Welcome to the Oceania Healthcare Limited full year result announcement for FY 2023. All participants are in a listen-only mode. First, we will hear a presentation, followed by a question and answer session. If you are participating in the teleconference, please ensure your webcast audio is muted to avoid an echo. You can mute the sound in the lower corner of the video player. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Brent Pattison, Chief Executive Officer, Kathryn Waugh, Chief Financial Officer, and Heath Milne, Head of Capital Markets and M&A. Please go ahead.
Well, good morning, everyone, welcome to Oceania's 2023 full year trading results and business update. As was said earlier, I'm joined by Kathryn, our CFO, and Heath, who's Head of our Capital Markets and M&A. Welcome, everyone. The financial year has not been without challenges, with the long cloud of COVID-19, significant weather events, and aged care and funding and staffing shortfalls. I think equally important, the softer residential housing sector as interest rates have climbed off the back of inflationary pressures that are present in New Zealand and some international markets. These macroeconomic and climate events have been widely discussed and debated by market commentators, I can certainly attest to the fact, having joined Oceania in March 2020, that the last several years have been disruptive in one way or another.
However, despite this market context, what will be appreciated by our investors, our partners, our residents, and staff, is that the underlying business fundamentals at Oceania are sound, and more importantly, the strategy for Oceania is well-defined, with the business demonstrating growth and resilience. If we think about the full year 2023 highlights, Oceania has delivered improved profitability year-on-year with a 5% increase in underlying EBITDA to NZD 80 million. In our village segment, the intentional capital allocation and investment made into high quality, well-designed communities has assisted the material uplift into deferred management fees of 18% to NZD 39 million. Our care premiumization strategy continues to provide profitable growth, up 8% year-on-year to NZD 20.4 million, and a compounding annual growth rate of circa 17%.
More than 60% of our total care beds and units are now premium, with the Care Suite innovation being a preferred product choice by customers. If we look across our property portfolio, we've delivered 233 Care Suites, apartments, and villas, including our flagship care at Lady Allum Milford and The Helier, which I'll touch on later. There's been a busy schedule ahead for the 2024 financial year, with 200-250 planned pipeline deliveries. We continue our investment in people capability with our clinical and operational teams coming under single leadership, and this is providing a resident-centric approach to the delivery of experience and service for all our residents.
Our debt funding sources, diversity, tenure, and low interest rates have been a feature of prudent balance sheet management with substantial headroom of around NZD 175 million across our total NZD 725 million facilities. I'm delighted to announce our 2023 to 2030 sustainability framework. This is a well-constructed and delightfully ambitious plan grounded in science-based targets, and Kathryn will touch on this later in more detail. Of note to investors is the Board's updated dividend payout policy. This will now target a 30%-50% payout ratio of underlying NPAT and signals confidence in investing for growth as we execute on our five-year strategic plan. Turning to Oceania's strategic pillars. Over the last 14 months, Oceania has been progressing the execution of our five-year strategic plan.
The strategic plan, consisting of four foundational pillars, has been informed by resident insights and their key service moments and evidence-based methodology and approach to the provision of care, a deep focus on design and curation of our portfolio of properties, and professionalization and investment in our people capability. At Oceania, our mission is to reimagine the retirement and aged care living experience in New Zealand, and our purpose is to Believe in Better. This notion of better has existed in the New Zealand culture for decades and is how we are perceived by the rest of the world. As Kiwis, we are renowned for challenging the status quo and asking, "Why not?" front-footing the changes that have made the world a better place.
It is in this spirit that drives us as a business and one that we want to celebrate in our residents, honoring them with pride and respect, because our residents have always strived for better, and so do we. Over the next couple of slides, I will focus on some insights for each of these foundational pillars. When we talk about offer, we are committed to the pursuit of intelligent design for our customers of today and the future. When we talk about resident experience, we deliver on key service moments to create great resident outcomes. Let's dig a little bit deeper. If we talk about curation of built form, we contract out our construction to a small number of trusted, highly capable and construction partners.
This has served us well and allowed us to focus on our disciplined approach to design and development and replenishment of our pipeline, basically the more than 1,700 odd units that we have in our forward workbook. This has also protected our development margins. We all know if you want to overspend, you need variations to your construction programs. Andrew Buckingham, our Group General Manager of Property, Design, and Development, has reevaluated our entire pipeline to take a more targeted approach to development activities. This has led to the premiumization of our built form and the notion of right product, right place. Our designs are for a smaller boutique resident population with a key focus on design, longevity, and quality.
Our consented build program maintains optionality with a good mix of regional and urban locations, and low density ILU over the next few years, which is easier to construct, phase, and recycle development cash proceeds into further growth. If we think about resident centricity, I've often commented that Oceania provides critical infrastructure and essential services. Oceania has been on a quest to modernize and premiumize its physical buildings, grounds, and assets. While this is a noble pursuit, it doesn't work if you haven't professionalized and tailored your service offering to match the physical elements. We've adopted a resident-centric approach to our services by capturing a deep understanding of both our residents of today and the future. We have, and continue to design around these needs to reimagine the aged care and living experience that we offer.
