KEY POINTS:
The NZX will get a much-needed shot in the arm with the float of AMP Capital's retirement business, Summerset, which is expected to list in September with a value over $350 million.
AMP Capital is to float 80 per cent of the business with the offer opening in August.
The $300 million expected to be raised makes it the biggest stock market float since 25 per cent of lines company Vector was listed in 2005.
NZX products group manager Geoff Brown described the float as a "healthy fillip" for the market.
Takeovers have wiped $12 billion of capital off the market in the past two years, with just $3 billion coming back by way of new listings.
Brown said the Summerset float was hugely positive, not just because of its size, but because it was in a sector with a great deal of investor appetite.
The fact that this was a private equity group selling back to the investing public was also a positive.
"It follows a similar process they undertook with Methven and I think that's great for the market."
Brown said Methven, a manufacturer of shower and tap fittings, had been a wonderful success.
Summerset, which has 10 villages providing accommodation for 1600 people, will join rival operators Ryman Healthcare and Metlifecare on the stock exchange.
It will be the third-largest retirement home operator by market capitalisation but aims to grow rapidly in the next few years.
It plans to have 20 villages complete or under development by 2011.
Villages are planned in Hastings, Waimauku, Warkworth, Karaka and Katikati.
Earlier this month, Summerset announced record pre-sales of $6.5 million for its $50 million Warkworth Village.
Chief executive Norah Barlow said at the time that the strong sales reflected the continued growth in demand for the lifestyle offered by retirement villages.
"While penetration rates for retirement villages have increased from 3 per cent in 1999 to around 4.3 per cent, they are still relatively low by international standards, which suggests demand will continue," she said.
With its head office at Paraparaumu near Wellington, Summerset was founded in 1994.
AMP Capital bought it for about $125 million in 2005.
Demographic trends are on the sector's side with the number of people aged over 65 - 512,000 as of 2006 - expected to grow to about 1.3 million by 2050.
But despite the growing market, analysts warn there are still risks in the sector.
It was possible for the level of development to outstrip demand depending on the number of competitors prepared to enter the sector. Operators needed to ensure they were targeting the most profitable segments of the market. Summerset claims to specifically target the middle-market segment.
There are also issues around the supply and price of land as the sector competes with other property developers.
Comparisons between competitors were not always easy to draw, said one analyst, who pointed out that Ryman and Metlifecare traded on vastly different price-to-earnings multiples.
Ryman, with 17 villages and two under construction, has a market capitalisation of $1.07 billion and trades on a multiple of nine times price to earnings (PE).
Metlifecare owns and operates 15 retirement villages, incorporating nine care facilities and seven hospitals.
It has a market capitalisation of $690 million and trades on a PE multiple of 26.
Metlifecare is in expansion mode, having this month announced the acquisition of a Christchurch retirement village and the development of a Takapuna site on the North Shore.
Chief executive Richard de Haast said the key to expansion was putting more residential units on sites it already owned.
With land prices so steep, it had to focus on internal growth and expansion, utilising its "land bank", particularly in areas with the biggest potential: Auckland and the Bay of Plenty.
Metlifecare is tightly held with more than 80 per cent of its stock in the hands of two big Australian investors. Fisher Funds has a further 11 per cent, leaving only about 5 per cent in the public's hands.
Lead brokers for the Summerset float will be First NZ Capital and ABN Amro Rothschild. The offer will be open to institutions and NZX firms as well as Summerset directors, staff and residents.
- Additional reporting Anne Gibson
The rivals
Listed retirement village operators
(by market capitalisation):
* Ryman Healthcare - $1.1 billion.
* Metlifecare - $700 million.
* Summerset - $350 million.
Summerset
* Owns and operates 10 retirement villages around the North Island.
* Seeking to develop another 10 by 2011.
* Owned by AMP Capital which paid $125 million for the business in 2005.
* AMP will retain a 20 per cent stake.
