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  1. #1
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    Default Summerset Group IPO

    AMP to list retirement village unit

    AMP Capital Investors has confirmed plans to float Summerset Group, one of the country's biggest retirement village businesses, on the sharemarket.

    AMP said today the share offer would open in August. AMP will retain 20 per cent of Summerset and sell new and existing shares comprising 80 per cent of the company. The fund manager bought the Paraparaumu-based Summerset for $125 million in late 2005.

    Summerset was set up in 1994, and its first village opened in 1997. It now has 11 villages, including ones at Trentham, near Porirua, and at Paraparaumu, and wants to own 20 villages by 2011. It had 770 units at the end of last year and plans to increase that to 2086 within four years.

    Summerset chief executive Norah Barlow said this week the company had net assets worth $200 million, with a "conservative" debt level.

    Brokers First NZ Capital and ABN Amro Rothschild have been appointed joint lead managers of the float.

    AMP's announcement today follows a Dominion Post story on Wednesday which said AMP was looking to list Summerset. Existing listed retirement village operators include Ryman Healthcare and Metlifecare
    \"The overweening conceit which the greater part of men have of their own abilities [and] their absurd presumption in their own good fortune.\" - <b>Adam Smith</b> - <i>The Wealth of Nations</i>

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  2. #2
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    Would like more comments on this float. Is it worth having a look at or just another private equity selling their holding to the public?
    This stock shines so bright that it \"Bling Blings\"

  3. #3
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    Nothing retiring about Summerset's float
    5:00AM Friday July 20, 2007
    By Liam Dann


    The interior of one of the units at Summerset.
    The NZX will get a much-needed shot in the arm with the float of AMP Capital's retirement business, Summerset, which is expected to list in September with a value over $350 million.

    AMP Capital is to float 80 per cent of the business with the offer opening in August.

    The $300 million expected to be raised makes it the biggest stock market float since 25 per cent of lines company Vector was listed in 2005.

    NZX products group manager Geoff Brown described the float as a "healthy fillip" for the market.

    Takeovers have wiped $12 billion of capital off the market in the past two years, with just $3 billion coming back by way of new listings.

    Brown said the Summerset float was hugely positive, not just because of its size, but because it was in a sector with a great deal of investor appetite.

    The fact that this was a private equity group selling back to the investing public was also a positive.

    "It follows a similar process they undertook with Methven and I think that's great for the market."

    Brown said Methven, a manufacturer of shower and tap fittings, had been a wonderful success.

    Summerset, which has 10 villages providing accommodation for 1600 people, will join rival operators Ryman Healthcare and Metlifecare on the stock exchange.

    It will be the third-largest retirement home operator by market capitalisation but aims to grow rapidly in the next few years.

    It plans to have 20 villages complete or under development by 2011.

    Villages are planned in Hastings, Waimauku, Warkworth, Karaka and Katikati.

    Earlier this month, Summerset announced record pre-sales of $6.5 million for its $50 million Warkworth Village.

    Chief executive Norah Barlow said at the time that the strong sales reflected the continued growth in demand for the lifestyle offered by retirement villages.

    "While penetration rates for retirement villages have increased from 3 per cent in 1999 to around 4.3 per cent, they are still relatively low by international standards, which suggests demand will continue," she said.

    With its head office at Paraparaumu near Wellington, Summerset was founded in 1994.

    AMP Capital bought it for about $125 million in 2005.

    Demographic trends are on the sector's side with the number of people aged over 65 - 512,000 as of 2006 - expected to grow to about 1.3 million by 2050.

    But despite the growing market, analysts warn there are still risks in the sector.

    It was possible for the level of development to outstrip demand depending on the number of competitors prepared to enter the sector. Operators needed to ensure they were targeting the most profitable segments of the market. Summerset claims to specifically target the middle-market segment.

    There are also issues around the supply and price of land as the sector competes with other property developers.

    Comparisons between competitors were not always easy to draw, said one analyst, who pointed out that Ryman and Metlifecare traded on vastly different price-to-earnings multiples.