We pride ourselves on offering a boutique experience that provides greater personalization, so our residents can live the life that matters to them. At the same time, we continue to define our operating model structure to enable our over 3,000 people to deliver on our brand promise. If we think about premiumization of care, the aged care sector, I think we all accept, is inadequately funded relative to the services, accommodation, and care it provides to older New Zealanders. It has been widely publicized the very real funding gap that exists in big day rates, more than a factor of five times, but also nursing and clinical staff wage deficits. The reality is, there are numerous sectors in New Zealand right now that would be putting their hands up for additional government funding. Oceania's response to this funding deficit has been to innovate.
Oceania introduced a hospital-certified Care Suite that provides an exceptional level of critical infrastructure, but more importantly, we provide a full complement of highly trained clinical staff, registered nurses, clinical managers, clinical directors, and nurse practitioners to deliver best-in-class care services. This innovation has required significant upfront investment, of which we are starting to see the financial rewards and quality resident outcomes. The year ahead, Oceania will innovate further by offering the first fully privately funded care residence at The Helier in St Heliers Bay, Auckland. Turning to Slide 4. When we talk about people capability, we have established the environment where our people can perform their life's best work and have a meaningful, rewarding career. When we talk about growth, we execute on sustainable, authentic, and growing units. Culture and capability.
I've always been a fan of Jim Collins' Good to Great narrative, and one of his famous quotes is, "Great vision without great people is irrelevant." We can't have a human-led approach to our residents without the incredible team of people who work with and for those residents every day. We recognize that we impact the health and wellbeing of our people through our workforce practices, the professional development programs, and approach to diversity and inclusion. Our aspiration is to be an employer of choice and to provide a safe, diverse, equitable, and inclusive workplace that fosters our people's development and their capability. The portfolio in full year 2023 delivered 233 units and care suites, helping to free up homes for purchase or rent as residents moved into our villages at a time when New Zealand faces a housing shortage.
We have significant capital markets experience and have maintained our gearing at the mid 30% range, balancing our cash and growth strategies in a highly disciplined approach. Lastly, on sustainability. Companies, let's be honest, will not exist in the future if they do not take sustainability and more broadly, their ESG obligations seriously. What is interesting is that the number one question I get at our annual resident AGMs is: What are you doing as an organization about climate? What's equally interesting is that our residents are eager to be involved and to help the many sustainable practices we have underway. You will see that we have dedicated a large part of our annual report to discussing our 2023 to 2030 sustainability framework, aspirations, and goals. I'd encourage you to make yourself familiar with this.
We are committed to science-based targets and are well progressed with our obligations under the TCFD risk disclosure regime. Kathryn will touch on this in a lot more detail in her update. We turn to the developments that we completed in full year 2023. The development deliveries for the full year 2023 have been an important pivot and proof point for our future. They are archetypes of the growing premium of the premiumization of both built form and service for our residents. We think about Lady Allum Care Centre, which is in the left-hand graphic, this comprises 96 premium care suites and 17 secured dementia care rooms, and is a beautifully appointed premium care center in the heart of Milford on Auckland's North Shore.
This was completed in September 2022 and was disrupted earlier through the weather events that we had in Auckland. It's the largest care development delivered by Oceania, and was highly anticipated with a large number of pre-sales. The area identified in blue in the graphic is the old care buildings, and these present future stages of apartment development. It's obvious from the site's location that these future development opportunities will have commanding views of Milford, Takapuna, the lake, and water views of Rangitoto. If we turn to The Helier on the right-hand side, we've completed 62 of the apartments at The Helier, and they are in the foreground of the graphic highlighted in blue. The Helier offers retirement and aged care living like no other.
It's located in the heart of St Heliers, this bespoke village offers residents 360-degree views over Waitematā Harbour and the Auckland CBD. It has been architecturally designed with a sympathetic approach to the surrounding neighborhood and steeped back into the cliff face. It offers unparalleled amenity and services comparable to what you would see in a five-star hotel experience, including valet parking, concierge services, chauffeur driver, and in-apartment executive chef catering. Guests can enjoy the stunning wine library and the five-star restaurant, along with the luxurious day spa. For guests requiring more support, we are offering private care residences that provide premium healthcare within luxurious surroundings. Our foundation residents are delighted to be moving into their apartments.
If we think about the developments that we have under construction, the forecast for 2024 is another busy schedule of quality property development with 409 units across eight sites currently under construction. More than half of our construction projects will be accented towards independent living and villa property types. The 32 private care residents and the remaining 17 apartments at The Helier will be delivered early in our 2024 financial year. The next stage of 28 apartments at The Bayview are well underway, and the site is really taking shape as a key destination in Tauranga. The 46 apartments at Bellevue will conclude our development at this site. It has certainly been well-received by the market. Elmwood will be our next large-scale delivery of 106 care suites and comes on stream later in full year 2024.
The last one from me, in just summing up our strategic intentions. As indicated earlier, Oceania is well underway in the execution of its five-year plan. We've taken intentional steps to maintain focus on delivering to our strategic pillars against the backdrop of what has been challenging external factors. In doing so, we are actively positioning for profitable growth with a focus on maintaining maximum development pipeline flexibility, innovation in resident experience and services, but also pioneering a new approach to aged care and aligning our activities to our Believe in Better promise. We will continue our focus on building integrated villages with our market-leading Care Suite offer and take this pioneering approach further with private paying care in the future. Pre-sales will become a key focus of our delivery model, providing ongoing sales confidence, efficient cash recycling, and growth assurance.
