OCA - Oceania Healthcare

[KW]

https://www.nzherald.co.nz/nz/aucklands-wesley-rest-home-shuts-doors-suddenly/75QAY4G7YJGWZCIVS7QCTQYJDQ/

Up to 50 elderly residents of an Auckland rest home fear they'll be left without someone to live after the facility's operator told them it would shut down in less than two months.

But the care home operator, Oceania Healthcare and the property owner, Airedale Property Trust, are at odds over who made the decision to close.

APT CEO Dean Shields denies that the company refused to re-sign the lease, and said it was ultimately Oceania who made the decision to close.  "We offered Oceania the ability to extend the lease, but Oceania has made the decision to not take up a lease extension and close down the care centre.

[winner (n)]

OCEANIA  "Believe in Better" says the sign.    Hmmm...better what ?

Sad state of affairs ..... must be horrible saying you are out on the street in a few weeks.

I assume no ORA at the this place? If so seems really bad management getting into this position.

Put the poor souls up in The Helier until they die ....that's what 'Believing in Better' is all about

[Buzz]

Will be interesting to know, given that we all know pure rest home care is unprofitable, and this Wesley Care Centre is an operating lease providing pure care services, i.e. Oceania will be making a loss on operations, whether they are just quiting the loss, or some other reason.

Heartless it may appear to be, but right there is the ethical conflict you have as a shareholder, whether you're happy to make a loss at the Wesley Care Centre or cut the losses by not continuing the operating lease. Dig deeper into how many other properties are pure care, operating lease arrangements.

I'm not sure how I feel about this yet, as a shareholder. I'd like to know a bit more about the circumstances for this decision. I'd also like to know what arrangements OCA have to relocate their residents.

[Whacc]

Heartless it may appear to be, but right there is the ethical conflict

Not really a conflict at all.

Companies burning their social license also burns value.

If you believe shareholders need to be 'heartless' to make gains then the 19th century called and wants you back.

[Ferg]

It could be both parties are telling the truth.  The article says APT offered OCA an additional 6 months on their existing lease to Feb 2024.  What sort of offer is that?  Lease terms are typically for years with multi-year rollover options.  And what was the rent rate offered?  Churches with leasehold property throughout Auckland are not known for their charity to tenants.

If the terms offered by APT were uneconomic for OCA, or APT wanted to squeeze another 6 months out of OCA before taking the property in a new direction, OCA may have pulled the plug given a 6 month rental term is an insult.  No one sane would rent a site for 6 months for their business, especially if a) the staff could be deployed elsewhere and b) the site was barely profitable or making losses.  It's not a hard decision.  The hard decision is what to do with existing residents.  Nothing personal - it's just business.

IMO OCA have been given "Hobson's choice" where it is understandable they said no.  But that does not preclude APT from taking the property in another direction in 2024.  So both parties could be correct in their statements to the media, but both have lied by omission (where OCA have not admitted to not agreeing with a 6 month lease term, and APT have not been forthcoming to the media with their alternative plans).  OCA need to come clean on the 6 months aspect.....if that is the case, then such a decision is understandable.  More so if there is an intractable / obstinate a-hole on the other side of the negotiating table....the power of walking away.

[Ferg]

Put the poor souls up in The Helier until they die ....that's what 'Believing in Better' is all about

My understanding is the care suites are not yet built there.  So apples and oranges.  Plus there is a completely different level of staffing required versus the apartments that are on the market.  In addition, there will be other facilities closer to Wesley which will be more convenient for affected families.

[Waltzing]

on wrong thread but ... the builidng never stops..

Out side Tamahere south of hamlton Ryman is creating a hole new town full of little boxes...

[KW]

If the terms offered by APT were uneconomic for OCA, or APT wanted to squeeze another 6 months out of OCA before taking the property in a new direction, OCA may have pulled the plug given a 6 month rental term is an insult.  No one sane would rent a site for 6 months for their business, especially if a) the staff could be deployed elsewhere and b) the site was barely profitable or making losses.  It's not a hard decision.  The hard decision is what to do with existing residents.  Nothing personal - it's just business.

I would have thought that if you had a building set up as a hospital facility, the lease terms would be very very long.  Or at least with many many tenant right of renewals.  Its not like you can just turf one rest home provider out every 5 years and then re-lease it to another rest home provider, all the while evicting one set of elderly residents out and then replacing them with a new set of elderly people.  

