JUDE BARBACK talks to Arvida Group chief executive Bill McDonald about the formidable task of getting the retirement and aged care sector’s newest player up and running.

I’m told the name ‘Arvida’ is a play on words: the ‘Arv’ stands for ‘A Retirement Village’ and ‘vida’ means life, vitality. It’s clever. I like it.

But then, I’d quite liked the group’s earlier temporary name, ‘Hercules’, too. Apparently, during initial discussions one of the chaps from Forsyth Barr had described getting the concept off the ground as “a Herculean task” and the name stuck.

As chief executive Bill McDonald gives me a quick précis of Arvida’s origins, it becomes clear that it has indeed been a big job.

McDonald credits the concept to the late Grant Adamson, one of the drivers of New Zealand’s retirement village industry. Although Adamson passed away soon after the group’s first meeting, director Michael Ambrose and McDonald were keen to fulfil Adamson’s vision and 18 months later, All Black and Arvida investor Dan Carter rang the bell at the sharemarket listing ceremony for the Arvida Group Limited. Shares began trading on the NZX Main Board in December last year, following an IPO (stock market launch) that raised $80 million in new capital.

Navigating initial obstacles

McDonald says whilst it has all been fairly plain sailing since then, it was getting to the IPO that was the main challenge.

He says there were “innumerable barriers and issues” standing in the way of successfully merging the 17 villages into one entity ready to list on the stock exchange.

“It took the combined commitment from a very determined team to push through and get this thing finished.”

McDonald says the 17 villages, scattered throughout New Zealand, came together through a combination of the group approaching the village, and villages approaching them.

There was a due diligence process in which they ascertained which villages were suitable, and negotiations were held with the owners.

“The merger and acquisition process was quite intense and complicated,” he says.

However, from the outset the group had a clear idea about the sort of village that would fit the mould; they took into account the quality of the operation, building, cash flow, and the mix of care and independent living. McDonald says they were also keen to include villages that had ‘brownfield’, or redevelopment, potential.

McDonald says Arvida is more biased towards providing care than other village operators, and describes it as a “key differentiator”. Approximately 50 per cent of the residents across its 17 villages are accommodated in aged care beds.

McDonald says there are opportunities to expand the care facilities at some of the villages, and there are various development projects in the pipeline.

Arvida intends to get bigger, too.

“Acquisition is a core part of our strategy,” says McDonald. “But – and it’s a big ‘but’ – we want to identify acquisitions that are genuinely earnings accretive to the bottom line.

“We’re not about growth for growth’s sake,” he adds.

Integration all-important

McDonald, an Australian, confirms Arvida has no plans at this stage to expand across the Tasman. For now, he says, the focus is on consolidating the 17 villages.

“The integration task to us is of critical importance – it’s our number one priority at this stage.”

He says the villages Arvida has acquired have been running very well and independently for some time, so rather than centralise operations across the board, they intend to provide greater support and governance instead.

“We’ll provide support services, as opposed to a classic M&A approach, where the old guys are out and the new guys are in; it’s more of a collaborative approach.”

McDonald says having 17 effective villages under one umbrella lends itself to capitalising on their various strengths.

“We’re identifying strong synergy areas that we’re focusing on at the moment. We’ll try and draw good examples from specific areas and cross-pollinate to enhance good practice.”

McDonald says Arvida hopes to streamline the auditing process and establish benchmarking across the villages. They intend to take a more understated approach to branding, with the individual villages retaining their name but with the addition of words along the lines of ‘Part of the Arvida Group’.

“We’re very keen for the villages to maintain their own identity and character,” says McDonald.

A point of difference

Arvida views itself as somewhat different from the big corporate players currently dominating the market, like Ryman Healthcare.

“I think that the market, from a customer point of view and also from an investor point of view, has fairly accurately identified that we’re not necessarily akin to the other players, and that we are offering something a little different.”

He says there were some initial concerns from the villages about being corporatised, but these fears were quickly allayed once they understood the group’s vision and goals.

McDonald says interaction with the villages – the staff and the residents – has been great so far.

In terms of how Arvida’s entrance has been received by the wider sector, McDonald says that while they haven’t really had much opportunity to interact with other villages, they feel welcomed by the sector.

“We’ve been so darn busy we haven’t had a great deal of time really to get off the road and do some observations. Certainly the general perception is that there is room for another operator, particularly one that has more of a focus on residents’ wellbeing and providing a holistic approach.”

In any case, McDonald is aware of the scrutiny. He says the group is the first of its kind for the retirement village sector.

“I think we will have quite a few eyes watching us,” he says a little wryly, referring not only to the sector, but to the investors as well.

Certainly, Arvida’s entrance onto New Zealand’s retirement and aged care landscape has created a fair amount of interest and speculation since the group made itself known publicly last September. Six months later, with a successful IPO under its belt, integration well underway, and development high on the agenda, the group appears to be off to a fine start.

The 17 villages currently comprising Arvida are: Glenbrae, Bay of Plenty; Molly Ryan, New Plymouth; Olive Tree, Palmerston North; Waikanae Lodge, Waikanae; Oakwoods and The Wood, Nelson; Ashwood, Blenheim; Ilam, The Maples, Mayfair, Park Lane, Rhodes on Cashmere, St Albans, St Allisa and Wendover, Christchurch; and Bainlea and Bainswood, Rangiora.

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