RYM-Ryman

[Mos]

Not sure its to do with that, but that in itself is an issue.  Huge problems with subsidence at the huge Remuera Edmund Hillary village.  Trying to stabilize that site, which was built on a former rubbish tip, but will that solve the problem or merely kick the can down the road.   Could be write-downs there and at a number of other villages with problems or land held for resale where the prices paid and / or carrying value is no longer realistic in terms of its likely resale value. 

Was some talk of ~ $300m write-down a while back, probably just idle speculation but it will be interesting to see how this pans out.  The way I see it, there's always more than one cockroach in the kitchen and with the likes of RYM and FBU for that matter, which is another notable example, they just keep on coming out of the woodwork.  No matter how many cockroaches you stomp on, they just keep on coming.

Ryman 24 Feb announcement

$300 m straight from the horse's mouth Basil - page 28 of 24 Feb Ryman NZX announcement. 

[Ferg]

Ryman 24 Feb announcement

$300 m straight from the horse's mouth Basil - page 28 of 24 Feb Ryman NZX announcement. 

That announcement says roughly $300m may be needed for:

• a reduction in the level of cost capitalisation
• New care centres to be valued for the first time in FY25
• In assessing care centre valuations, a portion of the valuation may be allocated to internally generated goodwill, which may no longer be recognised on the balance sheet
• the carrying value of development land will be assessed
• Given current market conditions, the valuer may apply greater discounting to buyback stock.

All these were lifted from p28.

Nothing there for revaluing investment properties, in particular the underlying assumptions for independent living units.  Unless that is captured in the "buyback stock" line...?  If not then it could be $300m for general property and care stuff plus another maybe $300m for investment properties.

[Basil]

Gosh...the cockroaches just keep on coming out of the woodwork...will it ever end ?

[Ferg]

I had a good sit down with Earl Gasparich several years ago when he was leading OCA.  His comments on this were that the various retirement companies use the same valuers who he thought were very conservative.

Your post got me thinking.....

Whilst the 4 listed RV's use the same valuers, they have varying values for discount rates and terminal growth rates, and also unit prices relative to the surrounding suburbs as shown in their affordability graphs & stats.

One RV stood out as being the most conservative on all 3 metrics.

RYM appears to be fully priced so it wouldn't surprise me if there was an adjustment to the investment property valuation on top of the $300m per the CR presentation.

[Basil]

One RV stood out as being the most conservative on all 3 metrics.

I've looked at that before mate, so I know which one, but their operational cash burn is absolutely atrocious.  They're priced where they are for profoundly good reasons that I've alluded to on that thread in this channel and in years past, on the other channel in great detail.  The discount rate is different for different types of units too, from memory, from what Earl told me.  The real problem is if you have literally hundreds of care suites that aren't selling, all the assumptions about future cash flows become quite theoretical, as do their theoretical values.  That's the 2X discount I was talking about yesterday. 

For RYM, I'm just amazed there's another $300m of acknowledged issues as well as the other issue that their sales have slowed dramatically since they changed their DMF structure.  I'm left wondering what's the next tranche of cockroaches to come out of the woodwork?  It's not a question of IF they are going to come out, it's just a question of from which direction lol.  New auditors for 2025 I see, so I am sure they will be keen to de-risk their audit from the get-go.  Be interesting to see what issues, if any, they uncover.  Watch this apace for the report in late May.  My contention with RYM is that the market is absolutely saturated with stock and the cash burn at their villages is so bad, another cash issue a couple / few years down the track cannot be ruled out of consideration.

[Shareguy]

So it only cost $25M to close out the Institutional loan.  A saving of $10M against the estimate in the cr documentation.

https://www.nzx.com/announcements/449136

Disc/ I have been buying

[Shareguy]

A balanced report I thought

https://www.thepost.co.nz/business/360619442/it-end-golden-weather-retirement-villages

[Basil]

I think its useful to sit back and now look at the bigger picture.
I completely disagree with the conclusion reached in the article

"But demand for retirement villages is high, and it's only going to grow, and that's why the sector remains promising for investors."

