Australian Unity finalises takeover of retirement village and aged care operator Greengate for $65M – raising question on price

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Health, wealth and care group Australian Unity has informed the ASX it has finalised the $65 million purchase of retirement village and aged care owner-operator Greengate Partnerships.

Greenage was created by Andrew Sweeney, Howard Smith and Matthew Fisher in 2004. Its CEO is Ralph Warburton.

As Australian Unity revealed on 20 May, the purchase of Greengate includes three recently completely and operational vertical co-located retirement village and residential aged care buildings – two in Sydney (St Brigid’s Green, Maroubra and St Patrick’s Green, Kogarah) and one in Brisbane (St Luke’s Green, Woolloongabba).

The three sites add 253 independent living units and 275 residential aged care beds to Australian Unity’s roster.

In addition, the Greengate portfolio includes a prime development site in Brisbane (Auchenflower) that has approval for a vertical co-located retirement village and residential aged care precinct.

Interesting price at $65M

On the surface the price paid looks very attractive for Australian Unity. There is no mention of debt taken over and other obligations but AU is achieving 253 independent living units that for Kogarah and Maroubra will be approaching prime DMF age of six to eight years given the older residents they will have attracted to the collocated site.

If 150 ILUs turn over in the next say 2 years at an average of $700K and pay a 30% DMF, the income to AU is $31.5M.

The 275 aged care beds in the Greengate mix would have cost an average of $200,000 to build or $55M – which almost covers the full purchase price of $65M.

On top of that AU wins the Auchenflower development site and a greater presence in Brisbane, building on their involvement in the huge Herston Quarter precinct.

Any way you look at it, it is a great deal for AU.

“The proposed purchase rest reflects our confidence in aged care as a sector where we can add real value for our members, customers and the broader Australian community and further underlines the important role mutual organisations can take in delivering high-quality, member-focused aged care and retirement living,” Australian Unity executive general manager residential communities Beverly Smith said.

“We look forward to meeting the Greengate customers and their families, as well as Greengate’s team members and welcoming them to Australian Unity.”