Babcock & Brown shacks with Prime Retirement

BABCOCK & Brown Communities has exercised an option to acquire the management rights to 12 retirement villages from the newly listed Prime Retirement and Aged Care Property Trust.

The properties are located in Queensland and New South Wales and comprise 3,600 retirement living units, including Buderim Gardens Retirement Resort; Hibiscus Noosa Outlook Retirement Resort; Hibiscus Buderim Meadows Retirement Resort; Hibiscus Chancellor Park Retirement Resort; Hibiscus Nambour Retirement Resort; and the Hibiscus Bellflower Retirement Resort – all on the Sunshine Coast, QLD.

Elsewhere in the QLD, the Carlyle Gardens in Townsville; Argyle Gardens in Bundaberg; Carlyle Gardens in Mackay; and Lindfield Gardens in Helensvale.

Finally, two properties are in NSW in the Greenleaf Ashton Gardens Retirement Village in Newcastle and the Brentwood Retirement Village in Kincumber

BBC’s managing director John Martin said all the retirement villages are located in high growth retirement corridors in coastal Queensland and NSW with 50% of the ILUs located on the Sunshine Coast.

“This acquisition enables us to expand our management platform into Queensland at marginal cost. We have sub-contracted the provision of management services for these villages to the vendor for an initial term to 30 June 2008, and there will be no change to the staffing or the routine operations of these villages,” he added.

The management rights are for a term of 25 years.

Under the terms of the management agreement, BBC will receive income comprising a fixed fee component of $520 per unit per annum and a variable component of 12% of the deferred management fees and capital gain received on resales of independent living units.

Upon completion, the acquisition is expected to be immediately accretive to BBC’s pro forma June 2008 EBITDA forecast of $81.2 million and annualised distribution yield of 8%.

There is no change in the ownership of any of the Prime Trust properties; nor in the cash flows to the trust. Following this transaction, BBC now has the management rights to 26 Prime Trust properties – 14 on fixed annual rental and 12 on deferred management fee model and SCV Group has 12 properties on pension rental model.

In addition, under the management agreement, BBC also has pre-emptive rights over the underlying village, should Prime Trust wish to dispose of the village.

The management rights effectively provides BBC with an additional exposure to approximately 430 equivalent ILUs in Queensland and NSW further enhancing BBC’s product and geographic diversity.

BBC will fund this acquisition through existing debt facilities.

Australian Property Journal