This very simplistic statement completely overlooks the rules of supply and demand and the sector is absolutely awash with stock.  Almost every second advertisement you hear on the radio is from a retirement company.

The facts as I see them.
1. The market is awash with stock and RYM and OCA are really struggling to sell, SUM aren't.
2. Internationally owned MET and ARV together with listed SUM, who are run like a well-oiled Swiss watch are far better situated to continue to supply vast amounts of new stock into the N.Z. market and in SUM's case the Australian market.
3. RYM and OCA have made such a mess of things they are having to dramatically dial back their build rate in future years.  This will undermine future years earnings both in terms of margin on new builds and in due course, lower level's of resales.
4. There are a vast and growing number of private companies now serving this sector and I truly believe the market will stay absolutely saturated with stock in the future.  This will suppress prices and margins.
5. Housing is still very expensive relative to the average income in N.Z. which really limits its ability to grow in real inflation adjusted terms.  This really hamstrings the amount of resale profits companies will make in the future.  Resale profits is where the rich vein's of gold have been found in the past but they are far less likely to be prevalent in the future.
6. The super profits in this industry in the past have bene made from unit resales into a booming housing market over a (perhaps once in a 100 year period) where house price growth vastly outstripped the inflation rate for a sustained period of about 2 decades.  I think it's unlikely I will see another period like that in my lifetime, (acknowledging I am early 60's so others have a longer frame of reference)
7. Returns on care have been constantly eroded through successive Govt inaction to the point where care no longer provides anything like an acceptable return on equity.  I think that problem is highly likely to be enduring for the foreseeable future.
8. We have moved from a situation in the early days of this industry 30 years ago where incoming residents typically paid about 70% of the value of their house for a new ILU.  Its close to 100% now for most units across N.Z. for most companies.  This makes moving more difficult for many and less attractive for others in that they no longer can free up significant funds for bucket list activities.
9. RYM's management and directors are unproven.  SUM's team are battle hardened and proven performers.  Trust is earned, not given and RYM's team have many years of hard work to retore the confidence of the investment community.
10. Fixed fees for life, once a common theme and very attractive, are no longer widely available.
11.There's more cockroaches to come out of RYM's kitchen as sure as night follows day.
12. The dividend yield in this sector has always been poor and will always be that way and this makes this sector unattractive for anyone needing decent yield..

[Shareguy]

Great points Basil. My thoughts in Red

I think its useful to sit back and now look at the bigger picture.
I completely disagree with the conclusion reached in the articleThis very simplistic statement completely overlooks the rules of supply and demand and the sector is absolutely awash with stock.  Almost every second advertisement you hear on the radio is from a retirement company.

The facts as I see them.
1. The market is awash with stock and RYM and OCA are really struggling to sell, SUM aren't.Yes there is a current over supply. However build rates have been scaled back and demand is only going to increase. Since January, new management have taken corrective action, including re-instating incentives, refocusing the sales team, and lowering asking prices at villages with excess stock, with the result that enquiry levels have improved. When questioned on the call management said that sales weakness did not reflect weakness in NZ or Victoria per se, but was specific to certain locations.