    Ryman, with 17 villages and two under construction, has a market capitalisation of $1.07 billion and trades on a multiple of nine times price to earnings (PE).

    Metlifecare owns and operates 15 retirement villages, incorporating nine care facilities and seven hospitals.

    It has a market capitalisation of $690 million and trades on a PE multiple of 26.

    Metlifecare is in expansion mode, having this month announced the acquisition of a Christchurch retirement village and the development of a Takapuna site on the North Shore.

    Chief executive Richard de Haast said the key to expansion was putting more residential units on sites it already owned.

    With land prices so steep, it had to focus on internal growth and expansion, utilising its "land bank", particularly in areas with the biggest potential: Auckland and the Bay of Plenty.

    Metlifecare is tightly held with more than 80 per cent of its stock i
    \"The overweening conceit which the greater part of men have of their own abilities [and] their absurd presumption in their own good fortune.\" - <b>Adam Smith</b> - <i>The Wealth of Nations</i>

    The information you have is not the information you want.
    The information you want is not the information you need.
    The information you need is not the information you can obtain.
    The informaton you can obtain costs more than you want to pay.

  4. #4
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    I'm all eyes and ears on this one. Will be following it carefully. Early days yet. Great booster for our little NZX, may even result in some spillover to other listed NZ stocks.

  5. #5
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    Definitely worth a look in, you can't deny the fundamentals of the industry look good.
    Disclaimer: Do not take my posts seriously. They are only opinions.

    AMR has sold all shares and is pursuing property.

  6. #6
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    and I am sure that it would be priced accordingly.
    om mani peme hum

  7. #7
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    quote:Originally posted by rmbbrave

    Nothing retiring about Summerset's float
    5:00AM Friday July 20, 2007
    By Liam Dann

    ...Ryman, with 17 villages and two under construction, has a market capitalisation of $1.07 billion and trades on a multiple of nine times price to earnings (PE).

    Metlifecare owns and operates 15 retirement villages, incorporating nine care facilities and seven hospitals....

    It has a market capitalisation of $690 million and trades on a PE multiple of 26.
    NZX quotes a P/E of 9 for Ryman, heaven only knows how they worked that out. I would suggest the true (historical) number is also 26 or 16-17 if you had in the revaluation gains for property etc.
    om mani peme hum

  8. #8
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    This morning ASB business was talking about this IPO.... and they were quite bullish about summerset... I would tend to agree with the whole long term view on baby boomers going into retirement and increased demand for this sector... BUT.... with property prices heated and likely to fall then this type of investment is likely to fall as it is correlated with housing market fall...
    Ryman is in the same position...

    In the mean time while we wait for property prices to correct, it will be a good solid investment... I have not looked into the details around the float, and I have not researched this company indepth, DYOR...
    [8D]
    .^sc

  9. #9
    Senior Member Halebop's Avatar
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    Long term Demographic trends are positive for the sector.

    Short term valuation criteria would be negative. As a commercial operator of real estate assets, NPV / DCF are sensitive to prevailing interest rates. I suspect AMP are trying to pick the top.

  10. #10
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    Operation seems very much leveraged to property prices. We have two different couples who are family friends. One couple moved into one of the new villages perhaps a year ago, the others delayed, price this year for lease to occupy - $70,000 dearer than last year. Up about 20%

    All my information is second hand from these people, and my interpretation my be a little confused, but it seems to me purchasers get a licence to occupy which must be surrended to the owning company on leaving, with repayment for lease at a discount to the original cost. Lease charges seem moderate, about $4000 annually, this apparently covers most outgoings one would pay for their own property - rates insurance maintenance of dwelling & grounds, so life is simple and thus the scheme has it's appeal.

    Profitability seems to me to mostly come from increasing lease purchase price which would have some connection with current house prices, thus my initial conclusion.

  11. #11
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    i'll stick with AVE on the ASX. quality outfit, still trading at lower p/e's than the other main players...

  12. #12
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    why sell? where are they using the funds ie the 300 mill they going to get out of this?

    definately looking like they going for a kill, 100% gain in 2 years is very good....

