New Zealand's proliferating retirement villages, home to 43,000 people, are at high risk of coronavirus infection, analysts say.
Retirement chiefs are meeting tomorrow to discuss a co-ordinated approach to the threat.
In an analysis headed "Covid-19 risk hangs over sector", Stephen Ridgewell, Adam Lilley and Sam White of Craigs Investment Partners released a detailed review of five listed retirement companies.
"Retirement villages/aged care facilities appear to be at high risk of infection from COVID-19. See for example outbreaks at rest homes in Sydney, New York and Washington State and elderly are at risk of high mortality rates of 15 per cent-plus, which is materially higher than for younger age demographics," they wrote.
Debt levels and longer-term plans by Ryman Healthcare, Summerset Group, Metlifecare, Oceania Healthcare and Arvida Group were all questioned.
The World Health Organisation says coronavirus has proved especially deadly for older people. The fatality rate in China for those over 80 is an estimated 21.9 per cent, it says.
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"We see risk of their businesses and share prices further de-coupling from house price trends in the near term due to the potential impact on demand of COVID-19," the document said.
A village outbreak would not only result in negative press but also a decline in prospective resident interest for both retirement village units and aged care beds, the analysts said.
They noted last week's Herald article about retirement sector chiefs meeting once a week to co-ordinate sector-wide measures to protect residents from an outbreak of COVID-19, and securing access to additional medical supplies from district health boards.
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John Collyns, Retirement Villages Association chief, said Ryman Healthcare's Gordon MacLeod, Metlifecare's Glen Sowry, Oceania Healthcare's Earl Gasparich, Generus Group's Graham Wilkinson, Arvida Group's Bill McDonald, Summerset's Julian Cook, the Aged Care Association's Simon O'Dowd, a representative from the Alpine Retirement Group and Bupa New Zealand's Maggie Owens were in the group which would meet again tomorrow.
The analysts said that clearly illustrated the level of concern in the sector and the high potential risk.
"This highlights an important truth: that an outbreak of COVID-19 at one facility would be negative to public confidence for not only the operator of that facility but for the whole industry."
Lifestyle villages were most at risk where residency was optional, such properties marketed as "cruise ships that don't go anywhere". The appeal of such villages has diminished considerably in the last few weeks.
Aged care demand would also rise and older people and their offspring involved in making decisions about where their relatives lived would be, were likely to seek more support at home rather than move into villages.
Tenure in a village hospital was usually two to three years and those places relied on a regular supply of new residents to maintain high occupancy.
A worst-case scenario could be the sector needing additional Government help via higher payments for hospital-level care to compensate for lower occupancies, the analysts said.
"The sector is in poor shape to deal with a sharp downturn in resident demand if it occurs, with debt levels already high relative to cash generation as the sector has been gearing up to increase the volume of retirement village units to be delivered over the next two to three years," they said.
Gearing ranges from 17.1 per cent for Metlifecare to 39.6 per cent for Ryman.
Discussions with operators previously suggested a sudden downturn would mean they focus first on completing existing villages under development, then mothball land banks and stop buying new land.
Ryman has the highest gearing and highest absolute level of debt it also has around $400m of headroom, the analysts said.
Ridgewell said yesterday that since the analysis was written last Thursday afternoon, the Government had acted "so the risk of community spread - and to the aged care sector - appears to have reduced".
Collyns of the association said yesterday that members took a long-term inter-generational approach and villages were developed in phases over many years.
"Fundamentally, the outlook for the sector in the long-term remains good. Older New Zealanders value the security, reassurance and peace of mind villages provide and there is an increasing ageing demographic. Consequently, while a possible slowing in houses sales may have an interim short term effect, it is difficult to see villages being impacted significantly in the longer term," Collyns said.
Collyns said the sector was resilient and has taken prudent and responsible steps from the outset to manage the risks.
Ryman said its main priority was to stop the spread of Covid-19 and no residents were affected. Anyone unwell with cold or flu symptoms, including high temperatures, was told to stay away from villages and anyone who had travelled to any affected countries should avoid visiting and self-isolate if they were exposed to the virus.
Oceania chief executive Earl Gasparich said some staff who had travelled to affected countries affected had been in self-isolation for 14 days. They had been paid for that time away from work but whether staff who now travelled to countries affected by the outbreak would be paid was something to be considered.
Gasparich was confident villages could access DHB equipment and he cited gloves for staff, gowns and other personal protective items.
He has no concerns about that aspect of dealing with any possible outbreak. Around 3500 residents live in Oceania villages, staffed by around 2700 people, he said.
Matt Goodson, Salt Funds Management's managing director, has also expressed concern about retirement village stocks' high debt levels, that many are in a busy development phase and exposed to the residential property market's fluctuations.