SUM - Summerset Group

[winner69]

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The logic is we have a death rate per year based on current stock. However the death rate is not converted 1 to 1 into re-sales rate for a given year (due to the times spent renovating and marketing).

The following year we recalculate the 7 year weighted average based on stock numbers, find the expected death rate, and then again apply the 10/12 conversion rate.

We are only applying this 10/12 to the expected deaths in a year. Next year - different deaths.

In your earlier post you knocked 8 units of the expected number for this year. Assuming they get sold when do pick up these sales in your calcs?

Wouldn't this year be as your calc of 38 plus the 2/12ths you knocked of last year

[Goldstein]

Dude, with all due respect, I understand how the demographics of villages work. The tenure profile is what drives the rate of exit and hence the rate of resales. This profile reaches maturity at about 10 years for each village, so will be a bit lumpy wrt to newer villages. Perhaps I should post the workings?

NewGuy, our calculations are the same. We both get a death rate of 46 per quarter for 2014. However, I don't assume that a new tenant is instantly in a unit once there has been a death. That is why I multiply 46 by 10/12 to get 38. Now my 10/12 may be too severe or not (Couta may be able to comment). But the conversion rate sure as hell aint 1 like you have.

[Goldstein]

Goldstein, Where does the other 2/12ths go? It goes into next year, and hence pretty much all washes out.

I'm comfortable with my assumptions and model. They've been checked/endorsed by several village owners.

Regardless, this is all an unnecessary distraction. The point remains that resales volumes are inexplicably low. I'm more interested in why. Cheers.

We actually get the same number of death rate per quarter for 2014 of 46. I've multiplied by a conversion rate 10/12 which brings me to 38.

I said in my email that this was very rough. There 's a lot that needs to be done to a unit before it is fit for a resale and I'm no expert in this (although back in my uni days I had a summer job renovating rest homes).

The fact is that I don't know whether there would be a quick turn around or whether a complete refit is needed, or even whether a unit might be re-purposed. So I simply apply an "I don't know factor". You have assumed that upon death there is an instantaneous new tenant. That's the only difference in what we are doing.

Maybe I'm not being clear. All I'm trying to do is see what is reasonable for the quarterly results for 2014.

[Gunny]

I was interested to see Rogers comment on the average age of new residents being 78. Hasn't this increased dramatically over the last 10 years. I remember when my parents moved into a Summerset village the minimim age was in the mid 50's. Is there any data on the current age band spread of actual residents.

My question is, if a significant number of younger people (55-65) got in early on this could have skewed the population current age downwards. If so, as time goes on with a 78 average age of new residents then the average age of Summerset residents will increase and the average stay rate decrease from current levels. Lots of other factors of course, people living longer etc. but is there a blip here that will further contribute to the resales in the comng years.

Gunny

[Gunny]

Perhaps I can get Dad to knock on everyones door and get their age and current health status to provide a one site sample. Suspect he is too busy playing pool though.

[winner69]

Doesn't really matter if have more or less sales than expected at the end of the day after revaluations SUM will make about $35m to $36m this year. The values still go up even if residents aren't dying to plan.

That will take Book Value (after paying some divies) to about $1.40 a share

So currently trading at 2 times prospective Book Value. RYM is well over 3 times BV. The SUM 2 times BV is a lot lower than what t was late last year when it hit 3 times BV

Institutions will be looking at in this light. They probably see it pretty fairly valued, if not on the cheap side at the moment

But compared to a real property company 2 times BV is not cheap

[winner69]

Curious about the seasonality of dying I was

By the looks of some charts on Stats NZ website it looks like the peak dying months are June, July and August when nearly 30% more die than in summer months (65 and over)

So using Goldies 2/12ths theory Q4 should be the boomer quarter for resales.

Long term climate change /global warming could change this as oldies don't do too well in heat waves either.

[percy]

Well I went down to Barrington Mall yesterday,and noticed "the wall of ageing" NZders has not slowed down.This confirms to me that NZders over the age of 65 years is on track to meet the projected increase from around 550,000 in 2009,to 1,000,000 in the 2020s.
Looks to me, well run companies like MET,SUM,and RYM's projected increases in build rate, will fall well short of the numbers required.
The tail winds in this sector are blowing a lot stronger,and I expect they will reach gale force in the not to distant future.!!!

[winner69]

NG ...but if units go up in value aren't shareholders richer because of it?

[couta1]

Now look what happens when you go skiing for the day you end up having a book to read when you come home. The whole resale thing is and always will be cyclical regardless of available stock, remember more stock becomes available whenever someone dies or moves into the care center which brings me to a point which most of you would not be aware of and that is there has recently been an increase in the number of serviced apartments tied up for rest home care. So for instance there is one village I know of which currently has 5 serviced apartments tied up and currently unavailable for resale until beds become available in the rest home for these 5 people(This may take many months or longer) So what are we to make of the low resales figures this quarter in the light of this, well maybe nothing at all it maybe just a blip in the great scheme of things. On a couple of other points re more people dying in the winter that is true in the community but not so in retirement villages with their constant temp monitoring and quick attention to care needs. Finally should Sum raise their entry age from 65 to 70 like Ryman, yes from a shareholders perspective. Should Sum be building dementia units on their new sites a definite yes for the reason of overall appeal to prospective buyers. Enough from me for now, I'm off skiing again tomorrow hope the weathers good