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  13. #13
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    It concerns me when private equity sell down most of their holdings in an IPO. Have to look at the propectus very carefully on this one to convince me. The only reason I am even looking into this is cos the sector is doing very well.
    This stock shines so bright that it \"Bling Blings\"

  14. #14
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    Would have to take a good look at the projections - reading the old Feltex thread has dampened my interest in this IPO.

    What are their levels of debt?
    Has the market peaked?
    Disclaimer: Do not take my posts seriously. They are only opinions.

    AMR has sold all shares and is pursuing property.

  15. #15
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    Looking from its market (client/customer/consumer) point of view, my feeling is that most of these people would want a 'total package' ie from retirement living to final care.
    It appears from summerset website that they are swinging away from 24 hours care and concentrating more on 'serviced apartment' in their more recent development. Seems to indicate that 'age-care' is not as attractive.
    Looks more like just a property play

  16. #16
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    seems like it's worth a closer look, but we're all going to have to be very careful over the next couple of years as private equity starts selling out to the public. It's a cycle, and now that interest rates are on the rise the private equity boom will probably start to wane a little, thus having seen companies disapear we're likely to see companies return. Private equity is a good thing in general as it cuts out the fat, uses more efficient capital structures and in general adds value... but questions must be asked when the time comes to flick it off to joe-mom&pop-investor.

    don't think it will offer much chance to make a quick buck on debut though.... *searches for a prospectus*

  17. #17
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    I'm a little sceptical on this one.
    I think AMP are selling at the top , They have the research teams etc.. They are only keeping 20%, why not keep a controlling interest?
    Why would you sell a good earner if in fact it is/gonna be ??
    Summerset is established sure but it's a small boy up against two bigger boy's. Takeover target maybe !!
    We are in the dark at the moment, lets have a good look when all the splurb is out.
    Cheers BB

  18. #18
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    takeover target? I think unlikely. Probably Metlife and ryman have already run their rulers over it and decided not at that price!

  19. #19
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    quote:Originally posted by Yossarian

    takeover target? I think unlikely. Probably Metlife and ryman have already run their rulers over it and decided not at that price!

    I agree. If it is a T/O target they wouldnt need to do a IPO. Not at these price.
    This stock shines so bright that it \"Bling Blings\"

  20. #20
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    Quest for gold in golden years

    Two financial giants are going head-to-head for $400 million of investors' cash in two retirement village floats.

    Dutch finance group ING yesterday said it would float its villages in Epsom and Remuera, pitching itself against Australian heavyweight AMP to be first to the market with a share offer.

    The floats will double the number of listed retirement village operators on the NZX. Ryman Healthcare and Metlifecare are the only current listed eldercare specialists, with a combined market capitalisation of $1.7 billion.

    ING wants to raise $100 million from shares in its retirement business which will be called ING Real Living. The float will be managed by Forsyth Barr.

    Last month, AMP NZ Capital Investors said it would float 80 per cent of its Summerset retirement village business, which was established in 1994 and owns a string of villages throughout New Zealand.

    This float is expected to seek about $300 million, and is likely to be the year's largest.

    AMP spokeswoman Jane Anderson could not give any further details on the Summerset float or say when the prospectus would be issued.

    But it is understood AMP is aiming to have Summerset listed by September, and Real Living is scheduled to float in late September or early October.

    ING, which is floating Real Living with Symphony Investments, said yesterday it was considering developing a further property in Remuera. The company's float would offer up to $100 million of stapled shares.

    ING and Symphony are already in partnership, jointly controlling the manager of listed ING Property Trust.

    Real Living will be chaired by former Metlifecare chairman Peter Fitzsimmons.

    Ricky Ward of Tyndall Investment Management said the two new floats would provide alternatives for investors who could now only get exposure to the sector from two companies.

    But some investment analysts said the ING float was far too small to attract interest from big institutions.


    ING Real Living

    * Raising $100 million.

    * Villages in Epsom, Remuera.

    * Another village planned.

    Summerset

    *Aiming to raise $350 million.

    * 11 villages, 1600 retirees, 400 staff.


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