OCA - Oceania Group - retirement villages

[Maverick]

I'm curious why you think fixed fees for life gives an "illusion" of security mate ?
My research on this subject is much more extensive than I can go into on this forum and I can assure you that old folks really put a very high value on the security this gives them.

Elderly vulnerable people face so many uncertainties in their lives. How long will I live, how will I be cared for, will I fit into this village, will I make friends, will my family come and see me, will I be happy here e.t.c.e.t.c. One of their biggest fears is can I afford to live comfortably AND well ? Apart from food, their weekly fees are their biggest expense so its impossible to overstate the importance to many people of locking this cost down permanently for the rest of their life.

Many people from this generation have grown up budgeting every last cent, (something that's completely lost on most people today) and put a tremendous value on the financial certainty that locking down their weekly fees gives them.

Maybe my choice of words isn`t quite right . What I meant is that the "illusion of security " encapsulates their desire to have that "feeling " of security while they certainly don`t need it. My friend at Ryman really values the certainty of fixed fees, he keeps mentioning it, but it is completely a misplaced concern that he will ever not be able to afford staying on there. He will not be able to spend his wealth no matter how he might try, so in reality a couple of extra bucks each week in fees is of total insignificance , I would presume everyone there is in the same boat...so that`s why I called it an "illusion".
I do agree solidly with your points which is why I think OCAs policy on it is a no brainer ( and yet others in the sector don`t seem to agree)

And yes BaaBaa.....all getting a tad exciting at the moment, go us all for having the patience.

[Bjauck]

…
Page 9 of the annual report...OCA got a remarkable 603 units, (inclusive of this very challenging site), consented during FY20 and that in a year impacted heavily by Covid !
That's a remarkable accomplishment in the circumstances ! 85.7% of their development pipeline is now consented. http://nzx-prod-s7fsd7f98s.s3-websit...346/331468.pdf
….

Fixed fees definitely provide certainty.

A good achievement and hopefully the development near Glover Park will blend in with the surroundings (maybe even more so than the housing it replaces...) They have done well to obtain this consent and they seem to have a skilful team. I am not unhappy that OCA is now my largest holding.

[Beagle]

Maybe my choice of words isn`t quite right . What I meant is that the "illusion of security " encapsulates their desire to have that "feeling " of security while they certainly don`t need it. My friend at Ryman really values the certainty of fixed fees, he keeps mentioning it, but it is completely a misplaced concern that he will ever not be able to afford staying on there. He will not be able to spend his wealth no matter how he might try, so in reality a couple of extra bucks each week in fees is of total insignificance , I would presume everyone there is in the same boat...so that`s why I called it an "illusion".
I do agree solidly with your points which is why I think OCAs policy on it is a no brainer ( and yet others in the sector don`t seem to agree)

And yes BaaBaa.....all getting a tad exciting at the moment, go us all for having the patience.

Thanks for that mate, I see where you are coming from now and you are absolutely right...there are some very powerful psychological forces at work here both at a conscious and subconscious / subliminal level.

Fixed fees for life taps directly into the psychology of our instinct for survival. Maslow's hierarchy of needs https://www.simplypsychology.org/maslow.html shows at a foundational level our deep need for food, water, warmth, rest, safety and security. These needs must be met for a baseline of satisfactory living. By offering to lock in the cost forever, (at today's prices), of meeting some of those foundational needs you have a tremendously powerful marketing tool.

My thoughts are that as we move up that pyramid towards self actualization there can be nagging instinctive doubts that at some stage the foundations of our life might collapse and we are unable to meet our basic needs. Locking in the price of those foundational needs forever at today's prices gives people much more certainty and security and is far more likely to mean they are more comfortable operating further up the pyramid of needs and generally being more secure and happy people. That's worth a lot to a lot of people and is why fixed fees for life has become the gold standard in the industry.
SUM hasn't understood this and I think their sales results in recent years reflect their poor understanding in this area.

Actually...speaking of basic needs...rest comes to mind

[Arthur]

The fixed fee guarantee is only as good as the quality of the contract and the solvency of the underlying company. There are many people that have bought "investment" apartments with a "rental guarantee" only to see it fall over when the parent company liquidates. I'm not saying that this will happen in these rest homes, but with all of the money printing if/when inflation takes off costs could escalate rapidly. Average tenancy time is unlikely to be too long, so it is more likely that the contracts would just be left to run rather than generate bad-will. It is more likely that if inflation returns the fixed price option will slowly be withdrawn.

[nevchev]

https://www.nzx.com/announcements/360896

[winner69]

So they going to get $125m at 2.3% pa (maybe a fraction more)

http://nzx-prod-s7fsd7f98s.s3-websit...896/332218.pdf

[bull....]

So they going to get $125m at 2.3% pa (maybe a fraction more)

http://nzx-prod-s7fsd7f98s.s3-websit...896/332218.pdf

range is 2.28 - 2.48 % not quite as good as summerset got

[winner69]

Bonds in great demand I’m told

[Bjauck]

The fixed fee guarantee is only as good as the quality of the contract and the solvency of the underlying company. There are many people that have bought "investment" apartments with a "rental guarantee" only to see it fall over when the parent company liquidates. I'm not saying that this will happen in these rest homes, but with all of the money printing if/when inflation takes off costs could escalate rapidly. Average tenancy time is unlikely to be too long, so it is more likely that the contracts would just be left to run rather than generate bad-will. It is more likely that if inflation returns the fixed price option will slowly be withdrawn.

For retired people not necessarily super-wealthy then having a fixed fee is reassuring. Choosing the company with which to take out an ORA is important too.

Of course there are many risks with everything - on both an individual and environmental level. I don't imagine that many of those people who occupied leaky buildings had taken that risk into account. Auckland has a tremendous population growth rate, every new public work/ new road involves people who face compulsory acquisition of their property or homes.

[peat]

lol @ Maslow getting thrown around in an OCA thread.... Big in Psych 101
I thought you did a commerce degree Beagle. ;+)


PS so as to add some value to my post, NB the bonds are redeemable after 3 years so there is not necessarily so much upside as one might hope in the long run.

Oceania Healthcare may elect (at its discretion) to redeem all, but not some only, of the Bonds on any Interest Payment Date after the third anniversary of the Issue Date by giving not less than 20 Business Days’ notice of the redemption date.
If the Bonds are redeemed early in this manner, they will be redeemed for the greater of:– their Principal Amount; and– their market price (excluding interest), calculated as the arithmetic average of thedaily volume weighted average price (excluding interest) of Bonds traded through theNZX Debt Market over the 10 Business Days immediately prior to the date on whichOceania Healthcare gave the redemption notice

So if interest rates keep going down then after 3 years OCA might take you out at market rates and erode any further potential. Redeemable bonds are a bit one sided if you ask me