Alastair Duncan is a member of the Caring Counts Coalition and acts as a shareholder representative to Metlifecare and Arvida for the E tū union.

It’s annual reporting season in the aged care and retirement village business and well-heeled suits are mixing with the usual crowd of owners/residents at corporate venues as listed providers report another year of record growth and profits. Listed operators Metlifecare, Ryman and Summerset continue to spin golden profits from the silver tsunami, while relative newcomers, Arvida and Oceania are also doing very nicely.

It’s easy to see how the listed providers are doing. Just check the share market pages in your local, overseas-owned newspaper – just beside the racing column and squeezed in by the entertainment and escort services advertisements (at least in the Dominion Post). Long-standing operator Metlifecare hit the $3 billion mark for its asset base and, with 18 villages in Auckland alone, its growth is indicative of the booming gold mine of aged care. 

A half-year net profit of $56 million and a development margin of 30% which distinguishes the property side of the business from the “care” side allows growth off the back of low waged cleaners and kitchen staff (the care staff having benefited from the union-led equal pay settlement – largely funded by taxpayers!). Ryman’s asset base comes in at $5.8 billion and in 2018 it declared a net profit of $388 million. Like the rest of the sector, Ryman separates its property and sales arm from its “care” side but trades on the quality of its care every bit as much as its bricks and mortar to sell the peace of mind from which the sector makes its money.

Offshore Capital Flow

Watchdog 146 (December 2017) reported on the Australian leveraged sale of 12 BUPA facilities to Heritage Lifecare with $115.7 million of trans-Tasman capital crossing the ditch to buy up 100 percent of Heritage (the details are in Linda Hill’s write up of the July 2017 Overseas Investment Office Decisions, “Australian Private Equity Buys Up NZ Retirement Villages”,  http://canterbury.cyberplace.org.nz/community/CAFCA/cafca17/fi-2017-07.html).

49.8% of Heritage is held by Australian capital; another 9.5% in the Cayman Islands, and just 16% is held locally of this “Kiwi” success story. In a classic case of “it’s a small world”, Heritage boss David Renwick ended up buying back several rest homes from BUPA, having sold them to BUPA over a decade ago - both times with off-shore financing.

Renwick has been around the sector for a long, long time, and the move caught many unawares. The sale involved rest homes as opposed to retirement units, at a time when the conventional wisdom is the real money is made from licence to occupy arrangements. Under these deals, residents buy, at market prices, a licence to occupy their home, which expires upon death. The unit is then on-sold to another “occupier”.

BUPA isn’t a listed operator and most likely sent most of its income from the Heritage sale straight off to its Australian arm. Since the overnight disappearance of its well-respected Chief Executive Officer (CEO), Grainne Moss, two years ago (she now runs Oranga Tamariki), BUPA has been increasingly under the control of its trans-Tasman big sister – itself a subsidiary of the UK-based parent company. BUPA waited till the deal was done with Heritage before alerting staff – a move that damaged its relationship with the relevant unions, E tū and the NZ Nurses Organisation (NZNO).

Cleaners And Cooks Left Behind

Annual general meetings can result in strange bedfellows. At its 2017 AGM, Metlifecare boss and one-time Air New Zealand high flyer, Glen Sowry, was challenged by former Act MP, John Boscawen, about why resales were down on previous years. Sowry spent five minutes explaining that “resales’ were down because of “extended occupancy” - never quite mustering the courage to say that it was because residents weren’t dying fast enough.

Boscawen went on to chastise Metlifecare for not raising the wages of its domestic staff to match those of the carers – a move welcomed by union delegates at the meeting. Yet, while the bankers and their backers are doing very well, the industry maintains that margins are still not good enough to pay their staff properly.

In July 2017, 3,000 unionised workers withdrew their wage claim for six years of backpay in exchange for a phased-in $2 billion pay rise. The English National government made sure the settlement was shared across the 50,000 workers in the sector and now attention has turned to the 40% of workers who missed out on the settlement. As many as 15,000 nurses and domestic staff also contribute to aged care, but employers have actively resisted restoring relativities lost in July 2017 when the carers’ equal pay deal came into force.

Many household staff in the corporate sector survive on hourly rates on or just above the minimum wage of $16.50 and the nurses’ union, NZNO, reports that just 0.2% of new graduates are interested in working in aged care. For nurses, the district health boards’ (DHB) settlement will put further pressure on providers. And, in an industry that must operate 24/7, the absence of decent weekend and night rates means the conditions enjoyed by the whole workforce remain below par (it’s worth noting here that the 1991 repeal of the Factories and Commercial Premises Act by the Bolger National government did away with the statutory 40-hour week and a regulatory guarantee of overtime).

In June 2018, the NZ Aged Care Association (NZACA) spoke out (Dominion Post, 17/6/18) over its ongoing concern that the pay rises had failed to attract younger Kiwis to aged care work, and that the reliance on overseas workers was what was keeping the sector going. NZACA has a point, though, at the same time, they failed to mention their five-year legal fight against equal pay and their current position that any sort of safe staffing regulations is anathema to them.

Regulations Resisted

Ryman and other operators developing sites and maintaining land banks are rightly bound to follow complex zoning and construction standards. But when it comes to staffing, the sector opposes any move to regulate numbers to ensure safe staffing numbers. It’s been 14 years since the Clark Labour government failed to renew the Old People’s Homes Regulations which lapsed in 2004, and the Ministry of Health’s recommendation that “new regulations need to be developed” has gone nowhere.

In June 2018 the Caring Counts Coalition - a fragile blend of providers, unions and community groups - met with NZ First’s Tracey Martin, the Minister for Seniors, and pushed for a review of standards in the sector, with NZACA quick to claim the sector was able to self-regulate. That went against the 2012 Caring Counts’ report, authored by the Human Rights Commission, which told the-then Key National government that “voluntary indicators for safe aged care and dementia care should become compulsory to ensure protection of both carers and old people”.

In August 2017, Consumer slammed two operators, BUPA and Oceania, over its care levels, noting that per resident the level of care - at 6.77 hours a week - was “well below the 12-hour minimum recommended indicators” in the voluntary guidelines produced by the Ministry of Health and Standards NZ in 2005. “We previously called for the resident-to-staff ratio in the guidelines to be mandatory”, concluded Consumer.

There is some good news. In July 2018 the on-line aged care magazine, Insite, reported that the Finance and Expenditure Select Committee which is considering the Overseas Investment Amendment Bill, had rejected the retirement village operators’ request that they be exempt from consent processes when buying sensitive or residential land to build new villages. That doesn’t mean that an application would be declined but it does mean there’s one more opportunity to test how deep foreign capital mines the rich vein of the silver generation here in New Zealand.

Meanwhile, in granting Heritage the right to buy Cargill, the BUPA care home in Invercargill, the Overseas Investment Office says: “the investment is likely to result in benefit to New Zealand as a result of the introduction of capital into New Zealand for development purpose through upgrading the Cargill facility”. Which suggests that the investors in the Caymans don’t need to worry too much about the Overseas Investment Office. The upgrade has yet to start.