Ryman Healthcare bombshell: reviewing fixed weekly fees, DMF for new residents

Dean Hamilton has been chairman of Ryman Healthcare for just over a year. He has cleaned out half the executive team and board, paid down some of its debt, suspended the dividend and pulled the pin on developments. Photo / Michael Craig

• 14,600 existing Ryman residents’ fixed fees will remain ‘sacrosanct’.
• But those buying into Ryman in the future may not get fixed weekly fees.
• Ryman’s 20% deferred management fee is also under review.

New Zealand’s biggest listed retirement village company is reviewing whether it will continue to offer only fixed weekly fees for new residents and is also examining its low 20% deferred management fee [DMF].

Shareholders at Ryman Healthcare’s AGM in Christchurch asked if residents’ weekly fees would remain permanently fixed, prompting a chief to say that was under review and future residents’ fees may not be fully fixed.

Dean Hamilton, executive chairman, said fixing weekly fees had proven very expensive for the business, which houses 14,600 residents here and in Australia.

Costs of rates, insurance and services such as plumbing were up, Hamilton said.

“We didn’t anticipate that when we fixed fees for life in 2016 or 2017. That’s been quite a financial drag on that. We may well offer a choice,” he said.

New residents may see changes, he indicated.

Ryman is an outlier by fixing weekly fees on the purchase of an occupation rights agreement: other listed retirement operators increase weekly fees, linked to the Consumers Price Index (CPI).

Fees can be around $120/week or more for residents.

“The fixed fee has hurt us. No one expected rates to go up 15% per annum. They were hard to predict four to five years ago when we set those. We need to make sure we don’t do that to ourselves again. That would not be very clever. We need to look at the services we offer. We’re not going to take a whole lot of services out or reduce our quality of care,” Hamilton said.

He also revealed Ryman was examining whether it would hold the deferred management fees at 20% and indicated an announcement on that in the next few months.

Another shareholder asked if residents whose fees were fixed when they bought could be forced to pay more.

“Contracts are sacroscant. We will not change an existing resident. It will be the resident who starts tomorrow who will have a fixed fee but also a choice – a choice which goes up over time. We haven’t made that decision,” Hamilton told her.

A question about the Park Tce, Christchurch site – which Ryman owns but where work has not started – resulted in Hamilton saying Ryman had a number of projects in that city and there were no plans for this site immediately.

Ryman Healthcare executive chairman Dean Hamilton says the company's grow-at-all-costs mentality led it to take on too much debt. Photo / Michael Craig

“It’s a little of an eyesore on the river there. We have our hands full with 10 under way. Some of the trouble we got into – we had too much on our plate,” Hamilton said.

At Takapuna, land beside Lake Pupuke was not what was expected and needed remediating. The ground was more challenging than what Ryman had hoped.

Frank Stewart from the New Zealand Shareholders Association said around 90 people were at the meeting so asked how many were online. He was told that was around 280.

Shareholder Joanna Hickman asked about trading for the first four months of the March 31, 2025 year.

“More challenging,” was how Hamilton summed it up, referring to unemployment, the housing market and Wellington layoffs.

Asked about the low share price, he said a return to very good performance was anticipated.

Ryman Healthcare has left this site at Takapuna indefinitely. Photo / Jason Dorday

Wellington’s ex-Teachers’ College site in Karori was not sold, he said in response to a question about that site, where the business once planned a $320 million village.

The site had an historic building overlay, the council allowed less density than anticipated and earthquake standards had increased – factors which made development uneconomic.

“So we’re better to take our money off the table,” he said, adding that other Ryman villages in Wellington were full and so demand was strong.

Asked about funding, Hamilton said “people won’t build new care beds” if the Government contribution remained so low.

Arvida Group was being sold, a shareholder noted, and asked if Ryman had any unsolicited offers. Hamilton said it had not.

Asked about investment in Australia, Hamilton said the business would finish existing development sites.

“We have 10 bits of land, not built on – five in Australia, five in New Zealand. We have choice. What we’ll be doing when we do get back into building new villages, we will look at total care return, demand, cost of debt. We need to be very sure when we start a village that we complete it,” he said.

A shareholder said “if it wasn’t for Asians” working in the sector, the retirement sector could not operate. She cited people from the Philippines and China.

“Has the board considered staffing in the future and this problem?” she asked.

Hamilton said Ryman villages had “great staffing. We’ve got a great variety of people, great background”. Nursing shortages from the pandemic had changed, he said.

New hospitals opened by Ryman at Miriam Corban in Henderson, James Wattie in Hastings and a planned one at Keith Park at Hobsonville were able to be fully staffed, he said.

Hamilton opened his address to today’s AGM with: “We have fallen well short in recent years.”

Three areas of focus to improve performance:

• Improving the performance of existing villages, examining revenue and cost opportunities;
• Improving the efficiency of new developments with 14 of 16 developments “unable to fully recycle our build costs with the first sell-down of occupation rights”;
• Creating a sustainable fit-for-purpose overhead structure: “We have over the last eight years seen our support costs grow at a faster rate than our unit and bed numbers. We have to become leaner in what we do.”

“A number of long-standing employees have left,” Hamilton said.

Cashflow from existing operations, development activity and net profit before tax and fair value movements were further areas of focus, he said.

Hamilton called the most recent result “disappointing”: the combined impact of impairments and other one-off costs, some $283.9m in total, had led to a significant reduction in reported net profit after tax of $4.8m in the year to March 31, 2024 compared to $257.8m in 2023.

Ryman has $2.51 billion of debt, up $201m from March 2023. Gearing is 36.2%.

The company has 10 development projects, which Hamilton said would allow bank debt to be repaid as occupation rights agreements were sold. The company has 5371 units and beds available for development.

Deloitte was Ryman’s auditor since it listed in 1999 but it has now changed to PwC.

Hamilton complained that Health New Zealand Te Whata Ora had provided only a 3.2% increase in funding for the aged care sector for the current year.

“We question what measure of sustainability, let alone incentive for growth, does that provide the broader sector, which has some 37,000 care beds – two-thirds of which are in private or charitable hands,” Hamilton said.

He called for the Government to examine funding the aged care sector.

“If it’s not fixed, aged care will inevitably become a broader healthcare issue. Instead of paying $250/night to aged care providers, Te Whata Ora will be paying $1400 a night for a public hospital bed and blocking those beds from the general public,” Hamilton warned.

Ryman had submitted to the Aged Care Task Force, which provided recommendations to the Government in March including support for a co-contribution model.

“We are hopeful of bipartisan support being reached in current negotiations. The changes proposed will be a positive sign for the industry and make investing in new aged care assets in Australia potentially more attractive than in New Zealand,” he warned.

Shares are trading on the NZX today around $4.56, giving a market cap of $3.1b.

Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.