2. Internationally owned MET and ARV together with listed SUM, who are run like a well-oiled Swiss watch are far better situated to continue to supply vast amounts of new stock into the N.Z. market and in SUM's case the Australian market. Don't know about that. Don't forget Ryman are still best in class from a residents experience. Not only readers digest but Ryman Healthcare was named Best Provider Nationwide at the 2024 Aged Advisor People's Choice Awards for Best Retirement Village and Aged Care facilities. This is the fifth time that Ryman secured this prestigious award, which recognises the best of the best in retirement living and aged care across New Zealand.[The awards are based on over 15,000 reviews and ratings from more than 940 retirement and aged care facilities across the country. No question from a shareholders point of view it's been a shambles but most importantly in my opinion the overall offering is well regarded. If they can continue to supply a market leading product then investor metrics will and should improve in my opinion.
3. RYM and OCA have made such a mess of things they are having to dramatically dial back their build rate in future years.  This will undermine future years earnings both in terms of margin on new builds and in due course, lower level's of resales. Yes Ryman has lowered the build rate guidance by 50 percent for FY26 and FY27. Makes perfect sense to me and capex is guided to a 45 percent reduction than prior consensus. Ryman state a return to disciplined growth over time with a mix of greenfield developments and expanding/completing existing villages. Also on the call M&A particularly in Australia
4. There are a vast and growing number of private companies now serving this sector and I truly believe the market will stay absolutely saturated with stock in the future.  This will suppress prices and margins. Yes agree a lot more competition but all the reports I read say we are going to still have a big shortage. Have a look at this report

https://www.jll.nz/en/trends-and-insights/research/retirement-villages-market-review#:~:text=In%20our%20latest%20analysis%20of,year%20average%20of%201%2C696%20units.

5. Housing is still very expensive relative to the average income in N.Z. which really limits its ability to grow in real inflation adjusted terms.  This really hamstrings the amount of resale profits companies will make in the future.  Resale profits is where the rich vein's of gold have been found in the past but they are far less likely to be prevalent in the future. Yes agree. Incomes need to rise. As far as prices go there will still be money to be made, but agree that we are are unlikely to see the large increases that we have seen in the past without decent changes in income.
6. The super profits in this industry in the past have bene made from unit resales into a booming housing market over a (perhaps once in a 100 year period) where house price growth vastly outstripped the inflation rate for a sustained period of about 2 decades.  I think it's unlikely I will see another period like that in my lifetime, (acknowledging I am early 60's so others have a longer frame of reference) Yes agree see above
7. Returns on care have been constantly eroded through successive Govt inaction to the point where care no longer provides anything like an acceptable return on equity.  I think that problem is highly likely to be enduring for the foreseeable future. Yes unless the government funds care adequately a lot of people will be unable to access it unless you are wealthy. Hospitals and family's will bear the brunt. Hopefully it won't come to that....
8. We have moved from a situation in the early days of this industry 30 years ago where incoming residents typically paid about 70% of the value of their house for a new ILU.  It's close to 100% now for most units across N.Z. for most companies.  This makes moving more difficult for many and less attractive for others in that they no longer can free up significant funds for bucket list activities. Yes agree
9. RYM's management and directors are unproven.  SUM's team are battle hardened and proven performers.  Trust is earned, not given and RYM's team have many years of hard work to retore the confidence of the investment community.

Yes agree only time will tell. A new ceo who has at least committed $250k in the cap raise is positive. Disappointing that the directors have NOT stocked up other than taking up entitlements in the cap raise.

10. Fixed fees for life, once a common theme and very attractive, are no longer widely available. Yes and I think that was the right move. I had free air for life with my dive bottles with Sportways years ago. Several years later they went broke.
11.There's more cockroaches to come out of RYM's kitchen as sure as night follows day. Yes maybe. Craig's think that there is going to be another write down of the investment property's to reflect slower sales and price cuts.
12. The dividend yield in this sector has always been poor and will always be that way and this makes this sector unattractive for anyone needing decent yield.. Yes agree but I'm holding for capital gain and possible M&A. According to Craig's Ryman at $2.80 trades at 0.57 x price/nta, it's lowest level on record. Even assuming a further (and probably final) $500m write down of Nta in its FY25 year end accounts,this would reduce Nta to $4.5bn or $4.45 per share. So worst case Rymans trading to a 37 percent discount to "worst case" Nta. By comparison Ryman has traded at an average 1.89xnta over the past five years,and 0.81 x since the February 2023 CR.

