Maturity market in state of flux

Listed Abano Healthcare Group is considering the future of its 12 ElderCare properties around the country with a sell-off being one of three options under examination.

Abano managing director Alan Clarke said Clavell Capital would deliver a report in April on the company's three options for the properties, worth about $55 million.

"We might need to grow the assets and look at opportunities provided by the Methodists and Salvation Army," he said, citing the sale of aged-care complexes by those two organisations.

"We could sell the land and buildings to an AMP-type organisation and become an operator only, or we could exit the sector completely."

ElderCare has aged-care complexes - including nursing homes, hospitals, villas and apartments - at Birkdale, Glenfield, West Harbour, Sandringham and Takanini in Auckland. It has other facilities in Whitianga, Tauranga, Taupo, Hastings, Paraparaumu, Nelson and Invercargill.

Abano's shares are trading around $1.35.

Listed Ryman Healthcare, which is based in Christchurch, has 13 complexes throughout the country and is more sure where its aged-care business is heading: fast expansion. Its half-year report to September outlined a bullish growth drive.

"The programme for expansion has continued during the past six months, with new land acquired in Hamilton, Wanganui, Lower Hutt and Christchurch," directors told shareholders. "The land bank is now sufficient to build 1300 new beds or retirement village units and will fuel the development programme over the next four years.

"Construction work is taking place in Auckland, Hamilton, Napier, Wellington and Invercargill ... In 2005, we plan to begin development of new villages in Wanganui and Christchurch, and to commence expansion of the Shona McFarlane Village in Lower Hutt."

Ryman shares are trading around $3.75.

"The directors continue to be positive about the opportunities presented in the retirement village industry. The company represents less than 10 per cent of a large and fragmented industry, which will grow substantially over the next 25 years as the number of people over 65 grows from 450,000 to an estimated 926,000."

But charities in the sector are struggling. Seventeen private elderly care and rest home complexes are up for sale, as charities bale out of an industry that they say has become unviable because of insufficient Government funding and an oversupply of rest home beds in Auckland.

Since November, the Salvation Army, Methodist Mission Northern and Freemasons have put their aged-care businesses up for sale.

The Salvation Army and Freemasons are trying to sell 13 properties but hope the buyers will continue the businesses so the elderly can stay.

The Methodists have taken a different approach. They want to keep their Auckland real estate but sell their aged-care businesses.

The Salvation Army properties are in Auckland, Paeroa, Tauranga, Taupo, Eltham, Napier, Palmerston North, Upper Hutt, Nelson, Christchurch and Dunedin.

Methodist Mission Northern's elderly care complexes are all in Auckland: Everil Orr Village in Mt Albert, Wesley Village in Mt Eden and Franklin Village in Pukekohe.

The Freemasons' complex is on a 5.2ha block of land in Mt Roskill.

Major Alistair Herring, in charge of the Salvation Army's services for older people, said $20 million would be needed to upgrade 13 facilities within the next five years, partly prompting the move to sell.

One of the 13 properties, Omahanui Village in Napier, is under contract to listed company Ryman Healthcare, which owns adjoining land, but the deal has not yet been settled.

David Smith, chairman of Methodist Mission Northern, said selling three Auckland elderly care businesses to a new operator while retaining the real estate was an attempt at a financial turnaround.

"A major benefit of the move would be to turn a loss-making operation into a profitable enterprise," Smith said. "This would allow the mission to build up its financial resources so that redevelopment of the under-utilised sites becomes possible."

What's it all about?

Abano Healthcare Group is examining the future of its 13 ElderCare properties around the country.

Rival Ryman Healthcare is expanding and cites a rapidly ageing population as an opportunity, not a threat.

The Salvation Army owns 13 aged-care properties, with 633 beds for sale. One Napier property is under contract.

Methodist Mission Northern has three Auckland aged-care businesses for sale but is keeping the properties. The mission cares for about 1700 people.

The Freemasons, which house about 200 people at a Mt Roskill property, want to sell.