Ryman at $1.83 is the bill for building villages on borrowed money

Ryman Healthcare shares traded above $14 in 2020. This week they changed hands at $1.83. Summerset has fallen from above $15 to $6.78, Oceania from $1.50 to 66c and Arvida from above $2 to $1.69, according to RNZ’s tally of the sector. Radius Residential Care, by contrast, is down just 4.2 percent over five years.

That gap is the story. This is not a sector-wide sentiment wobble. Investors are repricing a specific capital model, debt-funded development that relied on an ever-rising housing market and a flattering profit metric to keep the dividends flowing.

The warnings were in plain sight

None of this arrived without notice. In 2023, a Forsyth Barr report found Ryman, Arvida and Oceania had tripled their debt over five years, more than any other NZX sector, with debt servicing consuming about 20 percent of underlying profits, double the 2018-2022 level. Then-Forsyth Barr analyst Aaron Ibbotson said the companies had probably taken on too much debt.

By mid-2024, Jarden analysts reported that Ryman’s loan-to-value ratio had approached 50 percent during a rapid-development phase, while its banks kept extending credit. Ryman, Oceania and Arvida all suspended dividends.

A profit number that flattered everyone

The deeper problem was the yardstick. The sector’s favoured “underlying profit” measure is largely non-GAAP, and its development margin has excluded costs like communal and care facilities that operators need to attract residents. That allowed borrowed money to fund dividends while gearing climbed.

Ryman’s FY24 result showed the disconnect starkly. Underlying profit was still $270.0 million, while reported net profit collapsed to $4.8 million from $257.8 million, after $283.9 million of land bank impairments. When the headline figure and the cash diverge that far, investors stop trusting the headline figure. Share prices have fallen further than operations alone would justify because confidence in the metric itself evaporated.

Twenty years to get your money back

Grant Thornton’s 2025 research explains why leverage is so dangerous here. A modelled villa project delivered a 16.5 percent annual return on equity but took more than 20 years to recover the investment. Grant Thornton’s Pam Newlove said at the time that many operators were “struggling to cover operating expenses in the current economic environment.”

A 20-year payback funded with short-cycle bank debt is a bet that you can refinance through several property cycles. It worked until it didn’t.

Ryman’s repair is real, but dilutive

Ryman has done the hard yards. At its 2024 half-year, net debt sat at $2.56 billion with gearing of 37.3 percent. In 2025, a $1.0 billion equity raise cut net debt by $840 million and took gearing to 28.1 percent.

Greg Smith, investment specialist at Generate, told RNZ that Ryman’s latest result delivered its first positive free cash flow in more than a decade at $188 million, with gearing down to 27.8 percent. “The repair job is gaining traction, but it remains more of a turnaround story,” he said. With so many new shares issued, he expects the market to judge Ryman on valuation against net assets, “rather than a return to old share prices.” Shareholders who bought at $14 should take note.

Summerset looks like collateral damage. Smith pointed to first-half sales up 17 percent and resales up 23 percent, though development margins slipped to 20 percent. Gertjan Verdickt of the University of Queensland noted analysts’ average target of $12.56, implying more than 80 percent upside.

The election could rewrite the cash cycle

The sharpest near-term risk is political. The Government proposes capping repayments to departing residents at nine months, with 10 percent paid within four weeks. Labour wants three months, applied to existing residents too, and the Government’s own modelling puts the extra capital required at $3.2 billion to $4.1 billion. Labour’s capital gains tax on investment property adds further uncertainty to the housing sentiment that drives resales.

Koura KiwiSaver founder Rupert Carlyon argues operators “got away with murder for a very long time” on right-to-occupy terms, and he has a point. Faster repayment is fair to residents. But a retrospective three-month rule is a capital shock that would push operators to build less at exactly the wrong time. In 2025, Harbour Asset Management’s analysis suggested the sector pipeline could fall below the 20,000-plus units needed to meet demographic demand through 2033.

What happens next

The sector’s recovery now hinges on three things outside its control: a housing market that starts moving, an election result that settles the repayment rules, and wage costs that Carlyon says are already squeezing margins. Operators that have de-levered, Ryman included, can survive the wait. What they cannot do is go back to the old model. At $1.83, the market has made clear it will no longer pay for growth funded by debt and dressed up as profit.

Sources

• RNZ: What’s going on with retirement village share prices? (2026-10-21)
• RNZ: Debt holding back retirement village sector – report (2023-03-27)
• BusinessDesk: Retirement sector struggling to keep lid on debt, analysts say (2024-07-17)
• BusinessDesk: Retirement sector faces reckoning over performance metrics
• NZX: Ryman Healthcare FY24 full-year result (2024-05-26)
• Ryman Healthcare: Half Year Report September 2024 (2024)
• Ryman Healthcare: NZX release, FY25 results to 31 March 2025 (2025-05-29)
• Grant Thornton: The path to profitability (2025-06-23)
• Harbour Asset Management: Harbour Navigator – Retirement village shares, refreshed? (2025-03-31)