SUM - Summerset Group

[skid]

Sorry--those links were supposed to be the charts (have to use drop down box)

[skid]

So Couta, Id be interested to hear what you did in these firms and what motivated you to make your prediction.
They both obviously have lots of villages and working in one is not always an indication of the business overall,but having said that,often workers get a relatively good feel of how things are going--Do Share

[skid]

I have not done in depth research into SUM but there are some other factors i would certainly look into aside from good management
Interest Rates--Do they have alot of debt on their properties? (we have been given a pretty good indication that they will rise)
Which leads to the second-the property market in general--How would a downturn affect them?
And last -the overall markets--How badly would a sizable correction affect them?

These factors have been pretty sweet so far--will they continue for another 5 yrs?
If they do,then I suppose management becomes the major issue to consider--If they dont,then the equation becomes a bit more complicated.

People still get old and need accommodation so Im relatively confident they will still be around in yrs to come,but growth in profits can be affected by many things. IMO

[MAC]

All market wanes and waxes respond to economic cycles, including the property and share markets, and are mostly all correlated anyway. The secret of a long term hold is to stick with outperforming stocks.

The retirement sector has some degree of immunity also, the respectful elderly when they purchase are not buying property, they are buying aged care and security in knowing they will actually be taken care of in the twilight years, or, they are buying some degree of access to this security in advance anticipating requiring it in a few years.

You can’t take your wealth with you but you can end your days with dignity and respect, and your kids would probably just buy a sport’s car or go on an OE.

Just ten reasons why Summerset will continue to outperform;

1. Accelerating growth (an additional 200 units/yr in 2014 to 300 units/yr in 2015).
2. The aging demographic driving sector growth.
3. Baby boomers the wealthiest generation in human history.
4. Increasing net margins.
5. Award winning operational performance.
6. A sales and marketing premium for being the best in breed.
7. The highest ratio of villages within the lucrative Auckland region.
8. The highest land bank, also in key areas.
9. Revenue funded growth with only cashflow debt requirements.
10. Proven growth and goal focused management

Not to mention that SUM is undervalued at present.

[Bjauck]

3. Baby boomers the wealthiest generation in human history.

A lot of that baby boomer wealth (especially in NZ) is based on surging real estate prices. As the "demographic bulge" of boomers decide to cash in on their properties to buy a Licence in a SUM complex (or just to downsize or cash-up their investment properties etc) do you think the decades of boomer-fuelled house price growth may come to an end? I think that there could be a real risk to what many have come to assume to be chronic out-performance of residential real estate. Asset revaluations could turn negative. I agree with all your other positive points with the caveat primarily on this point 3.

[macduffy]

I think you've got a point there, Bj. While the average house price, particularly in Auckland, probably enjoys a healthy margin over the average cost of a retirement villa, apartment etc at present , the question may become whether that margin remains sufficient to buy that licence and to finance the ongoing costs of retirement village living. I've taken stakes in the three listed companies but they're only a part of a diversified portfolio.

[MAC]

It’s a healthy and interesting debate to have I think as it’s all a bit unprecedented in New Zealand history.

Certainly the boomers coming out of the property market will free up stock for generation x, but I agree at some point in time, could be ten years from now the property market will die as demand falls away. Remember all those school closures in the 1980’s and early 1990’s after the demographic shift occurred and the boomers had passed through.

Having said that, I see the aged care retirement village as being in the same bucket as hospitals, if the property market were to take a dive, the land value of a hospital would drop but this only represents 1 or 2% of the total site value, a hospital is valued in the healthcare sector not the real estate sector.

Similarly the value of the land an aged care retirement village sits on will drop, again it’s only 1 or 2%, but the aged care facilities on that land is in the healthcare market, and not in the commercial real estate market or in the residential real estate market.

Also, I’m inclined to anticipate that for a senior respectful elderly person living in a modern world where their children won’t change their nappies, their priorities are increasingly going to be on security of care first and inheritance second. The boomers cash will most probably prioritise toward their own care before any surplus from the sale of their house is allocated.

[winner69]

MAC said - Certainly the boomers coming out of the property market will free up stock for generation x, but I agree at some point in time, could be ten years from now the property market will die as demand falls away.

One of the big issues is that those Xers or 13ers are now at the peak f their earning cycles and have realised that are about to or have inherited a poor economy and a ravaged environment. They blame the generations before them.

It is likely that most of his generation will not match the economic fortunes of their baby boomer parents. It possibly is not a generation that feels it should pay the dues for people in the past - not good for baby boomers.

Some generational theorists (notably Howe and Strauss) point out that history shows when generational cycles such as this happen depressions if not deflating happens. Imagine the wealth of baby boomers (as you say the richest generation in history) sees asset prices falling away.

One outcome is a return to multigenerational living as seen in Europe in the past. - grandparents and parents and children all sharing the same house and caring for each other (particularly granddad or nana)

Only time will tell us how al his evolves over the next 5 or 10 or 20 years.

Retirement villages might be necessary for quality living or they might just be glorified nursing homes. Who knows.

[winner69]

If interested in generational trends and multigenerational living here's an interesting insight

http://www.enlightenmentmag.com/tren...ational-living

Extract -

A record number of Americans live in multi-generational households today, according to Generations United™ (GU), a national organization focused on improving the lives of children, youth, and older people through intergenerational strategies, programs, and public policies.
Although the trend began before the economic downturn, the Recession has fueled a dramatic rise in U.S. multi-generational households from 46.5 million in 2007 to 51.4 million by the end of 2009 – a 10.5 percent increase in just three years.

[BlackPeter]

A lot of that baby boomer wealth (especially in NZ) is based on surging real estate prices. As the "demographic bulge" of boomers decide to cash in on their properties to buy a Licence in a SUM complex (or just to downsize or cash-up their investment properties etc) do you think the decades of boomer-fuelled house price growth may come to an end? I think that there could be a real risk to what many have come to assume to be chronic out-performance of residential real estate. Asset revaluations could turn negative. I agree with all your other positive points with the caveat primarily on this point 3.

Good point highlighting the risk of property values dropping when all the baby boomers try to sell them. On the other hand - assuming our politics stays rational, New Zealand has due to its space, climate and still sort of green reputation the natural advantage of being a desirable destination for well contributing and hard working immigrants. If we manage this immigration flow to our advantage, than it shouldn't be too hard to keep property prices in a desirable band. If they drop too much, open the immigration tap - and if they go too high, reduce the flow. Quite simple, isn't it?