On New Years Eve Australias fourth largest retirement village operator was sold by two American banks to a joint venture New Zealand group. JP Morgan and Morgan Stanley sold to the 50/50 joint venture between New Zealand Super Fund, which is owned by the NZ government, and the private equity firm Infratil.
RetireAustralia was established in 2005 as Meridian to build a portfolio of villages. Today it is the largest private village operator with 3,700 ILUs across 28 villages in NSW, SA and QLD. Plus they have a development pipeline of 500 ILUs.
The New Zealanders bought well, at basically the value of the villages with no premium - $406M, plus they took on the $210M in debt. RetireAustralia made an EBIT profit of $34M last financial year, making a P/E of 18.6%.
Infratil states it is confident it can achieve a strong equity IRR, projecting a high-teen post tax equity return. They have put in $215M so to get say a 15% return they need RetireAustralia to nearly double its annual profit to $64M.
Infratil gives the following key reasons why they invested:
- Strong management team
- Opportunity to become the market leader in integrated retirement living and aged care in Australia
- Good price paid the base business value no premium
- Growth potential through construction development
- Growth potential by extension of services and continuum of care model
- Increasing demand for retirement units in key locations
- Increasing needs of residents for high levels of service
NZ Super has a mandate to generate secure long term returns. Infratil has a mandate to deliver above average returns in the long term and has specialised in the transport and energy sector for investments. Following an investment in NZ village operator Metlifecare, Infratil now says it sees retirement villages and the continuum of care as a growth sector they will specialise in.
What is clear, co-located aged care is key to their vision of villages into the future, with older residents the target market.
The average tenure of RetireAustralias residents is 8.4 years and their average age is 80.7 years.
RetireAustralia founder Tim Russell and his team will stay in place.
