Viability of retirement village developer questioned after auditor’s warning

Investors in Prime Retirement and Aged Care Property Trust, which owns $1.4 billion worth of aged care facilities and nursing homes, have been warned by the company’s auditors about its viability as a going concern.

 

Prime’s auditors, Pitcher Partners, made the blunt warning after Prime admitted it had technically breached its covenants and was in discussions with its banks about changing some loan conditions.

“Should the trust not have the continuing support of its financiers or be able to obtain sufficient alternate funding, should this be required, there would be significant uncertainty whether it would be able to continue as a going concern,” the auditors wrote in Prime’s half-yearly report.

Prime posted a loss of $91.2 million in the first half, mainly as a result of a $44.8 million reduction in the value of its property portfolio. The company has $12.7 million in cash, compared with $154.4 million by 31 December 2007.

The company, which is chaired by former federal health minister Michael Wooldridge, is now considering a number of options as part of a strategic review, including selling $60 million of non-core assets, hunting for a cornerstone investor willing to pump some cash into the entity, and looking for a merger with another company.

“The immediate focus of the board is to conserve cash while the economy is in its current turmoil. Our intent is for the trust to emerge as a strong and focused operation,” Wooldridge said in a statement.

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