Residents will be at the heart of all of our new service design, which is, in fact, our product, and provides our point of difference to future-proof the business for our customers of the future. We will invest in land banks to replenish our development pipeline whilst carefully balancing our cash to development ratio. Our development pipeline will be accented by greenfield and a lot more independent living, villa-oriented product. We will invest more in ongoing training and development of our people capability to deliver our Believe in Better promise. I'm gonna hand over now to Kathryn to talk through the financial trading results, and I'll circle back at the end for Q&A.
Thank you, Brent, and thank you again to everyone for dialing in today. You'll notice my section's a little bit different to previous reporting cycles with a new section on cash recycling. Let's step through some of the main points, and then we'll open up for question time after my section. Sustainability. Last time we spoke to you about sustainability, it was becoming part of what we do and becoming integral to both our business and our strategic direction. I talked then about how we had established our first sustainability-linked loan with our banking syndicate and how you can expect to see more of us in this space. This year on our website, you'll see the financial year 2022 and financial year 2023 greenhouse gas emissions reporting.
It's a key first step for us in our commitment to reducing our greenhouse gas emissions and to provide a first step in setting science-based targets with the Science Based Targets initiative. Over the last six months, we have spent a significant amount of time on the foundational and establishment processes in the sustainability space, not just around our three KPIs of care resident wellbeing, diversion of waste, and greenhouse gas emissions, but also in respect to really embedding sustainability into our Oceania's DNA. This starts with our refreshed sustainability framework, which is on Slide 9 at the moment, and our refreshed materiality framework, which is detailed in our annual report. The senior leadership team, the executive team, and the Board of Directors have determined Oceania's most significant economic, social, and environmental impacts, and these have informed the development of this refreshed framework.
The framework sets out our long-term aspirations to create long-term value for our stakeholders and our partners while ensuring we also take care of the environment for generations to come. At the core of our aspiration out to 2030 is the desire to create sustainable retirement and aged care living experiences for today and for our people of tomorrow. We have set aspirations and goals which align to each of our four strategic pillars of offer, resident experience, people capability and growth. You will see that for the first time in our annual report, we're starting to dip our toe further into the integration of our reporting. You will see us moving closer in this space, and as we continue to frame our focus, we will provide increased reporting against our key sustainable objectives. Now for our trading highlights from what, for many companies, has been a challenging year.
On the coming slides, I will talk to the detail behind this result and provide some insight into the elements which contributed to our 5% year-on-year increase in underlying EBITDA. Overall, a solid result, all things considered. Brent touched on our current development pipeline earlier. We have continued our disciplined approach to ensuring that we continue to focus on the right product in the right place, something that's becoming even more important in the current market. Total assets continue to grow, an increase of just over 13%. A portion of this increase came from the acquisition of Remuera Rise in Green Bay in July of 2022. Part of the increase has arisen from the combination of positive fair value movements of NZD 31 million and additional development spend during the year. This compares to the fair value increase of NZD 105 million in the previous year.
We've continued to see strong resales in volumes of both ILU and Care Suites year-on-year. New sales continue to be lower than prior years, but we are pleased to have seen an overall steady end to the year with 128 new sales and 280 resales. The maturing of our product, which has been developed since IPO, coupled with an ongoing uptake of the Care Suite model, continues to be demonstrated through an ongoing increase in premium revenue, which has increased 8% over the last 12 months and 33% over the last 24. Moving now to our care business and our ongoing premiumization of the portfolio.
It will come as no surprise to the people on the call that while we've seen some really positive proof points for our premium care business, it's also shaped up to be a really tough year for our standard offering. Let's start with a look at how standard care beds in our portfolio have fared over the last 12 months. Recent weather events are a key driver of our recent reduction in occupancy, but we have also, along with many of our peers, been negatively impacted from reduced admissions, particularly hospital admissions during the period that Te Whatu Ora is establishing process and policy. Coupling this with cost inflation, wage pressures and occupancy costs, this has resulted for a hard year for the profitability of our standard beds. It's important to note, however, we do not expect these cost pressures to have a cumulative impact.
We've always looked to remunerate our people well and ahead of funding in order to reward, retain, and attract the best people to care for our residents. We are pleased to say that we received our first pay parity payment from the government, the benefit of which will be recognized in the first quarter of FY 2024. Pay parity, together with annual government funding and improved occupancy, will bring an improvement to our standard care results. 10 of our sites were identified for divestment, and two of these are now under contract. In addition to this, we've exited the arrangement with Airedale Property Trust in respect to the Everil Orr site in Auckland. Care residents and staff at this specific site were transferred to our other Auckland sites where it suited their circumstances. These divestments will have a positive impact on our EBITDA per bed going forward.
If we look now at the revenue from premiumization, that of realized gains and deferred management fees from our Care Suites and add in the drag of standard beds, we're talked to a very different story, one of growth. While noting an increase in premium revenue in the period, a compounded growth of 16%-17%, the later delivery of our Lady Allum Care Suites in Milford, Auckland, and the delay of the Redwood development in Blenheim, which will now be delivered partway through 2024, has meant that we have not achieved our true potential in new Care Suite sales and the associated DMF. This is very much a timing issue. We will see the deferred management fee benefits in relation to strong FY 2023 Care Suite sales be presented in financial years 2024 and 2025.
