That raises another question, what do you expect SUMs build rate to be in six years? If their buildrate decreases (and likely leads to a decrease in underlying profit) what value do you assign their shares?
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I guess a lot depends on where you live.
My wife and I will decide next year, whether we sell our four bedroom house ,and move into a two bedroom unit,or move straight into a retirement village.
We live in Spreydon,ChCh,not far from Barrington Mall,and are in Cashmere High School zone. With people getting sick of traffic, commuting from Rolleston/Rangiora etc I would expect our house to sell quickly.
Any one noticed I have not mentioned house prices,unit prices or retirement unit prices.?
It will be a lifestyle decision.
And there are thousands in our situation.
I find more and more young elderly-around 70 are moving into retirement villages.
Initially I thought many would regret it-but so far not one.
I was talking to a couple yesterday who loved the stress-free social aspects.
Similar people and lots of activities.Heated pool and swims everyday.
Personally I know its not for me-or any of my friends.
One of my wifes friends is already there and no regrets.
As percy states its a lifestyle decision and finances don't come into it.Cost of living is about the same-management fees are similar to council rates.
Just a smaller inheritance for the kids-and for most that might not be a bad thing
Couple slightly different reasons for looking at a retirement village.
The past ten years my wife has lost her social life looking after relations.First an uncle and an aunt,then her mother,then a brother.Two of her brothers have died in the past 9 months, and an old school friend of her's died yesterday. So moving into a retirement life should give her more friendships,and activities.
The second reason would be so we can have more holidays,without leaving our house unattended.
Both daughters have already received a fair chunk of their inheritance.
What if I asked you to substantiate those claims ? What if I told you and could substantiate it that average real estate prices in ST John's and Parnell had increased in the last two years and a half years by circa 60% ? You think that might underwrite their development margins for years to come as they build out new villages there at around an average price of 75% of the respective suburb ?
What of I told you average Parnell prices are now an average of $2m and many of those are poorly insulated old design weather board villa's. You think people in their late seventies might like a supportive living environment in a nice new well insulated unit that means they can free up circa $500,000 in capital ?
I added SUM more to my portfolio today. I have full confidence that management are highly motivated to continue to grow this company at a very strong rate and full confidence in the compelling long term population demographics.
Look up JLL retirement village white papers 2017.
Do you have any comments about the oversupply issue I raised? Is it a concern? Maybe you believe sum will be least affected due to quality of units and brand?
I'm not interested in talking about short term development margins at the moment unless there is concrete figures, at the moment my model has 21% for fy17.
Ah yes, it was in response to someone questioning why SUM has a PE below most of its peers.
SUM = 140M Operating Revenue FY16
75% came from the sale/resale of occupancy rights
15% came from medical/aged care services.
RYM = 429M Operating Revenue FY17
33% came from the sale/resale of occupancy rights
53% came from medical/aged care services.
OCA = 192M Operating Revenue FY16
10% came from the sale/resale of occupancy rights
81% came from medical/aged care services.
In my opinion, the biggest tailwinds are providing care and medical services to the growing ageing population.
Sum is still going to do very well over the next decade or two, but it won't be afforded the "price to everything" of its peers.
"JLL expects to record continued growth in New Zealand’s 75 plus penetration rate over the next 15 years, assuming adequate retirement village unit supply reaches the market in order to fulfil demand."
You'd think the way they talk here they are worried there isn't enough being built?
Not all other operators are increasing their build rate - some are converting, some are building care facilities (not the same as units), some are doing a bit of everything, some are even struggling big time and likely to shut... so no, not all other operators are increasing their build rate year after year (the 5 companies listed aren't the only ones in the retirement business... although they probably represent some of the best)
"If we look ahead to 2043, Statistics New Zealand’s population forecasts suggest the number of people in this age bracket will grow by 164 percent. In Auckland, that growth rate is expected to be 205 percent."
Even if penetration doesn't increase (which I doubt), these stats are likely to keep a 'floor' under things.
There is a possibility, which is unique to Auckland, that there may (not for certain) be an over supply of retirement units in the medium term - this has been discussed a while back I believe... in which case the worse will not be filled - sum companies will be more than fine
- correct, and this is why ARV is trading a bit higher, they are a premium offering, with a unique culture and extremely good continuum of care - not trying to develop shoe box units for all. As for Oceania, well that is still trading on a much lower PE than anything else listed, but like arvida ("the dog") was when it was trading some 41% cheaper than it was today only 2 ish short years ago, hopefully the market will 'adjust' this over time (speaking of which, FY17 results shouldn't be to far away). Ryman, well they have their australian offering, and also a impressive continuum of care... funny how while house prices (which relate to unit prices I think) might stall a bit in some areas, those "doggy low margin" care beds will likely become increasingly important as time goes on, and a consideration on the minds of folk moving into villages (and unlike [possibly] retirement units in Auckland, there is a looming nation wide shortage of these by the way...)