OCA - Oceania Group - retirement villages

[Waltzing]

Only one thing happened in after the GFC, house prices went through the roof, clouds, up there... Basically an investor recently commented that the greatest assets bubble in history was about to start building if the fed did not take it foot off the rocket motors... If you did not buy US tech you also missed the tech bubble starting to build 3.0.. If this is Ipso them prices at these levels in 5 years time will be though of as the low and regret will be high.

Amended - Here in the central north island house prices really hit heights in 2018-2019.

[mfd]

Only one thing happened in after the GFC, house prices went through the roof, clouds, up there...

I don't think the data agrees with this, certainly not for New Zealand. Taking a national average (QV index), house prices fell about 10% between the peak at the end of 2007 and mid 2009. They got back to the peak prices in 2012. Prices really went crazy starting around 2015.

This all happened despite interest rates falling from 8.25% to 2.5%. We'll see what happens this time, but banking on price rises just now would be brave.

https://www.interest.co.nz/charts/re...se-price-index

https://www.interest.co.nz/charts/interest-rates/ocr

[Baa_Baa]

The short termism and trader talk here is misplaced, this is one of those assets that long term investors will enjoy handsome returns for many years to come. When the share price trades below fair value, that's when the silent majority of investors are increasing their holdings. Who'd have thought you could buy this for less than half IPO and well below NTA recently. What a gift for long term investors.

Everything else is noise.

[King1212]

Yeah braw.....else just ramping n jealous...

OCA....O for awesome!

[Waltzing]

Correct MFD - i should have been specific but i did say "in 5 year time". Yes house prices in this central north island area did not go crazy until 2017-2019. I was merely trying not to be a down rampa and say that prices here might look very cheap in 5 years time. After all the amount of QE by the FED and on market purchasing which did not even exist in that period by the fed might drive a recovering at a far faster pace. Asian flew in the USA was similar and that showed a recovery far faster than the GFC.

[Maverick]

Snoopy, the more I read your posts where you often compare village ORAs and renting houses out as the same thing, I feel you don't quite get the chasm between the two.

On one hand we all know how a rental works, you might be lucky to get 2-4% return , plus any capital gain.
Where as a standard RV villa ORA will return 30% over an average of 7 years occupancy ..therefore about 4% p/a (30%/7yrs). plus any capital gain.
Then add a weekly villa fee ,say, $130
Already your unabused RV villa is looking significantly better.

Now this is the point I don't quite think you are getting Snoopy…..
Your house is , at best, returning 2 -4% on “your” capital whereas the Villa is paid up front, in full by the client, so you are making 4% on “their” money. You have now been fully reimbursed for your villa and can perpetuate the process limited only by time to build another one and demand . You are now making 4% on someone else's money.

Properties rising is a nice additional bonus of course but not the core of OCAs model.
OCAs real point of difference from its peers, is that it can churn a care suit over every 3 yrs rather than the standard 7 for a villa . So that's effectively a 10% return p/a, again entirely on some else's money.

OCA have deliberately targeted care suits as the coming excessive demand will not be met by other competitors...perhaps an opposing example is SUM who have targeted villas until now and now having to curb their build rates.

I especially like the term recently coined by BaaBaa for the care side of the business as a “loss leader” and especially “COGS”...that's just brilliant!
……..got to get those customers coming into the store somehow.

[Waltzing]

I feel Inspector come auditor SNOOP is at his best with banks. I dont think the market actually has a handle on the market model of OCA at all.

[Paradox]

OCAs real point of difference from its peers, is that it can churn a care suit over every 3 yrs rather than the standard 7 for a villa . So that's effectively a 10% return p/a, again entirely on some else's money.

I haven't looked into OCA's asset turnover (i.e, Sales/Average Net Operating Assets), but is it on par with rest of the players?

Other advantage for OCA (and other aged care providers) is that funding from DHBs is limited and invariably favours incumbents rather than new entrants. Cashflow isn't quite an issue then?

[Snow Leopard]

In the nearly 16 years ( 'anniversary' is 15-Jul, that will be a better excuse to share a bottle of wine than 610 years since The Battle of Grunwald ) that I have frequented this board the subject of how these healthcare/retirement village companies actually make (or don't make in MET's case) their money has come up on a pretty regular basis.

So, very generally:
You make a little money, or at least do not lose too much doing the care & added services bit:
You make a bit on money reselling (the right to occupy) an existing unit at a higher price than last time:
You make most money selling a new unit for more than it cost to build.

Each of these involves cash-flow and the value of the properties is related to the 'expected future cash-flow they will generate', but in reality means the state of the residential property market.

Underlying all this the value is dependent upon the premise that in the long run they company can build more and more new units every year ( on a long term basis ) which leads one to consider the possible parallels with the 'Shoe Event Horizon'. [If necessary Google It, Think About It & DO NOT Dismiss It]

Should you think you have all that sorted before I get back from the wine cellar then you can ponder the industries insistence that the "underlying profit" thing is a better measure of performance than the old NPAT/Comprehensive Income.

Anyway good night or good morning or whatever to you depending on your time-zone.

Disc: Mostly harmless

[King1212]

https://www.scoop.co.nz/stories/BU20...y+25+June+2020

House Price will hold