There are buyers and sellers everyday!
It is a matter of the price sellers are prepared to sell at and what buyers are prepared to pay - the sp trend tells the story there.
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They are ultimately protected by replace cost which is sky rocketing and in no circumstances would you be able to replicate the new facilities cheaper than they built them for. It's not the value of the NET tangible assets that matters it's the value of the float which is nearly a billion dollars. Unless you want to mark it all down by 77% then you are in the money.
What’s this billion dollar float you talk about SRob? I’m struggling to get my thick head around the idea sorry
So the $917,647,000 Deferred management fee/refundable occupation license item on the balance sheet is essentially an interest free loan that cannot be called and is only paid back once the next lot of money has come through. It is a thing of immense beauty and the key to understanding the industry.
So it allows them to massively increase the amount of property they own and develop, at no cost or risk. Also worth noting here the terms and rate on their actual conventional debt which is outstanding, one bond is I think 2027 at 2.3% and the other 2028 at 3.3%. So massively negative in real terms.
So a conventional developer like you or I in simple terms, to build a million dollar house, we have to first get a million dollars, then build the house and then to build another one we either have to sell the first, or go to the bank and borrow against the first and maybe get 800k if we are lucky and subject to handing over the title to the first one to the bank and paying interest and introducing all kinds of risk.
OCA has their cake and eats it, they 'sell' the first house for more than a million while still owning it and don't pay any interest on the money they get and they don't have to pay it back (they keep a ton of it too) until it's been 'sold' again, and they do this until the cows come home and then do it some more. So they can never get into trouble with this type of liability, and it reminds me of float in the insurance industry which is fought over like crazy. Only this is way better as float is heavily regulated and you have to put up your own capital too.
Then as they develop more they get more of this free money and develop more... It's one hell of a business, and everyone is missing it as they think you're buying the net tangible assets but no, you are also buying the free billion dollars. I've never seen it discussed here but it's the real key to the business model.
Please forgive an interjection from someone not in or yet invested in the industry. But sometimes those not in the industry are able to see potential solutions more clearly. It seems to me that both care workers and care nurses are under so much pressure these days, that their underlying good nature and commitment to doing good for their residents sees them as slaves to their jobs, and without wage parity to their other health system peers.
The solution came to me in a blinding flash - re-introduce slavery, but with a very important modern twist. Since modern care workers are so wedded to their responsibilities, and work in slave like conditions, it would make sense to 'be honest' and reclassify them -officially- as slaves. This would end all pay parity arguments, threats of strikes or any such bourgeois 'rights' issues, and allow workers to focus solely on their work. Of course,to get care workers to accept such a deal there would have to be 'compensatory offsets'.
Accommodation would all be in house, but to five star standards. Oceanias many unsold apartments would be ideal residential bases for our live-in slave population. This too would provide an instant solution to the excess unsold accommodation stock at Oceania we keep hearing about. 'Five star food' supplied by the cities' finest chefs would be the cuisine starting point. A personal trainer and masseuse for each slave would ensure our people kept in top physical condition. Doctor and dental visits would all be free. A giant personal TV with unlimited access to all the world's streaming services would keep them entertained. All laundry would be done for our slaves. Once a month they would be escorted to town via limousine and a minder to spend a generous clothing allowance, on garments of the finest patterns and made of silk. These minders would be dedicated professionals themselves, employed under the moniker tag 'slave driver'. All worries of their previous life for our slaves, struggling to pay rent, power and food in a hostile climate of rampant inflation would be gone. But, and here is the one disadvantage, they would not be allowed to leave Oceania - which of course would solve the staffing crisis. If they got too old or physically decrepit to do the work, then they would instantly transition from 'worker' to 'inmate', removing all long term care worries.
Once a year, replacing Labour day (because no-one these days works a 40 hour week anyway) the country would have a 'Slave Appreciation Day' (acronym SAD, sounds catchy), where we 'externals' would stop to remember our 'dedicated slave workforce' who would not be able to stop and appreciate themselves - because they would still be working looking after those 'oldies'. My 'elegant solution' does seem to solve most of the industry's problems, including the ever increasing wage bills that shareholders seem to worry about.
SNOOPY
It is an asset in all but a technical sense. Float in the insurance industry is viciously fought over to the point where they're happy to lose money on underwriting in order to gain the float to invest. Look at the amount of this source of funds vs the amount of interest bearing debt, or the amount of equity.
Google 'insurance float' for a quick overview of the concept.
My answer would be that they didn't.
They didn't need to, they wanted to. And it's not all bank debt, looks like just over half is and a fair bit is due to weak exchange rate affecting their USD bonds.
Ultimately this conventional debt allows them to ramp the float faster.