Cash collection through the Care Suite model is a real benefit, we are observing shorter tenures of two to three years as compared to other product types in our portfolio that are longer in cases of hospital residents. With funding lying ahead of us, moderating cost pressure in our business and further premiumization of the portfolio to come, we retain our view of a future EBITDA per bed of NZD 10,000 and in excess of NZD 17,000 when including realized development and resale gains. Moving to Slide 12, let's have a look at how sales have shaped up from a full year perspective. You often hear from us about how we are a portfolio business. We have developed some great properties in the last wee while during a time when the market has slowed.
It's been a hard year for everyone in this industry. We are finally starting to hear some brighter news. Everyone would have heard, for example, ANZ recently moderating their view of the residential market dips, which is pleasing. We have seen an increase in Care Suite volumes, both resales and new sales, representative of continued demand for the product with waitlists at many of our established sites. Both this financial year and next financial year, we lean heavily into Care Suite deliveries with developments at Lady Allum in Auckland, Redwood in Blenheim and Elmwood in Auckland. Further enhancing the premium care product in our portfolio at a time that Care Suite continue to grow from strength to strength. ILU resales have continued to increase both in volumes and average prices. Average prices are of course impacted by the type of product and the region in which the product is sold.
We are pleased that we have maintained ILU resale volumes and margins in what has been a pressured market. When looking at new sale ILU, the pressure towards the end of the first half has continued, with new sales flat when comparing the two halves, particularly as a result of the lengthening of days to sell that we've experienced. Moving forward, and as the market recovers, we expect that we will be able to benefit from improving volumes of our premium product across New Zealand. Our usual slide on embedded value is provided in the appendices to this presentation.
We've seen a total increase in embedded value of 23% since this time last year, with embedded value including NZD 251 million of accrued DMF cash flows to be realized and NZD 207 million of realized gains, resale gains, continuing demonstration of the future benefits from the premiumization of our portfolio. Now, for a new slide. Oceania has always had a disciplined approach to capital management. The sector more recently has seen a heightened focus on cash from developments. On Slide 13, we present our analysis of three different types of product from our portfolio, the development cash margins, all of which are positive. This subset of three sites have been selected to illustrate the differing developments that we have undertaken. Gracelands in Hastings, a villa development at an existing mature site in a regional location. Meadowbank, a multi-year, multi-stage integrated village in suburban Auckland.
The Sands in Browns Bay, a single-stage small site integrated village, again in Auckland. The cash margins are noted on screen. It's important to note that this analysis is intended to demonstrate the cash margin on a first-time sale basis. Excluded are the resale cash margins and cash received in relation to the deferred management fees and ongoing weekly and daily fees. Touching on Gracelands as to an example as to why this is important. Gracelands saw a 12.3% cash recovery on first-time sales. What is important is this, is that this is the cash margin on first-time sales, which excludes deferred management fees and resale gains, which are clearly well in excess of this initial cash margin. The same applies for both Meadowbank and The Sands. These sites have also delivered better cash margins, as you might expect from a key urban location.
Keeping up with the theme of capital expenditure and developments, Slide 14 provides context for where our capital investment is focused, and we provide more detail around spend in areas of investment such as IT, refurbishments, and maintenance of our assets. Acquisitions over the last two years refer to the purchase of Waterford and Franklin, funded through capital last year, and the purchase of Remuera Rise and Green Bay, funded through debt in this financial year. Development capital expenditure remains our largest spend, particularly in this year with The Helier, our premium site development, coming to an end and the 409 units and care suites under construction at the eight sites that Brent spoke to earlier. While development CapEx has grown, our overall spend is consistent with last year.
The illustration on the right of this slide provides a snapshot of our development drawn debt to the value of our underlying development assets. As a result of the structure of our banking facilities, proceeds from sales of developments once fully paid down can be paid against current development drawings. As a result of this, at 31 March, we had 1.3x coverage of our development debt balance. For my last slide of today, I end with the balance sheet and a view of our current position. Starting with our capital raise in 2021, followed by the issuance of two retail bonds, and followed by our recent refinance of our banking facilities back in July of last year, which maintained our current interest rate swaps. We strengthened and future-proofed our balance sheet.
This upfront effort has resulted in us standing here today with substantial headroom of NZD 175 million in our debt facilities. A long-dated tenor of debt with the next refinancing date in FY 2028. A blended fixed interest on our retail bonds of 2.7%, and an average fixed rate, including margin and line fees on our banking debt of 4.1%. During the period, we funded the acquisition of Green Bay and Remuera Rise through our banking facilities, a payment of around NZD 60 million. Coupled with the slower new sales and the delay to the completion of stage two of The Helier, this sees us at the expected peak debt point around now.
This will continue for the next few months into FY 2024 as we complete developments at The Helier, the Bellevue in Christchurch, and Redwood in Blenheim, all of which were originally scheduled to be completed in FY 2023. Despite this, with a loan-to-value ratio of 36.9% as at March, the upfront investment in our capital structure has allowed us to continue to execute on our five-year plan. It is also important to note that with Stage 1 of The Helier now open and stage 2 opening later this year, we will begin to see significant cash recovery for the investment made. Finally, dividends, which Brent touched on earlier. We continue to look to reward our shareholders through our dividend program and today have announced a final dividend of NZD 0.013.
This is at a slightly lower level than investors would have noted in the past, that of 38% of underlying NPAT in respect to the full year. Our directors have announced a change to the dividend policy today and specifically to reduction to the dividend payout ratio from 50%-60% of underlying NPAT to a level of 30%-50%. A signal of how we are looking to diligently manage our balance sheet and investment of capital and intend to preserve cash for future growth, while also continuing to reward our investors through the payment of a dividend. Thank you for your time today. We will now hand back to the operator and open the call for questions.
