote from: BlackPeter on Mar 21, 2023, 09:37 AMCapital gains tax might well be in the cards (and , if implemented in a sensible way even might be fair and sensible) .... but I guess what you are talking would be a capital gains tax on unrealized gains. Remember - retirement villages might gain in value due to properties rising, but they don't realize this value unless they sell their property, which - of course they normally don't do. They only sell a right to occupy, and they pay anyway taxes (as they should) on their income derived from these sales.

Do you have any credible link or evidence that any of the parties currently in parliament is proposing to tax unrealised capital gains? - or are you just scaremongering?

Yes and the fact that many conveniently forget is that an ORA is basically a long term rental arrangement and not a property purchase.

Quote from: BlackPeter on Mar 21, 2023, 10:03 AMI didn't say that the current implementation of a CGT in NZ is fair and sensible, didn't I?

Nope. And the chances of getting one implemented by a Labour/Greens Govt is practically nil.  And even if it was implemented in a fair and sensible manner, it is guaranteed that any future Left Govt will meddle with it, raising tax rates, reducing "loopholes" etc.  They simply can't be trusted. Just like the new Labor Govt in Australia is now going to tax unrealised capital gains in superannuation accounts.  Its a slippery slope.

The end result will be what little capital this country manages to attract, will leave for more advantageous shores.  Like Singapore
https://www.smh.com.au/lifestyle/paradise-found-in-singapore-for-gina-rinehart-20120731-23c1v.html

Quote from: KW on Mar 21, 2023, 09:56 AMFair and sensible? LOL.  Have a look at the 10 year Brightline, its basically a tax on inflation as there is no adjustment or discount for inflation over a long period so tax is levied at the full marginal rate which is now up to 39%.  Unlike the Australian CGT where there is a 50% tax discount (so maximum rate of 22.5%) on assets held longer for one year, or the Americans where the tax is levied at 0-20% for long term gains (vs 10-37% for short term gains). 

You make some great points.
You and some others may know that the sale of a license to occupy comes under the "financial arrangements" provisions of the Income Tac Act whereby people enter into a financial arrangement that involves them making an interest free loan for the period of their tenure in exchange for the right to occupy their unit and enjoy community facilities.

In my view the RV industry has benefited enormously over the years by the fact that they can resell that license to occupy over and over again without paying tax on the (previously) ever increasing price.
It would be a very simple change of legislation to make gains on resale of license to occupy taxable income.  My understanding is at this point in time the whole industry is relying on resales being tax free based on a binding ruling the IRD issued on this matter many years back.  A simple legislative change would change this and considering the average tenure is under 10 years this could easily be sold as "closing another loophole" if Chris Hipkins wants to stick with Cindy's narrative, or "levelling the playing field" if he wants to create his own PR style.  I reckon the vast majority of the public would lap this up as great news as its perceived that retirement village companies are getting very rich off residents backs.

I think its fair to say given that the industry is currently under review and increasingly its looking like the forthcoming election is far from a foregone conclusion for a National led coalition, that if a Labour led coalition gets in for a third term the risks of a change to the tax treatment on gains on license to occupy resales, will never be higher.   

Quote from: Basil on Mar 22, 2023, 02:46 PMYou make some great points.
You and some others may know that the sale of a license to occupy comes under the "financial arrangements" provisions of the Income Tac Act whereby people enter into a financial arrangement that involves them making an interest free loan for the period of their tenure in exchange for the right to occupy their unit and enjoy community facilities.

That also would presumably apply to anyone where the home they live in is held in a family trust where IRD consider the arrangement a license to occupy. If no rent is being paid to the trust, could there be an assessed value of rent imposed by IRD then calling it an interest free loan. I'm no expert in this field but the implications have got the brain going.

Quote from: Whome on Mar 22, 2023, 03:34 PMThat also would presumably apply to anyone where the home they live in is held in a family trust where IRD consider the arrangement a license to occupy. If no rent is being paid to the trust, could there be an assessed value of rent imposed by IRD then calling it an interest free loan. I'm no expert in this field but the implications have got the brain going.

F.Y.I. The IRD have recently started asking for, (among many other new disclosures requested), market value rent details of houses occupied by Trustee's in annual Trust tax returns.    They're looking to try and widen the tax net to pay for critical infrastructure rebuilding, I think that much is very clear.  Don't expect much, if anything, before the election but if Labour get a third term, prepare to be shocked!

Quote from: Basil on Mar 22, 2023, 03:51 PMF.Y.I. The IRD have recently started asking for, (among many other new disclosures requested), market value rent details of houses occupied by Trustee's in annual Trust tax returns.    They're looking to try and widen the tax net to pay for critical infrastructure rebuilding, I think that much is very clear.  Don't expect much, if anything, before the election but if Labour get a third term, prepare to be shocked!

I had a Q&A session recently for the annual Trust tax return with the accountant which is what prompted my query. The info required now also included the Names, addresses, DOB and tax no. For all trustees and beneficiaries.

For Bar review Debt of RYM, OCA and ARV

The three aged care stocks with March year ends (Ryman [RYM], Arvida [ARV] and Oceania [OCA]) have tripled net debt over the last five years. As a group, aged care stands out in the NZ market; it has taken on more debt, both absolute and relative, than any other sector. Revaluation gains and capital raises has kept asset leverage largely flat, but in relation to earnings, and certainly cash generation, leverage has increased materially. With weighted interest rates set to double from FY22 to FY24 we have taken a closer look at covenants, interest expense and cash interest to be paid over the FY23–FY25 period. We walk away less concerned that covenants will be breached. On our estimates, P&L debt servicing will consume ~20% of EBIT, up from ~10% during FY18–FY22, and capitalised interest will consume ~10% of new sales cash flow. We expect the ability to reduce the absolute level of net debt will be a key focus for the market over the next 18 months.

Covenants are not created equal; we do not forecast any breaches, and if it gets close, we expect leniency from the banks


The three aged care stocks included in this analysis have similar levels of leverage (net debt/(net debt + equity)) of ~30–35%. Currently our estimates suggest that none are getting close to breaching leverage covenants of ~45–50%. OCA, ARV and RYM have also published interest coverage ratio (ICR) covenants of ~2.00–2.25x cash adjusted underlying EBIT. While gearing levels are similar there are differences, both with regards to the numerator (some version of a cash adjusted underlying EBIT) and the denominator (interest expense). Ultimately we do not expect any of these three to breach covenants. RYM and ARV are likely to be closest, due to more onerous covenant structures than OCA. As part of its capital increase, RYM received an amendment to its 2.25x ICR covenant until FY25 and also has fixed a large proportion of its debt for ~24 months. Post FY25, we believe RYM needs to have reduced its net debt in order to not get close to its ICR covenants. ARV's published covenants are the most onerous as they (1) are the highest (2.25x); (2) currently do not include all development gains; and (3) no part of the capitalised interest expense is excluded. Assuming ARV gets the technical amendement relating to its development gains (both OCA and RYM include almost all development gains), our modelling suggests that ARV will be close to but not below its covenants. However, should it need to, we expect a similar amendment to RYM. Longer term, for both RYM and ARV, they would likely need to either move some debt into a dedicated development facility like OCA or reduce the level of net debt in relation to EBIT.

Level of debt likely a key driver of performance over next 18 months — OCA and RYM best positioned


Outside of company specific details, we expect levels of debt and house prices to dominate the overall performance of the aged care sector over the next 18 months. While we remain cautious on near-term house price development we expect flat to declining levels of debt, a significant turn around from the last few years. If interest rates and construction costs remain high, we estimate that the sector has an attractive "out" by not starting any new build projects. This could result in the sector becoming largely debt free. Net debt makes up between 40% (RYM) and 50% (OCA) of enterprise value. Deleveraging can provide a powerful tailwind for the equity. While debt covenants can create some unease for equity holders, we believe they provide good discipline and an added incentive to reduce debt or at least reduce the speed at which it accumulates.

In theory an inflationary environment should be good news for aged care stocks


The core part of the aged care model is to use free funding from its occupational rights holders from one village to build a new village then rinse and repeat. An inflationary, high interest environment increases the value of this free funding. The 1970s was decade horribilis for equities, but house prices more than tripled in nominal terms in NZ. The future is uncertain and a key negative scenario for equities centers around inflation being more sticky than anticipated. Aged care operators that keep debt under control, grow by recycling cash and keep overheads low have the potential to perform well in a wide range of scenarios.

Run-down scenario provides an attractive back stop for the sector Run-down scenario provides an attractive back stop for the sector


The financial gearing in the aged care stocks has increased as the market value of equity has declined and interest bearing debt has increased. This high level of gearing has increased the risk/reward dynamic in the aged care sector; leverage works both ways. If this increased gearing was to be resolved organically i.e. through the release of cash tied up in development work in progress and unsold stock, it could provide signifiant tailwinds for the equity.

The aged care operators have taken notice of the increased costs of both debt and equity. The most significant action has been taken by RYM, which is also the operator that has built up the most amount of debt, in absolute terms and relative to assets. In February 2023, RYM raised over NZ$900m of equity to pay off its USPP debt and, more importantly in our view, announced a major pivot away from high density developments. RYM has also guided towards positive free cash flow in FY25, which would be a first since FY14. ARV and OCA have also signalled a slowdown in development and a more cautious approach to growth.

On our estimates OCA, ARV and, after the capital increase and strategy shift (pivot to less high density villages), to a large degree RYM, can pay down most of their interest bearing debt organically. This is through a combination of completing current construction, selling down unsold stock and collecting accounts receivables of stock that is sold but for which cash has not been collected (see our report "What If? Fast Track to Ex-Growth", published on 5 December 2022 for more detail).

This "wind down" of development operations would reduce EBITDA through lower development gains but increase it through earnings from the added units and from reduced costs and complexity. If these operators are able to achieve the exit EBITDA we estimate, pay down debt alongside the development run down, and trade on their current EV/EBITDA multiples, there would be a sizeable upside to the equity value over the next three to four years. And this is using today's depressed multiples.


The debt boom is (has to be) over


Focus across the listed aged care sector has for a long time been on growth. Specifically, growth in units, net asset values and underlying earnings. We believe that focus should be on, and is changing to, cash generation and levels of debt. In times of very low debt costs, rising property values and equity valuations at a multiple of book value, growing fast with borrowed money, is a rational prioritisation.

Today the world looks very different. All aged care operators are valued below tangible book value, house price inflation is negative and the aged care companies are raising incremental debt above 6%. In this environment we believe share price performance will be partly driven by an ability to generate free cash flow and reduce net debt.


Interest expense increasing but manageable


Net debt to annuity earnings has approached ~8x as the aged care sector has more than doubled net debt to ~NZ$4.5bn, up from below NZ$2bn five years ago. The build up of debt has been matched by an equally rapid build up of assets (partly funded by equity), leaving asset leverage ratios (net debt/(net debt + equity)) largely stable at around ~30–35%. The exception is RYM prior to its capital raise. Looking ahead, we expect debt levels to stabilise. We forecast that leverage for both RYM and OCA will decline over our forecast period.

We forecast the weighted average interest expense to approach ~6% over the next two to three years and aggregate interest expense of close to NZ$200m, up from ~NZ$100m in FY22. OCA stands out as the one with the least dramatic increase in effective interest rate. It has both the highest starting point (FY22) and lowest end point (FY25). OCA fixed a large proportion of its debt in the first half of 2022 and has also chosen to leave its retail bonds largely unswapped, which leaves it relatively unexposed.

Even though most debt is supporting development work in progress (WIP) approximately half of interest cost is expensed through the P&L. OCA and ARV in particular expense a substantial proportion of interest expense (over half), likely as a consequence of most of the debt originating from acquisitions. For OCA we expect a slight shift to a higher proportion being capitalised as the development facility is repricing faster.


Will OCA and ARV follow RYM? We think not


RYM's capital increase raises the question, will others follow suit? We think not. Firstly and most importantly, the underlying issue with regards to RYM, according to our estimates, was that RYM did not fully recycle cash in its new developments. This is particularly so over the last five years, leading to a build up of core debt. Prior to RYM's change of strategy and capital raise, we estimated that it would be left with ~NZ$1.8bn of core debt should it finish and sell down current villages under construction. This compares to being largely debt free for the other three operators in a similar run down scenario (see our report "What If? Fast Track to Ex-Growth", published on 5 December 2022 for more detail). Secondly, our analysis suggests that none of the aged care operators will go below their interest covenants (assuming ARV will get its technical amendment, discussed at its 1H23 result).


ur understanding is that RYM and ARV have interest expense for all of their debt included in the ICR used for testing their covenants. OCA has a development facility that is excluded. Assuming ARV receives its technical adjustment, which we have no reason to believe it won't, all three operators will stay within ICR covenants on our estimates, but with a relatively small margin of error. We believe there is ample room for variations and/or restructuring so that a large(r) proportion of debt is included in more traditional development facilities, which are not subject to ICR covenants.

