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  1. #5101
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    Quote Originally Posted by macduffy View Post
    Why would you expect the current buildrate to continue unabated for another six years? Are retirement companies not aware of this risk?
    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?

  2. #5102
    percy
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    Quote Originally Posted by Hoop View Post
    I read this thread and all I see is the positives,,, and one large positive is increasing numbers of weathy (thanks to the 40year property boom cycle) baby boomers entering their retirement years and one negative (possible property crash)...

    There is a "perception" that the retirement village sector will see good times like it is now for the next 30 years so we all will use this sector as our very long term (superannuation type) investment....But..is this perception valid?..Is this created perception based around the current environment?



    There are many other important factors which lie in the shadows....

    I think it was Halebop (Halebop can you add comment) a few years back on ST that said the demographic factor will be the biggest factor that will affect the property market starting in the near future, when the baby boomer generation bubble reach retirement and start downsizing ....As they move into smaller dwellings their last big 3 -4 bedroom home that once housed them and their children will be sold off into an ever decreasing market as there isn't the replacement numbers of Gen Y and Millennial couples...also .. the wealthy Generation is the exiting Baby boomers not the entering Millenials.
    Here lies the problem...The property market could become fractionated...and the mobility to move from house to retirement village may become more restrictive due to financial contraints rather than willingness..

    Also there are the usual other potential problems.. Politicians and their Party's housing policies (upcoming election), Competition and large dictating Competitors entering and diluting an affluent market...NZ's ever changing Fiscal Policies.... tightening migration restrictions (upcoming election) ...
    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.
    Last edited by percy; 29-06-2017 at 01:28 PM.

  3. #5103
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    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

  4. #5104
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    Quote Originally Posted by percy View Post
    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.
    And the attraction of a brand new unit adds to the attraction.No matter where the property cycle is at.
    h2

  5. #5105
    percy
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    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.
    Last edited by percy; 29-06-2017 at 03:30 PM.

  6. #5106
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by James108 View Post
    What if I told you penetration rate in Auckland had increased from 14.8% in 2015 to 15.1% in 2016.

    How long can a 0.3% increase in penetration per year be maintained?

    What is the increase in penetration required for this year when SUM has increased build rate by 12.5%, keep in mind all the other operators are also increasing build rate.

    What if I told you that based on the current development pipeline Auckland needs to have a penetration rate of 19.2% by 2023 to avoid an oversupply. Either that or reduce buildrate.
    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.
    Last edited by Beagle; 29-06-2017 at 03:49 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  7. #5107
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    Quote Originally Posted by Beagle View Post
    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.

  8. #5108
    Senior Member hardt's Avatar
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    Quote Originally Posted by winner69 View Post
    I was going to reply to a good post from hardt (I think it was) but it has been deleted. Shame as it must have taken a while to write.

    Always good to hear the quant's view
    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.

  9. #5109
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    Quote Originally Posted by James108 View Post
    What if I told you penetration rate in Auckland had increased from 14.8% in 2015 to 15.1% in 2016.

    How long can a 0.3% increase in penetration per year be maintained?

    What is the increase in penetration required for this year when SUM has increased build rate by 12.5%, keep in mind all the other operators are also increasing build rate.

    What if I told you that based on the current development pipeline Auckland needs to have a penetration rate of 19.2% by 2023 to avoid an oversupply. Either that or reduce buildrate.
    "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

    Quote Originally Posted by hardt View Post
    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.
    - 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...)
    Last edited by trader_jackson; 29-06-2017 at 07:18 PM.

  10. #5110
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    Quote Originally Posted by James108 View Post
    ...
    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?..
    Although perhaps some time off, if sometime in the future the current model appeasr to be reaching market saturation, perhaps different markets could be tapped - such as a pensioner rental units and a slightly different scheme for the 50-70 yo market.

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