Thank you. A reminder that if you are participating in the teleconference, please ensure your webcast audio is muted to avoid an echo. You can mute the sound in the lower corner of the video player. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Arie Dekker with Jarden. Please go ahead.
Good morning, Thanks for the presentation. Just on the change in payout on the dividend policy, can you just talk a little bit about how you sized, you know, resized that down to 30%-50%, what the factors influencing that were?
Yeah, I think, from my perspective, first of all, Arie, it's a Board decision. If we think about the factors, it's actually just recognizing the part of the cycle that we're in. We want to have the right mix of reward for those investors that are looking for a yield. We're paying a pretty compelling yield. Also, we want to signal confidence around reinvesting cash back into the business. Traditionally, we've operated a DRP. A lot of investors have chosen to take up that DRP with the confidence around us reinvesting those cash proceeds. Part of it is just reflecting the environment that we're in and getting the balance right between yield and our aspirations around growth.
Yeah. There's not a lot of commentary on outlook today. Could you just give an indication in terms of, you know, for where you sort of sit now, I mean, a guide as much, whether you're likely to be at the lower or higher end of the range for FY 2024?
As it pertains to dividends, you mean, Arie?
Yeah, the percentage payout.
Yeah. I think, well, that's a matter that the Board considers as we get to each of those, judgment decisions. I think, traditionally, you know, we have a range and traditionally we've paid in the middle of that range. If we think about when it was at higher levels, and even with the moderation that's occurred. I'm certainly not prepared at this stage to give guidance. It would be inappropriate, but it is fair to say that, from a historical basis, you know, we've paid around middle of the range.
Sure. Then just on debt outlook, you know, I think the commitments on the CapEx side are a bit less than this year and, you know, the development that you've sort of committed to is sort of broadly in line with this year. You've got a lot of inventory coming on in the early part of the year and the late part of FY 2023. I mean, on your outlook, are you expecting debt to be lower at the end of FY 2024 than it is than it sits at in FY 2023? What sort of quantum?
I think I'll answer some of the question, and I'm sure Kathryn will jump in as well. From my perspective, Arie, you know, being around the sector for a while, you have moments of farming and you have moments of harvesting. I think if we think about the key developments that we've done over the last couple of years, we're in a situation where we are expecting, you know, good cash return coming from that. That's obviously gonna go to reducing our gearing, reducing our overall debt and increasing our headroom. It's something that we've signaled. We've talked about 2023 being sort of a peak gearing window. We noted the sort of the later delivery of a couple of those products.
We are definitely expecting to see a, you know, a moderation or improvement in our debt position.
Yeah. I think I'd just add to that, Arie, the key point, there as well, and I touched on in my slides, is the Helier is coming online for Stage 2 slightly later than we would have expected. Being a premium site, we expect to see the cash coming in there and, you know, to the latter half of the year will significantly aid our debt balances.
I think just to round that out, I think just in terms of overall holistically debt position, there's probably a few too many unknowns, such as, you know, we announced a couple of divestments with this result. What outcomes we get there. I think, the gap between development CapEx and new sales process is probably one that we would expect to narrow in this year.
Yeah, just on that point, I mean, obviously the two sites that sold post balance date, I think were for NZD 10 million. And then there's the Everil Orr site that you talked about. What's the net book value on the remaining sites that you're holding for sale, post Everil Orr and those two sites?
If we kinda look at the information that's in our stated accounts, I think from a held for sale asset perspective, we have around NZD 100 million, but it is important that you also include our held for sale Awatere. From a net perspective, we're always looking at divesting around between NZD 55 million-NZD 60 million of our assets. As you've said, we haven't disclosed the sales price on those two, but we did disclose the carry in amount, which was NZD 10 million. We're kinda really working through the process on the other NZD 50 million.
Okay. Just in terms of beds that you're looking to exit from here, so 52 with Everil Orr. How many beds went with those two other sites, and how much have you got remaining that are held for sale?
They were smaller sites, so those two would be less than 100 combined.
Yes. Yeah, around 100. Yeah, there's probably another couple of hundred in other sites.
A couple of hundred. Yeah. Last question. 100 in the last site. Just on pricing, there wasn't any fair value movement in second half and embedded value, refinancing gains were down a touch on first half 2023. Can you just sort of talk about what happened to pricing in the second half, and what your expectations are with regard to pricing, you know, in the next six months? You know, noting also you've obviously got quite a lot of inventory that you'll be looking to release as well.
Yeah. If I start with the latter part of your question, Arie, and then Kathryn can probably pick up the former part. If we think about our pricing, we're obviously a portfolio business. We're delivering, you know, high quality properties, and as a result, you know, across all of our categories, pricing has gone up. That allows us a bit of a buffer. If we continue to see choppy waters from here, there's obviously an opportunity to think about the trade between sort of price and volume. There are a couple of areas where we have taken, you know, a fresh look at pricing. Tauranga would be a good example of that.
We saw that, you know, the peak to trough was sort of more acute in Tauranga. There's a lot of high quality operators there. We modified our pricing slightly at The Bayview in recognition that it hadn't really recovered to the same degree that it had in other areas. Another example would be in Hamilton at Awatere. Yeah, we've certainly seen, you know, a significant increase in inquiries and applications at Awatere as a consequence of that. Overall, we're dynamically pricing. We certainly haven't pushed any levers aggressively as it relates to cash backs or other inducements.
