SUM - Summerset Group

[BlackPeter]

Anyone know what model SUM use?
Or the others?

Here is a summary of Summersets up to date conditions - check particularly page 22:
https://www.summerset.co.nz/assets/B...n-08.12.14.pdf

Worthwhile to note that you don't buy a unit - you buy a right to occupy. If e.g. something happens to the unit - it is not the problem of the occupier, but the village will provide either with a replacement - or pay you the full market value for your unit without any deductions .

[kiwico]

There is regulation in NZ of a sort - there is the Retirement Villages Act 2003 and the code of practice all villages need to adhere to. The code is there to protect residents and was greatly enhanced post Canterbury earthquakes to deal with the issue when a resident needs to move out of their unit due to damage.

[Beagle]

Our bear in disguise ... here we go again. Any chance you could explain to us the relevance of the outdated Australian material you posted? What has this to do with SUM - they don't operate in Australia and they have ways fairer contracts anyway?

Well said. SUM people need to get over the sensationalist Australian newspaper reports which have nothing to do with SUM as they don't operate there. SUM have a 94% resident satisfaction survey which they are very proud of which is in line with the same very high resident satisfaction survey they did the previous year so they must be doing a LOT of things very well !

My guess is a lot of the younger generation are a bit miffed they will inherit a lot less, (no capital gain and the DMF) but here's a free heads up, old folks don't care. What they care about is being happy and living in a well supported, safe and caring community environment.
It's their money and they are free to do with it what they please.

Overall the penetration rate for retirement village living in terms of old folks housing needs has been steadily rising in N.Z. so there's obviously increasing level's of satisfaction from our elderly folks.

P.S. Good day for the sector overall. I think some investors took comfort from the fact that despite all the much hyped talk of a property crash the very latest national average data shows the housing market increased 0.348% from June to July 2017 i.e. an average annual rate of just over 4% per annum.
http://www.interest.co.nz/property/8...ristchurch-now
Still a supportive environment for retirement companies and in line with my price model assumptions.

[Harley]

https://thewest.com.au/news/wa/exclu...-ng-b88554470z

[percy]

Well said. SUM people need to get over the sensationalist Australian newspaper reports which have nothing to do with SUM as they don't operate there. SUM have a 94% resident satisfaction survey which they are very proud of which is in line with the same very high resident satisfaction survey they did the previous year so they must be doing a LOT of things very well !

My guess is a lot of the younger generation are a bit miffed they will inherit a lot less, (no capital gain and the DMF) but here's a free heads up, old folks don't care. What they care about is being happy and living in a well supported, safe and caring community environment.
It's their money and they are free to do with it what they please.

Overall the penetration rate for retirement village living in terms of old folks housing needs has been steadily rising in N.Z. so there's obviously increasing level's of satisfaction from our elderly folks.

Australia
....Someone kindly posted on Ryman thread, a report of RYM's agm.What is of particular interest, is RYM's Australian director,George Savvides comments.
Inheritance.
...Our house has a rateable valuation of $540,000.Market valuation may be close to that.No mortgage.
So far retirement village units we may be looking at are near $340,000.
That would free up $200,000.
In 10 years time I die.Retirement village unit gives my estate approx.$250,000.
The freed up $200,000, "percy" invested over 10 years, will most probably generate between $600,000 and $800,000,
Well positioned.?

[dobby41]

The freed up $200,000, "percy" invested over 10 years, will most probably generate between $600,000 and $800,000,
Well positioned.?

300% to 400% in 10 years - impressive!
What's that - 20% to 30% compounding per annum?

[dobby41]

My guess is a lot of the younger generation are a bit miffed they will inherit a lot less, (no capital gain and the DMF) but here's a free heads up, old folks don't care. What they care about is being happy and living in a well supported, safe and caring community environment.
It's their money and they are free to do with it what they please.

I think you are right that many younger generation are worried about their inheritance.
So are many older people which is a drag on the numbers going into a village. They are used to saving for a rainy day and want to leave something. Took a little bit to convince my parents to move and they can see the benefits now.

What does concern me with the model is what happens if they want to move somewhere else. They wouldn't have enough money having missed out on any capital gain AND paying to have the place refurbished. I hadn't thought of that senario before.
Good for the shareholder though.

[Bjauck]

...
...Our house has a rateable valuation of $540,000.Market valuation may be close to that.No mortgage.
So far retirement village units we may be looking at are near $340,000.
That would free up $200,000.
....

I think you would make the most of that freed up investment capital!

The current older generation has enjoyed a boost over the years in their leveraged real estate capital values beyond both the increase in inflation and incomes. Today's first home buyers, even if they can afford the deposits, won't be as lucky to enjoy such windfall residential real estate price increases, as interest rates cannot fall much further.

As the older land owing generation (including those who were in a position to free up part of their real estate wealth when they moved into a great SUM unit!) pass away there are plenty of the younger and hard working generation who need however to rely on inheriting assets so that they can afford to move out of their cramped, but still expensive, apartments.

increasingly, more so than in the past, it is a question of how wealthy your family is that determines if you can buy and what type of house house the younger generation can buy. Perhaps that is why there is pressure on the older generation to preserve inheritances.

[BlackPeter]

increasingly, more so than in the past, it is a question of how wealthy your family is that determines if you can buy and what type of house house the younger generation can buy. Perhaps that is why there is pressure on the older generation to preserve inheritances.

Probably the wrong question and admittedly not the right discussion for this thread either. However interesting to note that most wealthy countries have much lower rates of home ownership than most poor countries. Switzerland: 43.4%, Germany: 51.9%, New Zealand: 64.8%, India 86.6%, Romania: 96.4%;

https://en.wikipedia.org/wiki/List_o...ownership_rate

Only exception I can see in this list is Singapore - they are reasonably wealthy and have still a very high home ownership rate, but this is due to the state selling every Singaporean couple at their wedding day a heavily subsidized flat.

Just saying - we might be in a dead end if we want to improve our wealth by keeping our homeownership rates up ... home ownership reduces flexibility.

[Bjauck]

...
Just saying - we might be in a dead end if we want to improve our wealth by keeping our homeownership rates up ... home ownership reduces flexibility.

I think it is a relevant discussion although general and not just specific to SUM.
Agree - in NZ so much of household wealth is tied up in the family home (with expensive residential land). The SUM model is based on selling ORAs, the prices of which are based on surrounding real estate values. If fewer of the surrounding homes are owner occupied then the potential market for ORAs will drop. Not a problem for the next decade or so as the tsunami of land-owning retiring baby boomers continues to grow...

However if you wish to encourage a diversion into productive assets and away from investing and inflating the price of land - then I imagine taxation and lending preferences will need to change to encourage such a change. As you say there are many wealthy countries with a greater proportion of household wealth invested in productive assets as opposed to owning residential land (and inflating the price of land?). In that situation perhaps the retirement companies need to devise a scheme the cost of which is not reliant on ORA/real estate value relativity.