NZ Super, Infratil target aged care integration
Morrison & Co, an investment manager of New Zealand-listed infrastructure fund Infratil, has been looking into Australian retirement village space for a while. In early 2014, it approached RetireAustralia, the country’s fourth-largest player, as a potential investee.
The owners, Morgan Stanley Real Estate and J.P. Morgan Global Special Opportunities Group, had been planning to list the business, but when this didn't pan out, Morrison & Co. said it could facilitate a full exit. New Zealand Superannuation Fund (NZ Super) and Infratil bought RetireAustralia for A$640.2 million ($521 million), contributing A$429.5 million in equity. Each holds a $50% interest in the business.
"Morrison & Co is one of our external investment managers and we discuss investment opportunities with them regularly," says Matt Whineray, NZ Super's CIO.
NZ Super and Infratil previously teamed up to acquire nearly 40% of New Zealand retirement village operator and developer Metlifecare.
"New Zealand and Australia's populations are ageing. These changing demographics, which will play out over many years, are likely to be positive for long-term demand for retirement care," "The sector is therefore a good fit for investors with long time horizons, like the NZ Super Fund."
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. NZ Super and Infratil see the potential to develop the RetireAustralia into a leading integrated retirement living and aged care provider.
"RetireAustralia has an existing pipeline of development options," says Whineray. "The Australian retirement sector is currently largely focused on retirement villages. We believe there may be an opportunity to offer more integrated aged care services as well."
The company operates 28 villages across New South Wales, South Australia and Queensland, with over 3,700 independent living units and apartments. 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. EBIT is expected to reach $40 million in 2015.
RetireAustralia's business model is like that of other major retirement village operators in the country, with property development the primary driver. The new owners will move the business towards a combination of home, community and residential aged care.
At present in Australia, aged care services are usually provided by the government but the burden in growing and greater private sector involvement is seen as necessary. Therefore, NZ Super and Infratil want to bring the New Zealand approach - where these functions are fulfilled by a number of retirement village operators - across the Tasman Sea.
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