Pacific Equity Partners is thought to have moved on from Aveo, but now the attention is turning to listed real estate trusts as potential suitors.
Bids for the $3bn-plus retirement village operator are understood to be due next week, and the understanding is there’s some real estate trusts giving the opportunity serious consideration.
One of them is understood to be $7.4bn real estate investor Charter Hall.
While a bid by Charter Hall is not a certainty, it’s believed to be weighing the opportunity and remains undecided as to whether it will progress.
Some also believe GPT Group may be thinking about Aveo, although others believe this is less likely.
While Aveo seems miles away from the usual play for groups like Charter Hall and GPT, it’s possible they proceed because they would be using third party capital for their tilt at a time where there is plenty of capital-chasing alternative real estate investment classes, steering the big investors away from other traditional assets like shopping centres.
The thematic angle of retirement living is attractive as a play on the growing ageing population.
Generally across the industry, there’s appetite for funds to invest in living-related investments.
But, market experts say generating strong returns from retirement living is not that simple.
It’s a complex and hard business, and the deferred management fee model can be a deterrent for some investors.
Still, when it comes to Charter Hall, market sources believe squaring away a deal to buy Australian Venue Co pub landlord Hotel Property Investments remains of top priority for the David Harrison-led property fund manager, and is creating plenty of debate within the company’s boardroom.
Charter Hall’s satellite, Charter Hall Retail REIT, has a takeover bid on the table for HPI, valuing the target at $755m. The offer was rejected.
As of last month, it held about 28 per cent after lifting its offer in October from $3.65 to $3.85 per share and declaring its offer best and final.
The offer would be declared unconditional at 35 per cent acceptance.
That is expected to occupy much of its thinking pre-Christmas when it comes to corporate activity.
Should REITs enter the mix for Aveo, they would likely be competing with private equity in the Morgan Stanley and Barrenjoey-run auction.
It is understood a number of parties have been in a data room taking a look, like private equity firms EQT and Blackstone, while the Lendlease-backed Keyton Retirement Villages and potentially Stonepeak have taken information memorandums to assess the merits of an acquisition.
After looking, PEP will not progress, say sources.
The Aveo business is owned by Canadian private equity firm Brookfield, which purchased the then-listed business in 2019 for $1.3bn, or $2bn including debt.
Established in 1970, Aveo has 86 retirement facilities along the eastern seaboard, including independent living units and serviced apartments.
It has a deferred management fee model where income is back-ended.
Aveo has 4 per cent market share, ahead of Lendlease with 1.9 per cent and Bolton Clarke with 1 per cent, according to IBISWorld.
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