Babcock & Brown Communities investment group selling aged care portfolio
When financially troubled Babcock & Brown Communities (BBC) – a satellite fund of investment bank, Babcock & Brown – sought to divest itself of investments, it put its portfolio of retirement villages and aged care homes on the market.
The Sydney Morning Herald reported that industry leaders, Lend Lease and Stockland, were expected to be among the first bidders for BBC’s 56 retirement villages and 29 aged care homes and others under construction.
However, it has been Prime Retirement and Aged Care Property Trust making the first bid; an all-scrip offer to buy 40% of BBC to build a strategic stake in the retirement living facilities operator.
Prime believes that if it can successfully acquire the stake, it will be in strong position to make a full takeover.
“The purpose of the offer is for Prime Trust to achieve a strategic stake in BBC, as directors believe that it will encourage the creation of Australia’s largest senior living asset class with consequential efficiencies and capital market advantages,” Prime managing director, Philip Powell, said on 3 September.
“The directors of Prime Trust believe that if they can secure a strategic holding in BBC, they will then pursue a full merger, probably by way of a scheme of arrangement.”
Prime and BBC are already linked through management agreements for 25 facilities, which Prime either leases to BBC or are managed by BBC.
But Prime said that it had a number of “concerns and issues” about how the agreements are being interpreted and managed by BBC.
“Merging the assets and operations together will assist in removing such concerns and provide improved operational outcomes,” it said in a statement.
Prime owns more than 4,600 retirement resort units and 770 aged care beds in Australia, and has a pipeline for another 2,900 units and beds over the next five years.
Some 13 of its facilities are on long term lease to BBC and 12 are subject to management agreements.
“This offer is a first step to enable Prime Trust to achieve a strategic investment in BBC, and a platform to be able to work with BBC and its manager toward a merger,” Prime said.
“At this stage there is no guarantee that a merger will occur.”
