NZ Super, Infratil agree buy RetireAustralia for $521m

The two investors will provide A$429.5 million in equity - with the balance funded through existing bank debt - and each hold a 50% interest in the business. The sellers are said to have previously considered a A$600 million IPO for RetireAustralia but abandoned the plan in August.

The company is the fourth-largest player in Australia's retirement village industry, with approximately 3,700 independent living units and apartments, or a 3% market share. NZ Super and Infratil see the potential to create a market leader in integrated retirement living and aged care through a combination of brownfield and greenfield development.

RetireAustralia operates 28 villages across New South Wales, South Australia and Queensland. Operating revenue came to A$75.3 million in 2014, up from A$71.1 million the previous year, while underlying EBIT grew from A$32.7 million to A$34.3 million over the same period.

The company is the largest privately-held pure-play retirement operator in Australia. It is consistent with many of its industry peers in that the business has been driven by property developers, which means there has been more focus on hard facilities and less on the service and care elements. NZ Super and Infratil want to take RetireAustralia into home and community care as well as residential aged care.

"We are pleased to be increasing our exposure to the retirement village sector in Australia. The sector's attractive demographics and future growth opportunities make it a good fit for long-term investors such as the NZ Super Fund," Matt Whineray, NZ Super's CIO, said in a statement.

Retirement villages and aged care services are increasingly targeted by private investors as a means of leveraging the ageing populations of Australia and New Zealand. Australia's 85-and-over demographic is expected to grow at 4.7% per annum through 2044, while the overall population increases by 1%. Retirement village penetration is around 5%, compared to 10% in the US.

In November The Blackstone Group invested $150 million in retirement village developer National Lifestyle Villages, while Quadrant Private Equity completed its exit from New Zealand-based Summerset in late 2013 with an estimated return multiple of more than 3.7x. It took the business public in 2011.

In the aged care space, Archer Capital acquired Primelife Aged Care from Lend Lease Group for A$270 million in February 2013. A few months later, AMP Capital sold a 47.62% interest in Domain Principal Group to Singapore's G.K. Goh Holdings for A$136.7 million. More recently, Quadrant made a partial exit through Estia Health's A$834 million IPO. It bought a majority interest in the business, the fourth-largest provider of aged care services in Australia, in late 2013.

As of June 2014, Australia's residential aged care industry comprised approximately 1,000 providers operating 2,700 facilities with around 190,000 places. Non-profit and government-owned providers account for 64% of places, with the private sector operating the remainder. The Department of Health forecasts that approximately 259,000 places in care facilities will be required by 2022.

NZ Super is New Zealand's sovereign wealth fund, with NZ$27 billion ($20.9 billion) in assets. Infratil has over NZ$5.9 billion under management as the owner and operator of businesses across energy, transportation infrastructure and social infrastructure.

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• Topics
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• New Zealand Superannuation Fund
• buyout
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