Aveo shares slump amid media probe

Retirement village owner Aveo Group's shares have fallen as the company finds itself at the centre of a media investigation into its business practices.

Aveo Group shares have slumped as the retirement and nursing home operator faces a media investigation alleging it has used exorbitant fees and complex contracts to increase profits.

Following media reports in Fairfax publications and ahead of a program due to run on the ABC's Four Corners on Monday night, Aveo has released to the ASX its responses to a series of questions put to the company by journalists and defended its business practices.

Four Corners and Fairfax have jointly investigated the company and have interviewed residents, lawyers, a lobby group and former employees.

Articles already published include claims Aveo was "aggressive" in its exit fee structures and had a vested interest in "churning" resident turnover to increase those exit fees and its profits.

In one question, Aveo was asked to explain why exit fees vary from 20 per cent in some earlier contracts to 40 per cent at Freedom Aged Care, which it acquired in February 2016.

The company said the higher rate reflected the higher costs of managing a high level care service.

It also said it has been standardising exit fees across the group to 35 per cent of the entry price of a unit, with no refurbishment and sales costs and a guaranteed buyback of the unit if it has not been sold within six or 12 months.

Aveo is converting its villages from freehold to leasehold and was asked about claims from a lawyer that it has been obtaining the freehold title for virtually nothing.

"This absolutely false," Aveo's response said.

"In converting a unit from a resident freehold tenure to a resident leasehold tenure, Aveo will need to buy back the unit from the departing resident at a negotiated price, based on the market price, and then re-lease the same unit to a new resident at a market price."

Shares in Aveo were down by 9.3 per cent, or 28.5 per cent, to $2.765 at 1348 AEST.

Source AAP

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