Compulsory ‘buy-backs’ blamed for Settlers Lifestyle receivership

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The QLD government’s mandated 18 month buyback regulations that became operative July 1 have been blamed for the failure of the five village Settlers Lifestyle group, with 687 homes.

The new regulation requires operators to buy back village homes if they have not sold 18 months after they have been vacated, irrespective of whether the village is strata title or if the residents share or don’t share in the capital gain.

According to lawyers MinterEllison, on day one of the buybacks (1 July) they processed over 100 repurchases by operators.

Aveo reported in their investor update last week that it had 213 mandated buybacks in the past 12 months (a mix of statutory and contractual buybacks).

The Settlers experience is a near-perfect reflection of the perfect buyback storm for village operators in a slow village sales market.

Sales are slow – homes have not sold in 18 months – meaning no DMF income – creating low cash flow – then operators are required to buy back the homes when little cash is available.

Just two of the Settlers villages are in Queensland: Rockhampton and Forest Lake. But it doesn’t take many repurchases to make a significant capital hit.

Settlers Lifestyle is owned by a Singapore-domiciled offshore investment fund manager Forum Partners, headed by Australia’s Andrew Faulk.

Forum Partners acquired the five retirement communities from listed retirement village operator Ingenia in 2016 for $55M.

Forum has $6billion in assets under management with offices in Europe, Asia and the US.

Settlers fell into difficulties following a default on its mortgage agreements with Investect Australia.

Damien Hodgkinson of DEM Asia Group has been appointed voluntary administrator.

FTI Consulting has been appointed receivers and managers over The Settlers Group, which comprises Settlers Company, Settlers Operations and Forum Settlers.

The three Settlers villages outside of Queensland are Settlers Ridge Estate (NSW), Settlers Lakeside (WA) and Settlers Ridgewood Rise (WA).

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