OCA - Oceania Group - retirement villages

[mcdongle]

Surprises me.
Driving around ChCh I note the large number of vacant properties.To Lease/Rent signs everywhere.
Hillsborough,Sydenham,Moorhouse Ave,Wrights Road,Riccarton,Blenheim Road,Addington,Woolston,Papanui.Kaiapoi the same.
Space in Barrington Mall and Eastgate Mall appears half empty.

Yes..lots of builders in CHCH.cutting wages... laying off staff..one large developer I have been told has gone from 24 foreman to 9. Others have moved to Queenstown to find work......

[iceman]

This. Over the last few years, I've increased the rent and received less income due to rising costs (rates up 37% this year). Two percent net on current market value is about as good as it gets. The only reasons for holding residential property investment are (i) diversification + direct control over the asset and (ii) to make sure that you don't get priced out of the market if prices keep going up.

Agree with you and Beagle about residential property investment. But I do not agree about ¨direct control¨ being a good reason for holding as it is getting harder and harder to get rid of bad tenants, which in reality means you have no control for many weeks while bad tenants can trash the house and pay no rent. The current political thinking is that landlords have too many rights compared to tenants, which is a complete opposite to reality if you ask me. I have residential properties in 2 European countries and it is fair to say that compared tho them, Kiwi tenants are generally not very good. I do realise I´m generalising as I currently have a very good long term tenant in my only NZ residential property, but I´d probably sell if she moved out, rather than look for another good tenant. All too hard being residential landlord in NZ for a very average return.
p.s. we are probably a little of topic on this thread though :-)

[rainey]

How would you explain the increase in price of listed property companies then?

Retirement villages are dealing with individual citizens who have probably just sold a property. Commercial listed property companies are a slightly different category Beagle,s reply explains it far better than I can

[Bjauck]

....All too hard being residential landlord in NZ for a very average return.
p.s. we are probably a little of topic on this thread though :-)

OCA and the other retirement companies are Landlords too with their occupants holding a licence to occupy. They have received tax rulings based on the NZ tax system and I think that means they have minimal tax burden (non-imputed dividends are paid)

You say NZ landlords receive an average return. However many overseas landlords have CGT to reckon with, so the leveraged capital gains that some NZ landlords have received would be taxable in many overseas jurisdictions. Obviously if the rental property has no debt then the capital gains would have been unleveraged but the NZ system encourages debt to be maximised which boosts property values consequently reducing the net taxable rent yield whilst increasing untaxed leveraged capital gains (over the long term house prices have risen faster than inflation and incomes)

[artemis]

..... Why anyone would bother with a Government looking to make life even harder for landlords with even more enhancements to tenants rights and a possible capital gains tax / and or ring-fencing of tax losses is beyond my comprehension but I guess some people simply feel more comfortable in bricks and mortar they control themselves because its what they've always done.

Yes, but the other side is a dramatic decline in new lending to residential property investors. (Reserve Bank.) Add that to existing rentals being sold and the flow on effect is significant. And means that if demand continues rents will increase and so will returns even if prices drop. Though ring-fencing of rental losses might push that day out for some.

[Beagle]

Surprises me.
Driving around ChCh I note the large number of vacant properties.To Lease/Rent signs everywhere.
Hillsborough,Sydenham,Moorhouse Ave,Wrights Road,Riccarton,Blenheim Road,Addington,Woolston,Papanui.Kaiapoi the same.
Space in Barrington Mall and Eastgate Mall appears half empty.

What has happened in Chch is very, very sad. Even nearly 8 years after the earthquakes the rebuild of infrastructure and iconic cultural landmarks such as the Cathedral is progressing slower than a snails pace. I think you are confusing commercial property in Chch with prospects elsewhere in N.Z and the smart money realises that it will probably take a generation for Chch to become a vibrant thriving city again just like it took Napier about the same time to thrive after their earthquake of 1931. People are risk averse with where they choose to live and you can't blame them for that. Auckland and Wellington commercial property has clearly been doing extremely well as you can see from companies listed on the NZX that concentrate their investments in those area's.

But I agree, we are well off track and overdue to get back to discussing the unique attributes of OCA's business model. Very low national average cost of a care suite and apartment and the churn rate especially on care suites is the key to highly satisfactory returns going forward. Worth noting however that it will take them about 6 years to transform their business model fully so this is probably the best investment time horizon. As the Mainland cheese advertisement says, "good things take time"

I for one am happy to wait at least that long because for one thing the yield of about 6% in 2019 and growing each year is far better than residential property, (and at the current price its arguably trading below normalised book value) and there's no work involved, you don't have to struggle to evict tenants and they're probably very unlikely to contaminate the units with methamphetamine or have parties where they trash the place !

My focus for 2019 is yield and the ability of a company to grow their yield going into 2020 and beyond. I really want 7% but this one fits the bill because of its ability to grow future dividends strongly. I have very low expectations of capital gains in my portfolio for 2019 and 2020. The market PE is still too high in my opinion. I will focus on value stocks which offer moderate to high sustainable dividend yields with growth in dividends a key focus and try and forget about making easy money (famous last words) from shares I think are stupidly cheap including this one. If the bull isn't already dead I expect it will need numerous trips to the vet (AKA much more world-wide artificial central bank stimulation) to keep it going. I think most central banks have used nearly all their tools already and have very few levers to pull, so I will focus on yield and try and forget about easy capital gains..(not easy for a Beagle to do as they love free easy lunches).

[Leftfield]

Although this article does not mention OCA it just needs a few stories like this to muddy the waters for retirement home investors.

https://www.newsroom.co.nz/2018/12/3.../diana-clement

While I think such shares still have their place in a balanced portfolio, make sure you are not over exposed and DYOR. Take Care.

[winner69]

Although this article does not mention OCA it just needs a few stories like this to muddy the waters for retirement home investors.

https://www.newsroom.co.nz/2018/12/3.../diana-clement

While I think such shares still have their place in a balanced portfolio, make sure you are not over exposed and DYOR. Take Care.

Lest we forget -the quicker the existing customers die or move on to care facilities, the fatter the profit.



Fatter the profit - richer we get as shareholders

[Leftfield]

Lest we forget -the quicker the existing customers die or move on to care facilities, the fatter the profit.
Fatter the profit - richer we get as shareholders

'Customer Satisfaction' is more fundamental than 'profit'. If a company is not providing customer satisfaction or loyalty, in the long term they will not make profits.

[couta1]

'Customer Satisfaction' is more fundamental than 'profit'. If a company is not providing customer satisfaction or loyalty, in the long term they will not make profits.

The small minority that complain won't have any effect on short or long term profits, trust me nothing has changed over the near 30 yrs my wife and myself have been involved in the industry, there will always be that small vocal group.