Aveo has bought out 11 institutional investors in the Retirement Village Group (RVG) for $101M, delivering 31% of the investment fund that owns 28 retirement villages with 3,436 units and serviced apartments. The price paid was a 21% discount on RVGs current security value.
Last year they paid $56 million to purchase 19% of RVG from three investors including Macquarie and Telstra Super. Aveo achieved a 12% discount on that deal.
All up Aveo now owns 73% of RVG with REST Industry Super the only other fund investor.
Aveo CEO Geoff Grady says the acquisitions will add 1.5% earnings per share over the next two years, taking Aveo to at least 7.5% which is ahead of the companys predictions.
The RVG portfolio is made up of mature or older villages but in prime Sydney and Melbourne locations. They also have a healthy ratio of serviced apartments. Aveo has been hamstrung in introducing development and care strategies which had been voted down by RVG. Grady now wants to bring in the newly acquired Freedom Care packages which suit smaller physical units with lower entry prices.
Aveo is advising that a $150,000 serviced apartment can be repackaged at $300,000 with the Freedom Care, a home care instalment model it acquired when Aveo purchased the 15 retirement villages making up Freedom Aged Care earlier this year for $210 million.
Importantly for the retirement village sector, the institutional investment market likes the methodical way Aveo is building value. Their share price hit $3.44 briefly last Thursday, a new market high and well above the net asset value of each share around $2.85 - which is where its value was in February.