Lend Lease is believed to have placed its New Zealand retirement business on the market, with Goldman Sachs understood to be advising on the transaction.
The listed group manages 77 retirement villages across Australia and New Zealand, five of which are across the Tasman.
Sources suggest the New Zealand business may sell for about $100 million, suggesting that the overall operation could be worth about $2 billion.
Goldman Sachs is known to be close to the company, working on previous deals for Lend Lease in the past, along with Gresham.
The divestment raises questions about the company’s plans for its overall retirement division in Australia.
Different laws surrounding the bond structure make the model seem more attractive in New Zealand.
A spokesman for Lend Lease could not be reached yesterday.
However, the company’s strategy has always been understood to be to spin off the retirement operations into its funds management arm.
In September last year, Stockland hired Macquarie Capital to find investors for its $1.1bn retirement business in Australia, with a potential spin-off under consideration.
This assumed improving market sentiment.
However, it is widely known that listed groups have not always been so committed to the retirement sector as an investment, due to the lower cash returns it offers compared to other asset classes.
Previously, groups have held on to the investments, often because of a lack of buyers in the market.
In the aftermath of the global financial crisis, the sector was out of favour for wholesale investors, many of whom were burnt by the demise of various groups at the time, such as Retirement Villages Group.
But various superannuation funds and large investors may be running out of lucrative investment options for exposure to the country’s ageing population at a time when interest rates are low and cash yields in the sector are improving.
One market analyst said the company needed to embark on divestments to generate profits, adding that Lend Lease had previously indicated that at some point it wanted to exit the retirement business.
He said that collectively, the business generated about $130m annually.
Some believe that the best option for Lend Lease would be to spin out its entire retirement division and provide shareholders with an in specie distribution of that business.
Listed rival Aveo, which made $71m in earnings before interest and tax, is currently trading with a $1.5bn market value that could make such a move more attractive to the company.
However, one theory is that the New Zealand business is being divested to boost the company’s 2016 financial year profit result.