We take a very conservative position as it relates to the settlement of those, or the cash recognition, if you like, of the settlements of, you know, of our portfolio. You are right to say that we have larger balances of unsold stock. We're actually seeing, you know, good inquiry. If we think about April 2022 through to April 2023, on an inquiry basis, we're up about 90%. We've got a good head of steam as it relates to applications. We're actually starting to see residents recognize that the market is the market. As a consequence, you know, we're starting to see an increase in activity, but we're also starting to see a moderation of days to sell.
We look back over the last two years, our days to sell as it relates to care suites haven't actually changed. We're sort of, so that's good, and we know that that's a needs-based product. Villas, the days to sell are up about 15% on what they've traditionally been. In apartments, the days to sell are up about 20% on what they've traditionally been. You know, it's about product, it's about mix. You know, we're also here to, you know, to capture value and maintain those kind of margins that we've enjoyed. You know, Kathryn may have some other comments as well, Arie.
I think Brent probably covered all of it, Arie, unless there's a follow-on question from you.
No, no. That, that's great. The only one it did prompt me on was actually just Awatere. Just timing for delivery for Awatere Stage 3 and Waterford Stage 1. I mean, you're not calling them out for 2024. Are they gonna be early 2025 or are you slowing down there?
Yeah. Well, I think that's part of the optionality that I talked about before, Arie. We're well advanced in the design. I just think we're taking a more sort of, you know, prudent view to delivery. It's about sales as much as it is about product delivery. I think at this stage, we've got, well, certainly Andrew has plenty on his plate to deliver. He's got about 400 odd units. Those are, you know, those are areas of optionality in the portfolio that we could accelerate if we have a more positive, more favorable environment. Also, it doesn't include some of the other sites that we have, you know, more villa product to deliver. You know, a good example would be Franklin.
That might be something that we choose to accelerate. If we were to conclude an option on Green Bay in North Auckland, then that would be another example. There's definitely things within the pipeline to accelerate if we choose to do that.
Great. Thank you very much.
Your next question comes from Bianca Fledderus with UBS. Please go ahead.
Good morning, Brent and Kathryn. Firstly, just the two care assets that you conditionally sold. I appreciate you didn't share the sale price, but could you comment broadly on what the price to book value, or what price to book they were sold at? I guess if you can't, were they sort of at a premium or discount?
I think the easiest way of describing that is probably market, but I'll let Kathryn give it the more scientific response, Bianca.
I think, Bianca, as you'll recall at the interim when we announced we're doing hold for sale, there are a few people that kinda said, "Are you sure in this market there's gonna be huge discounts given where people's sales prices were?" That's certainly not what we've experienced, we obviously can't give you a number, the other party wouldn't thank me for that. We've disclosed the CBRE amount, I think it's safe for us to say it's very close to that. We're not seeing discounts coming through in these types of transactions.
Okay. That's, that's great. Thank you. Just on the demand side, so on new sales, and in particular focusing on Care Suites. You delivered 167 Care Suites during the year and sold 74. I'm just wondering what's really driving that because I would have thought that Care Suites would be less dependent on the residential property market given the lower price point and, as it's more needs-based.
Yeah, I think you're exactly right, Bianca. That's part of our confidence around the product type. I think some of that is just timing. We touched on the deliveries around that kind of product mix. There has actually just been, you know, a more challenging backdrop. What we've also observed is that there are a number of people that have been increasing their hospital stays and using that as a way of delaying a decision with the uncertainty of the either the weather events, the cyclone and/or just the economic conditions. You're seeing aged people living at home, making regular visits to the hospital system as a way of getting that kind of initial care. Yeah, we're confident that, you know, Care Suites is an adopted product.
People like the convenience of it and the services that we offer. It's as much about the timing as it is, you know, the, you know, desirability of the product.
Okay. Thank you. I'm just wondering what sort of demand you're seeing for the different kind of products, because you mentioned you're seeing high demand for the more premium product. In particular, I'm wondering is there still demand for your more dated products? Do you have to lower the prices for the sort of older products, compared to what you saw a year ago?
Yeah. I think I've, t hose are all good questions. I think, we've definitely seen a move to premiumization. Therefore, we've seen a greater adoption of sort of new products. Our resale portfolio, given the tenure of the residents, is actually still very fresh and still very new and obviously of higher quality. Most of the standard beds that we have, we've undertaken a, you know, a disciplined approach over many years to start a conversion process of those into either a premium accommodation room or a Care Suite, so that the portfolio represents a great experience and a consistent experience for people up and down the country.
I just think that with resales, with that tenure, then it does mean that that becomes a larger feature of what we're doing, going forward. It's no longer just about new sales of Care Suite. It's getting the balance right. Maybe that's the, you know, the essence of your question.
Yes. I was more wondering about independent living units in your older villages, if it's harder to sell those, and if you have to lower prices for the older stock.
No.
That you use compared to your newer villages.