Ryman Healthcare (RYM)Ryman Healthcare (RYM)


Debt and interest structure


RYM's debt structure has changed considerably since its last result. RYM's capital raise in order to repay its NZ$725m of USPP debt, which was majority floating, and restructuring of its hedges/swaps on its remaining bank debt means we estimate it enters FY24 with ~70% of its debt fixed. We understand that this debt has been fixed at a weighted average interest rate of ~4.5%.

ovenant structure


As announced at its capital raise in February 2023, RYM has received amendments to its ICR covenants through to FY26. These amendments lower its ICR covenants to 1.75x through to FY25, 2.00x at 1H26 before returning to 2.25x in FY26. Using RYM's indicated adjusted EBIT (EBIT less non cash component of DMF) calculation and our earnings and interest forecasts we estimate that RYM's ICR will bottom out at ~2.00x in FY23, suggesting that these covenant amendments were needed.


Arvida (ARV)


Debt and interest structure


ARV has a relatively small portion of its debt fixed relative to OCA and RYM at ~40%. This leaves ARV as one of the most exposed to floating benchmark interest rates. Unlike OCA, all of ARV's debt is part of the same corporate facility and it does not make use of a development facility. We estimate up to ~75% of its debt is associated with developments.

Covenant structure


ARV currently has the most onerous ICR covenants of the three aged care operators assessed in this report. Its covenant of 2.25x is the highest and covers all interest costs (expensed and capitalised). We have calculated ARV's ICR with the assumption it receives the technical amendment flagged at its 1H23 result. With this assumption we estimate ARV will get close to its covenants but not breach them. Should ARV want more headroom on these covenants we see it possible for ARV to get a similar amendment to RYM or utilise a development facility like OCA.

Oceania Healthcare (OCA)


Debt and interest structure


OCA's debt has a high portion fixed through its two retail bonds and swaps (~86% in FY22). While this has led OCA to realise higher interest expenses relative to RYM and ARV in FY21 and FY22 we estimate this fixed portion should allow it to have a lower weighted interest rate over the next three years, given the increase in floating benchmark interest rates.

Covenant structure


OCA's interest coverage ratio covenants are structured differently to RYM and ARV given its use of a development facility. At its 1H23 result, OCA had NZ$165m of its bank in such a facility, interest on this debt is capitalised and excluded from any interest coverage ratio covenants. The use of a development facility as well as a high proportion of debt fixed at relatively attractive levels gives OCA substantially more headroom relative to RYM and ARV. Our analysis of OCA's debt profile has led us to reduce our estimates of interest expense relatively materially for FY24 and FY25.

Might get an idea how sales have going lately

ARV might come out with an Investor News and SUM first quarter sales update is due.

Talked with US gent today  who has moved here and he said what goes up in houses prices .....

He stated clearly that the 2 year increase in houses price could have taken 10 years out of capital gains in the market...

And that he already knew of stressed NZ houses with increasing mortgage rates....

He also questioned how a country could grow its economy from investing in houses that he said "were just being passed around like a PONZ....  you know that word... scheme"....

 
 

Quote from: Waltzing on Apr 02, 2023, 07:05 PMTalked with US gent today  who has moved here and he said what goes up in houses prices .....

He stated clearly that the 2 year increase in houses price could have taken 10 years out of capital gains in the market...

And that he already knew of stressed NZ houses with increasing mortgage rates....

He also questioned how a country could grow its economy from investing in houses that he said "were just being passed around like a PONZ....  you know that word... scheme"....

 
 

Given that you say this Gent comes out of a country with exactly the same problems (see attached chart) - I am wondering whether this is a case of the prophet not being worth a lot in his own country?
US housepricegrowth.JPG

yes BP .... 

friend just bought 10 acres in up state NY... seemed to say it was a bargain compared to NZ... and remember the US dollar is stronger.

 Another US citizen retuning home with NZ wife in tow.... kicking and sobbing to leave..

Quote from: Waltzing on Apr 02, 2023, 07:05 PMTalked with US gent today  who has moved here and he said what goes up in houses prices .....

He stated clearly that the 2 year increase in houses price could have taken 10 years out of capital gains in the market...

And that he already knew of stressed NZ houses with increasing mortgage rates....

He also questioned how a country could grow its economy from investing in houses that he said "were just being passed around like a PONZ....  you know that word... scheme"....

Yes.  Auckland prices according to a very recent survey, even after falls since the peak in Nov 2021, are still the seventh most expensive in the world on a per capita basis.  There is a VERY strong correlation between house prices and the retirement sector stocks and I think house prices, rampant construction costs, and huge shortages of care and nursing staff as well as the massive annual increases in their pay rates remain as very serious headwinds for this sector for the foreseeable future.

Craig's latest on Ryman had this to say

At $5.37, RYM is priced at 0.85x NTA, a 66% discount to its five year average price/NTA of 2.5x. RYM's multiple has compressed the most of all its peers over the last five years, notwithstanding there has been severe multiple compression across the sector.
Casting our eye across the sector, we expect that market focus will remain on which operator will next need to raise capital. We think SUM and ARV are least likely given modest gearing and broad acre development books. OCA is more likely in our view given higher capex density sites, already high gearing, and negative FCF generation, and we note OCA's stated intent to dispose of assets at its November result (which has not yet been successful and we think will struggle to be so). Refer to our November note on OCA for further analysis

From shareguy's post above - OCA is more likely (to have a capital raise) in our view given higher capex density sites, already high gearing, and negative FCF generation, and we note OCA's stated intent to dispose of assets at its November result (which has not yet been successful and we think will struggle to be so)

So a OCA cap raise announced at results time ...or earlier?

If it happens probably not too discounted

Quote from: winner (n) on Apr 10, 2023, 09:03 AMFrom shareguy's post above - OCA is more likely (to have a capital raise) in our view given higher capex density sites, already high gearing, and negative FCF generation, and we note OCA's stated intent to dispose of assets at its November result (which has not yet been successful and we think will struggle to be so)

So a OCA cap raise announced at results time ...or earlier?

If it happens probably not too discounted

I think so, unless they can sell some stuff they will have little choice. Tomlinson or others not buying at these levels is telling

Quote from: Shareguy on Apr 10, 2023, 10:14 AMI think so, unless they can sell some stuff they will have little choice. Tomlinson or others not buying at these levels is telling

VERY good point.  You would have thought we would have seen some of these wealthy insiders put their hand in their pocket in the low 70's.
Maybe some dog's barking about various issues has put them off lol

Quote from: Shareguy on Apr 10, 2023, 10:14 AMI think so, unless they can sell some stuff they will have little choice. Tomlinson or others not buying at these levels is telling

Why would he buy at these levels or any level for that matter when he already holds over 26 mill shares, it doesn't tell anything as he probably has enough wouldn't you say? All the speculation about a CR is just that and a waste of time IMO, I don't see it happening at this point in time.

Quote from: Breezy on Apr 10, 2023, 11:04 AMWhy would he buy at these levels or any level for that matter when he already holds over 26 mill shares, it doesn't tell anything as he probably has enough wouldn't you say? All the speculation about a CR is just that and a waste of time IMO, I don't see it happening at this point in time.

Tomlinson bought quite a few (3.7m shares) at the placement price of $1.30 in 2021:

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/370170/343612.pdf

Quote from: Breezy on Apr 10, 2023, 11:04 AMWhy would he buy at these levels or any level for that matter when he already holds over 26 mill shares, it doesn't tell anything as he probably has enough wouldn't you say? All the speculation about a CR is just that and a waste of time IMO, I don't see it happening at this point in time.

You may be right, he does have plenty. Just thought since Ivenco was sold last year which was a business he had a lot of money invested that he might add to his OCA holding with some of the proceeds. He holds under 4 percent. Hgh he holds 9.8 percent. His last purchase apart from drp was October 21 when he purchased over a million shares at $1.41. I agree that any capital raise is just speculation. Hopefully they will give us an update on asset sales soon.

Disc, long term holder.

FY23 results for ARV, RYM and OCA, all in late May will be very interesting....some a much easier read than others lol
I think we'll see the effects of the headwinds in this sector in all their reports.

Quote from: Basil on Apr 10, 2023, 10:51 AMVERY good point.  You would have thought we would have seen some of these wealthy insiders put their hand in their pocket in the low 70's.
Maybe some dog's barking about various issues has put them off lol

I highly doubt the likes of Mr T et al would take any notice whatsoever of some random dog barking on an anonymous internet forum.

Quote from: Basil on Apr 10, 2023, 12:17 PMFY23 results for ARV, RYM and OCA, all in late May will be very interesting....some a much easier read than others lol
I think we'll see the effects of the headwinds in this sector in all their reports.

Agree,however we should see them adjust their business models to suit the conditions.
Looks to me as they have already made the right adjustments,whether it is committing to fewer high rise villages,or slower build rates.

Quote from: Breezy on Apr 10, 2023, 01:10 PMI highly doubt the likes of Mr T et al would take any notice whatsoever of some random dog barking on an anonymous internet forum.

I agree which begs the question maybe he sees the same issues as I do and thinks its better to invest new capital elsewhere ?

Sure, there are levers they can pull such as slowing the build rate, concentrating on low rise rather than high rise, hedging interest costs, (too expensive to implement that further at this stage), and some are trying to reduce their exposure to care to try and mitigate the effects of the rampant staff cost increases but when care is the majority thrust of your business model there's only so much you can do and realistically, probably there are no buyers for small care focused villages with no development potential so wanting to reduce care focus may be a lot easier said than done. 
Headwinds to remain for the sector for the foreseeable future is how I see it.  SUM are better placed to weather those headwinds than the others.

Nah, far more likely they're having a beer and laughing about the fact that you really don't understand their business.

Quote from: Basil on Apr 10, 2023, 10:51 AMVERY good point.  You would have thought we would have seen some of these wealthy insiders put their hand in their pocket in the low 70's.
Maybe some dog's barking about various issues has put them off lol

Quote from: Basil on Apr 10, 2023, 01:26 PMI agree which begs the question maybe he sees the same issues as I do and thinks its better to invest new capital elsewhere ?

Sure, there are levers they can pull such as slowing the build rate, concentrating on low rise rather than high rise, hedging interest costs, (too expensive to implement that further at this stage), and some are trying to reduce their exposure to care to try and mitigate the effects of the rampant staff cost increases but when care is the majority thrust of your business model there's only so much you can do and realistically, probably there are no buyers for small care focused villages with no development potential so wanting to reduce care focus may be a lot easier said than done. 
Headwinds to remain for the sector for the foreseeable future is how I see it.  SUM are better placed to weather those headwinds than the others.

From memory - the average tenure of a care suite is something like three years. It would not be too hard to drive the care section down and use the vacated space for something else, if that's what they want to do.

Have a look at e.g. MCK / CDL to see how one can quite profitably dispose of surplus apartments and living room.

Last time I checked - there is still a huge need for residential housing.

Obviously - I realise you are still in your cyclical ramp down phase (rather sure this will change later this year) ... and appreciate you shining the light on all the warts of the stock. However - after some time it gets boring if you show us again and again the same issues ... and always forget that there are not just threats, but opportunities as well.

Quick look at a couple of metrics over past 5 years from 2018 to 2022 inclusive (SUM December Year, RYM/OCA March with OCA previously having a May year end one period is only 10 months which I have not adjusted for

IFRS profit per share divided by year commencing NTA per share  (simple average of 5 years)
- SUM 23.9% (noting the 2017 year prior was much higher)
- RYM 19.1%
- OCA 8.9%

Net Asset Value per share growth (simple average of 5 years)
- SUM 21.9%
- RYM 15.9%
- OCA 12.1%

Shows how good SUM has been at creating economic value over the period. RYM also quite good over the period but expect the low price capital raise to have a negative impact this year onwards. OCA still in the long transformation period with a larger care and rebuild hand brakes.

Noted that it easy to measure the past but hard to predict the future. I hold all but expect the SUM economic engine to continue to outperform the others which is recognised in relative market pricing between SUM and OCA.

Despite the real estate gloom I still see good long term prospects in the industry. With SUM's average price new sale price of $658,000 and resale price of $561,000 in 2022, I don't think their unit prices are too elevated. Hard to build/buy a decent house at these levels.

Welcome other perspectives on this.



 

Summerset's quarterly sales update just confirms the head winds the sector is currently facing still persist

Low level of activity (sales volumes) in overall property market affecting sector sales as well.

