Retirement village operators

[nztx]

The is a least one retirement village that I know of that does share the capital gain. This is run under a trust rather than a commercial model though, but does encompass independent living and care suites, although not secure dementia units. This is done by taking the capital retention component on the 'right to occupy' a unit as 15% of the 'unit sale price', not the 'unit purchase price'. This particular village has reached a 'steady state' in the sense that the number of residents is not planned to increase. However, there are some 'sealing issues' with the roof design of the villas that have lead to 'leaky building' issues, So there are some long term capital commitments needed, beyond normal 'wear and tear', to keep the village up to scratch.

To balance the funding there is a 'facility fee' upon entering the village. Since I have been associated with this place, over a period of some 20 years, I have watched the completion of the wider village facilities to the blueprint of the founder. However the facility fee is set to continue and has risen from $10k to $35k over the 20 years. This increase is simply to cover village operating costs and is increasingly used to 'subsidise' the care side of the village.

Such a model is highly beneficial to the occupiers, or at least it has been up to now. However it does rely on booming property prices to keep the village balance sheet looking good. With much lower capital gains into the future, and perhaps even periods of capital loss, I can foresee the non-refunable 'facility fee' growing dramatically. In the near future I wouldn't be surprised to see a $50k non-refundable 'facility fee', a defacto 'entrance fee' being the norm in village that share capital gains (and gulp capital losses) going forwards.

SNOOPY

With this RV Review stuff going on is there a prospect of even higher initial unit buy-in costs on the cards ?

Many of the oldies are probably only looking for a nice set up where they're looked after well for their
fading years - with company & care and may not care too much about how things get untangled after
they're gone, so as long as they see something good / better than where they moved in from until
they depart for up above or wherever ..

I really can't see the RV Operators missing out, one way or another, after all - there are costs of growing facilities
further, maintaining villages & their services along the way, and delivering up a surplus for the trust or corporate
owning the show - in most cases things aren't set up to just deliver up a Social Service as a non profit..

[Ggcc]

No one is questioning the actual living in or care in retirement villages.
It is "the right to occupy" agreement which is boarding on being an illegal agreement.
I do think the chair of the may villages ie RYM's Dr.David Kerr,OCA's Liz Coutts,and OCA's Rob Campbell will see the errors of their ways.They are good peopl and run great villages.

I do feel though that if government create new legislation, this will incur extra charges to the customer. Leave it to the market is the best option, with as little political interference as possible. Look what it has done for tenants of rentals.

If people are disappointed in the industry, they will alert others of their generation through RSA, clubs or other things like garden groups. The complaints process will change and is constantly changing how things are done. No one wants complaints of their organisation on the internet.

An example of my own experience is I have heard nothing but good things from residents at Summerset Napier. The only people seeming to complain are the children who get less when they pass on. That was quoted by three different residents to me. There are some entitled children out there.

[Bjauck]

....
An example of my own experience is I have heard nothing but good things from residents at Summerset Napier. The only people seeming to complain are the children who get less when they pass on. That was quoted by three different residents to me. There are some entitled children out there.

Of those people I know in villages, they all seem very happy. The villages are well maintained. I do wonder what may happen when interest rates are no longer falling and consequently residential property capital gains may stagnate. Will the Village managements remain so good during those periods?

Entitled children? I guess that may have happened as a result of NZ making its housing so expensive and having little pension fund provision. Many people may hope for a generous inheritance to be able to afford home ownership or to provide a boost to pension funds.

[850man]

I do feel though that if government create new legislation, this will incur extra charges to the customer. Leave it to the market is the best option, with as little political interference as possible. Look what it has done for tenants of rentals.

If people are disappointed in the industry, they will alert others of their generation through RSA, clubs or other things like garden groups. The complaints process will change and is constantly changing how things are done. No one wants complaints of their organisation on the internet.

An example of my own experience is I have heard nothing but good things from residents at Summerset Napier. The only people seeming to complain are the children who get less when they pass on. That was quoted by three different residents to me. There are some entitled children out there.

The last thing any industry in NZ needs is meddling by this government, running a bath is about where the skillset ends.

