On Tuesday, we reported on rumours that the property and investment group was planning to buy into the sector – today, the confirmation.
HomeCo has announced it is undertaking a $140 million and $30 million security purchase plan to fund the $32.59 million acquisition of Aurrum Aged Care’s Erina home on the NSW Central Coast plus the $127.8 million purchase of three neighbourhood centres owned by Woolworths and $25.5 million to buy the Parafield Retail Complex.
The group, led by Managing Director and former UBS investment banker David Di Pilla (pictured) (who is also an Aurrum director), has declared a trading halt until Friday as it works through details of the funding arrangements, but estimates the deal will boost the value of its holdings to over $1.2 billion.
The 250-bed aged care home, which was built in 2003 and refurbished in 2015 with a new 71-bed $16.5 million building (Terrigal Drive) added in 2017, is being acquired for $20 million scrip in HomeCo securities to be issued at the proposed FY20 final dividend of $0.075 per security and $12.59 million cash.
The home will be leased back to Aurrum following the acquisition at an initial rent of $2.2 million per annum, for a period of 10 years (with 2 x 10-year options) with completion of the detail subject to securityholder approval at a general meeting expected to be held in mid-August.
However, HomeCo notes that it has already received voting intentions from entities related to Spotlight and Chemist Warehouse indicating their support for the acquisition.
Its investor presentation also notes the future demand for residential aged care in Australia, with an extra 80,000 places required over the next decade and a quarter of the existing stock – around 56,000 beds – needing to be rebuilt or refurbished during the same time at an estimated cost of $56 billion.
The question is now: will HomeCo be looking to acquire other homes – and will other providers also take the opportunity to sell off their assets and free up some cash?
Aurrum has nine aged care homes across NSW and Victoria with over 1,000 aged care beds.