OCA - Oceania Group - retirement villages

[winner69]

$230m of debt headroom still available not enough?

If they took that $230m up their debt/equity ratio would be a bit higher than RYM's was prompting the capital raise

[bull....]

If they took that $230m up their debt/equity ratio would be a bit higher than RYM's was prompting the capital raise

guess they could do a briscoe's type sale to help

[ThaiJohn]

It could become a takeover target if it gets much cheaper.

[Balance]

Have you got a source for that Balance? My intel suggests OCA presales are going well on some developments.

Your intel is similar to what the company stated at last year’s AGM : “We are now starting to observe a level of presales for our new care suite developments, including at Lady Allum which opened recently.”

Which is of course very different from proceeding with a development with presales!

What the RVs like OCA have been doing is paying up for development sites at ever more expensive prices and then, going ahead with building retirement and care units without presales in expectation that the units will sell like hot cakes pre or post completion. In residential property market terminology, ‘spec’ builds.

Prudent property developers go ahead with developments when they have secured firm, committed and legal presales.

As I wrote before, the RVs have been using debt in recent years to pursue such ‘spec’ developments. This is where they are getting caught with the drastic market down turn.

[Ferg]

Thanks Balance. Understood - so you are referring to presales where people buy off the plans and then the developer proceeds with construction, whereas the RV's are building new sites and counting "presales" as sales that occur some time during the build process but before completion. Gotcha. I agree it is quite a different risk profile and one that likely comes at a price, either way. BTW I wasn't referring to suites per se - in some cases a single apartment can sell for the same value as 9 or more suites.

I get that sources of funds are drying up for the some of the relatively smaller or mid-sized developers who can't sell their latest 'spec' development (the not so 'prudent' ones). As you too would have seen before....it is always the last deal that pushes such developers under and they usually blame the banks ("if only the bank had extended my credit by 6 months" etc). I don't see the RVs being in the same boat as those developers given the fixed price construction contracts, the established credit facilities and headroom, and the market intel and research that goes into new builds prior to acquiring land and/or turning over the first sod.

Ryman however is another story - what they did was inexcusable turning a USD denominated fixed interest payment flow into a NZD denominated floating rate payment flow. IMO they could have hedged the FX part without making it a floating interest rate. OCA on the other hand have no USD exposure and have fixed ~69% of their interest bearing debts for FY23 at an average cost of under 3%, they have plenty of headroom (in both funding and covenants per the last HY report) and the vast majority of their liabilities incur 0% interest (being the ORAs).

[percy]

Thanks Balance. Understood - so you are referring to presales where people buy off the plans and then the developer proceeds with construction, whereas the RV's are building new sites and counting "presales" as sales that occur some time during the build process but before completion. Gotcha. I agree it is quite a different risk profile and one that likely comes at a price, either way. BTW I wasn't referring to suites per se - in some cases a single apartment can sell for the same value as 9 or more suites.

I get that sources of funds are drying up for the some of the relatively smaller or mid-sized developers who can't sell their latest 'spec' development (the not so 'prudent' ones). As you too would have seen before....it is always the last deal that pushes such developers under and they usually blame the banks ("if only the bank had extended my credit by 6 months" etc). I don't see the RVs being in the same boat as those developers given the fixed price construction contracts, the established credit facilities and headroom, and the market intel and research that goes into new builds prior to acquiring land and/or turning over the first sod.

Ryman however is another story - what they did was inexcusable turning a USD denominated fixed interest payment flow into a NZD denominated floating rate payment flow. IMO they could have hedged the FX part without making it a floating interest rate. OCA on the other hand have no USD exposure and have fixed ~69% of their interest bearing debts for FY23 at an average cost of under 3%, they have plenty of headroom (in both funding and covenants per the last HY report) and the vast majority of their liabilities incur 0% interest (being the ORAs).

Thanks for your post.

[nztx]

It could become a takeover target if it gets much cheaper.

Are the Swedes who swallowed MetLifeProp a few years back ready for another discounted chomp in the Sector ?

Who else has enough available readies unless another suitor is prepared to throw some of their scrip around
for a bit of predatory motions and expansion ?

Perhaps some of the foreign or Aussie Vulture funds might start taking an interest ?

[bull....]

Are the Swedes who swallowed MetLifeProp a few years back ready for another discounted chomp in the Sector ?

Who else has enough available readies unless another suitor is prepared to throw some of their scrip around
for a bit of predatory motions and expansion ?

Perhaps some of the foreign or Aussie Vulture funds might start taking an interest ?

fat chance i reckon.
not even corporate's or private equity want to touch this space at the moment
ie bupa had to with drawl there sale i guess to no interest or if there was interest it must have been at much lower valuations

[SailorRob]

fat chance i reckon.
not even corporate's or private equity want to touch this space at the moment
ie bupa had to with drawl there sale i guess to no interest or if there was interest it must have been at much lower valuations

Do you mean Bupa made a sale using a American Southern state accent? Was this some type of sales ploy to sound like the local yokels or something?

[850man]

Are the Swedes who swallowed MetLifeProp a few years back ready for another discounted chomp in the Sector ?

Who else has enough available readies unless another suitor is prepared to throw some of their scrip around
for a bit of predatory motions and expansion ?

Perhaps some of the foreign or Aussie Vulture funds might start taking an interest ?

If they do get approached, let's hope the board don't hand it all over at 55% of NTA