OCA - Oceania Group - retirement villages

[Beagle]

I presume by worst you mean quarterly inflation and I agree that genie has been well and truly let out of the bottle and its going to be devilishly hard to get that back under control as everyone else adjusts their prices.

[Ggcc]

I presume by worst you mean quarterly inflation and I agree that genie has been well and truly let out of the bottle and its going to be devilishly hard to get that back under control as everyone else adjusts their prices.

I know because my business is seeing price increases every week. Some items at much as 60%. I can’t absorb that sort of increase and need to pass it on.

[Maverick]

That's correct Biscuit - I am coming up with lower capacity figures versus what was reported in the AR. I'm also unsure about the other number I tagged red being the vacant new builds. I have zero sense if that is correct or if it is out by miles. I don't think I am comparing apples with oranges.....or maybe reported capacity is weighted for being available for only part of the year....?

q1....Lastly, if I take last years capacity and add the new builds, I consistently get lower numbers than OCA provides in terms of total capacity for units and care suites. Have I done something wrong?

That's a mighty load of work there Ferg, awesome layout too.
I think I can see 2 or 3 questions in there but let me at least tackle one of them for now.

Winner has hit the nail on the head with conversions throwing your numbers off. OCA has been gutting about 50-60 beds/rooms per year and built about 40-50 cares suites in their shells. This effectively removes the count of beds and replaces them with a smaller number of renovated cares suites.
Now here's where it just muddy and essentially the nub of your stock imbalance. OCA don't count/report a newly converted care suites as a new DELIVERY in the investor presentation but they do get lumped in with the care suite NEW SALES (and do materially bring down the average new C/S sale price as they are much cheaper). OCA have been doing this in older villages since they listed but these conversions are now all but wrapped up this year. This kind of lines up with your out of balance amounts of about 30 each year( yes , they sometimes pull down the odd old care suite too , but lets no go there today)

OCA reported these conversions separately one year but quickly gave up. I don't believe for a moment its anything dodgy ,to me ,It appears they have just tried to simplify their reporting as it all just gets too much( as noted many times on ST). You are the only person I'm aware of who has picked up this anomaly in such detail, so well done for your thoroughness Ferg!

Note to newbies . Care "beds" are not the same as care "suites"

[Beagle]

I know because my business is seeing price increases every week. Some items at much as 60%. I can’t absorb that sort of increase and need to pass it on.

I think OCA should be really bold and put up prices by 25% across the board. Its a needs based business and you either want what they offer or you don't and does it really matter to an 85 year old who's just sold their $2 million mansion whether a care suite is $500K or $625K ?

[850man]

I think OCA should be really bold and put up prices by 25% across the board. Its a needs based business and you either want what they offer or you don't and does it really matter to an 85 year old who's just sold their $2 million mansion whether a care suite is $500K or $625K ?

Agree. Price has long appeared low compared to the market for no real reason. Let's hope Brent is watching this thread.

[Ferg]

Winner has hit the nail on the head with conversions throwing your numbers off. OCA has been gutting about 50-60 beds/rooms per year and built about 40-50 cares suites in their shells. This effectively removes the count of beds and replaces them with a smaller number of renovated cares suites.
Now here's where it just muddy and essentially the nub of your stock imbalance. OCA don't count/report a newly converted care suites as a new DELIVERY in the investor presentation but they do get lumped in with the care suite NEW SALES

Thanks Maverick. I don't for a minute think there is anything dodgy, my first reaction on seeing something I don't understand is to think there is a gap in my knowledge, rather than a gap in someone else's integrity!

I think that answers the question about total capacity not reconciling. Where care beds are converted to suites but not counted as new builds in the presentation, then this would lead to OCA reporting a higher capacity than I am calculating - which is what my analysis shows. It also makes sense that if you have surplus demand in one area and an excess of capacity in another to undertake conversions.

However, you raise a point that these converted beds (into suites) are included in the new build sales volumes. Comparing new build sales volumes in my analysis (which may be inflated by the conversions) with the number of new builds (which exclude conversions) then that would make my calculations above worse where I reckon there were 180 unsold new builds at the end of the last fiscal year. If that is correct then maybe their pricing is about right? The vacant units+suites being less than the total vacancies suggests 180 *could* be correct but once again I'm not sure if I have missed something e.g. the time factor whereby new builds take on average x months to fill which may be beyond the last reported year end.

[Maverick]

Thanks Maverick. I don't for a minute think there is anything dodgy, my first reaction on seeing something I don't understand is to think there is a gap in my knowledge, rather than a gap in someone else's integrity!

Comparing new build sales volumes in my analysis (which may be inflated by the conversions) with the number of new builds (which exclude conversions) then that would make my calculations above worse where I reckon there were 180 unsold new builds at the end of the last fiscal year. If that is correct then maybe their pricing is about right? The vacant units+suites being less than the total vacancies suggests 180 *could* be correct but once again I'm not sure if I have missed something e.g. the time factor whereby new builds take on average x months to fill which may be beyond the last reported year end.

