RYM - Ryman Healthcare

[Vaygor1]

Well stated Sparky.

Yes, NZ's market size is easily big enough to accommodate RYM and all the other players. It's practically a no-brainer.

Also, in addition to affordability as demonstrated by Sparks, when the RYM tenant moves out, they (or their estate) 'sell' their unit back to RYM for what they bought it for. Then RYM 'resells' it to the next occupant at the new (increased) market rate. On their books, RYM do not recognise the extra worth that their units hold in this respect until after the 'resell'.


Not sure why the attachment in my last post has stopped working (RYM 10 year trading history). So here it is again.
Attachment 4280

[POSSUM THE CAT]

Sparky The Clown You are judging others by your own thoughts I am in the age group (70plus) and I have yet to see a Ryman Village that I would consider living in. There is two Metlifecare villages I would consider if it became a necessity. I do not want to live anywhere you have to use village transport to get anywhere. Who wants to be stuck in the likes of Orewa when you have to go to the hospital twice a week.

[Vaygor1]

That is your right Possum. Different strokes for different folks.
Ryman's villages are full to the eyeballs.

No one is forced to use village transport as far as I am aware.

[CJ]

Also, in addition to affordability as demonstrated by Sparks, when the RYM tenant moves out, they (or their estate) 'sell' their unit back to RYM for what they bought it for.

They sell it back at a depreciated rate, which will be no more than 25% depreciation, if I recall correctly.

They 'purchase' it back for what they paid for it - more like returning a deposit - called the occupation advance. Note that this is only paid back once it is resold to a new occupant, presumably at a higher value (market dependant) so there is never a cashflow squeeze.

However, they withhold from the repayment the occupation advance the management fee, which in Rymans case is 5% a year capped at 20% (ie four years - I actually though it was 5 but the weblink below says 20%). Different companies use different % and years - I think Metlife is 7% capped at 21%. Average occupancy over the industry as a whole in Independent living is about 7-8 years.

On top of that, they charge for services on top of that which I assume are things like cleaning, upkeep + addons like food and alcohol.

If that doesn't make sence, then in RYM words:
http://www.rymanhealthcare.co.nz/inv.../our-cashflows

[Vaygor1]

They sell it back at a depreciated rate, which will be no more than 25% depreciation, if I recall correctly.

You may be right Sparky. I will check.
I do know that RYM do not claim depreciation on their occupied assets to the taxman.
I like the philosophy. Also, as a result, I do not have to worry about assuming an unknown number called recovery-on-depreciation in forward analysis of RYM.

[Vaygor1]

They 'purchase' it back for what they paid for it - more like returning a deposit - called the occupation advance. Note that this is only paid back once it is resold to a new occupant, presumably at a higher value (market dependant) so there is never a cashflow squeeze.
....(abridged)...

If that doesn't make sence, then in RYM words:
http://www.rymanhealthcare.co.nz/inv.../our-cashflows

Thanks CJ!
Much appreciated.
I will take a look.

[skid]

So they pocket the capital gain? Pretty sweet deal in todays market.
Just to play devils advocate ,what would happen if values fell by 40% Would they still be buying back at a loss or is there some provision for that?

[Vaygor1]

So they pocket the capital gain? Pretty sweet deal in todays market.
Just to play devils advocate ,what would happen if values fell by 40% Would they still be buying back at a loss or is there some provision for that?

Pretty sweet deal over any 7-year-average occupancy period.

The answer to your question is Yes, they would still buy it back. But look back in history and tell me if there has ever been a time when the average price of well-maintained properties in NZ/Aus is less than it was 7 years previous.

Remember, RYM never sell the tenant the property in question, they sell them only the right to occupy. So in technical terms, they cannot buy it back because they never sold it in the 1st place.

[CJ]

I do know that RYM do not claim depreciation on their occupied assets to the taxman.
I like the philosophy. Also, as a result, I do not have to worry about assuming an unknown number called recovery-on-depreciation in forward analysis of RYM.

Depreciation on Buildings for tax purposes was changed to 0% a couple of years ago so no one claims deprecation on buildings any more.

I am pretty sure they did claim depn prior to this - it is one of the reasons they have tax loses (or use to anyway).

Potentially there still would be depn claw back should they sell an old property but given the property comes with a Retirement License, it is more likely they would sell the company holding the property (pretty sure each village has its own company) so no depn recovery.

For accounting purposes, they dont deprecate either as they are classed as 'investment properties' so are subject to revaluations/impairments rather than depreciation.

Happy to be proven wrong as this is all from memory from a bit of work I did years ago.

[Hoop]

Thanks for your posts hoop and ENP.

I am wondering why you both have elected to choose a datum at a point in time (2009) when the share price was so low ($1.20) for a very short period of time, and trading at low volumes. Do you think that $1.20 was a fair price at the time?.......................

.

I chose this growth datum base point (mar2009) as it was the change of a cyclic trend (bottom).....Its easier to relate to later on......When you read the media (at your own risk) they (media) usually relate the percentage price performance of a company and compare it with the overall sharemarket performance at that same time, ie comparisons during bull market or bear market

Do you think that $1.20 was a fair price at the time?......Fundamentally no but technically yes.....technicals are objects which measures Group Investor buy/sell behaviour....investor behaviour at that time saw the GFC happening and as the property market relies heavily on the flow of finance, investors as a group "perceived" the property sector was at an enormous risk of crashing and rebalanced the risk v reward and reduced the share price accordingly. This lowering share price saw RYM as being one of several companies on the NZX that got savagely mauled by the cyclic bear.....during the capulation phase of a bear market irrational fear takes hold...I think RYM got its fair share of irrationality then as well.

4 years later with hindsight 120c is obviously considered a steal and those who took the huge risk got the huge reward......It was a steal because RYM is in NZ and did not suffer the 2008/2009 GFC related property crash that followed around the world in places such as USA, Europe.

....Vaygor1...Consider this scenario.... if RYM was in USA (or NZ suffered a similar property crash {as feared} ) ...The sellers would have felt guilty selling shares at that price (120) to buyers such as you and they then would have the qualifications to say that same phrase ..."who obviously didn't know better".

Many may see this post as an example of Fundamentals being superior to Technicals....however remember Fundamentals as well as Technicals can both be severely affected by crises....Technicals can sometime be an advanced warning system.

In RYM case the less likely scenario occurred... the fundamental crisis never happened...and the Technical crisis ended up being due to unfounded fear....Result...FA 1 v TA 0