Infratil Ltd and the NZ Superannuation Fund have entered into another 50:50 joint venture, this one to buy Australia’s largest privately owned retirement village owner & operator, RetireAustralia.
Infratil and the Super Fund bought Z Energy Ltd – Shell NZ Ltd’s distribution & retail businesses and 17.1% interest in the NZ Refining Co Ltd – from global energy company Shell in 2010. Their remaining 20% each on listing was locked in until the release in November of Z’s results for the half-year to 30 September 2014.
The 2 partners announced their Australian joint venture in a statement to the NZX & ASX after the markets closed on Christmas Eve.
Their agreement is to acquire 100% of RetireAustralia from JP Morgan Chase & Co and Morgan Stanley for $A640.2 million, with settlement scheduled for Wednesday, 31 December.
Australia media said early this year the vendors had contemplated listing RetireAustralia, but abandoned that option in August.
Infratil & the Super Fund will invest $A214.8 million of equity each and take over existing bank debt on RetireAustralia’s balance sheet for the remaining 30% of the investment.
The consideration includes estimated transaction costs of $A23.5 million and is subject to the usual completion adjustments for working capital & net debt. The acquisition price represents a multiple of 1.0x NTA.
RetireAustralia managing director Tim Russell founded Meridien Retirement Living (now RetireAustralia) in 2005 and built up a portfolio of 3700 independent living units & apartments through the acquisition of 28 retirement villages in New South Wales, South Australia & Queensland, with development plans for another 500 units. It is the largest privately held pure-play retirement operator in Australia.
Mr Russell spent 10 years in investment banking & funds management at Graham & Co and Bankers Trust before joining FKP Ltd as investments general manager in 2003. He was responsible for creating FKP’s real estate funds management business and had overall responsibility for its retirement business.
FKP, previously a property developer, also became Australia’s biggest retirement village operator a decade ago. Through the Retirement Villages NZ Ltd partnership with Macquarie Bank, FKP bought a majority stake in NZX-listed Metlifecare Ltd, exiting at the end of 2013 after the merger of 3 retirement village companies into an enlarged Metlifecare.
Out of that selldown, Infratil & the NZ Super Fund acquired 19.88% of Metlifecare each.
Infratil chief executive Marko Bogoievski said in the Christmas Eve statement: “RetireAustralia provides a strong platform in an Australian sector that offers very attractive long-term growth prospects…. The business has the potential to become the market leader in the retirement living sector.
“RetireAustralia is led by an experienced management team and comes with a strong development pipeline & a mature existing portfolio. Underlying ebit for the June 2015 financial year is forecast at $A35-40 million. [Underlying earnings before interest & tax is a non-GAAP financial measure which removes the impact of non-cash items, deferred tax & the impact of the company’s capital structure.]
“We have spent a considerable amount of time evaluating the sector in Australia and identified RetireAustralia as a high quality access point, given the profile of the assets and the capability of the management team.”
Super Fund chief investment officer Matt Whineray said: “We are pleased to be increasing our exposure to the retirement village sector in Australia. The sector’s attractive demographics & growth opportunities make it a good fit for long-term investors such as the NZ Super Fund.”
RetireAustralia chief executive Mr Russell said: “My preference has always been to find owners like Infratil & the NZ Super Fund who have the necessary experience & access to capital to enable a long-term focus for the business as it enters the next phase of growth.”
Attribution: JV release.