A lot more choice these days too.  Very rare I bother watching the main network T.V. news at night live with all the advertisements, (usually record it and skip through the adds and other rubbish bits at 30 times fast forward with my Sky remote) but I did the other night and was surprised to see several adds on the main network news at night by upmarket looking privately developed retirement villages I had never heard of before.  Must be costing then a fair bit to advertise on T.V. in the 6.00 p.m. to 7.00 p.m. advertising slots and noticed RYM sponsor the weather now, wonder how much that costs them.

Far more to this sector than just the listed players these days.  All those unlisted privately owned retirement villages must be suck a fair bit of oxygen out of the room, not to forget that Metlifecare, (only listed with their bonds) have a huge development program too.

Interesting article. Not good for people without money.

https://www.theweeklysource.com.au/new-zealand-retirement-villages-are-reducing-aged-care-beds-why/

People may qualify for a Government Subsidy for Care Suites, if they have a NASC assessment and are deemed to require rest home level care (or hospital level). Whether the subsidy is exactly the same amount as for a standard care I have no idea, but I imagine so.

We seem to go round in circles with these discussions, but whichever government wins the election, will have to face reality. Aged care is in crisis mode already. Funding must increase for all providers. If that doesn't happen, our hospitals will find themselves inundated with elderly folk, who need care, but have nowhere to go. No government is stupid enough to let it get to that point.

Quote from: Shareguy on Apr 14, 2023, 07:12 PMInteresting article. Not good for people without money.

https://www.theweeklysource.com.au/new-zealand-retirement-villages-are-reducing-aged-care-beds-why/

I find this very interesting. Make of it what you will for all the negativity at the sector.
https://www.1news.co.nz/2023/04/15/r...y-open-letter/

Quote from: Greekwatchdog on Apr 15, 2023, 08:18 AMI find this very interesting. Make of it what you will for all the negativity at the sector.
https://www.1news.co.nz/2023/04/15/r...y-open-letter/

Something that a lot of us already know, only the ill informed or those living in an alternative universe could say otherwise. A lot of the negativity is generated by political agenda and families looking for that extra inheritance money.

Quote from: Greekwatchdog on Apr 15, 2023, 08:18 AMI find this very interesting. Make of it what you will for all the negativity at the sector.
https://www.1news.co.nz/2023/04/15/r...y-open-letter/

My Aunt & Uncle love living in their retirement village.  They think it was a genius move on their behalf as they got in early, when they could afford it, and have been there for many years  now.  Entry price is now over $1M so they have traded off future capital gains for the ability to have bought in to the village at a level they could afford. I wonder if the same financial trade off still exists at current unit pricing though?  

https://www.stuff.co.nz/national/health/131779902/nurses-demand-political-action-amid-chronic-staffing-crisis

This situation is not unique to NZ. My daughter is a theatre nurse currently working as an agency nurse in Aussie. The hospital she is working in is experiencing the same staffing issues. It appears to be a global issue. Both Labour and National have failed to "read the room" for years, just as they have with Aged Care. They should have been planning ahead and thinking proactively. Free nursing training would have been a good start. So would going back to hospital based training, and paying student nurses while they are training, so those of us who really wanted to do it, could train and still feed our kids.

I don't know what the answer is to the nursing and caregiver staffing issues. Sure, unions can argue for more money, but it doesn't solve the underlying issue of inadequate staffing levels. The rest home my mother is in, has just had another three caregivers resign - two of whom are going to the new Bunnings store to work. They just can't/don't want to do it anymore. If you ask anyone in that position they will invariably tell you they are not leaving because of the residents/the job itself. They are leaving because the work is getting more and more difficult, residents needs are becoming higher, and they are expected to "suck it up" with the staff they have. That kind of pressure is how mistakes are made.

Quote from: Waltzing on Apr 15, 2023, 04:06 PMhttps://www.stuff.co.nz/national/health/131779902/nurses-demand-political-action-amid-chronic-staffing-crisis

https://www.rferl.org/a/ukraine-russia-latvia-riga-medics-doctor-nurse-work-permit-gastroenterologist/32343833.html#:~:text=More%20than%2020%20Ukrainian%20doctors,nurses%20until%20the%20Ukrainians%20arrived.

https://www.nzherald.co.nz/nz/exhausted-desperate-hospital-workers-filed-23000-reports-warning-of-unsafe-staffing/3OXLDESX5NHNVOLJLT4JQBP47Y/

Easy to forget that Labour's egregiously unreasonable punishment of landlords is going to be another huge factor in landlords selling up which combined with interest rates at a multi decade high is going to force a lot of selling pressure on houses going forward.

https://www.stuff.co.nz/business/property/131738452/landlord-interest-payments-jump-up-by-thousands-due-to-new-tax-rules

How are the old folks going to eb able to sell their McMansion to afford that upmarket retirement unit?
 

I agree interest rates slow down the property market.,but have yet not slowed down the ageing population.
With so many landlords selling up, I expect they will on mass move into retirement villages.
Will the villages be able to keep up with the demand.?

I think you're missing the point entirely.  People selling their rental properties are investors selling because the property is cash flow negative after interest rate increases and the Govt choosing to deliberately undermine their business.  They're far more likely to reinvest in term deposits at current level's, if they can sell their property, or reinvest in shares.

The real issue is the property market is slowing dramatically and mortgage applicants are being stress tested at 8.5%+ and most can't afford a house at that level with the current prevailing prices.  Something in this pressure cooker environment has to change and the most likely thing is prices reverting to somewhere around pre Covid level's, (median national price is still about 20% above that level even after falls of 17 months since the Nov 2021 peak).

From my observations the gap between independent living 2 bedroom retirement village unit pricing and median house prices has never been smaller so a ~ 20% reduction in the median house price may create a situation where RV unit pricing has to fall so old folks can still afford them.  That sets up an interesting dynamic when the cost to construct a unit is rising all the time.  Development margins are going to come under unprecedented pressure going forward in my opinion.

" (median national price is still about 20% above   ....   ****

Oh My Giddy Aunt...

Quote from: lorraina on Apr 17, 2023, 09:53 AMI agree interest rates slow down the property market.,but have yet not slowed down the ageing population.
With so many landlords selling up, I expect they will on mass move into retirement villages.
Will the villages be able to keep up with the demand.?

no doubt your post is the same reason you have held retirement stocks over the last 12 month whilst they have got slaughtered......retirement sector is just leveraged property developers dressed up......I very much believe shares in RV will continue to be under selling pressure whilst the residential house market falls

Yes the trust I help out on holds OCA,RYM and SUM.
Held RYM and SUM for years.Will continue to hold for years too.Also supported RYM's capital raise.
I bought a modest holding in ARV, with some funds from the huge profit on my part sale of my overweight position in SFF [usx],mainly as the wife wants us, in time, to move into Rhodes On Cashmere ,which is owned by ARV.
I do not currently hold,however I like OCA.
No one I know who lives in, or has family in any retirement village has a bad word to say about any of them.
I visited people who live at Bupa village Prebbleton.Another fine village.
The old saying "give people what they want,and you will get what you want" comes to mind,as the sector certainly is giving their residents what they want.

Maybe go and enjoy lunch with our mutual friend KW and ask her to remind you of the lack of wisdom of holding shares in a confirmed, strong downtrend.

The worm is very unlikely to turn until the real estate market does.

Thank you,however I  have managed very well making my own decisions.

https://www.msn.com/en-nz/news/other/recession-to-be-deeper-longer-than-expected-asb-bank-predicts/ar-AA19Y2I8?ocid=msedgntp&cvid=33b57d3e2efc424b95e865d8537c9c82&ei=15

Quote from: Basil on Apr 18, 2023, 08:39 AMhttps://www.msn.com/en-nz/news/other/recession-to-be-deeper-longer-than-expected-asb-bank-predicts/ar-AA19Y2I8?ocid=msedgntp&cvid=33b57d3e2efc424b95e865d8537c9c82&ei=15

But you keep telling us economists can't forecast their way out of a paper bag .....soon worries here

In the past, housing loan interest rates were at 8% and above. Somewhat above today's rates used for stress testing.

No question about that.

But what were house prices at that time compared to the recent past and to current prices? How far will house prices have to fall to meet that historic comparison?

There's a difference between $400,000 at 8.5% and $800,000 at 8.5%.

Quote from: Henry Filth on Apr 18, 2023, 09:40 AMIn the past, housing loan interest rates were at 8% and above. Somewhat above today's rates used for stress testing.

No question about that.

But what were house prices at that time compared to the recent past and to current prices? How far will house prices have to fall to meet that historic comparison?

There's a difference between $400,000 at 8.5% and $800,000 at 8.5%.

Your first post hits the nail directly on the head.  Welcome to the forum.

Quote from: winner (n) on Apr 18, 2023, 09:28 AMBut you keep telling us economists can't forecast their way out of a paper bag .....soon worries here

I presume you meant no worries here ?  Maybe so but the fact remains as noted by the above new poster, housing despite falls over the last 17 months is more unaffordable than ever due to interest rates applicable to much larger average loan balances than prevailed a very long time ago when they were last at this level.  As I said yesterday, something in this housing pressure cooker has to give and the only thing that can give at this point in time is prices.

Quote from: Henry Filth on Apr 18, 2023, 09:40 AMIn the past, housing loan interest rates were at 8% and above. Somewhat above today's rates used for stress testing.

No question about that.

But what were house prices at that time compared to the recent past and to current prices? How far will house prices have to fall to meet that historic comparison?

There's a difference between $400,000 at 8.5% and $800,000 at 8.5%.

Totally agree with this but there are other factors also, cost of building has come up a lot and unlikely to go away or reduce significantly any time soon. Also incomes have come up and I think there's more couples and individuals earning decent incomes without kids that are ready to buy even in today's market.

We finished two new stand alone 3 bed's in lower hutt last year and the cost to build each was about 533k and I already owned the land. I don't know how many new build's developer spec shoe boxes, I'd say a fair few of them aren't owner occupied and the ones who do quickly outgrow them.

8.5% would be tough for anyone, 400k or 800k it'd be a big part of that households income. I bought in 2012 for 365k on a 5% deposit as a min-wage apprentice and I think I was paying 6.29% in my second year. 2 jobs, 7 days a week eating egg sandwiches and muesli.

Min wage for me was 13.50 an hour from memory and today it's $22.70 which is 68% increase, I spent over the kiwisaver cap for my area which was 300k at the time, so will use that rather than my 365k. 300k comes up to 504k and I bought an ex state house in need of complete reno.

I think we are already at 500-650k mark for the equivalent houses in my area so I don't see prices dropping much further from here and if they do it's unlikely to be for a sustained period of time.

A lot of residential land also has a completely different value with all the changes to development rules in recent years.

REINZ say median price in March was 1.3% higher than February ...yes UP

The $775,000 is 12.9% down from a year ago up with prices higher than Feb maybe the decline has stopped

RBNZ has hit the market with a sledgehammer since then.
SUM was the last man standing in this sector that was trading within a reasonable scope to its asset backing, (not that I think NTA is an especially relevant metric, it's earnings and cash flow that really matter)
After the release of Q 1 sales its clear even best of breed is not immune to the severe headwinds affecting this sector and it's in the process of being sharply rerated downwards. 

Quote from: winner (n) on Apr 18, 2023, 11:38 AMREINZ say median price in March was 1.3% higher than February ...yes UP

The $775,000 is 12.9% down from a year ago up with prices higher than Feb maybe the decline has stopped

Unfortunately, the more reliable HPI index is down 0.8% month-on-month. Still on a pretty steady decline.

Quote from: mfd on Apr 18, 2023, 01:55 PMUnfortunately, the more reliable HPI index is down 0.8% month-on-month. Still on a pretty steady decline.

But Westpac man says " The REINZ House Price Index was flat in seasonally adjusted terms – the first time we haven't seen a monthly fall since November 2021"

That's pretty good news eh

Insofar as retire sector goes the real concern is the ongoing decline in sales volumes ......and that's coming through in ARV and SUM reports and no doubt OCA will have the same story next month.

Quote from: Basil on Apr 18, 2023, 01:44 PMRBNZ has hit the market with a sledgehammer since then.
SUM was the last man standing in this sector that was trading within a reasonable scope to its asset backing, (not that I think NTA is an especially relevant metric, it's earnings and cash flow that really matter)
After the release of Q 1 sales its clear even best of breed is not immune to the severe headwinds affecting this sector and it's in the process of being sharply rerated downwards. 

Yep SUM down about 10% since that sales update .....market not like

SUM ASM next Wednesday. If they sound a bit gloomy then expect the share price to fall further

And no doubt the others in the sector will follow suit as their reports still a month off.

