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A few days ago, I said last week was a key moment for the Retirement Village sector in New Zealand. Yesterday I listened to Ryman Healthcare talk about its results and plans; and I cannot help but think this week has been Ryman's key moment. Considering axing Fixed Weekly Fees, lifting its low deferred management fee (exit fee for the Brits) and selling some sites; all of these would have been unthinkable previously. Great to see a Board and a business responding to the environment and setting a new course for shareholders. Also, as a nod to Michael Stanton, great to see Ryman talking about sustainability. RVA Ryman Healthcare ARCO (Associated Retirement Community Operators) Retirement Living Council
I think the sustainability they were speaking of was mgmt structure….a new way to talk about redundancies.
Fixed fees are not sustainable and place too much risk on the operator. No one in Australia does it (I think RetireAustralia played with it briefly) and the industry here is cranking along with all villages virtually full. Ryman’s exit fee was always too low. I went through their annual report some years ago to figure out if their stabilised operating model was profitable because I couldn’t figure out how they were making money with fixed fees and low exit fees. Turns out it wasn’t. The Australian industry press here often praises the NZ RV industry with the implication that we should be more like them. I’m not convinced.
Ryman's system seems to be the payment in advance for a lifetime lice to occupy. If that is so, and I assume the occupier has some sort of security, and Ryman's sells the location surely that leaves the occupier snookered.
Evolution is certainly a key factor to the future for NZ aged care over the next 10-30 years Richard
This change in direction comes at a time when the Industry “model” (hailed as being among the best in the world for providing equity between owners and residents) is under review by regulators! The drive being that residents feel that “equity” is too strongly in favour of operators. The push for fixed fees across the board is high on the list for the RVRANZ. The oft voiced benefit of our Industy is that it enables cash poor asset rich older people to live in villages with relatively low daily costs but with a relatively expensive exit fee! Enjoy now pay later seems will be under threat if more and more operators switch to our “old” model of CPI adjustments. It is always good to remind ourselves as to why the switch to Fixed Fees for life was adopted! It was to give residents certainty and to ensure operators didn’t have to justify the increase on an annual basis. Either the Executive Chairman didn’t know or the article is incorrect in saying fixed fees were implemented in 2016/2017! They have been a Ryman cornerstone offering long long before that! Indeed interesting times. I remain a fan of fixed fees for life and if adjustments must be made, maybe the exit fee should increase by a couple of percentage points.
thank you for the mention Richard Hinchliffe. I see sustainability as a clear value creation opportunity. Very much looking forward to driving further momentum in this space over the course of this year and beyond.
Forecasting a fixed fee is always good to be difficult especially when it comes to council changing things constantly but if they have to increase it they should to cover costs . If a health care provider wants to play a fair game they have to give their residents a share in the capital gains based on market value and not purchase value . In that case the health care provider is not exposed to risks of real estate market slump ! Especially in areas outside Auckland region Just my thoughts!
Retired Managing Director at Six Continents Consulting LLC
9moVery interesting. Is it difficult for citizens of the USA to get in?