RYM - Ryman Healthcare

[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.

[Vaygor1]

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.

Yes Bjauck, it would be interesting to see the same graph on a region-by-region and/or city-by-city basis.
My view is that even if Auckland had a real down period that was long lasting, capital growth would be unlikely to go negative if measured over 7 years, and if so, not by much. Meanwhile, the rest of the country will likely play catch-up, which it normally seems to do in the years following Auckland bolting ahead. RYM is well diversified in this respect plus they are adding Victoria Australia into the mix.

Looking at the graph, and using the fact that RYM listed in June 1999, it appears the most recent 7-8 years should have been the worst in RYM's history for gains on Capital Growth. Not bad given their results over the same period. My calcs on RYM's EPS growth over 8 year periods, commencing each year since listing, seems to back this up.

Can't figure out why MET don't adopt the same policy as SUM & RYM. An indicator that MET is too risk averse?

[Bjauck]

Can't figure out why MET don't adopt the same policy as SUM & RYM. An indicator that MET is too risk averse?

Sometime ago (sorry can't provide a ref) I read that Auckland, measured since 1945, historically on average, has an additional 1% pa in house price growth compared with NZ-wide figures.

Perhaps RYM and SUM are so confident of their ability to build good villages in desirable locations that they feel that even in a prolonged downturn, their resale values will hold up better than the surrounding areas especially given the demographic tsunami helping things along! On the other hand MET have had their troubles (in the past hopefully) so that they have decided to doubly cover themselves by including the capital loss clause.

[Harvey Specter]

I think it is just that MET has been in the game longer than the other two so was able to get away with more, hence had this extremely favourable, but probably unneeded clause. The others entered the market and realised it wasn't really necessary.

[Vaygor1]

From http://www.rbnz.govt.nz/statistics/k...prices_values/ I downloaded the raw data excel file which goes back a further 9 years to 1981 and used it to produce the following chart. Things were even better back then regarding certainty of general NZ housing Capital Growth. Imagine if we had another 1982... wouldn't surprise me in a few years from now when all this money the US is printing distributes itself throughout the globe.

Attachment 5158

[cyclist]

Nice stuff thanks Vaygor1. This has answered the remaining question in my mind "what about in the 80's when interest rates went through the roof". But of course interest rates were high in response to rampant inflation, which shows through in the housing statistics too.

I think I am feeling comfortable that this is a low risk for the industry, while noting a small remaining level of discomfort when considering traditional housing (un)affordability measures such as price to household income.

[Bobcat.]

RYM has again bounced off its newly established downward trendline. Bears are in control and not just because of a drifting DJIA and S&P500. I don't expect it will recover to trade above $7.75 anytime soon.

Discl: no longer holding.

[MAC]

RYM has again bounced off its newly established downward trendline. Bears are in control and not just because of a drifting DJIA and S&P500. I don't expect it will recover to trade above $7.75 anytime soon.

Bobcat, traditionally RYM has traded with a beta of 0.5 or thereabouts, but have recently been included in a more exposed MSCI index, thus potentially more liquidity, volitility and also possibly higher forward beta, do you think some of the recent volatility is due in part to this ?