OCA share price close to going into the 60's ...golly gosh, as bad as SUM going into the 700's

Quote from: winner (n) on Apr 18, 2023, 02:33 PMBut Westpac man says " The REINZ House Price Index was flat in seasonally adjusted terms – the first time we haven't seen a monthly fall since November 2021"

That's pretty good news eh

Insofar as retire sector goes the real concern is the ongoing decline in sales volumes ......and that's coming through in ARV and SUM reports and no doubt OCA will have the same story next month.

Yeap, no doubt RYM will also be reporting the effects next month.
One thing to watch for with all those reporting next month is how much they are losing on day to day village operations.   Its worth noting that RYM, ARV and OCA all reporting offer fixed weekly fees for life which were set when costs were much lower and with inflation in general running at over 7% and the real rate of inflation in the care sector probably well north of that....   Its one thing for sales volumes to be down, but quite another when that's exacerbated by alarming rates of increase in the losses from running village operations.  Factor in MUCH higher debt funding costs and a Government radically underfunding care and as I see it, you basically have "The perfect storm".

Imagine just for a moment what would happen if the Govt changed the tax policy and made the resale gains of licenses to occupy taxable income and closed that "loophole"  Perhaps another 20-50% fall for the entire sector?  Just as well the Govt's review of this sector is unlikely to include looking at the tax treatment of resale of license to occupy...but maybe they do?  As I see it they've basically hung the entire sector out to dry with the extra Covid costs these companies have faced so its not inconceivable that they put the boot in with a change to the tax treatment of license resales.  This Govt have form with this sort of thing.  Just look how they have turned the tables on more than 100 years of tax law by disallowing interest on residential property investment undermining the most basic of all principles of the tax law that an expense necessarily incurred in earning income is tax deductible.
Longstanding tax principles mean nothing to this Government.

Quote from: Basil on Apr 18, 2023, 03:06 PMYeap, no doubt RYM will also be reporting the effects next month.
One thing to watch for with all those reporting next month is how much they are losing on day to day village operations.  Its one thing for sales volumes to be down, but quite another when that's exacerbated by alarming rates of increase in the losses from running village operations.  Factor in MUCH higher funding costs and a Government radically underfunding care and you basically have "The perfect storm".

Imagine what would happen if the Govt changed the tax policy and made the resale gains of licences to occupy taxable income and closed that "loophole"
Perhaps another 20-50% fall for the entire sector?  Just as well the Govt's review of this sector is unlikely to include looking at the tax treatment...but it is nonetheless a very real risk.

All hail the prophet of doom, imagine if a giant meteorite struck the earth tomorrow.

Quote from: Breezy on Apr 18, 2023, 03:16 PMAll hail the prophet of doom, imagine if a giant meteorite struck the earth tomorrow.

Go hard or go home eh, why worry.  Wake up and smell the coffee.  Tens of thousands of landlords across the country never thought the Govt would kneecap their major investment in the way they have. 

Basil, Why did you pick ARV in the shareTrader 2023 comp when you've known the sector is so poor performing?

137   Beagle   HLG    ARG    HGH    TRA    ARV       47917.75375   95.84%   

It was a wildcard "dark horse" last pick entry based on its very deep discount to NTA.  I wouldn't pick it today.
I have also sold my stake in ARV since then.  I have come to realise that NTA matters very little in this sector.
All that really matters is what you can earn from the assets and share prices eventually follow earnings.
Companies with a high care sector business model are like cars driving with the handbrake on.
SUM is in my view the only stock really worth owning long term in this sector, (lowest care percentage of their business model and smartest operators).
That said, this is not the right time to own them, either.  All boats fall on an outgoing tide.

You, and others, keep bringing this up as a serious possibility. Others of us have tried to point out that the likelihood of it happening, is close to zero. How do you not understand that the government (doesn't matter which party) cannot afford to do this? They are 100% reliant on Aged Care Providers/RVs, to provide Aged Care for the entire country. The government provides none themselves. They washed their hands of it years ago, and decided that financially assisting external providers was the better option. They cannot and will not ever pick that up again. They may well, and probably should, tweak a few things over the next few years, but they literally cannot afford to make major tax or other changes, that would negatively impact on the services those providers can continue to provide.

The government should be working with providers to come up with a mutually agreeable plan for how NZ is going to manage the crisis we are already in, particularly in terms of dementia care, and they need to find a way to work in partnership to ensure providers will continue to provide a care arm to their business. Because, if they don't, there will be a hell of a lot of elderly folk either lining up for a hospital bed, or dying alone in their homes in 15-20 years.

These conversations go round and round in circles. Why are any of you apparently so surprised that RVs are experiencing a somewhat tougher time right now? Isn't that precisely what you would expect, given inflation and the many global economic issues we are dealing with?

Investors have two options. Sell up and shut up. Or stick with whatever company they hold, and trust that this is a temporary situation. If one still has faith in said company, and said company is doing what they said they would (while adapting as needed to current economic issues) - patience is a virtue.

In the meantime, this constant circular debate is nothing short of pointless.

Quote from: Basil on Apr 18, 2023, 03:06 PMImagine just for a moment what would happen if the Govt changed the tax policy and made the resale gains of licenses to occupy taxable income and closed that "loophole"  Perhaps another 20-50% fall for the entire sector?  Just as well the Govt's review of this sector is unlikely to include looking at the tax treatment of resale of license to occupy...but maybe they do?

Logically they should not interfere, but this Govt has built quite a track record over the last 5 and a half years of doing a lot of illogical things.  For example, their repetitive interference with private landlords rights and the tax rules was very recently reported to have resulted in twice as many people in emergency housing as this time last year.   That's hundreds of extra young families being moved into motels and being forced to rub shoulders with gang members peddling methamphetamine. This Govt don't seem to understand the principles of unintended consequences, so you never really know what they are going to do next.

Quote from: Basil on Apr 18, 2023, 03:35 PMIt was a wildcard "dark horse" last pick entry based on its very deep discount to NTA.  I wouldn't pick it today.
I have also sold my stake in ARV since then.  I have come to realise that NTA matters very little in this sector.
All that really matters is what you can earn from the assets and share prices eventually follow earnings.
Companies with a high care sector business model are like cars driving with the handbrake on.
SUM is in my view the only stock really worth owning long term in this sector, (lowest care percentage of their business model and smartest operators).
That said, this is not the right time to own them, either.  All boats fall on an outgoing tide.

Fair enough. Appreciate the answer. I think ARG and ARV are just different types of  property boats falling on the same tide.

QuoteQuote from: Basil on Today at 03:06 PM
Imagine just for a moment what would happen if the Govt changed the tax policy and made the resale gains of licenses to occupy taxable income and closed that "loophole"  Perhaps another 20-50% fall for the entire sector?  Just as well the Govt's review of this sector is unlikely to include looking at the tax treatment of resale of license to occupy...but maybe they do?

There was fund manager suggesting the other day that part of the reason retire stocks had been beaten down was tax changes etc were being factored into the prices. This on top of high costs in sector and not so flash property market hurting the stocks in the sector.

Maybe he was trying to say it wasn't his fault for continuing to hold these stocks.

But "this lot" will probably not be the government after the election (at least that seems to be the general consensus of opinion here). I cannot seriously imagine a National Government would have any desire to rock the boat. They may not, however, be very open to increasing the care subsidy either. Social conscience is not their forte.

Quote from: Basil on Apr 18, 2023, 03:49 PMLogically they should not interfere, but this Govt has built quite a track record over the last 5 and a half years of doing a lot of illogical things.  For example, their interference with private landlords was very recently reported to have resulted in twice as many people in emergency housing as this time las year.
You never really know with this lot what they are going to do next.

Quote from: Untamed on Apr 18, 2023, 03:56 PMBut "this lot" will probably not be the government after the election (at least that seems to be the general consensus of opinion here). I cannot seriously imagine a National Government would have any desire to rock the boat. They may not, however, be very open to increasing the care subsidy either. Social conscience is not their forte.

The polls are a real worry, (it seems the public think Chippy is a quite likeable brand of lipstick on a pig), and if a Labour lead Maori and Greens party coalition get in for a third term all bets are off.
Thing is, this Govt have basically thrown the care sector under the bus, I think we can all agree on that.
All National have promised to do is index care bed contributions to inflation.  Isn't that just leaving the care sector under the bus?

Polls are meaningless. Nobody has ever polled me for my opinion. Having said that, National better up their game or they will have nobody to blame but themselves.

You are right - neither party has given sufficient attention to the Aged Care situation, for many years. They have apparently just hoped the problem would go away if they ignored it. More fool them. Anyone working in the sector, at any level, could have told them this was coming. Now they are faced with a crisis, with additional crises looming (drug and alcohol related particularly) - and they have no plan.

All of us, as investors and as tomorrow's "elderly" should be talking to politicians/candidates and asking them what their party is going to do. If, by some remote chance, any party steps up and comes out with policy that addresses this, and a commitment to do what needs to be done - they will get my vote this time round.

Quote from: Basil on Apr 18, 2023, 04:01 PMThe polls are a real worry, (it seems the public think Chippy is a quite likeable brand of lipstick on a pig), and if a Labour lead Maori and Greens party coalition get in for a third term all bets are off.
Thing is, this Govt have basically thrown the care sector under the bus, I think we can all agree on that.
All National have promised to do is index care bed contributions to inflation.  Isn't that just leaving the care sector under the bus?

Quote from: Perky on Apr 18, 2023, 03:50 PMFair enough. Appreciate the answer. I think ARG and ARV are just different types of  property boats falling on the same tide.

Maybe but I think ARG can pay me (effectively for a 33% taxpayer) close to 9% gross right through the cycle.
For old hungry semi retired dogs like me, that keeps me well fed and watered.

Quote from: Basil on Apr 18, 2023, 01:44 PMRBNZ has hit the market with a sledgehammer since then.
SUM was the last man standing in this sector that was trading within a reasonable scope to its asset backing, (not that I think NTA is an especially relevant metric, it's earnings and cash flow that really matter)
After the release of Q 1 sales its clear even best of breed is not immune to the severe headwinds affecting this sector and it's in the process of being sharply rerated downwards. 

You can take the NTA with a grain of salt.  Retirement villages are in the exact same situation as commercial property currently - nobody wants to sell anything at a lower price because that will then provide firm data to the valuers, so they'll wear the lower sales volumes while maintaining cap values.  But as soon as they are forced to drop prices in order to get sales, then that will unleash a wave of revaluations across the industry.  And to date a lot of their statutory profits have come from upward property revaluations, so you can expect losses as they start downwards devaluing.

Quote from: KW on Apr 18, 2023, 05:02 PMYou can take the NTA with a grain of salt.  Retirement villages are in the exact same situation as commercial property currently - nobody wants to sell anything at a lower price because that will then provide firm data to the valuers, so they'll wear the lower sales volumes while maintaining cap values.  But as soon as they are forced to drop prices in order to get sales, then that will unleash a wave of revaluations across the industry.  And to date a lot of their statutory profits have come from upward property revaluations, so you can expect losses as they start downwards devaluing.

Yup - just like the banks are holding out against defaults and mortgagee sales.

RBNZ currently has no choice but to keep raising interest rates to counter the Labour government's spendthrift behaviour.

Saw Hipkins defending prolific government spending today?  No less than Treasury has come out to assert that the government has been fanning inflation with its prolific and wasteful spending.

Quote from: Basil on Apr 18, 2023, 01:44 PMRBNZ has hit the market with a sledgehammer since then.
SUM was the last man standing in this sector that was trading within a reasonable scope to its asset backing, (not that I think NTA is an especially relevant metric, it's earnings and cash flow that really matter)
After the release of Q 1 sales its clear even best of breed is not immune to the severe headwinds affecting this sector and it's in the process of being sharply rerated downwards. 

Please take care of yourself. It is so easy to talk yourself into a depression!

And hey - there is light at the end of the tunnel, and it is not a freight train coming towards us.

In the recent ANZ NZ Economic Update (April 18th) I noticed that they started wondering, whether we might reach Real estate bottom already a bit earlier than predicted (they expected it to bottom this winter).

Now - I realise that neither the economists nor you (or I) are able to predict the future, but just spreading bad vibes to annoy people is bad for your mood and your health.

Last time I checked we didn't had a flood of empty houses at our doorsteps and the last migration numbers I saw showed more than 10k people surplus arriving at our shores. 10 k in one month! Just wondering where they will live?

Maybe some of these immigrants bring even money to buy houses? Maybe some of our young people are not braindead enough to spend their last penny at Hallensteins but start instead their Kiwi homeowner career?

Who knows?

