OCA - Oceania Group - retirement villages

[teabag]

got a shade over 1/4 of application, via chrisLee

[Beagle]

To buy stuff .... growth through acquisition

Need to play the EPS accretive trick I reckon

At $1.30 seems OK

http://nzx-prod-s7fsd7f98s.s3-websit...544/342878.pdf

Buying at a 3% discount to CBRE's valuation as of 31 March 2020 is an exceptional deal and I note its a full feature village with swimming pool bowling green etc which marks a bit of a departure from OCA's other villages. Its not far away from SUM's Hobsonville village and i know that village has been extremely lucrative for SUM.

Being low to mid single digit underlying eps accretive with immediate effect and with ongoing growth from NTA discount realization as well as scope for inclusion of care suites on the site...all looks really good to me. Likewise the Pukekohe land acquisition facilitates the transformation of a very small low value old care facility into a modern full feature retirement village and will be a good earner for them in this fast growing area. Both these acquisitions add scale to the company without much of any extra overhead. All good so far.

Issuing shares at such a discount, not so good. Doing a capital raise just before they announce their FY21 profit also makes me a little nervous.

Warning - Good rant about Cindy's tax war against investors follows :-

Cindy dressing up the removal of investors ability to claim interest as deductible against rental income as "closing a loophole" is the most disingenuous tripe I have ever heard and cuts directly across the fundamental ethos of the taxation system that a business expense necessarily incurred as part of earning revenue should be tax deductible. That fundamental principle is well enshrined in tax law throughout the western world and has been for as far back as I can ever remember. Calling it "closing a loophole" is blatant leftist propaganda and an outrageous bald faced lie.

No question its a game changer for property investors and over the next four years as interest deducibility is gradually phased out it will suck some wind out of property investors sails.
Might apply for $50K worth in the retail OCA offer if its at the same price as the institutional offer $1.30, (which I think it will be), or might buy some more WHS and / or HLG instead, lets see what their results look like in the next 2 days. Good to see this site up and running again.

[Beagle]

Suppose everybody happy Brent got top job

After all he has made “significant contribution to both the strategic direction and the performance of Oceania Healthcare over the last 15 months in his role as Chief Financial Officer.”

Onwards and upwards

Yes, very happy.

[alokdhir]

Tax loophole which was mentioned while removing mortgage interest deductions for property investors ...they were referring to actual users or owners occupiers not getting that benefit while property Investors getting it as it was a business for them . Owners cannot deduct mortgage interest from their salaries but investors could thus it was a loophole or not level playing field as per them and many others

[Bjauck]

Tax loophole which was mentioned while removing mortgage interest deductions for property investors ...they were referring to actual users or owners occupiers not getting that benefit while property Investors getting it as it was a business for them . Owners cannot deduct mortgage interest from their salaries but investors could thus it was a loophole or not level playing field as per them and many others

Owner occupiers cannot deduct interest because they do not earn taxable income from owning the home. Their annual accommodation benefit from their ownership is tax free. For some reason the income tax system does not tax that benefit from ownership. Owner occupiers still have the advantage. That is the loophole! It still needs to be closed...the playing field is still not level.

[850man]

Tax loophole which was mentioned while removing mortgage interest deductions for property investors ...they were referring to actual users or owners occupiers not getting that benefit while property Investors getting it as it was a business for them . Owners cannot deduct mortgage interest from their salaries but investors could thus it was a loophole or not level playing field as per them and many others

This is not a loophole and the government and other commentators using this term were deliberately misleading the public. This chnage will remove the ability for a residential rental property business from claiming the interest costs for any money they have borrowed (i.e. mortgage) as an expense against revenue earned when calculating net profit. Every business except not residential rental property can claim interest costs as an expense, this is a standard activity and not a loophole. The ability to run a residential rental business at a loss on paper and claim that loss against your salaried earnings as an expense went years ago - LAQC.
This new move will result in either landlords selling their rentals or increasing rents to cover the increased costs they will face. Either way less rentals and those that remain will become more expensive, great outcome for renters!
(apologies this is off-topic)

[winner69]

Won’t be funny if they put retirement sector interest and capital gains into the equation ......you never know what may happen these days

Some say current tax treatment for the sector is a ‘loophole’

[Habits]

Tax loophole which was mentioned while removing mortgage interest deductions for property investors ...they were referring to actual users or owners occupiers not getting that benefit while property Investors getting it as it was a business for them . Owners cannot deduct mortgage interest from their salaries but investors could thus it was a loophole or not level playing field as per them and many others

I suppose next we won't be allowed to use rent to pay off the mortgage as its also unfair to FHB ... Might come a day when we give the total rent to govt. Just kidding,, but this govt has been scheming and plotting ever since 2017 election and no doubt they still are. Thats good for the appeal of equities, some of which have a lot of room left to run. The rental announcements have also brought about low wholesale interest rates,, another positive for equities.

[James108]

Agree calling it a loophole is disingenuous but overall very happy with the change, taking the steam out of the out of control house inflation is more important than tax norms. Housing is supposedly a human right and it is and should be a very heavily regulated sector, all levers should be pulled until residential housing delivers an outcome much closer to what society requires. Luckily for those of us invested in Oceania I believe they are doing an excellent job on delivering on their societal expectations of excellent care.

The outcome as I see it will be, downward pressure on house prices, upward pressure on rents (although the additional costs will not be fully passed on). In Auckland after 10 years of increasing the build rate of new dwellings construction has finally started to exceed that required by population increase, I expect this will help reduce upward pressure on rents. Winners are FHB, losers are landlords and lifetime renters. Owner occupiers little impact.

For us Oceania (and SUM in my case) holders I think the 20% increase in house price seen in the last year will continue to flow through the accounts in the years to come. This may be moderated by maybe a fall in the order of 10% (?) over the next few years.

[Bjauck]

Won’t be funny if they put retirement sector interest and capital gains into the equation ......you never know what may happen these days

Some say current tax treatment for the sector is a ‘loophole’

Labour certainly have some big knives out at the moment. However the villages are usually owned for decades. The government would be cautious about revisiting that taxation of ORAs. More accommodation is needed not less.