Scape poised to seal $3bn-plus buy of retirement village operator Aveo

Developing Queensland – retirement living – Aveo Springfield.

It may just be a coincidence that top representatives from APG were in Sydney last week at a time that Scape was said to be putting finishing touches on a $3bn-plus deal to buy Aveo from Brookfield.

But the visit coincides with talk APG may surface as a key backer to the transaction, along with money out of South Korea. With respect to South Korean funds, some were pointing to NPS.

Key to getting a deal across the line for student accommo­dation provider Scape was gaining funding partners to provide the financial fire power for a transaction.

At the weekend, it was said to be imminent.

Scape is the biggest purpose-built student accommodation owner and operator in Australia across Sydney, Melbourne, Brisbane and Adelaide and already has a relationship with APG.

Advised by Deutsche Bank and Macquarie Capital, Scape entered exclusive talks with Brookfield in April to buy Aveo, fending off competition from Singapore sovereign wealth fund GIC.

Key to the deal is believed to be cheap funding on offer from banks.

APG has an existing relationship with Scape. The Australian reported last year Scape had struck a $1bn partnership with APG Asset Management and Canada’s Ivanhoe Cambridge to develop purpose-built student accommo­dation assets in Australia’s student housing sector.

Aveo, for sale through Barrenjoey and Morgan Stanley, was purchased by Brookfield from the listed market in 2019, paying $1.3bn for the business that was previously known as FKP, or $2bn including debt.

Established in 1970, Aveo has 67 retirement facilities along the eastern seaboard.

With 4 per cent of market share ahead of Keyton and Bolton Clarke, it has a deferred management fee model where income is back-ended, but also offers an upfront payment or bond payment option.

Price expectations were set high for Aveo after Stockland in 2022 offloaded its retirement living business for about $1bn to private equity firm EQT, which fended off competition from other buyout funds including Blackstone and Kohlberg Kravis Roberts.

It comes as land lease retirement living operator GemLife, which predominantly operates in Queensland, launches its $750m initial public offering to list as a $1.6bn business. The performance of GemLife when it lists on July 3 will be closely watched.

The group’s main operations are in Queensland, where the market is performing strongly.

The share price of rival ­Ingenia, which is also dominant in the state, is up almost 60 per cent over a year.

Its other listed comparable, Lifestyle Communities, is down more than 24 per cent over the same period, but that predominantly operates in the Victorian market, where the level of sales has been less buoyant than in the Sunshine State.