ARV - Arvida Retirement Villages

[Maverick]

Hey Winner, your back of envelope maths are pretty good and sadly I fully agree with your summary too.

I feel sorry for ARV, they have been caught out pretty bad by Govt underfunding.
OCAs shuffling with their rest homes have gained them ~$8m in extra premium fees over the last 2 years . This large gain hasn’t even kept their care operations treading water . Compare that to ARV which has gained only $0.7m in extra premium fees.

of the ~1600 beds they own they have only 10% as care suits. Most seem to be just conversions as opposed to new deliveries. Just not enough to offset the Govt damage.

Luckily , or through brilliant management, ARV bought loads of good quality villas and have enjoyed a housing boom since. They have done really well on that front but with the extra shares issued to do it and the now millstone of their rest homes, it has made it a pretty neutered EPS result ( very generally speaking.)

These poor guys really have been screwed by the Govt with underfunding. So they divest 4 rest homes this year , what else can they do? No doubt each divestment also comes with a negative sale price.

For a $3.4 b company, building 250-300 villas and care units is the only option left available but is not going to get them out this lower growth situation in a hurry.

ARV are run really well and are rolling out SUM style villages , generally single level, which is a great model. But owning all these care beds is now problematic. Unfortunately doing more care suit single level conversions won’t work well enough either to compensate as there just isn’t enough profit in those (they don’t sell for that much and they can only be done in moderate numbers), as opposed to a full high density rebuild in a premium area.

ARV will still grow slowly for now and just maybe the Govt will increase funding but the poor buggers have really been rogered through no fault of their own doing.

Really sorry TJ , I know you love this company. Todays report , to me, paints a clear picture of how dire the ordinary rest home side of the industry currently is. That even the great stuff happening in the ARV villas , high sales rates, prices and margins seems to be barely sufficient to compensate the care for now.
On the positive , there will come a time when their village developments will grow past the anchor of their care but I don’t follow this company close enough to know when that might be….maybe we are already there.