Anyway - life is good, sun will rise tomorrow and I see no issues for investors in retirement villages if they have an attention span longer than a fruit fly ...

Fair enough BP.  Each to their own.  Mum late Mum often used to say, there's always sunshine after rain.  I'm happy to sit the downtrend out and wait for a new well proven uptrend to start in SUM as evidenced by a break up through 200 day MA, whenever that happens in due course.

Gosh, more talk about light at the end of the tunnel.  I guess the key question is how long is the tunnel ?  Are we talking the Homer Tunnell or the very long Waterview tunnel in Auckland ?  For my money that's something I don't need to ponder.  I'll let TA tell me the answer.
https://www.msn.com/en-nz/news/national/beginning-of-the-end-for-nz-house-price-downturn-why-one-property-economist-says-mortgage-rates-may-have-reached-peak/ar-AA1a3Xi1?ocid=msedgntp&cvid=f6ba7431b3a949868431401bf1387c85&ei=12

Migration might solve the problem https://www.oneroof.co.nz/news/43436

Quote from: Basil on Apr 20, 2023, 10:00 AMFair enough BP.  Each to their own.  Mum late Mum often used to say, there's always sunshine after rain.  I'm happy to sit the downtrend out and wait for a new well proven uptrend to start in SUM as evidenced by a break up through 200 day MA, whenever that happens in due course.

Gosh, more talk about light at the end of the tunnel.  I guess the key question is how long is the tunnel ?  Are we talking the Homer Tunnell or the very long Waterview tunnel in Auckland ?  For my money that's something I don't need to ponder.  I'll let TA tell me the answer.
https://www.msn.com/en-nz/news/national/beginning-of-the-end-for-nz-house-price-downturn-why-one-property-economist-says-mortgage-rates-may-have-reached-peak/ar-AA1a3Xi1?ocid=msedgntp&cvid=f6ba7431b3a949868431401bf1387c85&ei=12

Migration might solve the problem https://www.oneroof.co.nz/news/43436

I guess this discussion is probably larger than just retirement stocks, it is about investment strategies - but anyway:

I do realize that one school of thought says "buy only in an established uptrend". TA based. And yes, if there is a small number of people doing that in a random market, this might be one of many available winning strategies (though, depending on your favourite indicators you might have a fickle established uptrend and spend more in broker charges than you save in capital gains, but this is a different question).

Always interesting to do a min-max - analysis: If everybody religiously uses this amazing TA based strategy (only buy in an established uptrend), it is easy to see that the market stops working: nobody would sell in an uptrend (no market) and nobody would buy in a downtrend either (no market as well). Do you think its just idiots selling in an uptrend and buying in a downtrend? There are many winning strategies doing that.

Interesting to notice that fund managers typically buy in downtrends (that's the only time when they can get enough stock without distorting the market) and sell in uptrends. Some people call them "smart money". While I don't agree with the latter label (and not just because money is always dumb), I don't think that they are particularly stupid either.

A different school of thought says - buy when an investment is fundamentally undervalued. Obviously - it is as impossible to determine the future value of any investment as it is to predict the future value of a share. You have to make working assumptions, and if they turn right and nothing unexpected happens, you win, and otherwise you loose.

Some particularly smart people claim that they are combining these two strategies ... and yes, I sometimes try to do that as well (without reflecting on my smartness :) ); Not sure, though whether ordinary strategies work in extraordinary times.

I am coming from a part of the world where during the last century the value of the money got completely destroyed - two times. OK - given that they used at that stage paper money, you still could use it for the toilet or for paper hanging. But apart from that - any cash was worth Zilch. Members of my family experienced these times and some lost (the ones holding cash) and some gained (the ones holding property and shares). Looking at the global situation (WW3 potentially looming, and huge public debts everywhere)- I am not saying it will come again, but I would not exclude it either.

Who knows, how NZ and / or any international investments will react, but no doubt some will do better than others.

What I do know is - after the last two money destruction events in Germany there have been two classes of "haves": Class one used to have lots of cash, and they had afterwards nothing. Class two used to have property and ownership in production facilities (like shares) - and they did very well.

If the next reset comes (and nobody can predict when) I try to belong to the second group of people, i.e. lets talk about which companies will do best in the future (and no matter whether we will have another reset or not), but lets forget these TA games which require you to hold 100% cash at the point when the money is reset. Bad gaming strategy, that.

But as you say - each to their own, and nobody can predict the future.

Can't see anything in your post that's on topic...perhaps we can discuss investment strategies another time in a more appropriate thread.
On topic - Brian Cree Executive Director of Radius Healthcare has been running full page adds in the Herald and other publications saying some very concerning things about the healthcare industry and the chronic extent of the underfunding.
You may be able to access a digital representation of the physical newspaper here...well worth a read.
https://edition.pagesuite.com/html5/reader/production/default.aspx?pubname=&pubid=18dca2a1-e3ba-465f-bdee-0d067d11827d
Page 4.

https://www.nzherald.co.nz/nz/politics/new-zealanders-in-australia-to-get-pathway-to-citizenship-pm-chris-hipkins-says-biggest-improvement-in-rights-in-a-generation/6PLRW4T7C5B6TAQD3A257OLYQA/

So if you are a young nurse and know can earn 30-50% more in Australia and housing is some states is much cheaper surely this dramatic change to the pathway to residency makes it much more attractive to shift there?  Nurse retention was already a headwind, its now potentially, worsened.

So, which New Zealand institution will be the first to pivot to teaching nursing to the Australian standard?

https://www.msn.com/en-nz/news/national/australia-s-major-visa-changes-could-open-floodgates-for-kiwis-to-migrate-commentators/ar-AA1aazPa?ocid=msedgntp&cvid=1b9d355beaf34627abcd1f98e423305d&ei=7

Quote from: Basil on Apr 22, 2023, 03:44 PMhttps://www.msn.com/en-nz/news/national/australia-s-major-visa-changes-could-open-floodgates-for-kiwis-to-migrate-commentators/ar-AA1aazPa?ocid=msedgntp&cvid=1b9d355beaf34627abcd1f98e423305d&ei=7

Yes they have taken the Pavlova, The flat white, Russell Crowe, and Pharlap and now this. Whens it going to end.

This is great news for Australia and the nearly 700k of Kiwi who live their. For NZ will put a lot more pressure on employers to compete. Hopefully will not lead to the huge migration loss we had in 2004 to I think 2012, which was 30k a year to Australia alone. 

A positive vote winner for current lot.

Quote from: Shareguy on Apr 22, 2023, 04:47 PMYes they have taken the Pavlova, The flat white, Russell Crowe, and Pharlap and now this. Whens it going to end.

This is great news for Australia and the nearly 700k of Kiwi who live their. For NZ will put a lot more pressure on employers to compete. Hopefully will not lead to the huge migration loss we had in 2004 to I think 2012, which was 30k a year to Australia alone. 

A positive vote winner for current lot.

Don't forget how worried we are about our infrastructure. 30k Kiwis less a year leaves for the remaining lot lots more toilets per butt and road km as well as undisturbed fishing spots for the real men.

No worries - our xenophobes and claustrophobes should be be happy.

Quote from: Basil on Apr 22, 2023, 11:40 AMSo if you are a young nurse and know can earn 30-50% more in Australia and housing is some states is much cheaper surely this dramatic change to the pathway to residency makes it much more attractive to shift there?  Nurse retention was already a headwind, its now potentially, worsened.

WANTED
"Old grizzled nurse with no ambition wanted to work in the retirement sector.  Must have $1m in cash to buy a house as mortgages in NZ are now unaffordable.  Cost cutting employer will pay you as little as possible with no security of employer viability.  Little on site back up help available.   Helmet supplied for banging your head against the toilet cubicle in your lunch break.  Tissues to wipe the tears not supplied (use toilet paper).  Please apply to <fill in any NZ retirement village you like>"

Hmmf!   I think I missed my provessional calling in life as a copyvriter.

RB

Quote from: Red Baron on Apr 22, 2023, 07:29 PMWANTED
"Old grizzled nurse with no ambition wanted to work in the retirement sector.  Must have $1m in cash to buy a house as mortgages in NZ are now unaffordable.  Cost cutting employer will pay you as little as possible with no security of employer viability.  Little on site back up help available.   Helmet supplied for banging your head against the toilet cubicle in your lunch break.  Tissues to wipe the tears not supplied (use toilet paper).  Please apply to <fill in any NZ retirement village you like>"

Hmmf!   I think I missed my provessional calling in life as a copyvriter.

RB

Looks like you embarked instead on a career as phantasy writer. While I can't see anybody buying this stuff - you are still allowed to publish it for free on the internet :P ;

Quote from: Henry Filth on Apr 22, 2023, 02:12 PMSo, which New Zealand institution will be the first to pivot to teaching nursing to the Australian standard?

Probably this one, since NZ Nursing Union isnt interested in approving it. 
https://www.newsroom.co.nz/up-education-hits-wall-with-nursing-council

Quote from: Shareguy on Apr 22, 2023, 04:47 PMYes they have taken the Pavlova, The flat white, Russell Crowe, and Pharlap and now this. Whens it going to end.

This is great news for Australia and the nearly 700k of Kiwi who live their. For NZ will put a lot more pressure on employers to compete. Hopefully will not lead to the huge migration loss we had in 2004 to I think 2012, which was 30k a year to Australia alone. 

A positive vote winner for current lot.

The biggest change will be that people with children can now move to Australia.  Previously anyone with kids faced a system where their children couldnt access the NDIS or University student loans, so health and education would have to be privately paid for.  Now anyone with kids under 14 can move to Australia and after 4 years get citizenship for their kids in time for them to go to University.  And lets face it, would you rather enrol your kids in an Australian University where they get a world class education or one where they are taught "Maori Science (and other race based rubbish)" and the world laughs at them?  I foresee a lot of parents making the move just to get a better education for their kids now.  This is probably quite pertinent to a lot of Asian immigrants here, for whom education is important. 

And secondly, people in middle age won't need to move back to NZ if they suddenly become unwell or unemployed.  They can stay there and plan their retirement.  I looked into getting PR and citizenship, but did not qualify under the points system due to my job not being on the Skills List.  Things probably would be quite different if I could have.  This does have flow on effects to the demographic group looking to enter retirement villages in the next few decades.  As there is no age limit or health condition imposed, people can now chose to retire directly in Australia so we may see elderly people move to Australia to be closer to their children and grandchildren, rather than retiring in NZ.  There is no income requirement either, so those who can support themselves for 4 years will be able to citizenship as well, without needing to have worked there.

I just hope that it doesnt get abused - sadly I forsee a bunch of losers going to Australia, working the bare minimum to survive 4 years, and then applying for citizenship and going on a benefit immediately after.  The second rising of the Bondi Bludger will ruin it for the rest of us. 

https://www.nzherald.co.nz/nz/is-the-new-pathway-to-australia-paved-with-gold-for-kiwis/54S46GV6QRBWPEJZFYKRGJZBJM/

Some good points here. I think this deserves its own thread as a bit off topic here. Have created Australia thread.

 

Big month with three of the companies reporting.
No doubt many of us will be running the ruler over all 3 very carefully.

Had a surprising chat with my sister in law on the weekend who recently had to put her mother into care in Auckland.  Couldn't find anywhere appropriate for under $2,000 per week. :o
Not sure of the level of care required but I would guess its at the high end. 

Is this cost the new normal now ?  Was nothing like that when my Mum was in care a couple of years ago.  Think from memory the Govt paid about $1,300 per week and she paid $45 a day for a premium room with a nice sea view, total about $1600 per week, so yeah I guess with cost pressures over the last 2 years $2,000, (up 25%) shouldn't really surprise me for a nice room..  Thing is, I think $2,000 was for a tiny shoebox and X and her mother are paying $2,300 per week up more than 43% on what my Mum was paying 2 years ago !

If they're charging like this how can they not be making money from care ?  Not an especially upmarket facility in my opinion. https://www.metlifecare.co.nz/auckland-west/powley  Maybe the new Swiss owners of Metlifecare putting the boot in with fees ?

Quite possibly. I was never party to this kind of information in my job, but I was told on numerous occasions by one gentleman (106 years old with a sharper brain than you or I!) that he was paying $1300 week. He does have a private bathroom, which is an additional cost, so not entirely sure how of that total, is the room charge. This is basic rest home level care, so hospital level and secure dementia level care, would obviously be higher.

As you have said often, staffing costs are significant. Staffing costs are the greatest cost for that organisation. Continence products are apparently the second biggest cost. Those are provided by the rest home - but I have no idea whether that is the case with the big providers. I would certainly hope so.