Ferg, perhaps you weren't around in the 80s sharemarket. I learnt from that to treat everything as suspicious.

Back to OCA.....question 2
The empty units you've got figured at 180 or so is a little high on mine at 166 but certainly close enough between us.
Note that of these 60% are C/S . These are my calcs so don't take it as gospel but it is good enough for this exercise.

I spent time with Mudfish who lives nearby. We came up with a rather brilliant chart tracking and predicting cares suits sales. As you are a detail guy you will be interested. I have developed a good pre-covid formula which has proved reliable.

Rule 1. New apartments deliveries basically fully sell down over 1.5 years , heavily tilted to the summer. (hence hy2 is always much better than hy1)

Rule2. OCA has a sale rate of 20% of new C/s delivered per HY to fill up within 2.5 years. These sales continue at this regular , unseasonal pace for 5 HY periods. Beyond that , the block is full and as one empties(every 2.5 years) there is the right stream of replacement clients needing to move in.

C/S however are a different animal to apartments. As needs based they take time to sell down only as they are required ( regardless of price). Nobody lines up to get one on open day.
To give an example , Bayview(Tauranga) opened a block of c/s back in early 2019 and in theory they should have just recently sold the last new one. In fact they have sold much faster and there is now a waiting list there. There should actually still be brand new empty ones in Meadow bank (Auckland) which were delivered way back mid 2019.
I have calculated ( thanks to the graph Muddy and I made- he`s a deep thinker like you) OCA are selling them slightly too fast but investors will be pleased to hear that they are now ramping the prices second time around ( ie c/s re sale prices up 19% this year , remember that is only after 2.5 years.)

So the fact OCA have around 170 or so units is to be expected. But rest easy folks, price points are being ramped already.

Also don't forget that its not as important to squeeze every last dollar out of the sale price of a C/S The lion share of profit comes from a full efficiently staffed building that you can constantly churn every 2.5 years. That's a sh*t load of DMF continually flowing in regardless of what the HPI is doing.

[Beagle]

Some excellent prognostications guys but here we are at $1.41 down 4 cents (3%) for 2021 year to date and RYM down about the same while ARV and SUM are both up ~ 17% in the same period.

Care suite prices up 19% on where they were 2.5 years ago doesn't give me any comfort Mav when the real estate market is up ~ 40% on where it was 2.5 years ago.

OCA the only share I have lost money on this year...

Need to see something in next months report...this dog is getting restless.

Did a bit of research today. Very different prices.
2 Bedroom apartment at Lady Allum an OCA village in central Milford - just $650K https://www.trademe.co.nz/a/property...ing/3270418590
Birkenhead, far less upmarket suburb - Ryman 2 Bedroom $955K https://www.trademe.co.nz/a/property...7?bof=v4ykNBVr
Mayfair village 1 bedroom $815K https://www.trademe.co.nz/a/property...9?bof=v4ykNBVr
Devonport 2 Bedroom - Ryman $1.9m https://www.trademe.co.nz/a/property...8?bof=v4ykNBVr
and finally the one that makes the least sense to me of all in terms of relative pricing with its competitors at OCA's premier development the Sands on the waterfront at Browns Bay a 2 bedroom apartment for just $780K https://www.trademe.co.nz/a/property...5?bof=v4ykNBVr

Lady Allum is a very old established village and having been there I can sort of understand that its not in the A league so maybe the pricing isn't too far off the mark, (great suburb though and extremely handy to all sorts of things on the shore including North Shore hospital and all sorts of specialists just literally down the road), but the Sands unit pricing looks ridiculous to me and probably not much more, if anything, than when it was first built. Its hard in this rampant property market to understand OCA's pricing, go figure ? Like I said earlier today someone needs to take this by the scruff of the neck and make some bold pricing decisions...no point in selling up a storm if you're giving them away ! Why do I bother though ? (probably just venting a bit of frustration)..told Earl the same thing at least twice when he was in charge...like water of a ducks back.

[Ferg]

Why do I bother though ? (probably just venting a bit of frustration)..told Earl the same thing at least twice when he was in charge...like water of a ducks back.

You make valid points Beagle. However, regarding the point I have quoted: in my experience when I see such reactions (as in no reaction or "noted") from a CEO it is because they often know something I don't; as in they have some information which changes the outlook and/or conclusion but are not willing to share it at that time. People in such positions have worked hard to get there and in my experience can be months or even years ahead of others in their outlook on the business and what is coming up. Have faith Beagle - there will be a method to the madness that is not immediately obvious to us folk.

[Beagle]

Thanks for the encouragement mate, to be quite honest, I need it.

Cindy's Kindy lockdown Covid meat-grinder goes on and on and on and...