Brookfield puts Aveo on the market in a sale that could be worth $3bn

Aveo Peregian Springs retirement village residents playing bowls. Picture: Supplied

Almost five years on from buying Aveo, Canadian private equity firm Brookfield is placing the retirement village operator back on the market in a sale that could be worth $3bn.

DataRoom understands that investment banks have been invited to pitch in the past fortnight for a role selling what is one of the country’s largest retirement operators.

Among Aveo’s lenders are believed to be Goldman Sachs and Macquarie Capital, so they may be well placed when it comes to landing a role.

Brookfield purchased the then listed Aveo in 2019 for $1.3bn or $2bn including debt in a sale at the time handled by Bank of America.

The price was a 28 per cent premium to the company’s undisturbed security price and came as its major Malaysian shareholder Mulpha opted to offload its interest.

However, Bank of America’s local real estate head Tim Ryan left the bank last year.

It comes as Moelis and CBRE work separately selling non-core assets of the Aveo business.

Brookfield has been working to sell Aveo’s Tasmanian, Adelaide and Western Australia assets in a quest to position the business as an Eastern Seaboard index-linked bond.

The understanding is that the invitation to pitch has gone far and wide to multiple advisers.

Their job is to tell Brookfield how they would sell the business and to who it would be sold.

Aveo describes itself as Australia’s premier retirement living provider with 1200 residents nationally and state-of-the-art facilities.

It also offers personal and flexible home care.

First established in 1970 and headquartered in Sydney, it has 71 retirement facilities across the eastern seaboard, including independent living units and serviced apartments.

Brookfield has invested in the business since its acquisition under its leadership of Aveo’s chief executive Tony Randello.

It has 4 per cent of the market share, ahead of Lendlease with 1.9 per cent and Bolton Clarke with 1 per cent, according to IBISWorld.

Lendlease is a seller of its stake in retirement business now named Keyton, so is not expected to be among potential buyers.

However, one buyer could be the private equity firm EQT, which purchased Stockland’s retirement living business in 2022 for close to $1bn and renamed the operation Levande.

Kohlberg Kravis Roberts and Blackstone were underbidders.

A challenge could be the cheque size, and one option is that Brookfield sells just a stake.

IBISWorld says that the retirement living industry is worth $5.4bn in revenue annually with Australia’s ageing population underpinning rising demand for purpose-built retirement villages in the coming years.

The Royal Commission called for the development of an integrated system for the long-term support and care of older people, including affordable and appropriate housing.

The industry market research firm says higher customer expectations are changing the industry’s profile.

New purpose-built options include vertical higher-density facilities in inner-city locations, co-located retirement villages and intergenerational living options.

Retirement village operators gain profits by charging one-off buy-in fees, deferred management fees and recurrent charges similar to rent.

The fees are closely tied to rental charges and property prices in the wider residential market to make retirement village living competitive compared with independent living with periodic care.

While residential property prices have risen, greater transparency over retirement village

pricing structures has limited village operators’ ability to increase fees.

The sale comes as investment bank Jefferies makes quiet approaches to parties around the market to test their interest in RetireAustralia, earlier up for sale through Jarden and E&P Corporate Advisory for over $1bn.

The business is owned by Infratil and NZ Super and it is understood that it has not launched a formal sale process.