Investing in retirement villages

Please note this sub-forum does not provide professional finance advice. You should seek advice from a licensed financial advisor.

To post in this sub-forum you must have made 100 posts or have Trust status or have completed our ID Verification.

If investing please consider our affiliate link for new accounts: Sharesies.

Forums › Finance and wealth management › Investing in retirement villages

Tony123456

7 posts

Wannabe Geek

ID Verified

#284027 26-Mar-2021 07:44

Hi there,

Does anyone invest on any of the listed retirement operators? RYM, SUM, OCA, ARV

what’s your view on the sector?
Which one do you prefer and why?
Main things to look at before investing?

Cheers

sbiddle

30853 posts

Uber Geek

Retired Mod

Trusted

Biddle Corp

Lifetime subscriber

#2680870 26-Mar-2021 08:04

I have shares in a few.. I've always seen them as good long term dividend shares, and while Ryman is the biggest operator, some like Oceania have growth (or potentially "acquisition"!) potential. Ryman does carry pretty high debt levels.

One of the uncertainties right now however is the property tax changes the govt have suddenly introduced. This could have some pretty significant effects on the sector.

Quic Broadband

Move to New Zealand's best fibre broadband service (affiliate link). Note that to use Quic Broadband you must be comfortable with configuring your own router.

BlinkyBill

1443 posts

Uber Geek
Inactive user

#2680880 26-Mar-2021 08:38

sbiddle:

I have shares in a few.. I've always seen them as good long term dividend shares, and while Ryman is the biggest operator, some like Oceania have growth (or potentially "acquisition"!) potential. Ryman does carry pretty high debt levels.

One of the uncertainties right now however is the property tax changes the govt have suddenly introduced. This could have some pretty significant effects on the sector.

It’s probably useful to understand the business domain before investing - Ryman, Summerset etc don’t rent out village accomodation; instead they derive income from management fees and change in capital values of their properties. They pay tax on this income.

It’s difficult to see how property tax changes will affect retirement village operations - they don’t have rental income against which to offset interest paid, and the brightline test doesn’t apply.

I don’t think its obvious that Ryman has high debt levels; indeed my broker’s research division suggests otherwise, and notes that Ryman maintains margin performance above the sector average.

In general, retirement village operators, in my opinion, are solid core investments for any diversified portfolio; but you should take professional advice (and not ‘some guy on the internet’) unless you are dabbling for fun.

703

131 posts

Master Geek

#2681420 27-Mar-2021 14:33

I don't invest in them as I see them as taking advantage of the old with very high management fees and then when there are costly repairs, they take a huge management fee on top of that too.

mattwnz

20039 posts

Uber Geek

#2681515 27-Mar-2021 17:25

BlinkyBill:

It’s difficult to see how property tax changes will affect retirement village operations - they don’t have rental income against which to offset interest paid, and the brightline test doesn’t apply.

It depends if property prices drop or just flatline as a result of the changes. Prior to these changes, house values in my area were gaining 10k each month on the estimate websites, which is more than most house holds will earn. But I noticed that the value of some of these shares seem to have dropped since the announcement. Anyone should get proper financial advice before investing.

mattwnz

20039 posts

Uber Geek

#2681516 27-Mar-2021 17:28

703:

I don't invest in them as I see them as taking advantage of the old with very high management fees and then when there are costly repairs, they take a huge management fee on top of that too.

Do you have kiwisaver or ETFs? Are you sure that that they aren't investing in resthome shares? The alternative to private resthomes like this, is the government providing this service. They don't want to be providing houses, or building houses, which is why they go to the market to provide this. These places exist because there is a market for them, and very strong demand where in many you have to go onto a waiting list. Just like real estate agents exist, because there is a demand. eg people are prepared to pay a large amount to get the best price they can when selling their house, when they could sell privately.

703

131 posts

Master Geek

#2681798 27-Mar-2021 22:03

mattwnz:

Do you have kiwisaver or ETFs? Are you sure that that they aren't investing in resthome shares? The alternative to private resthomes like this, is the government providing this service. They don't want to be providing houses, or building houses, which is why they go to the market to provide this. These places exist because there is a market for them, and very strong demand where in many you have to go onto a waiting list. Just like real estate agents exist, because there is a demand. eg people are prepared to pay a large amount to get the best price they can when selling their house, when they could sell privately.

I think rest homes should be regulated, and partially state-funded, much like schools. Their management and how they operate should be reviewed by an independent body for yearly compliance. Records of complaints, and resolution by residents should be made transparent and reported on. I have no problem with rest homes, but the industry in general is not something I'd like to invest in, even if its high in demand and is lucrative.