So I would say OCA chose to close the facility and not renew the lease for the next extended period, while APT agreed to give an extra 6 months to the existing lease in order to give the residents time to find somewhere to live.  8 weeks is not very long - what happens to the people who don't have family to manage this process for them?  OCA should have made the decision 6 months ago, and then notified its residents instead of leaving it to the last minute. 

[Untamed]

(Cross posted elsewhere)

I was thinking about this last night. My thoughts are:

1.Oceania has said they can re-house 30 of those 50 residents, elsewhere
2.That leaves 20 beds to find somewhere - we do not know how many of those beds are standard rest home level, hospital level, or dementia level beds
3.Beds only become available when someone dies, moves to a higher level of care, moves to a different location OR, when brand new beds come on line (anywhere - with any provider servicing the area)
4. The word will have already gone out, to all local providers, seeking assistance to re-locate the remaining 20 residents - some will have respite beds available, which could possibly be used, at least temporarily

I was initially concerned about the two month time-line, but the more I think about it, the more I realise it makes bugger all difference. If there are beds available, residents can go now/soon. If there are no beds available right now, hopefully there will be at least some in a week or two, or a month. I have no idea how many providers or beds are available in this location, but I imagine there are many more than where I live, so the overall "pool" of beds is going to be much greater than it would be down here. I think they have a good shot at finding beds for all 20 residents, within the two months time-frame. Dementia beds could be an issue however, if they are D3 (secure unit) beds.

My thinking would be, families and OCA will work together to find solutions, starting right now. Residents will move into beds as they become available - and I imagine the 30 residents OCA can accommodate elsewhere right now, will move very quickly. Having said that, you have to also consider the logistics of reducing the numbers in dribs and drabs - staffing becomes an issue if that drags on too long (caregivers, cleaners, cooks, housekeepers etc).

Time will tell and hopefully we will hear more soon, but my gut feeling is there is zero point hanging out beyond the two months. It would make zero difference to the availability of existing beds in the area - it is always impossible to predict when beds might be free.

It is more complicated than it sounds - kind of.

[Onemootpoint]

(Cross posted elsewhere)

Already responded elsewhere 
Thanks

[Basil]

The Helier - Paywalled  https://www.nzherald.co.nz/business/watch-first-look-inside-150m-st-heliers-the-helier-retirement-village/MPWYCFVRNBGOHLWQZUGNIX54IM/

Summary, you pay millions for an apartment, (there are no standalone units), with 2 bedroom apartments priced at $1.7 - $3.5m, the best ones have already sold for $5m+, and they scalp you 30% DMF after only 3 years with compulsory weekly fees of an incredible $550 per week for a couple.  If you need to subsequently move to a care suite they charge you an incredible $3,500 per week.  WOW, what an amazing deal, (for shareholders), no wonder they are very cagey about how many have sold.

OCA now cover the full spectrum of village types from the Helier right at the top for people for whom money is no object and who arguably have more money than sense right down to the approximately 15 or so basic old care villages they're trying to sell because they're probably losing money on most of them. 
You could say they have the whole field covered !

[Whacc]

It is more complicated than it sounds - kind of.

It's a cluster and the people saying "just put them in The Helier" will also be the first moaning about care earnings and the slow sell down of units.
No good options.

If you move these people into new care suites then you can't sell them and book development margin.
If you move them into existing care suites then you can't resell them and book resale margin.
For the entire time those people are in those units you're not booking any DMF.

These people may well be in other units for years rather than months as well.
This was the experience at The BayView in Tauranga and Awatere in Hamilton.  All care suites occupied and you end up turning potential purchasers away, especially as their care needs are usually so immediate.

So putting them in The Helier would be a decision that would potentially cost the business 8 digits.
Deferring the sales means material dead loss on DMF, not receiving the cash on sales results in more financing costs and an inability to recycle that capital into starting other projects.

[Whacc]

WOW, what an amazing deal, (for shareholders)

So you're buying back in again if it's so good for shareholders?

[Basil]

One swallow does not a summer make.

[Whacc]

I'm not sure what your point is then.

If there is an addressable market for any product and people are free and willing to buy that without any form of duress at a particular price point then what's the issue?