Rumours Japara to sell off and lease back aged care homes – listed providers looking to raise equity. Aurrum Aged Care director touted as potential buyer

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Last week, we reported on speculation by The Australian that Regis was looking to spin off its real estate assets – now similar rumours are surfacing around Japara Healthcare in its Dataroom section.

The newspaper says sources close to the Melbourne-based listed operator say the group is looking to reduce its debt by selling off and leasing back some of its aged care homes.

Last month, Japara warned the market it expected its full-year financial results to take a hit of $270 to $300 million – mostly against goodwill – because of COVID-19.

As of 30 April, the provider’s net debt was $201 million with available liquidity in cash and undrawn debt of $144 million and a current market value of $127 million.

Regis on the other hand had debt of $281.5 million in December and a current market value of $433 million.

The column also says both operators could be looking at equity raising in the coming weeks as they look to increase cash reserves in the wake of the lower occupancy and rising costs of the pandemic.

Despite the hit to the sector’s finances, aged care has attracted interest, but the expectation is that investors are waiting for the results of the Royal Commission’s Final Report in November.

One potential buyer being touted is Home Consortium, led by Managing Director and former UBS investment banker David di Pilla (pictured) who also serves as a director for East Coast aged care provider Aurrum Aged Care.

Home Consortium acquired the old Masters property sites last year for $750 million in 2016 and now has 30 centres across five states incorporating brands including Woolworths, Coles, chemist Warehouse, Spotlight and Anaconda while Aurrum has nine aged care homes across NSW and Victoria with over 1,000 aged care beds.

As we reported here, Mr Di Pilla’s father-in-law Alex Shaw, formerly the CEO of Royal Freemasons Benevolent Institution, is also an investor in the Consortium with he and his wife Mary major backers of Aurrum.

It is understood that Home Consortium or other interests back by Mr Di Pilla had a small stake in Japara before divesting the shares – increasing the possibility that he could be involved in any industry consolidation.

The Australian reports that Home Consortium has previously raised the idea of establishing a healthcare and wellness REIT, which could then be used to fund the purchase of a listed operator, or that Mr Di Pilla could opt to set up a new healthcare care property trust.

Watch this space then.


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