Deal Galls Prime Investors


Investors may be interested to  read the attached article in today's Australian Financial Review which reports that the majority of the Trust's retirement villages have been sold to Lend Lease in what has been described as a discount deal..


We have numerous concerns about this reported transaction.  First and foremost, we maintain that Lend Lease does not have proper title to the village management rights, having acquired them from a party which itself did not have proper title having not paid commercial consideration for the rights.  We also note that the absence of proper title is further underlined by the fact that the Call Option used to acquire the management rights was exercised after the Option had already expired worthless.


With Lend Lease claiming to have title to the management rights, it would appear that, understandably, no external party has been prepared to pay a reasonable amount for the villages, leaving Lend Lease as the only party interested in acquiring the villages and able to use its position to acquire the villages at discounted prices in an uncompetitive market.


As investors will recall, the management of the Trust's villages by Lend Lease triggered a massive writedown in the value of the Trust's portfolio.  The externalisation of the management rights in this manner has also had the effect of discouraging potential buyers and provided an opportunity for Lend Lease to unreasonably acquire the villages at what would appear to be bargain prices.


We have made strong representations to Lend Lease, and put Lend Lease on notice, that it does not have proper title to the village management rights.  We have suggested that it would be highly inappropriate for Lend Lease to acquire the villages pending the resolution of the management rights issues.  More importantly, we note that Court proceedings have been initiated by the Liquidators against Lend Lease in relation to the management rights.  Despite these legal proceedings, Lend Lease has chosen to proceed with the acquisition of the villages, and it is noted that these actions will serve to crystallise the loss suffered to the Trust.


We are also aware that the Receivers have an obligation to maximise the recovery of funds for creditors and the reported sale of the villages without first resolving the contested management rights issues raises a number of further concerns which we intend to pursue.