A listed retirement business has clocked a 31 per cent sales rise in the latest quarter.
The company saw strong trade in three areas of the country, driven largely by new sales.
Illness or death of residents wasn’t the main reason for the strong resales – one of the grimmer facts of life in villages.
Summerset Group, with a market capitalisation of $2.9 billion, sold 225 properties in last year’s third quarter but that shot up to 296 sales in the final three months of 2020. Of the 296 sales, the majority of 176 sales were for new places due to high development levels.
But a further 120 sales of occupation rights were classified as “resales”. Retirement village residents sell properties due to illness and needing a higher level of care so they move into another part of the village or the families sell the property of their deceased relative.
Few residents leave villages because they don’t like it. They are severely financially penalised if they do. The contracts say the businesses can keep 20 to 30 per cent of the purchase price of an occupation right after on a three-year tier system.
Summerset said villages at Casebrook in Christchurch, Ellerslie in Auckland and Rototuna in Hamilton “were the standout performers in Q4”.
“We are very pleased with these results and have a strong pipeline of sales for Q1, 2021,” said outgoing chief executive Julian Cook, soon to be replaced by Scott Scoullar, deputy chief executive and chief financial officer.
Schoullar explained more about the resales versus new sales.
“Sales in Q4 are totally driven by new sales and building new villages. For example, the number of new units sold was 175 for Q4 vs 58-100 in all the prior three quarters. Resales volumes of 120 in the fourth quarter are actually down a little bit from the third quarter which was 125 resales so no real change in the volumes of resales over the last six months,” Schoullar said.
“Resales were slightly lower than normal during the first half of the year due to all the COVID restrictions and leaving residents being unable to move out their belongings which has elevated the second-half volume of resales,” he said.
“Overall year on year resales are only up by 58. Yet more than 4000 people live in our villages.Again most of the increase in the 58 resales is more reflective of the company progressively having more villages across the country,” he said.
CEO Julian Cook said the business had opened the main building at Casebrook last March and had sold 88 per cent of its serviced apartments and memory care centre apartments.
Rototuna’s main building in Hamilton opened in November and the first residents moved into Summerset’s new village in Bell Block in New Plymouth last month.
Pre-sales for this year were already encouraging, particularly at the new Kenepuru village in Wellington and Te Awa in Napier.
Around 93 per cent of Te Awa’s villas had been presold already. They are due to be finished by March.
Summerset will also soon open the main building at its new Nelson village at Richmond., Cook said.
Last year, Summerset announced it wanted to build eight-level blocks for 216 apartments, 100 hospital rooms and 235 parking spaces at 23 and 41 Cheshire St in Parnell, according to its application.
That has upset some locals like Graham Roberts, who lives two houses away from the site, is a member of the Gibraltar Owners Group which wants the company in which he owns shares to engage.
Around 45,000 New Zealanders now live in retirement villages owned by six big operators, according to an annual study by real estate agents and consultants JLL.
The retirement villages and aged-care whitepaper was written by JLL senior research analyst Lisa Chen showed Summerset had the biggest development pipeline after buying seven sites last year. It plans new 4726 new units.
Ryman Healthcare was second busiest planning 2816 units, Arvida Group planned 1484 units, Metlifecare planned 1348 units, Oceania Healthcare 1119 units and Bupa NZ 448 units.
Around 70 per cent of Summerset, Ryman and Metlifecare plans are for new villages but 90 per cent of Oceania and Arvida’s plans are to expand existing villages.
Bupa is split more evenly between new villages and expansion of existing villages, JLL found.
Existing villages are growing or being redeveloped and new villages are rising.
Summerset Group has villages in Aotea, Avonhead, Bell Block, Casebrook,
Dunedin, Ellerslie, Hamilton, Hastings, Havelock North, Hobsonville, Karaka, Katikati,
Kenepuru, Levin, Manukau, Napier, Nelson, New Plymouth, Palmerston North, Papamoa
Beach, Paraparaumu, Richmond, Rototuna, St Johns, Taupo, Te Awa, Trentham,
Wanganui, Warkworth, Whangarei and Wigram.
It owns 31 villages either completed or currently under development. It has a further nine sites pegged for development at Half Moon Bay, Milldale and Parnell, all in Auckland.
It has land at Prebbleton and Rangiora in Canterbury, Waikanae on the Kapiti Coast, Blenheim, Cambridge and Lower Hutt as well as two sites in Victoria, Australia.
Summerset is trading around $12.64, up from just $3.70 when the first lockdown was announced towards the end of last March.
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