RYM - Ryman Healthcare

[Bjauck]

Bjauck- The repayment to the resident is fixed so they do not suffer capital loses (atleast not with RYM, sum,met). Some operators charge the refurb cost to the exiting resident (RYM definitely doesn't though they may reserve the right if the place is trashed)

Edit: by fixed, I mean it is a set % per year with a cap. Each operator is different but for example, one uses 5% with a maximum of 25%. Average residency is about 7 years I think.

Ok thanks.

Eldernet had an example of a licence to occupy In addition to the amortisation there was some liability on the resident for any drop in the actual resale price achieved for the unit. For example unit bought for $300k...resold for $280k. The "owner" would be liable for the amortisation 25% of 300k=75k plus the loss on resale 300k-280k=20k.

I must get copies of the licence agreements to check the clauses.

[Bjauck]

Bjauck- The repayment to the resident is fixed so they do not suffer capital loses (atleast not with RYM, sum,met). Some operators charge the refurb cost to the exiting resident (RYM definitely doesn't though they may reserve the right if the place is trashed)

Consumer in Feb 2013 produced a comparison of retirement villages charges which can be found here http://www.consumer.org.nz/reports/r.../market-growth . In their table it claims that any capital loss on resale is paid by MET residents in addition to the up to 30% amortisation of original purchase price. RYM and SUM residents are not liable for capital loss (according to this table). In the table, the only other provider to charge for capital losses is BUPA.

I still have not seen current licence agreements. I imagine they can change at any time. In a static or declining property market, whether an operator has an additional charge for decline in value could have a material bearing on a prospective resident's choice of operator.

[cyclist]

Consumer in Feb 2013 produced a comparison of retirement villages charges which can be found here http://www.consumer.org.nz/reports/r.../market-growth . In their table it claims that any capital loss on resale is paid by MET residents in addition to the up to 30% amortisation of original purchase price. RYM and SUM residents are not liable for capital loss (according to this table). In the table, the only other provider to charge for capital losses is BUPA.

I still have not seen current licence agreements. I imagine they can change at any time. In a static or declining property market, whether an operator has an additional charge for decline in value could have a material bearing on a prospective resident's choice of operator.

I contacted SUM about this, and they confirmed that the resident is not liable for any capital loss. They pointed out that the average tenure of 6-8 years gives them a level of protection against short-term market fluctuations. i.e. unlikely that an occupation right that was last sold 6-8 years ago, would presently be worth less than the previous price.

(p.s. Wrong thread for SUM, but the principal applies to all).

[Vaygor1]

....i.e. unlikely that an occupation right that was last sold 6-8 years ago, would presently be worth less than the previous price.

(p.s. Wrong thread for SUM, but the principal applies to all).

Instead of unlikely, I would say almost a dead cert.
Referring to the chart below from http://www.rbnz.govt.nz/statistics/k...prices_values/
For RYM or SUM to have made a loss on capital, you would need to find any 8 year period where the area between the blue line and the zero line is greater on the negative side of zero than the positive side.... no need to get the ruler and calculator out.

Attachment 5151

[Bjauck]

Instead of unlikely, I would say almost a dead cert.
Referring to the chart below from http://www.rbnz.govt.nz/statistics/k...prices_values/
For RYM or SUM to have made a loss on capital, you would need to find any 8 year period where the area between the blue line and the zero line is greater on the negative side of zero than the positive side.... no need to get the ruler and calculator out.

Attachment 5151

Certainly your stats show for NZ as a whole it would look like almost a dead cert that there would be no capital loss after 7 years...NZ stats are of course heavily influenced by Auckland...so for some other regions it would not have been quite the same dead cert.

Interestingly it was MET in Consumer's table that were shown to charge the outgoing resident for any capital loss (in addition to the amortisation). MET has much of its investment in the Auckland market. As for the future...will the next 7 years see a dead certainty for continuing capital growth in Auckland and the rest of the country? We have had a period of historically low interest rates helping to boost property prices...will that continue for the next 7 years? Whether or not a company charges for capital losses may increasingly become a relevant issue for those contemplating a move into a retirement village.

[Snow Leopard]

Don't focus exclusively on new village sales. The real money is in the villages which were built around 4-6 years ago, and are now experiencing churn of their residents as they shuffle off their mortal coil, or move from independent care to managed care within the same village.

Unit sold for $310,000 in 2007 is sold back to Ryman for $250. Ryman spend as little as $5k on the unit to refurbish (because its only 4-6 years old and just needs a coat of paint, carpet and curtain steam-clean), and is then sold for $360,000.

Figures are hypothetical, but you get the idea. This is the real reason why RYM and SUM are winners, and if MET gets its act together, will also be a winner.

Hypothetical but actually pretty close to my guestimates (based on FY2013), which I have dug up from the dusty back shelves of my hard drive:

The average re-sale of occupation rights : $358K
The average previous sale or resale of same occupation rights: $309K
Average return of monies associated with previous sale: (above less fees) $256K.

Basically each existing unit is currently worth about $10K per year in net inflow of occupation loans: total $37M

New sales are actually very important as they represent $358K per new unit of cash and represent the bulk of net cash inflow: total $179M.

And of course it is the influx of new 'borrowed' money that creates the virtuous circle:
Build new units (and buy other plant & property) with borrowed money;
Sell new units and get more borrowed money;
repeat and rinse.
This is made all the merrier in the asset ledger by the difference between the cost of building the unit and the market value of that same unit (revaluations).
Ryman are very good at this.

Best Wishes
Paper Tiger

Disc: All figures are approximate and may be totally wrong.

[skid]

Hypothetical but actually pretty close to my guestimates (based on FY2013), which I have dug up from the dusty back shelves of my hard drive:

The average re-sale of occupation rights : $358K
The average previous sale or resale of same occupation rights: $309K
Average return of monies associated with previous sale: (above less fees) $256K.

Basically each existing unit is currently worth about $10K per year in net inflow of occupation loans: total $37M

New sales are actually very important as they represent $358K per new unit of cash and represent the bulk of net cash inflow: total $179M.

And of course it is the influx of new 'borrowed' money that creates the virtuous circle:
Build new units (and buy other plant & property) with borrowed money;
Sell new units and get more borrowed money;
repeat and rinse.
This is made all the merrier in the asset ledger by the difference between the cost of building the unit and the market value of that same unit (revaluations).
Ryman are very good at this.

Best Wishes
Paper Tiger

Disc: All figures are approximate and may be totally wrong.

Thats all good in a rising property market--but not so good in a falling market.
The world share markets and NZ property (and OZ to a lesser extent) are the 2 main outside forces
Best not to disregard them IMHO

[Harvey Specter]

While a new build brings on more cash, it does cost a lot of capex. A resale requires no capex at all (just a little maintenance) so is very high margin.

[Snow Leopard]

While a new build brings on more cash, it does cost a lot of capex. A resale requires no capex at all (just a little maintenance) so is very high margin.

But you do not want them to stop building.
An EPS of $0.15 with 3% growth does not support a share price of $7.55 for long.

Best Wishes
Paper Tiger

[Harvey Specter]

The retirement home beat up in the Hearld has started. The first articles were pretty weak so dont expect they will have any impact on the shareprice of the listed trio.