Dean Hamilton: Ryman Healthcare executive chair defends price hikes and job cuts

Retirement village operator Ryman Healthcare is raising prices and slowing down construction efforts to repair its financial holes. 

The company has raised its deferred management fee (DMF) and made three senior executives redundant in order to get profits back up.

Ryman Healthcare executive chair Dean Hamilton says people are living longer and staying longer - and they need to restructure to address that.

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Episode Transcript

Speaker 1 (00:00):
Now the country's largest age care operator is pumping up prices.
Ryme In Healthcare will increase its deferred management fees. That's
the amount that residents pay when they finally permanently vacate
their units, and also the weekly fixed charges they're going
to go up as well. Dean Hamilton is the Ryman
Healthcare executive chair.

Speaker 2 (00:16):
Heyden, Hi, Hey, how are you well?

Speaker 1 (00:19):
Thank you know, you're essentially pumping up your deferred management
fees because people are living.

Speaker 2 (00:24):
Longer, right, well, I wouldn't call them pumping up. We are.
We're moving more to a market basis. We've currently got
a twenty percent deferred management fee, which essentially is rent
that we take off the resident when they depart so
they don't pay rent on the way through. So we're
currently about twenty percent of the value they give us
when they move in, and we're going to move that

(00:44):
to thirty percent, which is where the majority of the
market is a large part because people are living longer
and staying with us longer. So we just believe we
need to get that restructure right to reflect that.

Speaker 1 (00:57):
I mean, that's obviously going to only affect new residents.
Would do You're not changing existing contracts.

Speaker 2 (01:02):
That's a key thing here that it's all about new residents.
We've got lifelong commitments for all our current residents, whether
that's on DMFF or whether that's the weekly fees. So
this is from one October the shift for a new resident,
there'll be a choice of DMF thirty or twenty five,
and there will be either a fixed fee or an
inflating weekly fee. So hopefully you know, for the whatever

(01:24):
financial position they're in, we can find a solution.

Speaker 1 (01:27):
But so what that means then is that you're potentially
a couple of decades, if not more, away from actually
seeing this flow through.

Speaker 2 (01:32):
Right, Probably not a couple of decades. The average person
in the living sect and up stays around nine years
our decade.

Speaker 1 (01:43):
Yeah, thank you, fair enough. But what about the weekly
fixed charges? How much are they going up by?

Speaker 2 (01:48):
So we haven't said that it differs by region, difference
by country. We've got our fifty villages. Ten of those
exist in Victoria. We've got forty throughout New Zealand, so
they'll be different by by country, and we will look
to largely move our current rate to an indexed rate.
So if you're paying roughly two hundred dollars an hour.

(02:09):
That around that rate will be a base fee that
you'll index off, and depending on the region, we'll then
have a higher fixed fee that says that'll never move again,
but that needs to capture nine years of inflation. So
it's a significantly higher number than the new weekly.

Speaker 1 (02:24):
Okay, do you know how much high?

Speaker 2 (02:27):
Well, again, it will change by regions, so we're kind
of not putting a price list out in the media today.
Will differ by region. So in terms.

Speaker 1 (02:35):
Of the number of units that we've got available in
the country, are we meeting demand yet or are we
still lagging here?

Speaker 2 (02:42):
Well, I think in terms of the current mark there,
we are reasonable balance at the moment, probably a little
bit more supply than demand because the residence obviously we've
still got this wave of aging population, but they are
now struggling to sell their houses because of the residential
property market. So invariably hither they need to sell their

(03:02):
family home and take that capital and purchase an occupational right.
And I think Auckland clearance rates are roughly twenty five percent,
so we have these people signed up, but they're just
struggling to sell their houses. So you know, I think
that will take a little bit of time to work through,
do you.

Speaker 1 (03:18):
Have but then okay, so let's say we work through that, Dean,
then where are we Are we going to have still
supply outstripping demand or all that flip around?

Speaker 2 (03:26):
I think they'll flip around because, in essence of the
recent report done by the government by an independent company
called SAPIA, in the next teen years will be twelve
thousand age care beds short, and there's potentially going to
be a similar number of retirement villae udits short as well.
So yeah, I think the danger will be particularly on

(03:48):
the age key is setting with. You know, we believe
the government underfunding age here residential age communities, and people
just aren't going to be building those new villages, which
is one of the reasons why we're pause. We want
to see what this government lands before we start building
more beds. We said we will, but you know, you
have to provide a reasonable return on capital. Otherwise these

(04:10):
people will not come into villagers, They'll end up in
your hospitals and they will cost you even more. So
we just think they need to lean in that one.

Speaker 1 (04:17):
Hundred and twelve thousand number. Is that just baby boomers
or are we starting to count the exits there as well.

Speaker 2 (04:22):
Now that's twelve thousand, not one hundred and twenty thousand,
twelve thousand, twelve thousand, twelve thousand. They'll be short in
AGEK beds within ten years.

Speaker 1 (04:31):
Okay, so that's still baby boomers.

Speaker 2 (04:32):
Yeah, yeah, that's just the aging population now, and you
know it's coming when.

Speaker 1 (04:37):
You guys cast ahead, when that baby boomer bubble bump
goes through, are you guys going to end up having
way too many units?

Speaker 2 (04:45):
No? I think if most of those demographics that run
through there, that's at least twenty five years away. And
so that's that's beyond my time frame, so not mine though.
Oh you're lucky, you're younger. It will have a bed
for you. It will give a bed for you.

Speaker 1 (05:03):
Under millennials, I thought the millennials were a really big
cohort as well.

Speaker 2 (05:08):
Now, what do you describe as a millennial. Everyone's got
a different definition.

Speaker 1 (05:11):
Okay, Well, I thought a millennial is sort of anyone
up to about like forty forty three, is forty four ish?

Speaker 2 (05:18):
Yeah, that's still homeowners, isn't it? By and large? Yea,
And so they will be looking to I think I
think the future. In my view, there'll be a combination
of people aging in place in their homes. Also people
wanted to move into residential age Kere like a Rhyming
village that has a continuum of key. You can start

(05:39):
out independent, you got a garage in your car and
you're driving the golf, but you're coming back, you having
dinner there from in the Paul playing bowls and then
as you know, as you get older or your partner
it becomes ill. You can move into service or you
can move into kre. So yeah, we still think the
product is remains a high demand and it'll be part
of the's nothing Roughly. I saw a number today twelve

(06:02):
percent of people ever seeing me father actually inside resident Thelitzo.
We're not saying it's the sole answer, but certainly part
of the solution we think.

Speaker 1 (06:11):
Dean, it's very good to talk to you. Thank you
so much, really appreciated. That's Dean Hamilton, Rhyman Healthcare's executive chair.
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