Vil­lage op­er­a­tors not in talks

Marlborough Express - - BUSINESS - CATHER­INE HAR­RIS

Re­tire­ment vil­lage op­er­a­tors Sum­mer­set Group and Metlife­care say there’s been no dis­cus­sion on a merger be­tween them, even though an an­a­lyst has sug­gested they might be bet­ter off if they did.

First NZ Cap­i­tal an­a­lyst Arie Dekker wrote in a re­search note that a merger would put the two com­pa­nies in a bet­ter po­si­tion to ex­pand into Aus­tralia, par­tic­u­larly as the do­mes­tic prop­erty mar­ket starts to slow.

‘‘We raise the ques­tion of what a more be­nign prop­erty mar­ket might mean for cap­i­tal ap­pre­ci­a­tion in the medium term and high­light why the up­side for in­vestors in both Sum­mer­set and Metlife­care from a re-rate in Mergeco could be sub­stan­tial,’’ Dekker said.

An up­beat prop­erty mar­ket has been good for the re­tire­ment vil­lage sec­tor, which bases the price of oc­cu­pa­tion rights to units off me­dian house prices.

But as the sec­tor ap­pears to slow, Dekker said Sum­mer­set and Metlife­care should con­sider join­ing forces.

Metlife­care’s bal­ance sheet was strong, as was its op­er­at­ing cash­flow and em­bed­ded value, while Sum­mer­set had more ad­vanced ‘‘de­vel­op­ment ca­pa­bil­ity’’ and a good land­bank, he said.

On Thurs­day, Sum­mer­set said its sales of oc­cu­pa­tion rights fell about 21 per cent in the third quar­ter, with a de­cline in both re­sales and new sales.

Nei­ther op­er­a­tor com­pletely panned the idea of merg­ing, but both said they were very fo­cused on their own plans.

Sum­mer­set’s deputy chief ex­ec­u­tive, Leanne Walker, ruled out it out for the mo­ment. ‘‘Our model has al­ways been to con­struct our own vil­lages rather than buy or com­bine with other op­er­a­tors,’’ she said.

‘‘We are well pre­pared to ex­pand into Aus­tralia, should the op­por­tu­nity arise.’’

Metlife­care, which has not in­di­cated in­ter­est in cross­ing the Tas­man, said there had been no Sum­mer­set talks. Chief ex­ec­u­tive Glen Sowry said it was fo­cused on or­ganic growth, largely in Auck­land and the Bay of Plenty.

‘‘Ob­vi­ously Arie has done a bit of in­dica­tive work on what the ben­e­fits of that could be in the fu­ture; at this stage, and I’m not go­ing to speak for Sum­mer­set, but we have a very clearly de­fined strat­egy of seek­ing to dif­fer­en­ti­ate our­selves in the mar­ket.’’

Dekker said both com­pa­nies had been grow­ing fast in terms of build­ing units, but their share prices in the last year had been mod­er­at­ing as in­vestors started to fac­tor in a more be­nign prop­erty mar­ket.

There was plenty of com­pe­ti­tion here but Aus­tralia had lots of po­ten­tial be­cause the New Zealand ‘‘con­tin­uum of care’’ model was not broadly avail­able.

‘‘We be­lieve a merged en­tity could be bet­ter placed to push on with Aus­tralia in a more timely and mean­ing­ful man­ner,’’ Dekker said.

PHOTO: ANDY JACK­SON/STUFF

First NZ Cap­i­tal be­lieves listed play­ers Metlife­care and Sum­mer­set should con­sider merg­ing.

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