Retirement village vacancies rise: Ryman Healthcare’s Dean Hamilton explains

Dean Hamilton talked about vacancies in the Ryman portfolio after the result. Photo / Michael Craig

Ryman Healthcare has more than 1000 retirement units vacant, with vacancy rates rising from 10% to 12.1% in the last year but its chairman says that’s no trend and “there isn’t an angle there”.

Instead, chairman Dean Hamilton says vacancies only increased lately due to the company opening three big new hospital blocks with beds which he expects will soon be taken - sold and occupied.

It is precisely because these three blocks were finished within the last six months that the vacancies in the portfolio rose at all, he said.

For Ryman, ‘units’ means independent villas, apartments and what it calls care beds which other people might refer to or see as a hospital bed or higher-needs portion of a village.

Extensive views from The Helier retirement complex in St Heliers. Photo / Oceania Healthcare

Ryman announced a 12.1% vacancy today in its half-year result. Unoccupied retirement unit stock was up 182 units from 974 in March to 1156 in September.

That follows Oceania Healthcare saying last Friday its new $150 million east Auckland village was 69% empty but new CEO Suzanne Dvorak expects that to change with summer arriving and interest rates dropping.

What’s going on? Vacancies in retirement villages didn’t used to be something on the radar and for Hamilton, it’s not a concern.

So we put some questions to him about this, after the company announced its half-year result.

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

Where are the highest vacancies in your portfolio?

“We opened three new main buildings with hospitals and apartments and that’s where the stock is that’s vacant: Hobsonville, Henderson and Hastings,” he said referring to the Keith Park, Miriam Corban and James Wattie villages.

At its Bert Newton village in Melbourne, apartments had been opened a year ago but Ryman only opened the hospital building two weeks ago, Hamilton said.

So out of 79 beds, Hamilton said he thinks only around five of those will be occupied after the first week.

“But people are just moving in,” he emphasised.

Around 96% of Ryman’s hospital or care beds were sold or occupied and 88% of its retirement villages, Hamilton said.

What’s caused rising vacancies?

“The development of the three new centres and the fact that they came on at same time in the six months.”

What does Ryman project to happen to vacancies in the future?

“We expect them to go down just like they normally do, particularly in Auckland where all of our care centres are full because there’s a higher demand for care in Auckland. Our retirement villages will get up to less than 10% vacant in the next 18 months.”

How much has the housing downturn affected your sales?

“People can’t sell their houses, or they do sell them and get less than what they thought they were going to get,” Hamilton acknowledges.

That makes it harder for Ryman to sell its occupation rights agreements, although he notes particularly high sales in the latest half-year.

How Ryman performed lately

It halved its net profit after tax, making $94.4 million net after-tax profit in the half-year to September 30, down from $187.1m in the previous corresponding period.

Total revenue rose 10% from $333.6m to $366.3m in the latest half-year.

Ryman has 9575 retirement village units which are home to 15,085 residents: 12,921 in this country and 2164 in Australia.

The company employs 7727 staff and has been running for 40 years.

Gearing stands at 37% and Ryman said it had complied with all lending covenants and obligations. It has total debt facilities of $3 billion, of which it has drawn down $2.5b.

It has land held for development valued at $466.4m.

The company said its 10% revenue rise was driven by increases in care and village fees following the opening of a new village and expansion at others.

Shares are trading down at $4.71, a 10% reduction in the last 12 months.

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