This article is from the Australian Property Journal archive
EUREKA has completed its $70.4 million equity raising announced last week, amidst controversy as the group was referred to the consumer watchdog over retirement village rental rises.
The retirement village operator is being investigated by the Australian Competition & Consumer Commission (ACCC) over claims of excessive rent increases, reflecting rental increases of nearly 30%, according to a report in The Australian.
With a number of the residents reportedly seeing two rental increase demand of 15% over a single year. This despite Tasmania allowing rent increases only once per annum.
This comes after 48 cases of rental increase demands were rejected by a residency tribunal, with numerous complaints by residents to Tasmania’s Department of Justice tenancy commissioner.
With the Tenants’ Union of Tasmania referring the cases to the ACCC, after claiming Eureka had ignored multiple decisions by the Tasmanian Tenancy Commissioner that concluded the increases were “unreasonable”.
Simon Owen, the new CEO at Eureka who took the helm around six weeks back, has said a review was undertaken of the internal processes around rental increases across the 52-village portfolio.
“It is critical that the Company has a rigorous process in reviewing the agreements and that we fully factor in the cost-of-living pressures that are affecting all Australian households to ensure that any rental increases are fair and reasonable,” said Owen.
“I take this issue very seriously and it is not acceptable that we issued an increase in rent for one resident by as much as 14 per cent. In general, our rent increases are aligned with increases that our residents receive in the Commonwealth Pension and Rent Assistance which makes it very transparent.”
Owen did claim that Eureka has seen major cost increases across insurance, council rates, electricity, food and interest rates.
Though at the same time, the group did see major profit increases in FY23, before taking a dip after the impacts of Aspen’s failed takeover.
“Clearly, we did not get it right with some of the proposed rental increases in Tasmania and we need to put in the place the appropriate checks and balances to ensure that we achieve the right outcomes,” added Owen.
Though reportedly, similar rental increase demands have been made to tenants in NSW and Western Australia as well.
With $50 a week increases in Broken Hill and $44.50 a week in Perth, according to The Australian.
Meanwhile, Eureka also announced today that it had successfully completed the equity raising announced on Thursday to fund the acquisition of almost 500 units across more than 10 more villages.
The institutional component raised in total $63.8 million, including a $15.0 million institutional placement and a $48.8 million accelerated non-renounceable pro-rata entitlement offer.
The retail component of the entitlement offer set to open this coming Thursday, with expectations to raise approximately $6.6 million.
“The high level of participation amongst existing shareholders was also very welcome and reflects the strong investor confidence in our growth strategy. This is a step change for the capital position of the Company and we are now well placed to expand Eureka’s portfolio of seniors’ rental communities,” said Owen.
“I look forward to updating the market in the coming weeks about the first tranche of villages that Eureka expects to acquire as we look to accelerate our growth profile off the back of a very successful capital raising.”