Yeah. Quite the opposite. If we think about the acquisition of Waterford as an example, you know, that villa product is, you know, is highly desirable. If we think about some of our regions, and we called out the cash margin, or Kathryn did the cash margin at Gracelands, which is a regional location in the Hawke's Bay, you know, we've seen really, really strong resales and actually, you know, very impressive prices. If we think about Green Gables, which is a new development but still had some villas on site, as they get refurbished and as residents leave, then we're also seeing, you know, good favorable outcomes there as well. I think as the portfolio matures, you know, we're seeing actually, you know, good activity, and that's probably represented in our resale margins.
By now we were probably expecting our resale margins to decline a bit. We're certainly expecting our development margins to decline. You know, we've been able to sort of maintain them at similar levels over the last two to three years, despite a very, very different housing sentiment now than, you know, two, three years ago.
Okay, great. Thanks very much. That's all from me.
The next question comes from Stephen Ridgewell with Craigs Investment Partners. Please go ahead.
Good morning, thanks for the presentation. It's good to see the progress and the ongoing transformation of the portfolio and that the Care Suite model is delivering much better returns per bed than many of your peers in our reporting. Just wondering if you could give us a sense of what underlying EBITDA growth would've been if you'd not bought the two villages, Remuera Rise and Bream Bay, earlier in the period. That is, what was the organic underlying EBITDA growth, please?
Yeah, sure. Those two sites, noting they were picked up a few months into the year, they contributed probably NZD 2 million-NZD 3 million of underlying EBITDA in this period. There's, yeah, and obviously there's, in particularly at Remuera Rise, there's a lot of embedded value which will show itself through in the resale gains that'll hit underlying EBITDA. In terms of operationally, there's not a huge underlying EBITDA impact flowing through in this period.
Okay, thank you. Just on the unsold inventory, which was up from NZD 191 million to NZD 348 million, and you have touched on a few issues behind that, but can you just remind us where most of that new sales stock is located? Is that mainly Blenheim, Lady Allum? Just to be clear, you know, how much of The Helier is in that NZD 348 million, please?
Well, I'll answer your first part, your last part, Stephen. The Helier, we've only had a couple of sales reflected in this year. It probably got delivered slightly later than we anticipated. We've taken a phased approach to that, so that obviously lies ahead for investors in the 2024 year. As it relates to the rest of the product mix, which Heath will comment on as well. I mean, it's pretty much across the board, to be honest. Eden, Bellevue, Bayview, Awatere, as well as kind of recent deliveries around Lady Allum, et cetera.
What's helpful about that from my perspective is, there are sort of regional accents, and there are urban accents, and there are varied product types, which gives us some confidence around kind of recovering our sales momentum and cash.
Not too much more to add there. We've had 62 departments at The Helier are what are included in this, in this financial year, which obviously hits our unsold stock balance. We've got kind of development sites from across the last couple of years, Awatere, Bayview, and Lady Allum, significant amount of care suites online during the period. Those are the key balances of stock for us.
Okay, thank you. Then I guess just on the same thematic, I mean, I appreciate a lot of those deliveries were late in the period, but if we just kinda go back to the beginning of the period where we had NZD 191 million of unsold stock and you've delivered new sales of NZD 51 million, kinda looks like it's taking around two years to sell down stock. I guess, is that a reasonable expectation going to FY 2024 that that's the kind of pace of sales if you like? Or would you perhaps expect, just given the inquiry increase you noted before, Brent, that perhaps it would sell down a little bit faster in the current financial year?
I think, let's wait to see what the Reserve Bank do at 2:00 today. From my perspective, Stephen, I think that's a really good point. We probably have observed as we've brought apartment developments to market, particularly where the market hasn't had that type of presentation before. You know, Awatere we touched on. Green Gables in Nelson was an example. The Bellevue in Christchurch were examples. They've all now got traction and, you know, kind of well underway. It probably, you know, it probably has taken us a couple of years to get through those sort of product deliveries. We've been ambitious with Lady Allum as it relates to the delivery of care. It's the largest single care delivery that we've done, but it has gone really well.
It was delivered later in the piece, but for the first time, we had pre-sales. Some of it's location. You know, it's located very close to the North Shore Hospital, as you appreciate. It is about horses for courses. You know, villas, you're almost building and selling. Apartments are taking a bit longer, as we know, and care suites have actually been well received. Increasingly pre-sales is becoming part of our care suite expectation.
Okay, great. Thanks. Just probably a more medium-term question. I guess, Brent, you've touched on, you know, it has been a tough market, and perhaps some of the development sounds like they're going a bit slower, in terms of completions. You know, with the 128 new sales we delivered that was, you know, new sales during FY 2023 that were booked. I think the company's previously indicated, you know, target run rate medium term was sort of 250-300. Is that still a reasonable expectation or is that we should be thinking of that as more market dependent? Is that something you'd expect to deliver perhaps into FY 2025 and 2026 from where you sit at the moment?
I think it is a bit market dependent. I think all of us are just a bit cautious. You know, we saw the housing market. You know, we've seen persistent inflation. We've seen, you know, reserve banks here in New Zealand, but also globally, you know, trying to bring inflation under control. So from our perspective, it is a bit market dependent. But what we have done is try to allow ourselves the maximum optionality in our pipeline so that we can, as we see a more, you know, favorable market, you know, accelerate some of that development. I touched on it earlier, you know, Franklin's a good example. It's largely a villa product in the first couple of stages of design.
As a consequence of that, you're selling to, you know, you're building to a, you know, a sale rather than building, spending, you know, a couple of years in the construction and then waiting for the cash. We've said 200- 250 over this next period. That's just, I think, acknowledgement that market conditions are a bit more tough.
