We received a couple of reports this week that tell a bigger story.
The first is the 2020 PwC/Property Council Retirement Census report. The second and third were the Half Year results for New Zealand operators Ryman and Arvida.
Consider these comparisons.
The PwC census of 586 villages across 52 operators reveals their development activity is in rapid decline.
This chart shows that in FY21 the 52 operators expect to deliver new villages that will have 780 homes across them.
Last year, just 12 months earlier, the same operators were predicting 1,371 new village homes would be delivered in FY21. That is a pullback of 36% and the trend continues for the next five years. See the top line of the table compared to the black sections of the columns.
In addition, vacancies have grown from 11% to 13%, and days vacant from vacancy to new occupant has moved up to 287 days. From refurbished and ready to market through to deposit taken is now 104 days or 15 weeks.
Against this backdrop is the HY financial reports of both Ryman and Arvida in New Zealand.
Both offer the continuum of care model with an emphasis on wellness and support to keep people in their own retirement village home as long as possible, by providing care and reablement.
Ryman has 12,000 residents across 39 villages. They have 1.9% unsold village homes. Their nursing homes have 97% occupancy.
Ryman’s total assets are valued at $8.34 billion.
This compares to Aveo with around 12,000 residents, with a valuation in 2018 of $6.7 billion, but realistically $4.5 billion.
In August 2019, Aveo announced it had accepted the offer of $1.27 billion for the 100% purchase of the company by the Canadian investment fund Brookfield.
The agreed price is $2.195 per security, valuing the group at $4.5 billion, or around half the valuation of Ryman.
Lendlease Retirement, with 15,000 residents, sold 25% of its business for around $450 million to the Dutch pension fund APG, we ‘guesstimate’, valuing the business also around the $4.5 billion mark.
Meanwhile NZ’s Arvida, established by Australian expat Bill McDonald just seven years ago, now with around 30 villages is valued at $2 billion.
Obviously, the New Zealanders have established a retirement living accommodation value proposition that resonates. And it is the continuum of care.
As we keep raising, the Royal Commission has handed the sector the opportunity to advocate for new, supportive regulations across zoning and building design and codes to fast track new seniors’ accommodation.
We don’t have far to look to deliver Federal and State governments a winning formula.
Oh, and did I mention that three of the top five residential builders by volume in New Zealand are retirement village operators?