It appears FKP has fast tracked the splitting and selling off its retirement business – largely Aveo branded.
FKP is a Brisbane based property group, a mini Stockland or Lend Lease. Since the GFC the property development business for FKP has been poor to say the least. Their retirement villages business has been its bright light. Between 2004 and 2007 it directly or indirectly built itself to be the second largest retirement village operator (behind Lend Lease) with about 11,500 ILUs owned or managed across Australia and New Zealand. The two major shareholders are Malaysia’s Mulpha with 26% and Stockland with just under 15%. (Stockland bought into FKP in late 2007 to with an eye on the Aveo retirement village assets). Both have lost up to 80% of their investment given today’s FKP share price.
Three months ago Peter Brown, CEO of FKP, announced his retirement. Seng Huang Lee of Mulpha became Executive Chairman and also announced that Goldman Sachs had been appointed to review if the retirement assets of FKP should be separated out from the parent company to release its real worth, stating it could be 12-18 months away if they were to split retirement out. It would appear this timetable has been fast tracked. Mr Lee now says the float of the Aveo assets will happen within three to six months. A value of about $1billion is mooted. The challenges are several. Aveo reports its sales are down this year compared to last – and last year’s sales were already down compared to competitors. How do you value villages in a market where so many villages are in distress? And what to do with Stockland – who has first rights on Aveo if the price is acceptable to them. They are unlikely to sit by.
In the meantime Aveo has been cost cutting to get overheads down – targeting a 10% reduction in 2013. Up to 40 staff were recently retrenched.