Aveo parent company FKP has issued one billion heavily discounted new securities at 20 cents to raise $208 million because it has reached the upper debt levels with its lenders. Their share price crashed from 38 cents to 28 cents as a result. Last Friday they were the most heavily traded securities on the ASX with 16 million changing hands. In six months the price has dropped 33% from 43 cents to 29 cents. The major blame for their cash flow position is slow sales of their Aerial apartment development in Camberwell (Melbourne) but the recent write down in values of their retirement villages by $225M would not help.
The Aveo Retirement division is the jewel in the crown, claiming to be the largest operator across Australia and New Zealand. And its plans have been emphasised in the new security offer. See the charts attached. Again they emphasise that they have to move in to the ‘continuum of care’ model to remain relevant, especially given their average resident age of 82.7 years – who will increasingly need care support.
FKP is also considering the demerger of Aveo from its main business to deliver short term value. In 2008 Stockland bought a 15% interest in FKP on the basis of having the first offer to buy the retirement assets if they are put up for sale, which still stands. The price appears to be just getting cheaper.