Scape parent rebrands and finalises huge retirement living purchase

Brookfield has finalised the long running sale of its Aveo retirement living asset to Scape’s rebranded parent business The Living Company.

The $3.85 billion sale marks a departure from the pure student accommodation play of the Scape business, perhaps in response to the falling numbers of foreign students in recent times and uncertainty about the sector’s future.

Inquiries to The Living Company did not result in any light shed on this possibility.

But founders of the $1.5 billion fund, Stephen Gaitanos, a former investment banker with Morgan Stanley and Craig Carracher, a former partner with Minter Ellison, along with South Korea’s National Pension System, which recently tipped $700 million into the company, are bound to be highly attuned to shifting market fundamentals.

While student housing has been a steady growth sector, the headline numbers of steadily growing international students could hide another story.

According to the ABC,  “Offshore student visa applications fell by almost 40 per cent in 2024, compared to the previous year. In real terms, that’s roughly 120,000 fewer prospective students seeking to study in Australia.”

Scape has made a mark in sustainability, especially after Chris Nunn, former AMP head of platform and ESG investing, joined the business two years ago.

A spokesperson for the company said: “Sustainability and our ESG goals (for the parent brand) will always be centrally aligned to our value set.”

Through Aveo, the parent company will acquire 65 retirement villages across Queensland, New South Wales, Victoria and Tasmania, with a portfolio of over 10,000 units and has another 3000 units in its pipeline.

According to The AFR, the sale came via a mammoth eight month auction, which was finalised in April, with the Scape founders battling it out with Singaporean sovereign wealth fund GIC (Government of Singapore Investment Corporation).

Brookfield originally acquired the company in 2019 after it landed in hot water over malpractice, which led to a class action against the company in 2017.

The scandal triggered the Australian Competition and Consumer Commission (ACCC) to launch an investigation into the retirement company, as well as the Royal Commission into Aged Care, which was launched in September 2018.

Stakeholder uncertainty, along with a downturn in the residential market at the time, forced Aveo to seek a takeover in November 2018.

This led to the last interested investor, Brookfield, buying the company with an uncontested offer of under $2.20 per share, with the total transaction size reported to be $2.067 billion – and taking the company off public listings.

The acquisition at the time came only a month after it acquired Australian Healthscope, owner and operator of 38 private hospitals, for $4 billion. Investor Mulpha International which owned 24.4 per cent of Aveo since the early 2000s, was unwilling to fully part with the retirement living provider and retained a 15.5 per cent stake, which will continue to hold.

Brookfield said it had invested more than $500 million into the business to help simplify customer contracts and create more “premium community experiences that cater to the modern retiree.” The retirement homes are currently near full occupancy.

Brookfield Real Estate chief executive Lowell Baron added that the living sector had been “the top segment for our global real estate strategy for more than a decade,” and that “given the favourable market dynamics that underpin the continued growth of the living sector, we will look to invest further capital in living across Asia Pacific.”

Brookfield Real Estate Australia co-head, Ruban Kaneshamoorthy said that the company had taken a “contrarian view” when it first invested in Aveo.

“During the past five years, in partnership with the Aveo management team, we invested heavily in the business and executed a business plan that moved Aveo from a platform with a lack of focus and direction to a high-performance, resident-first organisation that is well placed to take advantage of the strong demographic and structural tailwinds underpinning the growth of retirement living.”

After the acquisition, The Living Company will now have three different types of assets under its wings; student living through Scape, rent to live through XO Living and affordable housing and retirement living through Aveo.