[percy]

I think weekly fees should stop when the resident dies and the estate should be paid out within a certain timeframe (such as 6 months) irrespective of whether the unit has been occupied by a new incoming resident or not. If those are the changes you're after Percy then I completely agree mate, some reform is needed.

I feel very fortunate that we're being paid out promptly....hasn't always been the case with the Peninsula Club retirement village, one of my clients found it took them, (from vague memory) nearly 2 years to get paid after his mother died.

Nearly 2 years..Disgraceful.
Boardering on criminal.

[artemis]

I do feel though that if government create new legislation, this will incur extra charges to the customer. Leave it to the market is the best option, with as little political interference as possible. Look what it has done for tenants of rentals. ....

Doubt that RV tweaks via legislation is going to be top of mind for the government atm. Especially when it is the elderly residents who will be paying. Just like tenants.

[Maverick]

RNZ This morning.
https://www.rnz.co.nz/audio/player?audio_id=2018798959

Quite pleased I halved my holdings in this sector a short while ago. Some headwinds / uncertainty ahead.
Still 4.6% of my portfolio overall ...so I am paying attention.

Thanks for posting that link RTM.
Listening to the conversations it's pretty clear what the retirement commissioner and the lobby group are wanting. It's also reassuring to hear both sides , including the interviewer, all acknowledge the operators by and large are desirable and already doing a great job.

From the interview it seems obvious what their various motivations are, here are my key takeaways.
-The legislation is 20 years old and as it currently a bunch of pieces cobbled together no longer fit for purpose. The industry was in its infancy then so a cohesive framework is now needed so everyone has a common standard to work to.
-Underneath the proposed NZ framework each operator will still be free to set out their own ORA models as they wish.
-The complaints of the few currently have no channel or process available to be heard or enforced.
-A lot of the concern is mostly when a client exits a dwelling is that there are no standards or rules to procedures if things seem unfair.

Firstly , I'm reassured by the motivation for the retirement sector overhaul that they really just want a country wide framework established so everyone has a consistent rule book and a proper complaints process for the residents.
This seems timely given the industry has grown into a monster over the last 20 years, and will continue to do so.
This is no different than what we have in place for real estate, insurance , banking, electrical , building , tenancies, or pretty well any body operating within NZ .
All of these industries are governed and function well enough within their respective government imposed frameworks.

Secondly, I also take heart that all parties (including residents who want changes ) acknowledge the sector is vital to the country by offering product choices and housing stock. Also that they need to all stay sufficiently motivated to remain in business. All parties accept these companies require profit that has to be paid in one form or another by the client.

I personally believe this overhaul is a natural evolution and needed for the sector.
Most likely the big boys are already operating close enough to what the end result might be required anyway and if there are any shonky operators out there taking advantage then they should be brought in line or squeezed out. If any of us here were going into a village we would want a solid framework in place just like any other industry.

So in summary, I do not fear at all the overhaul, in fact I welcome it. IMO all the fear of profit sharing is half cocked and missing the point.
If the residents really do think they are being creamed they can always become a shareholder and join the oppressors.

[percy]

[QUOTE=Maverick;889659][FONT=Verdana]
Most likely the big boys are already operating close enough to what the end result might be required anyway and if there are any shonky operators out there taking advantage then they should be brought in line or squeezed out. If any of us here were going into a village we would want a solid framework in place just like any other industry.

I too would expect "the big boys" are already operating close enough to any new regulations.so have nothing to fear.
I also agree with your comment : all the fear of profit sharing is half cocked and missing the point..

[fungus pudding]

The last thing any industry in NZ needs is meddling by this government, running a bath is about where the skillset ends.

That's a bit harsh when they've still got Twyford in their ranks. It's about time they gave him some new project. He hasn't fixed anything for a while now. Then there's other talents like Kelvin Davis, Willie Jackson, David Parker and they could always drag Trevor Malllard out of the chair and back in the rank and file.

[dibble]

I do wonder what may happen when interest rates are no longer falling and consequently residential property capital gains may stagnate.?
.

Retirees and their FOMO, they ought be careful what they wish for, given the gathering national anger the next price move might be downwards and the quid pro quo of profit sharing is loss sharing.