Having said that, you cannot provide any level of care, without staff. That includes caregivers, RNs, housekeeping staff, cooks/kitchen staff, grounds/maintenance people, laundry. But some of those costs are not specific to "care suites/beds" - in an RV, some of those staffing costs also apply to those in villas or apartments, many of whom choose to have a main meal provided, gardening service, and RN support.

The division between what you see as "Care" and what you see as "independent living" within a village, is not as cut and dried as you might think.

Quote from: Basil on May 02, 2023, 09:07 AMIs this cost the new normal now ?

Quote from: Untamed on May 02, 2023, 09:17 AM...that he was paying $1300 week. He does have a private bathroom, which is an additional cost, so not entirely sure how of that total, is the room charge. This is basic rest home level care, so hospital level and secure dementia level care, would obviously be higher.

Thanks, that probably explains it.  They found out she is a diabetic and has several other issues so it probably is hospital level care. 
As for being sharp...well, I need two cups of coffee before attempting anything remotely like challenging.  Its only after the second cup of coffee my remaining two brain cells are able to communicate with each other properly lol
He must have been quite a character to still be sharp at 106 !

In late 2020, on behalf of a relative, we were researching care costs at a Ryman village in Auckland for long term financial planning purposes. At that time costs for hospital/dementia care ranged from $1629 to $1705 per week for a private paying resident. If entitled to a subsidy there was still a private portion of between $448-$525 per week. No doubt it has increased since then.

Perhaps that was to cover additional "premium" costs? My Mum is in a rest home - hospital level, with a full government subsidy. But she does not have any premium extras, so no additional payment needed, other than the usual family costs such as podiatry, hairdresser, toiletries etc.

Quote from: Mos on May 02, 2023, 02:25 PMIn late 2020, on behalf of a relative, we were researching care costs at a Ryman village in Auckland for long term financial planning purposes. At that time costs for hospital/dementia care ranged from $1629 to $1705 per week for a private paying resident. If entitled to a subsidy there was still a private portion of between $448-$525 per week. No doubt it has increased since then.

Quote from: Untamed on May 02, 2023, 03:15 PMPerhaps that was to cover additional "premium" costs? My Mum is in a rest home - hospital level, with a full government subsidy. But she does not have any premium extras, so no additional payment needed, other than the usual family costs such as podiatry, hairdresser, toiletries etc.

Interesting. A Ryman premium it seems.

Property prices still falling but rate of decline continues to ease ....bottoming out in other words

Property market to remain subdued for a few years

https://www.rnz.co.nz/news/business/489151/property-prices-still-falling-but-rate-of-decline-easing

Quote from: winner (n) on May 03, 2023, 07:55 AMProperty prices still falling but rate of decline continues to ease ....bottoming out in other words

Property market to remain subdued for a few years

https://www.rnz.co.nz/news/business/489151/property-prices-still-falling-but-rate-of-decline-easing

Better wait for more REINZ data I reckon.  Certainly, Barfoot and Thompson's report out and Peter Thompson himself saying winter had arrived early with lowest sales in 22 years and Auckland prices down a whopping $30,000 in April is not supportive of the contention that house price declines are slowing.  Auckland prices down down $245,000 from the peak in November 2021 = an average monthly fall of $14,400 so a $30,000 fall in April suggests the pace of the fall is increasing, not decreasing.   (Of course, don't expect any real estate agent to admit that).  Lowest April sales in 22 years and price down $30,000 in a month speaks for itself.  Who is to say they definitely won't continue to go down at $30,000 a month or thereabouts for quite some time...and I would suggest its exactly that thought prices that's going through buyers minds.  Why be in a hurry to buy now ?...and of course all this flows through into the RV stocks because for most people to buy a unit they have to sell and get the settlement proceeds from their home.

and from the circus ring leader himself.. along with falling farm profits...

https://www.nzherald.co.nz/business/reserve-bank-house-prices-remain-overvalued-and-risk-falling-a-lot-more/YU4BZ7YP2BBSXORNJZ6DZZC4C4/

Interesting chart in a Westpac report

Confirms strong relationship between dwelling consents and property prices

EFCC01B4-8E98-47F9-83C8-1F4580FC8B55.jpeg

Quote from: winner (n) on May 04, 2023, 12:09 PMInteresting chart in a Westpac report

Confirms strong relationship between dwelling consents and property prices

EFCC01B4-8E98-47F9-83C8-1F4580FC8B55.jpeg

Building consents - lagging indicator? 

Quote from: winner (n) on May 04, 2023, 12:09 PMInteresting chart in a Westpac report

Confirms strong relationship between dwelling consents and property prices

EFCC01B4-8E98-47F9-83C8-1F4580FC8B55.jpeg

Well, yes - seems to suggest we are nearly there (at the bottom), but should expect an L-shaped recovery. On the bright side - they chart inflation adjusted house prices, i.e. they expect them to go up, just not more than inflation.

This probably makes it right - everybody loves a bit of inflation, don't they?

https://www.9news.com.au/national/federal-budget-2023-frontline-worker-pay-rise-cost-of-living/66499f81-6888-48d8-a89a-ca0926327bbf

Decent sized increases for Australian workers in this sector.

Quote from: winner (n) on May 04, 2023, 12:09 PMInteresting chart in a Westpac report

Confirms strong relationship between dwelling consents and property prices

[url="https://stocktalk.co.nz/index.php?action=dlattach;attach=803;type=preview;file"]EFCC01B4-8E98-47F9-83C8-1F4580FC8B55.jpeg[/url]

Stating the obvious there as prices go up so builders profits increase and dwelling consents go up .
Obviously depending on the type of dwelling consent .
 I would take this westpac forecast with a large dose of salted Optimism   

Rather threatening headline today...... article paywalled.

https://www.nzherald.co.nz/business/commerce-commission-begins-retirement-village-probe-is-law-being-broken/COKO6GXK2VEQ7KUYJC5IVTMDYQ/

Quote from: Left Field on May 10, 2023, 02:56 PMRather threatening headline today...... article paywalled.
https://www.nzherald.co.nz/business/commerce-commission-begins-retirement-village-probe-is-law-being-broken/COKO6GXK2VEQ7KUYJC5IVTMDYQ/

"We understand those investigations to be about misleading representations, common amongst the bigger players that have rest homes and village facilities.
"Once you enter such a facility, the industry creates the impression that it can support and accommodate your needs for the rest of your life. They say they can move you to rest home care when in fact the small print makes it very clear that will only occur if there's a suitable bed available and other conditions are fulfilled," he said.
It wasn't as simple and clearcut a progression as suggested in advertising by the sector, Duffy said.
"That's concerning for residents believing they can rely on rest home care and thinking they will be able to stay with a spouse in a village. They may not be able to," Duffy said."

•   RYM / OCA / SUM / ARV – STOP PRESS – In Australia the Labor Government is cutting $2.2bn in funding for nursing homes over the next three years as it shifts its spending focus on in-home care which it suggests "reflects the increasing preference of older Australians to remain in their own homes". Citing the need for "budget repair", the government said it had moved to reprioritise spending away from nursing homes by "temporarily" reducing the provision of government-funded aged-care places from 78 per 1000 people over 70 to 60.1.  While negative at the margin for operators with Australian exposure (RYM / SUM) we note that New Zealand is currently well ahead of Australia with 'aging in place', falling penetration rates of rest home level care in NZ (equivalent to low care in AU) has been falling for 15 years now, and hasn't yet found a bottom. The other big-ticket Budget item was the pre-announced $11b increase in aged care funding to support higher wages, which we expect to largely be a pass-through for providers.

Quote from: Shareguy on May 10, 2023, 03:45 PM• RYM / OCA / SUM / ARV – STOP PRESS – In Australia the Labor Government is cutting $2.2bn in funding for nursing homes over the next three years as it shifts its spending focus on in-home care which it suggests "reflects the increasing preference of older Australians to remain in their own homes". Citing the need for "budget repair", the government said it had moved to reprioritise spending away from nursing homes by "temporarily" reducing the provision of government-funded aged-care places from 78 per 1000 people over 70 to 60.1.  While negative at the margin for operators with Australian exposure (RYM / SUM) we note that New Zealand is currently well ahead of Australia with 'aging in place', falling penetration rates of rest home level care in NZ (equivalent to low care in AU) has been falling for 15 years now, and hasn't yet found a bottom. The other big-ticket Budget item was the pre-announced $11b increase in aged care funding to support higher wages, which we expect to largely be a pass-through for providers.

One thing one of the village operators mentioned to us on our enquiries was that being in a retirement village independent unit meant you still qualify for all the standard "home care" services the Govt provides, like Nurse Maud etc.  I think Australia is going to move aged care down the same path as health and education - in that a third of the country is going to have to pay for private care if they want to be looked after. 

Quote from: Shareguy on May 10, 2023, 03:45 PM•   RYM / OCA / SUM / ARV – STOP PRESS – In Australia the Labor Government is cutting $2.2bn in funding for nursing homes over the next three years as it shifts its spending focus on in-home care which it suggests "reflects the increasing preference of older Australians to remain in their own homes". Citing the need for "budget repair", the government said it had moved to reprioritise spending away from nursing homes by "temporarily" reducing the provision of government-funded aged-care places from 78 per 1000 people over 70 to 60.1.  While negative at the margin for operators with Australian exposure (RYM / SUM) we note that New Zealand is currently well ahead of Australia with 'aging in place', falling penetration rates of rest home level care in NZ (equivalent to low care in AU) has been falling for 15 years now, and hasn't yet found a bottom. The other big-ticket Budget item was the pre-announced $11b increase in aged care funding to support higher wages, which we expect to largely be a pass-through for providers.

I've seen the downside of care in home up front and personal with two aging relatives that passed in recent years.  I know what they are trying to do is save money but the risks of falls and forgetting to take the correct medication are very real and a broken hip from a fall is a very miserable thing for old folks to endure in their sunset years.  Also puts a lot of pressure on children of old folks if they are living with them to keep on supporting them.  Its all very well to send a caregiver into your home for an hour a day for showering and a meal but there's 23 other hours in the day...

It can be a really hard journey emotionally for the kids too.  My advice is to stay vigilant...there comes a tipping point where in home care is not a viable solution anymore for all parties concerned.  Of course the DHB will try and push you past this point to save money....push back against that and bark very loudly when you think the time has come for full time care or you want more care in home for your loved one.

There are varying levels of in home assistance though Basil. Some people will get four visits a day - some may be just to administer or supervise the taking of medications. I know of one woman who has a morning visit for assistance with dressing, shower, and meds. She gets another visit at lunchtime to prepare lunch. Another in the evening to prepare tea meal and one later to do bedtime wash/assistance to bed/meds. It depends on the individuals needs and their NASC assessment report. If they are assessed as needing medication supervision they will get that. If they are charted controlled drugs such as insulin, morphine, fentanyl patches or medicinal cannabis - two caregivers will visit to administer those.

Quote from: Basil on May 10, 2023, 06:07 PMI've seen the downside of care in home up front and personal with two aging relatives that passed in recent years.  I know what they are trying to do is save money but the risks of falls and forgetting to take the correct medication are very real and a broken hip from a fall is a very miserable thing for old folks to endure in their sunset years.  Also puts a lot of pressure on children of old folks if they are living with them to keep on supporting them.  Its all very well to send a caregiver into your home for an hour a day for showering and a meal but there's 23 other hours in the day...

Quite right Untamed and towards the end my Mum was getting 2, or it might have been 3 visits a day, sorry I forget, (getting older myself lol).  Living on her own the risk of falls really worried me...it really messed with my head to be honest.  Needs assessors are human too of course and make mistakes and somewhat subjective assessments.  I thought they dragged the unit care out too long but would be the first to say I am not in a position to make an objective assessment due to my emotional involvement.  Everyone wants the very best for their own Mum eh  :)
There were a few times there towards the end my brother and I were deeply upset that we felt she wasn't getting enough Morphine.  That leaves a mark on you thinking your own Mum was in untoward level's of pain towards the end.

Do you mean at end of life when your Mum was actively dying and possibly on a syringe driver delivering morphine? I don't mean to pry, but if that's what you are referring to, what you were seeing may not have been pain, but "terminal agitation." This is very common in the final stages and is horrible for families to see, but it is a normal part of the dying process and something the person isn't aware of, nor does it bother them. Sometimes additional medications are added to the syringe driver to reduce the agitation, but the reality is, this is usually done for the family's benefit (less traumatic for them) than it is for the person.

Quote from: Basil on May 10, 2023, 06:19 PMThere were a few times there towards the end my brother and I were deeply upset that we felt she wasn't getting enough Morphine.  That leaves a mark on you thinking your own Mum was in untoward level's of pain towards the end.

