worth review for investment, page-8

Ok there are a number of sources of revenue here.

Government money - Basically the government allocates grants to retirement operators based on accredited beds and licenses.

The operator is a for profit organisation so there fee structure generally works in a few different ways. (however there can be different setups)

1. Someone goes in pays a deposit bond which the company can draw down from for a period of ten years at 3% per annum. ie 100,000 bond (held in an account by the operator, with any benefit of interest etc to the operator). Each year the operator draws down the allocated amount. When they "roll over" the family is generally returned the remainder of the bond. A new person goes in.

There are often a number of other charges that can be levied on a person on the way through. Alot depend on the level of care.

THAT system is generally for higher assistance nursing homes.

ILU (Independant living units) Which are AVE's main sector are a little different but the same concept.

Someone buys there unit/apartment etc (some being 500+ thousand). They pay the money to the operator. The operator draws there fee (as above) then upon "rollover" the operator will return the initial investment less the fee. Where this one differs is that the unit will be on sold and quite often the operator gets all of the uplift in value, however some times the deals can be structured that the operator splits the capital gain with the family of the "roll over". This also means that often the operator wont return the initial money until someone else has taken the apartment.

There can be capex provisions on the outgoing "roll over also"

Each of the villages generally have community facilities etc, which is where AVE excel because the level of their care is generally considered second to none and their villages often have pools, halls, cafes etc.

I will agree that individual villages seem to be a very lumpy cash flow proposition, however with a good spread of villages this should be smoothed.

I will agree also that the increasing value of the units depends on the market.

One thing with AVE is they have an amazing reputation and their vacancy rates are generally very low.

Also with the prices of real estate increasing (village IRRs where 17+% and have come down to 10-13%) it has become harder to buy quality assets at good prices so Aveum have begun exploiting their current capacity.

I have met some of the AVE management before and seen a number of their sites and mucky their sites do seem to be very good quality.

Please someone if they have more up to date information I will definitely stand corrected as it has been a number of years since I have had any exposure to the machinations of the senior living area.

The biggest bonus I see is that area of the population is going to explode even more and already beds and units are scarce around Australia.
AVE is a top notch provider that has been in operation for some 100+ years I think(previously Hibernian Friendly Society).
Their reputation has given them a head start on one acquisition so far (red cross or the like sold a village to AVE) and I believe that as charities divest themselves more from the sector in the future AVE will be in a great position. (Not for profit providers are still by far the largest in Aus)

Finally BNB has had a number of shots at AVE, Stockland wants to branch out I think (given pipeline of res sites why not?). If AVE dont put on greater size (whilst keeping debt to a minimum) they will definitely be a target in the next round of consolidation.

Hope that helps.. (ps sorry i didnt re read due to length so I apologise for the typos etc)