The strength of the New Zealand dollar and available cash proved an ideal combination for Infratil and the New Zealand Superannuation Fund, which have combined to buy Australia's fourth-largest retirement village operator.
The two investors, which combined previously to buy the former Shell investments and subsequently list them as Z Energy, will pay $A640.2 million ($NZ670 million) to buy all of RetireAustralia.
They will spend $A429.5 million in cash with the balance funded through existing bank debt on RetireAustralia's balance sheet.
Craigs Investment Partners broker Greg Easton said Infratil had been looking for potential opportunities from the sale of two Australian assets.
While the infrastructure company had paid out a special dividend of 15 cents per share in November, it still had cash looking for a home.
There had been a push into aged-care listings in New Zealand but Australia was a market with plenty of opportunities.
''Aged care seems to be the flavour of the year and this investment fits in with the model Infratil has.''
The kiwi was yesterday trading at A96c, meaning the timing of the acquisition was attractive.
Also, low interest rates in Australia meant taking on RetireAustralia's debt was attractive.
The Reserve Bank of Australia could lower interest rates still further as the economy deteriorated, Mr Easton said.
Infratil had experienced difficulty in its European airport investments and had pulled out of those investments at a loss.
One of the things Infratil and the super fund would do is impose the New Zealand model of retirement village ownership on the Australian market. The Australian operations were markedly different, he said.
The Australians were funded per bed, and the funding had just been released.
Having already invested in Australia, Infratil would be well aware of the regulations it needed to comply with and would look at the investment as long-term, Mr Easton said.
Infratil chief executive Mark Bogoievski said RetireAustralia provided a strong platform in an Australian sector offering long-term growth prospects.
With 28 villages across New South Wales, South Australia and Queensland, and more than 3700 independent living units and apartments, the business had the potential to become the market leader in the retirement living sector.
''I would expect retirement living could grow out into quite a significant part of our business. We can expect a greater proportion of that over-65, over-85 market thinking about going into retirement living.''
RetireAustralia was led by an experienced team and came with a strong development strategy and a mature existing portfolio.
Underlying earnings before interest and tax, which removed the impact of non-cash items, was forecast at $A30 million to $A40 million, he said.
''We have spent a considerable amount of time evaluating the sector in Australia and identified RetireAustralia as a high-quality access point given the profile of the assets and the capability of the management team.''
At a glance
• Infratil and the New Zealand Superannuation Fund combine to buy RetireAustralia, Australia's fourth-largest retirement village operator. The transaction is expected to be settled tomorrow.
• The business is now owned by Morgan Stanley Real Estate Investing and the JP Morgan Global Special Opportunities Group.
• The RetireAustralia investment will be managed by investment management firm HRL Morrison & Co on behalf of Infratil and the NZ Super Fund.
• Infratil and the NZ Super Fund previously worked together, buying the downstream assets of Shell NZ, now Z Energy.