Note that both Met and ARV which Craig's say has inferior brands were acquired at 0.83 x Nta(with the latter in 2024). With interest rates dropping I'm expecting a lot more interest in NZX listed equities. Time will tell.

[Basil]

Good debate and thanks for sharing your point of view Shareguy. Best wishes with it.

[KW]

When I went village shopping with my father, the Ngaio Marsh village units were priced at $770k - the same price as the brand new units being built at Kevin Hickman, and the new units at Summerset Avonhead.  I thought this was ridiculous pricing, as the NM units were much older, and RYMs idea of "refurbishment" was simply a new paint job and carpet.  The kitchen and bathroom (from 1999) were left in their original state.

Today I note these same units are now priced at $695k.  With a $15k travel voucher included.  The KH units have actually gone up in price and are now $795k. 

On the subject of a travel voucher - how useless is that?  Most 75-80 year olds (the average age of entry) are well past going travelling around the world.  And most of them are on their own, so who wants to go travelling by themselves at that age?   My father has free airfares for life (courtesy of being an Air NZ ex-employee) and even he doesnt travel overseas anymore.  Most of them wont even be able to get travel insurance at that age.    Whoever is doing RYM's marketing needs to get a new job.  They have really misread their customer base.

[lorraina]

We fly to Sydney on 10th April and  return on the 10th May. 
Royal Princess is 28 days.  Tauranga, back to Auckland, Pago Pago, Tahiti, Hawaii then Los Angles. Big ship and will have to wash hands all the time to be free of Covid.

The above was in an email my brother sent me.He lives in Hobart.He is 84 and his wife is 83.
There will be 3,540 passengers on board if it is fully booked.

Pity they are missing out on the Ryman offer...lol

[winner (n)]

We fly to Sydney on 10th April and  return on the 10th May. 
Royal Princess is 28 days.  Tauranga, back to Auckland, Pago Pago, Tahiti, Hawaii then Los Angles. Big ship and will have to wash hands all the time to be free of Covid.

The above was in an email my brother sent me.He lives in Hobart.He is 84 and his wife is 83.
There will be 3,540 passengers on board if it is fully booked.

Pity they are missing out on the Ryman offer...lol

Hope you told them to stay clear of the norovirus or other gastro issues

[BlackPeter]

When I went village shopping with my father, the Ngaio Marsh village units were priced at $770k - the same price as the brand new units being built at Kevin Hickman, and the new units at Summerset Avonhead.  I thought this was ridiculous pricing, as the NM units were much older, and RYMs idea of "refurbishment" was simply a new paint job and carpet.  The kitchen and bathroom (from 1999) were left in their original state.

Today I note these same units are now priced at $695k.  With a $15k travel voucher included.  The KH units have actually gone up in price and are now $795k. 

On the subject of a travel voucher - how useless is that?  Most 75-80 year olds (the average age of entry) are well past going travelling around the world.  And most of them are on their own, so who wants to go travelling by themselves at that age?  My father has free airfares for life (courtesy of being an Air NZ ex-employee) and even he doesnt travel overseas anymore.  Most of them wont even be able to get travel insurance at that age.    Whoever is doing RYM's marketing needs to get a new job.  They have really misread their customer base.

Jeez, do you suffer the midlife crisis blues?

Neighbors of us still got 10 years ago regular visits from their parents from the States - both (parents) at that stage already above 90! They still might, but they moved to Ossie, i.e. we don't see them anymore that often.

A friend (75) has annual visits from her sister (80+) from Canada.

Another neighbor (late 70íes)  is regularly visiting her children in Australia.

Getting a travel insurance at any age is not hard, unless you really have a condition which makes travelling risky, and even then the insurance would only exclude or charge a higher premium for this specific condition. Check: https://www.allianztravel.co.nz/ (and I am sure, there are more insurers).

[lorraina]

Hope you told them to stay clear of the norovirus or other gastro issues

I just wrote "enjoy your trip."
What else could I say.?..lol.