You have far more experience with these sort of things, I don't know to be honest.
We had the two year anniversary the other day so that stirred things up a bit for me emotionally.
One good thing is we got 9 months, (original prognosis was 6 months with lung cancer so an unexpected bonus of 3 months) to relive all the happy times and everything that needed to be said was said and we got to say Goodbye the day she passed.
She lived a good life and went to be with God at 91.5 years so that's a pretty good innings....anyway...enough emotional clap trap from me, let's get back to discussing retirement villages.  Three of them reporting this month so that should give a really good feel for the state of the industry overall.

REINZ April report says 'Nationally, the April 2023 median price decreased 10.9% year-on-year to $780,000.'

That $780,000 for April is up on the $775,000 reported in March .....so MEDIAN PRICE INCREASED IN APRIL. Cool

How number of sales declined again ....not a good sign for retirement sector sales volumes. Suppose Ryman and Oceania will mention that in coming weeks

yes you might get some bounces in the years ahead but is the trend now appearing ... and  its.... Down. just had ten years brought forward of prices spiking and it did not last long.

Quote from interest.co.nz about the terrible sales volumes numbers reported by REINZ .... Lowest April number reported since 1992 (except for 2020 lockdown)

Quote was ' All up, the figures the figures paint a disastrous picture of the state of the housing market.'

Hard to see how retirement sector sales won't be affected as well

Crickey...that was quite a confronting image to go with that story.  Not a pretty picture is it.
Now the Govt in full on "attack dog mode" looking to possibly even retrospectively change all the terms of existing retirement village contracts as well as making changes to future contracts.   

Quote from: Basil on May 11, 2023, 10:41 AMCrickey...that was quite a confronting image to go with that story.  Not a pretty picture is it.
Now the Govt in full on "attack dog mode" looking to possibly even retrospectively change all the terms of existing retirement village contracts as well as making changes to future contracts.   

They will change stuff all, its election year and 99% of residents don't want any changes, any Govt that interferes in this sector other than fringe window dressing is stuffed, if the big players reduce the care side offering of their business where are the Govt going to put the people with the hospitals already overflowing and home based care not able to adequately cater for the needy crowd.

Quote from: Breezy on May 11, 2023, 11:25 AMThey will change stuff all, its election year and 99% of residents don't want any changes, any Govt that interferes in this sector other than fringe window dressing is stuffed, if the big players reduce the care side offering of their business where are the Govt going to put the people with the hospitals already overflowing and home based care not able to adequately cater for the needy crowd.

Ryman are doing exactly that with all their new villages as you know.  Add in 1200 care beds that have disappeared in the last year, hundreds more at risk from one report I saw last week about another operator about to be liquidated by the IRD, Arvida trying to reduce the size of their care service... and we already have a train wreck of significant proportions with care. 

Agree the vast majority of residents are very happy and also agree there is a strong element of political grandstanding going on here but this Government don't care about cause and effect, it's all about buying themselves another term so they can continue their extreme reign of divisiveness and restorative justice. 

Food for thought.  How do you see this whole thing panning out if a Labour, Greens and Māori coalition get another term in power ?

We are most likely going to get that regardless of which party wins the election. I honestly cannot see either Labour or National coming to the party with the level of funding they need to for the aged care sector.

We should all be really concerned about that, and not just from a shareholder/investor perspective. I dread to think what aged care will look like in even five years, if things are not addressed urgently.

Quote from: Basil on May 11, 2023, 12:37 PMWe are going to have a train wreck of cataclysmic proportions if this lot get another term.

Quote from: Basil on May 11, 2023, 12:37 PMRyman are doing exactly that with all their new villages as you know.  Add in 1200 care beds that have disappeared in the last year, hundreds more at risk from one report I saw last week about another operator about to be liquidated by the IRD, Arvida trying to reduce the size of their care service... and we already have a train wreck of significant proportions with care. 

Agree the vast majority of residents are very happy and also agree there is a strong element of political grandstanding going on here but this Government don't care about cause and effect, it's all about buying themselves another term so they can continue their extreme reign of divisiveness and restorative justice. 

Food for thought.  How do you see this whole thing panning out if a Labour, Greens and Māori coalition get another term in power ?

I'm thinking in terms of a much more dramatic reduction in beds like completely shutting up and taking no more hospital level residents to start with then progress that to dementia level, thats when the real pain would hit the Govt and there would be an outcry from the streets. Because the sector is underfunded currently by over 500 mill the Govt could do stuff all about it. I'm really hoping that an unholy trinity like that never get to govern NZ and not just because of aged care, time will tell.

Quote from: winner (n) on May 11, 2023, 08:51 AMHow number of sales declined again ....not a good sign for retirement sector sales volumes. Suppose Ryman and Oceania will mention that in coming weeks

I am currently trying to tell my Dad that any offer in this market is a good offer, that the first offer is usually the best offer etc.  He has a price fixed in his head, and I worry that he will turn down offers on his house that are lower than this number.  I said any amount that is more than the price of the village unit is a bonus.  

Quote from: Basil on May 11, 2023, 12:37 PMFood for thought.  How do you see this whole thing panning out if a Labour, Greens and Māori coalition get another term in power ?

This will be your future.
https://www.stuff.co.nz/national/health/300872597/woman-96-died-of-sepsis-after-test-results-went-unchecked

Quote from: Breezy on May 11, 2023, 12:55 PMI'm thinking in terms of a much more dramatic reduction in beds like completely shutting up and taking no more hospital level residents to start with then progress that to dementia level, thats when the real pain would hit the Govt and there would be an outcry from the streets. Because the sector is underfunded currently by over 500 mill the Govt could do stuff all about it. I'm really hoping that an unholy trinity like that never get to govern NZ and not just because of aged care, time will tell.

Actually, the care side of things by the retirement village operators surprised me.  I am a total hard nosed business operator, so when I asked what the charges were for the care apartments  I was a bit shocked to find out that they dont charge extra over the $1300 Govt subsidy unless you want a "nicer" room, and even that is only $45-$75 a night extra.  This is why most of the beds are taken up with public health patients and are not available when needed for village residents.  

There is the potential for them to go fully private - ie.  they still get the Govt subsidy per bed, but they charge 2-3 times more to stay in the facility.  Existing village residents can pay for it out of their capital payment the village has retained - since they are unlikely to be in there for very long, and they are all are sitting on hundreds of thousands of dollars per resident, there is plenty of scope to charge like a wounded bull.  Of course, the families of these patients will also scream like they've been wounded by a bull lol.  But that then leaves only the poor people to go into publicly funded rest homes or to put up with "at home" care where you will die and nobody will notice, and you'll be eaten by your cats.

Quote from: KW on May 11, 2023, 02:23 PMThis will be your future.
https://www.stuff.co.nz/national/health/300872597/woman-96-died-of-sepsis-after-test-results-went-unchecked

To be fair - that's not the future, but the present ... but I agree, Labour demonstrated sufficiently that they can't improve it, and race based policies certainly won't make it better.

Sadly - National was instrumental in running down our health system and Labour, while throwing money at it, failed to fix it but made it worse. Quite an achievement. Its like throwing money at a house with leaking roof - you have afterwards a lot of money blown around by the wind, but the roof is still leaking.

However - all this has absolutely nothing to do with retirement stocks, maybe we need a handful of political threads to release the urge to express our political views :)( ;

Are some of the concerns and key risks in this in depth study coming to pass ?  In particular, an oversupply of units in the Auckland region.
https://www.nzherald.co.nz/business/risks-in-rampant-retirement-village-growth-study/4SED735UKTSWITVPPAOJHXEDBQ/

Weekend reading ....esp the comments

I despise the retirement village industry

https://thedailyblog.co.nz/2023/05/14/i-despise-the-retirement-village-industry/

We have an obligation to look after them to keep them in our social field and include them in our family lives.

Moving mum and dad off to a corporate babysitter who doesn't give a shit about them is a cold way to live a life.

I'm not clicking on that link because I know it will make me angry. Anyone who genuinely believes the likes of OCA, RYM, SUM and others are "corporate babysitters who don't give a shit about them" better hope they never meet me.

They have no idea. None.

Quote from: winner (n) on May 14, 2023, 04:16 PMWeekend reading ....esp the comments

I despise the retirement village industry

https://thedailyblog.co.nz/2023/05/14/i-despise-the-retirement-village-industry/

We have an obligation to look after them to keep them in our social field and include them in our family lives.

Moving mum and dad off to a corporate babysitter who doesn't give a shit about them is a cold way to live a life.

I stopped reading after the opening diatribe "It's not just the business tactics that would make your average South American Drug Cartel blush"

RYM first cab off the rank in this sector to report on Friday 19th.  Should be interesting.
Then its OCA's turn on 24 May. 

Quote from: Untamed on May 14, 2023, 06:23 PMI'm not clicking on that link because I know it will make me angry. Anyone who genuinely believes the likes of OCA, RYM, SUM and others are "corporate babysitters who don't give a shit about them" better hope they never meet me.

They have no idea. None.

Good on you, it's a very brief assassination of all RV's in general and the comments appear mostly to be from entitled benefactors aggrieved that their inheritance is reduced by their parents' selfish decisions to live a good end of life. It makes no distinctions between any of the RV's offerings to cater for the independent living, through rest home, to high care. It will certainly aggravate you if you read it, my only regret is that I did read it.

Quote from: winner (n) on May 14, 2023, 04:16 PMWeekend reading ....esp the comments

I despise the retirement village industry

https://thedailyblog.co.nz/2023/05/14/i-despise-the-retirement-village-industry/

We have an obligation to look after them to keep them in our social field and include them in our family lives.

Hmmmm - that is a very Chinese viewpoint and one I quite like if it is possible

I have no problem with families who prefer to take care of their elderly folk. But, not everyone is able to do that (for various reasons), and many elderly people have zero wish to live with their kids, no matter how much they love them. I have had many residents tell me that in my job. Even the closest families have personality conflicts and living together is not always the best option for either party.

Society and the media needs to stop with this BS. It is disrespectful to our elderly people to assume they are incapable of understanding the RV sector/what they are signing up for. Unless they have dementia, the vast majority of elderly people are more than capable of thinking for themselves, knowing exactly what they do or don't want to do, and have every right to make their own decisions. This article is bordering on libellous and I think the RV sector should collectively take legal action against the journalist concerned.

Yes, I read it. A trashy, fear mongering BS article. Fortunately, for the arsehole who wrote it, and for my own mental health I deleted the comment I was about to post.

I am so angry.

Quote from: Crackity on May 14, 2023, 09:04 PMHmmmm - that is a very Chinese viewpoint and one I quite like if it is possible

Quote from: winner (n) on May 14, 2023, 04:16 PMWeekend reading ....esp the comments

I despise the retirement village industry

...

We have an obligation to look after them to keep them in our social field and include them in our family lives.

Moving mum and dad off to a corporate babysitter who doesn't give a shit about them is a cold way to live a life.

Surprised you give this loser oxygen by citing him. There is a reason his disinformation channel went broke. He clearly did zero research before he produced this emotional clap-trap.

Quote from: Untamed on May 14, 2023, 06:23 PMI'm not clicking on that link because I know it will make me angry. Anyone who genuinely believes the likes of OCA, RYM, SUM and others are "corporate babysitters who don't give a shit about them" better hope they never meet me.

They have no idea. None.

Dont bother, its just full of young people angry that their family inheritence is gone, and their suggestions are to put elderly in "social housing" or "flatting with 4-5 other seniors" or "build more 1 bedroom studios" or have "apartments above the garage".  It seems that they arent really concerned with the elderly's quality of life or social connectiveness, so long as they are put away somewhere cheap and the money from the house is preserved.  The level of entitlement of that generation, and their lack of empathy, is quite amazing.

Quote from: Untamed on May 14, 2023, 10:04 PMI am so angry.

Pretty sure there must be an ancient Chinese proverb along these lines. "Person who pat and walk their dog a lot care a lot less what others think and find inner peace".  If no Chinese proverb like that then this Beagle claims the copyright  ;D 

Quote from: Basil on May 15, 2023, 10:49 AMPretty sure there must be an ancient Chinese proverb along these lines. "Person who pat and walk their dog a lot care a lot less what others think and find inner peace".  If no Chinese proverb like that then this Beagle claims the copyright  ;D

Some (a lot of) truth to that, I like it.

 :(

Except when it's a high maintenance, stress inducing corgi.

 

Quote from: Onemootpoint on May 15, 2023, 02:55 PMSome (a lot of) truth to that, I like it.