That makes sense. Maybe just one last one if I may. Corporate costs were down a couple of million bucks in the second half from the first half. Just wondering if you could give a little bit more color as to what's driven that. Is that a bit more capitalization of cost of development or have you sort of taken the cost out of the business?
You know, should we expect that second half run rate to kind of belong to FY 2024? Just some guidance on corporate costs would be useful. Thank you.
Yeah, thanks, Stephen. Yeah, I think in this year, there has been a kinda conscious effort of keeping costs down where we can. In previous years, we've obviously had a lot of establishments costs, particularly about kind of our clinical excellence model and a lot of investment in IT and kind of the setup phases of a lot of things that we've done that we haven't needed to have coming through this year. I mean, as far as guidance, the one thing I kinda would point out is obviously, post-floods, everyone's gonna be seeing a sizable increase in their insurance. That will be one thing that we're, you know, looking very closely at for what's gonna come through 2024.
Yes, as a team, we've still got that kind of critical eye to costs and keeping them down where we can.
Yeah. Another thing that I've done, Stephen, is obviously reduced the executive team. We've brought on some new capability. Those people have been able to add and develop, you know, teams underneath them. I think there's just been some simplification that's occurring in the business as well. We talked earlier, or I talked earlier around bringing clinical and operations so that we have a single delivery mechanism and a resident lens under single leadership. That's something that's different from what we've had in the past. I agree with Kathryn, one of the areas that we, you know, we really went large, but we're getting the benefits of it, was in this kind of model of care and clinical investment.
So, we've been able to, you know, taper or moderate or remove some of those costs going forward. Staff turnover is turning the corner, so we've got a, you know, compelling brand. We're not full-time recruiters anymore. I think that's helped as well. you know, we've got a more stabilized workforce who are enjoying what they're doing and providing great outcomes. I think that's just kind of helped in the cost moderation.
That's very helpful. That's all for me. Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll now pause a short moment to allow questions to be registered.
There's a couple of questions from the floor, so I might just address that. There's a question around with investors being wary about cash flows. Does that sort of signal debt difficulties for Oceania? Yeah, no. We've obviously been focused on cash. The sector is focused on cash. You know, for the longest time, we've been good stewards and managers of our balance sheet. There are a lot of things that we can do to, obviously, improve cash flow. We can slow our build rates. We can obviously recover cash through sales, et cetera. We're sitting with a comfortable position about where we are.
We've invested in the cycle, the next couple of years is our opportunity to kind of recover that investment, if you like, and turn it into future growth. Another question from the floor was, what was driving pressure on development margins? I think there's no secret that the construction market is tough. You know, we've seen a couple of people in the construction market that have gone to the wall, we're disappointed about that. What we are seeing is that supply pressures are easing. Oceania has always been accented towards fixed price contracts. We don't take the costs of construction teams. We get involved in the design and delivery and manage with fantastic partners the construction risk.
In time, we expect development margins to become compressed, particularly if you think about regional settings. It's actually quite difficult in some regional settings in New Zealand to be able to get staff and subtrades, et cetera. You know, development margins will moderate over time, but, you know, we're very comfortable with where they're at.
There's another couple of questions here. First of those, to add a bit of context to the cash margins on Slide 13, could you translate those into rough IRRs? I'll just respond to that by saying we don't look at development stages on, you know, from an IRR perspective on just first time cash sales, given a significant portion of that return comes from future resales and the DMF realized and resale gains captured at that point in time. No, we don't have. Yeah, we don't look at it on that basis. Second part of the question, have initial cash margin targets or IRR hurdles changed in response to the funding cost environment? To that I would say the targets themselves, no. We don't.
S imilarly to the, to the first question, we don't exclusively look at, I guess, cash margins on a target basis, as the announced [audio distortion] had in our presentation showed, we do have a track record of generating a cash margin, but we don't, we don't exclusively look at that as a, as a target for our developments necessarily. The, the IRR is generally a bigger focus of ours and whilst we're, I guess, in some instances seeing the gap between our hurdle rate and what a feasibility is showing narrowing, I wouldn't say that we've, we're certainly not getting more lenient on the IRR hurdle side.
We've just had another question through from Aaron Ibbotson at Forsyth Barr as well. The question was, if debt is peaking, shouldn't new sales cash flow be higher than CapEx? You talked to closing the gap, that seems overly conservative. Yeah, I'll just start off with this one, and we'll probably all have a bit to add on it. Yeah, when we talk about we're at peak debt at the moment, The Helier as our kind of flagship development in Auckland has obviously taken up a lot of our banking facilities from a land perspective, and also a build which has gone over a number of years. Also being our flagship, we do expect that there will be significant sales proceeds coming through from there.
This point of peak debt has arisen as we've ramped up our build rate at the time that our flagship is coming on board. As we get to the second half of 2024, we'll have finished that development and sales will be coming in. We'll be seeing that they will be offsetting. The sales and proceeds coming through there, then we're replacing the developments in our pipeline with kind of more smaller, more bespoke, more regional developments. That's where we see the closing of the gap.
Yeah. I think we're just about at the end of the time that we have allocated. Any last questions from the floor?
There are no further questions on the teleconference at this time.
Thank you. Well, thank you everyone. Thanks for participating. Thanks for your questions. We look forward to getting on with the business and the execution of our plan. Thank you, everyone.
That does conclude.