Yes good post apart from comparing OCA with REIT rubbish that doesn't produce anything.
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Yes good post apart from comparing OCA with REIT rubbish that doesn't produce anything.
Well, it appears you don't understand the nature of retirement villages, but this is ok. Maybe you don't understand the nature of REITS either, but this is ok as well. Everybody is here welcome to comment.
On the other hand are you amazingly proficient to spice your ignorance with strong words. Some might call this providing spice for the discussion, others might have stronger words to describe your contribution, but anyway - cheers for your comment.
They certainly provide colour.
Thanks BP.
In terms of assessing SUM vs OCA, OCA has always underperformed SUM share price significantly. I take it you think this will resolve in the future and that OCA is comparatively undervalued?
SUM has compounded earnings at a higher rate than virtually any company anywhere in the world anytime in history. Starting off a low base.
Was a 10 year CAGR close to 50%
Different things? - Yes and no. It depends very much on your viewpoint and which definition of REIT (Real Estate Investment Trust) you choose.
Very important? It does add no value at all what definition of REIT you use, as long as you understand what your investment is doing.
If you take the basic definition of a REIT (from investopedia): "A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate."
Isn't this exactly what OCA is doing? They own Real estate (tick) and they operate real estate (tick), which generates an income (tick). They charge their clients for the use of this real estate using various fees and charges, and part of this operation is to add some for this special customer group essential services (like care).
Of course - there is no point in just buying any REIT, you need to look at what you want from it and what it is specifically doing.
Lets look at a different example. You want to buy a car. If you want an economical shopping basket, than might buy a Ford Fiesta (and lets avoid to start discussing the benefits of various cars here, shall we). If you want a car which is able to pull your boat from one lake to the next, you might prefer something bigger and with 4WD.
Both vehicles however would be cars and useful for the intended purpose.
So, there are REITS (like e.g. ARG and KPG) focussing on providing space for a certain clientele. Often buildings for special customers, but as well providing rental accommodation. Different type of REIT business, but they are REITS.
Other REITS are buying land, subdividing it and selling it on (e.g. CDI). Different type of REIT business, but they are REITS.
Some REITS are owning and operating hotels (like MCI). Again - different type of REIT business, but they are REITS.
And than there are the retirement villages. They do provide an important service to their clients, but the core of their business is owning and renting out real estate. Any retirement village not owning their real estate would need a totally different business model, and I am not aware of any successful retirement company which does not get most of its cashflow from owning and renting out real estate. Do you?
But no matter which definition you choose for REITS and how you would like to call Retirement Villages - it is important to understand that the market treats retirement villages as REITS (and there are some people who say the market is always right).
Interest rates up - REITS down, Interest rates down REITS up. Did it ever occur to you there might be a reason for this correlation?
And yes, there are some REITS who do better than others ... but this does not mean that they are no REITS.
Looking at the current valuations - correct.
If you go some years back, you will find that SUM used to be at some stage as well one of the underdogs, but they managed already to climb out of this hole - different start time and start conditions than OCA and a different business (cruise ship experience for healthy clients).
No it's not what OCA is doing. There are only two posters who truly understand what OCA is doing and that's Maverick and Baa_Baa.
If REITS are about income producing real estate then they had better find some! Net Cash flows produced by their 'assets' are extremely thin vs prices they pay. Very ugly situation that will only ever look marginal in a ZIRP world.
Nobody can predict what rates will do, one could say they're not high right now, only in comparison to post GFC ZIRP.
Agree that OCA is trading with the dog REIT model.
And there's the opportunity.