Is anyone watching the latest season of Succession?  They have the future business model for retirement villages.  I can't wait for News Corp's entry into "land cruises".  Doderick Macht Frei.  ;D

Quote from: KW on May 16, 2023, 12:14 PMIs anyone watching the latest season of Succession?  They have the future business model for retirement villages.  I can't wait for News Corp's entry into "land cruises".  Doderick Macht Frei.  ;D

Is that series any good ?

Anything of substance in the budget to help with the chronic underfunding of care for this beleaguered sector ?

Absolutely nothing.

There's a slim chance they might get some assistance with the cost of staff pay increases, but I wouldn't hold my breath.

Health and disability

$2.6b over two years for cost pressures in the health system and reforms
More than $1b to increase pay rates and boost staff numbers

Quote from: Basil on May 18, 2023, 06:24 PMAnything of substance in the budget to help with the chronic underfunding of care for this beleaguered sector ?

Quote from: Untamed on May 18, 2023, 06:35 PMAbsolutely nothing.

There's a slim chance they might get some assistance with the cost of staff pay increases, but I wouldn't hold my breath.

Health and disability

$2.6b over two years for cost pressures in the health system and reforms
More than $1b to increase pay rates and boost staff numbers

Nothing 'specific' to aged care, but $3.6 billion is a decent chunk of money and one would hope that some of that flows into lifting pay rates of aged care workers and uplifting the inadequate room subsidies.

There's a few sector SP's perking up, ARV starting moving a while ago, OCA has bolted (above 50 and 100EMA already), SUM having a look and even RYM got a bid. This might be the sector turnaround starting, would be a shame to miss it. https://invst.ly/103uz2

I don't think they will get a subsidy increase out of that allocation. Funding for pay increases - maybe. Given the apparent state of the public hospital system right now, I expect that will be their priority. We will see.

Quote from: Buzz on May 18, 2023, 06:51 PMNothing 'specific' to aged care, but $3.6 billion is a decent chunk of money and one would hope that some of that flows into lifting pay rates of aged care workers and uplifting the inadequate room subsidies.

"The offer of care helps draws people to move from their own homes to villages in the first place, sometimes when they're still relatively able and fit. They hope that if they get sick or need help, they will get into the on-site hospitals. But eligibility for such a move has been the responsibility of district health boards, not village management. That's one of the many little-known facts, and great misconceptions, about retirement-village living.
So don't buy into a village thinking you'll automatically get into the hospital when you think the time has come. Not so."

So there is the business opportunity.  If you want to move into assisted living, but the Govt won't pay the subsidy, there should be an option to dip into your capital that the village is holding, and move you anyway.  But then you are paying $67k a year until such time that the Govt deems you eligible.  This might be relevant for the dementia units, Summerset mentioned that to be eligible you had to be Level 3 (whatever that means), but it implies that those with Level 1 and 2 dementia dont get access to care.

You are correct in saying it is not your decision whether you require a higher level of care or not, but that is no different to any aspect of the health system. I can't decide I need surgery, or medication. Medical professionals make those decisions. It is no different for aged care. If someone's needs increase over time, and they are struggling to live independently, their GP will refer them for a NASC assessment (Needs Assessment Service Coordination). NASC is contracted to do a full assessment of the person's medical/health needs, daily living skills and abilities, cognitive function etc. If they deem the person is in need of either hospital level care OR dementia care, they will be eligible for that care. Yes, they may have to wait for a bed to become available, but the RV concerned will absolutely give them preference to someone who is not already a client.

Quote from: KW on May 22, 2023, 02:38 PM"The offer of care helps draws people to move from their own homes to villages in the first place, sometimes when they're still relatively able and fit. They hope that if they get sick or need help, they will get into the on-site hospitals. But eligibility for such a move has been the responsibility of district health boards, not village management. That's one of the many little-known facts, and great misconceptions, about retirement-village living. So don't buy into a village thinking you'll automatically get into the hospital when you think the time has come. Not so."/b].

Level 3, I suspect refers to D3 level dementia. This means the person has been assessed as needing to be placed in a secure unit, as they may be prone to wandering off site. I am assuming Summerset is referring to this type of dementia facility - which is only available to those who meet the D3 requirement. Early/mid stage dementia clients can be catered for in rest homes, and most rest homes will have several people in this category, but if their dementia exacerbates to the point where they are wandering, or losing their boundaries in relation to other residents (going into their rooms, touching/taking their possessions, invading their privacy etc) they will usually be re-assessed and go to D3 level. This level also caters for people with dementia with major behavioural issues/sexualised behaviours/aggression/violence.

QuoteSo there is the business opportunity.  If you want to move into assisted living, but the Govt won't pay the subsidy, there should be an option to dip into your capital that the village is holding, and move you anyway.  But then you are paying $67k a year until such time that the Govt deems you eligible.  This might be relevant for the dementia units, Summerset mentioned that to be eligible you had to be Level 3 (whatever that means), but it implies that those with Level 1 and 2 dementia dont get access to care.

Quote from: Untamed on May 22, 2023, 04:43 PMYou are correct in saying it is not your decision whether you require a higher level of care or not, but that is no different to any aspect of the health system. I can't decide I need surgery, or medication. Medical professionals make those decisions. It is no different for aged care. If someone's needs increase over time, and they are struggling to live independently, their GP will refer them for a NASC assessment (Needs Assessment Service Coordination). NASC is contracted to do a full assessment of the person's medical/health needs, daily living skills and abilities, cognitive function etc. If they deem the person is in need of either hospital level care OR dementia care, they will be eligible for that care. Yes, they may have to wait for a bed to become available, but the RV concerned will absolutely give them preference to someone who is not already a client.

Yes, but just because you need healthcare doesnt mean that you get it these days.  Your doctor may assess you as needing a hip replacement, or cancer surgery, or aged care hospitalisation.  BUT the Govt decides that you cant have it.  So there is a huge gap between the people who absolutely need healthcare but cant access it because  the Govt decides otherwise.  Such is the state of our healthcare system.  Yes, it would be nice if everyone who was assessed as needing something got it straight away, but nowadays you might be waiting years.  You might be dead before you actually get treated for something. 

Yes, I appreciate that, but I have only ever known of one NASC assessment that resulted in a "not D3 at this stage" outcome. The person was re-assessed at a later time as hospital level, and transferred to another facility. Many people with dementia also have high health needs/multiple medical issues, so it can be difficult to find a balance between dementia and hospital care. If they are not presenting with high level behaviours they can usually be catered for in a hospital level facility. My own mother has Alzheimers, but cannot wander and her behaviours are not extreme, so she was assessed as hospital level due to her mobility issues, need for higher level of assistance and supervision, than could be provided at standard rest home level. The lines are always blurred to some extent. There are no definite "boundaries" between all of these differing levels of care, with some people.

Having said that, with regards to hospital interventions and surgery - the government doesn't decide that you "can't have it." There are assessments in these areas too, and processes to follow. Specialists will not recommend a course of treatment OR surgery, unless they believe it is necessary. I don't think even you, would really want to see "treatment/surgery on demand." Our system is not perfect, especially now, but it is far preferable to what people have to deal with in the US for example. Anyway, that is a whole different discussion which I am not keen to get into. I was simply providing a little inside information with regards to the aged care situation.

Quote from: KW on May 22, 2023, 05:23 PMYes, but just because you need healthcare doesnt mean that you get it these days.  Your doctor may assess you as needing a hip replacement, or cancer surgery, or aged care hospitalisation.  BUT the Govt decides that you cant have it.  So there is a huge gap between the people who absolutely need healthcare but cant access it because  the Govt decides otherwise.  Such is the state of our healthcare system.  Yes, it would be nice if everyone who was assessed as needing something got it straight away, but nowadays you might be waiting years.  You might be dead before you actually get treated for something. 

Quote from: Untamed on May 22, 2023, 06:15 PMHaving said that, with regards to hospital interventions and surgery - the government doesn't decide that you "can't have it." There are assessments in these areas too, and processes to follow. Specialists will not recommend a course of treatment OR surgery, unless they believe it is necessary. I don't think even you, would really want to see "treatment/surgery on demand." Our system is not perfect, especially now, but it is far preferable to what people have to deal with in the US for example. Anyway, that is a whole different discussion which I am not keen to get into. I was simply providing a little inside information with regards to the aged care situation.

That is not true. If you need a hip replacement or cancer surgery you get put on a waiting list, if you are lucky.  Many specialists are now telling people that they cant even get people who need surgery on to a waiting list, let alone actually get the surgery.  They are telling people they need to go private so they can get surgery, as it will be years before the public sector will accept them.  So absolutely, everyone should have treatment on demand, otherwise they remain unwell and in pain for years, unless they have private health insurance.  Which is why even doctors are telling people to go get private health cover, because they will likely never actually be treated by the public system.  At least in the US if you have health insurance you get treatment. 
We dont even have a fully fledged private health system in NZ so its not even close to being as good as the US or Australian private system.  Try getting a heart operation privately for instance.  Cant even deliver a baby in Christchurch thats how inadequate our private care system is.  That is going to have to change as the public system disintegrates, or else people are simply going to have to move to Australia or put up with early death or disability.  What a choice!

The news is full of people who cant get treatment.  We have a third world health care system.
https://www.rnz.co.nz/news/national/487296/wellington-cancer-patient-says-she-had-to-spend-30-000-after-public-system-let-her-down
https://www.1news.co.nz/2023/03/17/surgeons-say-theyre-forced-to-decide-which-cancer-patients-to-treat/
https://www.stuff.co.nz/national/health/129209277/surgical-waiting-list-soars-as-patients-languishing-in-pain-say-they-feel-like-the-living-dead

As I said, I don't wish to get into a discussion on the health system in general. Best we keep this to health services related to aged care, given this is the retirement sector thread. I stand by the comments I have made. Nobody can realistically expect people to assess themselves in terms of whether they need rest home, hospital level, or dementia level care. Yes, they will of course have input into a NASC assessment, as will their family, but it is the job of NASC and associated health professionals, to make the call. As for your suggestion that people should be able to buy their own higher level of care, within an RV, if they do not qualify under the NASC system, that is completely impractical. Providers have a finite number of higher needs beds. They need to go to people genuinely need them.

Quote from: KW on May 22, 2023, 08:39 PMThat is not true. If you need a hip replacement or cancer surgery you get put on a waiting list, if you are lucky.  Many specialists are now telling people that they cant even get people who need surgery on to a waiting list, let alone actually get the surgery.  They are telling people they need to go private so they can get surgery, as it will be years before the public sector will accept them.  So absolutely, everyone should have treatment on demand, otherwise they remain unwell and in pain for years, unless they have private health insurance.  Which is why even doctors are telling people to go get private health cover, because they will likely never actually be treated by the public system.  At least in the US if you have health insurance you get treatment. 
We dont even have a fully fledged private health system in NZ so its not even close to being as good as the US or Australian private system.  Try getting a heart operation privately for instance.  Cant even deliver a baby in Christchurch thats how inadequate our private care system is.  That is going to have to change as the public system disintegrates, or else people are simply going to have to move to Australia or put up with early death or disability.  What a choice!

The news is full of people who cant get treatment.  We have a third world health care system.
https://www.rnz.co.nz/news/national/487296/wellington-cancer-patient-says-she-had-to-spend-30-000-after-public-system-let-her-down
https://www.1news.co.nz/2023/03/17/surgeons-say-theyre-forced-to-decide-which-cancer-patients-to-treat/
https://www.stuff.co.nz/national/health/129209277/surgical-waiting-list-soars-as-patients-languishing-in-pain-say-they-feel-like-the-living-dead

Wife had heart issues.From first appointment at The Heart Group on 24th February,then Echocardiogram on 14th March,Angiogram on 29th March,Stent proceedure on 6th April.Went private no inssurance.Fast excellent service from Dr.Puri,St George's and The Heart Group.
On 17th April I saw my doctor as i felt my energy level was low.Blood test showed a big issue with Gluten.18th May  the  Gastroscopy I had at ChCh hospital confirmed I had Coeliac disease.Started Gluten free diet that day.
So wife received fast excellent service going private while I too enjoyed fast excellent service going public.

Quote from: lorraina on May 22, 2023, 09:34 PMWife had heart issues.From first appointment at The Heart Group on 24th February,then Echocardiogram on 14th March,Angiogram on 29th March,Stent proceedure on 6th April.Went private no inssurance.Fast excellent service from Dr.Puri,St George's and The Heart Group.
On 17th April I saw my doctor as i felt my energy level was low.Blood test showed a big issue with Gluten.18th May  the  Gastroscopy I had at ChCh hospital confirmed I had Coeliac disease.Started Gluten free diet that day.
So wife received fast excellent service going private while I too enjoyed fast excellent service going public.

Sorry to hear.....best wishes to you both. A timely reminder..... "health is wealth."