Because of the lockdown, Ryman developed 841 new units and care beds, below the targeted 900 but up from 757 in the previous year, and has lowered this year's target from 1,000 to 900 while maintaining its longer-term target of 1,600 a year.
Chief executive Gordon MacLeod told analysts on a conference call that Ryman is currently building at 12 different sites and doesn't plan on adding to that this year.
Those sites include two new villages at Ocean Grove in Victoria and Riccarton Park in Christchurch.
But the company could exceed its 900 unit target this year because, if demand is sufficiently strong, it can develop additional stages within those 12 sites, MacLeod said. Next year, the company could develop 1,300 units.
"Our overall plan is to continue to lift our build rate in Melbourne and Victoria" to match the pace of building in New Zealand.
But development spending is likely to fall below $600m compared to the $711m spent in the year just gone, which was up from $552m the previous year.
"I would expect it to be less than what it was this year – ended March – It might be in the fives. That would hopefully be with more units and beds delivered" because a lot of the preliminary development work has been completed at a number of sites.
Between March 31 and May 31, the company sold a further 131 existing units and MacLeod said resales have picked up first but the company is now starting to see interest in new units, although Australia is still experiencing lockdown restrictions.
MacLeod rejected a suggestion that Ryman will discount units in response to the expected fall in house prices, saying the company already offers market-leading terms and conditions with its deferred management fees capped at 20 per cent while some competitors charge 5 per cent to 10 per cent more.
Chief financial officer David Bennett said property prices in Auckland would need to drop 18 per cent before it affected the relative pricing of Ryman's independent units and that in Melbourne house prices would need to fall 30 per cent.
The price of Ryman's serviced apartments is about half that of the median house price in Auckland and Melbourne.
Kerr said that people deciding to sell their homes to move into a Ryman village tend to be over 80 and are making that decision out of need and that the "natural buffer" between Ryman's occupancy costs and the prevailing house price facilitates that decision.
Takapuna
"We've been through difficult real estate times in the past and we've managed that buffer so I think we will be fine," he said.
Ryman did announce the purchase of a new near-7,000 hectare site in Takapuna on which it plans to build a $120m village.
MacLeod was asked about the expected impact of the pandemic on the housing market and how the value of the site might be affected.
"We were delighted to buy that site. The only thing you could ever argue about is might the price have been slightly different," he said.
"The bottom line is that site is a cracker and we wanted it."
The Takapuna purchase takes the company's land bank to 6,595 beds and units, 3,861 of them in New Zealand and the rest in Victoria, to add to the 11,334 already operating.
During the year just gone, total sales of occupancy rights to units and beds rose 16 per cent to 1,436 with 923 of those being resales of existing units.
Because of the pandemic, sales were below target and that resulted in Ryman's debt rising to $1.71 billion at March 31 from $1.32b a year earlier and its bank-debt-to-bank-debt-plus equity ration rising to 42.6 per cent from 31.9 per cent.
Pent up gains
MacLeod said the company closely monitors the composition of its debt and the vast majority of it relates to land and work in progress.
"We know that we're only incurring debt to make productive assets that will fundamentally recycle capital."
Bennett said occupancy was 98 per cent at March 31 compared with 87 per cent for the aged care sector.
Ryman's development margin fell to 27 per cent from 30 per cent but remains above the company's target of 20 per cent to 25 per cent.
Bennett said "pent-up gains" of the company's resales bank eased slightly to $856m – that's the difference between what current residents paid and the current prices of existing units – showing that the company could keep growing profits even if all construction stopped.
Ryman shares are trading at $12.85, down 19 cents, or 1.5 per cent. They have fallen 21.3 per cent year to date compared with the benchmark S&P/NZX 50 Index's 5.1 per cent decline.
