By 2020, Ryman plans to build as much in Melbourne as it does in all New Zealand, says Simon Challies. Picture / Michael Craig
By 2020, Ryman plans to build as much in Melbourne as it does in all New Zealand, says Simon Challies. Picture / Michael Craig
Ryman Healthcare plans to build as much new retirement village and hospital stock in one Australian city as it will throughout New Zealand.
Yet chairman David Kerr has ruled out any ASX listing for the business, which has $3.6 billion of assets, 9000 residents and is forecasting 15,500 residents in the next five years.
An analyst and media briefing in Auckland yesterday heard from Kerr, who ruled out the dual listing because of the extra costs, which he said brought little advantage.
Managing director Simon Challies indicated Melbourne's growth potential was massive and virtually untapped for Ryman.
The company plans to develop five Melbourne sites and could have $700 million of assets there by 2020, with each new village in the city being worth $100 million to $150 million. That compares to about $100 million for a New Zealand village.
"The Melbourne market is about 20 per cent bigger than the whole New Zealand market," Challies said. "The plan is to build as much in Melbourne as we are in all of New Zealand, post-2020.
"To be able to afford to buy into a village in Melbourne, you need capital from a house and house values are much higher in Melbourne than in Auckland," he said, forecasting average pre-sale prices of A$650,000 to A$700,000 for an independent living villa in a retirement village.
That compares to much lower prices at Ryman's new Birkenhead village, now under construction on the old Fernz conference site, where pre-sales are in the $550,000 to $600,000 range.
"That's incredibly affordable for Auckland," Challies said, referring to homeowners getting about $1 million for their traditional North Shore family homes before they moved, enabling them to keep significant capital.
Prices at Ryman's planned New Lynn Tropicana and Greenlane villages would be much the same as at Birkenhead, he said, "maybe slightly higher at Greenlane".
Melbourne resales are expected to be 10 per cent to 15 per cent of initial sales.
"Resales mostly come because people move into a new level of care," he said, explaining that there was an average seven to eight years of independent living in villages before residents needed more intensive care.
Ryman has four villages under construction: Petone, opening this year; Birkenhead, opening next year; Pukekohe, opening late this year; and Rangiora opening next year.
The development programme is so hectic that in the past year Ryman has bought a drone to take aerial pictures of the four villages now under construction, dubbing it the Ryman Airforce. Challies said views of the new villages were needed for marketing material, so it made sense to buy the drone.
Ryman Healthcare's $120 million Birkenhead village, now under construction.
He said the business was "always considering five to six sites" and currently those were only in the upper North Island and Melbourne.
Birkenhead pre-sales have been strong.
Ryman pushed up its reported after-tax profit by 23 per cent in the latest six months, after its operating cash flows hit a record $157 million.
Underlying profit was up 6 per cent to $70.3 million in the September 30, 2015 half-year.
Valuation gains lifted the reported profit after tax by 23 per cent to $132.6 million.
But the next half year could exceed that because residents will move into the four new villages in the next six months.
The company confirmed it was on track to achieve 15 per cent underlying profit growth for the full year.
"We've got more building activity going on than ever before which gives us great confidence about the second half," Kerr said.
More than 160 units were completed in the first half, and with construction well advanced on the four new villages, the company is on track to complete 950 units.
The next four villages in the pipeline are all in high value locations in Melbourne and Auckland.
"Our new villages are selling off the plans faster than ever before because we are building in areas where there is a real need," Kerr said.
As well as the four villages about to open, the company has another four large scale projects awaiting consent.
They are: Greenlane, where construction is expected to start early 2016; Devonport; Brandon Park in Melbourne and Tropicana in Auckland, all at the consenting stage.
"The next four villages in the pipeline are all in high value locations in Melbourne and Auckland," said Kerr.
On completion, two of the villages -- Brandon Park in Melbourne and Tropicana in Auckland -- will be home to more than 600 residents apiece.
"The other two villages at Greenlane and Devonport are on iconic Auckland sites with great views of One Tree Hill and the city respectively," Kerr said.
A contract has been signed to buy a third site in Melbourne and confirmation of that deal is imminent.
The company is on target to open five villages in Melbourne by 2020 and to lift total resident numbers by 70 per cent to 15,500 in the same year.
Other new villages are planned but still at the design stage. They are Newtown in Wellington, River Rd in Hamilton, Site A, somewhere in New Zealand and Site B in Melbourne, Ryman said.
