Property slump slows traffic to rest homes

Friday 13th February 2009

The downturn in New Zealand's property market is hitting the elderly as they prepare for their twilight years - making it harder to sell their homes to enter retirement villages.

Metlifecare, New Zealand's biggest operator of retirement complexes, yesterday announced a first-half loss of $61.9 million, from a year-earlier loss of $12 million, reflecting a drop in the value of its property assets. The company is still getting new enquiries about its units but contracts are taking longer to settle as new customers find it harder to sell their own homes.

"Prospective residents are finding it difficult," chairman Jim McLay said. "This has resulted in a slowing of the settlement of Occupation Right Agreements which reduced the operating net cash flow by $10.2 million."

The company yesterday announced plans to raise as much as $37.8 million via a renounceable rights issue to strengthen its balance sheet. The sale is supported by 82% owner Retirement Villages New Zealand, a joint venture between Macquarie Group and Australia's FKP Property Group.

The offer will be on the basis of two rights for every five shares held at $1.08 a share. Shares of Metlifecare last traded on February 5 at $2.50 and are down 32% in the past three months.

The company will use the funds to repay debt. It suspended dividend payments until at least June 2010.

The record date is February 27 and the rights will begin trading on March 2 and close on March 25, the company said.

Occupation settlement rights are the contracts retirees sign with rest home operators giving them the right to occupy a unit in a village. Metlifecare had 2,392 units in 16 lifestyle villages and one new village under development on Auckland's North Shore as at December 31.

Figure this week from Quotable Value showed property values dropped 8.3% in the three months to January from a year earlier and sales remained at low levels.

By Jonathan Underhill

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