UPDATED: Arvida said its high proportion of care beds provides steady cash flows that will enable it to pay investors a healthy quarterly dividend and help fund new developments after listing.
UPDATED: Arvida, the retirement village operator planning to raise $80 million in an initial public offering, said its high proportion of care beds provides steady cash flows that will enable it to pay investors a healthy quarterly dividend and help fund new developments after listing.
The company formerly known as Hercules issued a prospectus yesterday for an IPO covering a planned mega merger of 17 privately-owned retirement homes that has taken 12 months to pull together.
Chief executive Bill McDonald said a key difference in its portfolio to other operators in the sector was the high proportion of care it provided with 852 care beds representing 54 percent of the portfolio and half of its 450 serviced apartments also provide care. That meant stronger cash flows and loss volatility in earnings than the retirement village side provides which would allow them to pay out between 60 to 80 percent of underlying profit, he said.
That should result in an indicative cash dividend yield of between 4.2 percent and 4.7 per cent in the 2016 financial year. Based on current earnings forecasts, Arvida intends paying a first dividend of about $2.3 million in late May 2015 for the first financial quarter ending March 31.
Arvida’s average age of entry for residents is 82 years, seven years above the NZ industry average. It will be the second largest listed provider of aged care behind Ryman on listing, though the unlisted Bupa Care Services is larger. In overall revenue terms, Arvida will rank behind Ryman and Metlifecare in the listed retirement sector but ahead of Summerset.
The shares will be priced in a range of 85 cents to $1 apiece with the final price being set through a bookbuild ending on Friday and list on the NZX will take place on Dec.18. Existing investors, who include a number of All Blacks, will hold around 60 percent of the company after the IPO. These shares will be subject to escrow arrangements until May 31, 2016.
The idea of the merged retirement group was started by the late Grant Adamson and then carried on by board director Michael Ambrose with due diligence carried out on around 40 resthomes. This was narrowed to 19, and then another two didn’t make the final cut, McDonald said.
CBRE has valued the portfolio at $227 million, with two thirds of it held in the South Island.
Some $70 million of the offer proceeds will be used to repay debt while $5.25 million is earmarked for facility investors and $4.35 million to cover the offer costs.
Chief financial officer Jeremy Nicoll said after the IPO Arvida would have low debt of around $7.8 million and has a $40 million bank borrowing facility that would enable it to carry out planned brownfield developments and any new acquisitions. The brownfield developments in various stages of completion will see another 200 to 250 care beds and units or $9 million worth added to the portfolio by 2016.
Chairman Peter Wilson said there had been a number of approaches from other resthome operators keen on joining the group and while Arvida did want to improve its geographic spread, any acquisitions would wait until the chief executive was comfortable with how the integration had gone. “We’ll do nothing in the near term but after six months it could be different,” he said. “Any consolidations would need to be earnings accretive.”
The financial information in the prospectus shows the company is forecast to make a loss of $1.4 million in the 2015 financial year on revenue of $59 million. When the costs of the offer and aggregating the resthome portfolio are excluded, the prospectus says, underlying profit for the 2015 financial year would be $4 million, rising to $13.3 million in the 2016 financial year. The underlying profit figures exclude unrealised gains from property revaluations and no synergy benefits of merging the group of resthomes have been factored into the forecasts as Wilson said these will be incremental.
(BusinessDesk)
EARLIER 17th Nov: Rest home operator Arvida to raise $80m in IPO
Arvida, the retirement village operator formerly known as Hercules, has issued a prospectus for an initial public offer to raise $80 million for a planned mega merger of 17 privately-owned retirement homes.
The prospectus, lodged with the Companies Office today ahead of a company briefing tomorrow, said the shares will be priced in a range of 85 cents to $1 apiece.
The final price for the shares will be set through a bookbuild this week and listing on the NZX is expected on Dec. 18. The maximum number of new shares on offer will be between 80 million to 91.4 million, depending on the final price.
All Blacks Richie McCaw and Dan Carter, who held shares in Christchurch’s Park Lane retirement village, are among existing investors expected to hold between 58.9 percent and 62.7 percent of the total shares on completion of the offer. The current owners will be exchanging over 90 percent of their current investment for shares in Arvida and these will be subject to escrow arrangements until May 31, 2016.
Arvida’s indicative market capitalisation is between $199.8 million and $221.4 million while the aggregate of CBRE market valuations of the portfolio of resthomes is about $227 million. The current occupancy level is 94 per cent.
Set up in January this year, Arvida plans to combine 17 retirement village and aged care operations across New Zealand to form one of the larger industry players. Initially there were indications that 19 retirement villages would be involved. The portfolio will house over 1800 residents with a mix of 852 care beds and 812 retirement units and a number of brownfield sites available for development.
In a letter to investors lodged with the prospectus, chairman Peter Wilson said Arvida will target a dividend payout ratio of between 60 percent and 80 percent of annual underlying profit, resulting in an indicative cash dividend yield of between 4.2 percent and 4.7 per cent in the 2016 financial year. Based on current earnings forecasts, Arvida intends paying a first dividend of about $2.3 million in late May 2015 for the first financial quarter ending March 31.
The financial information in the prospectus shows the company is forecast to make a loss of $1.4 million in the 2015 financial year on revenue of $59 million. When the costs of the offer and aggregating the resthome portfolio are excluded, the prospectus says, underlying profit for the 2015 financial year would be $4 million, rising to $13.3 million in the 2016 financial year.
Some $70 million of the offer proceeds will be used to repay debt while $5.25 million is earmarked for facility investors and $4.35 million to cover the offer costs.
There’s also a sweetener in the deal for those who set up Arvida and board and senior management team members. Around 2.3 million shares are also being issued to GA Village Management Services, an entity involved in setting up Arvida, and to current and former board members and senior management team members, with up to 1.2 million “at risk” shares to be issued on May 31, 2016, if the volume weighted average market price of shares around that time reaches 1.25 times the final offer price.
The senior management team will be led by chief executive Bill McDonald, who has held a number of senior positions with Stockland and ING in Australia where he has developed and operated retirement villages and aged care facilities.
(BusinessDesk)
