AVEO – Shareholders reflect general disquiet with AVEO attitude

A price fall in the AVEO share price today has signalled disquiet with profiteering behaviour on the part of AVEO Group.


A price fall in the AVEO share price today has signalled disquiet with profiteering behaviour on the part of AVEO Group.

When news hit over the last few days of an investigation into the hardline profiteering practices of the group,  the results were surprising. Usually these kinds of stories make a splash withing news circles, but financially there is often little reaction at all.

But times are changing, as Delta Airlines and United found out recently when dubious attitudes towards customers came to the fore, and the market decided that this behaviour was not to be tolerated.

High fees and complex legalities are not uncommon in the retirement industry. Notoriously high exit fees from retirement villages are a burden on retirees, a disincentive to move away from villages where resident may be less-than-happy, and a lucrative endeavour for the operators and companies behind this industry.

Moving in to a retirement village is only one part of the cost, as operators charge high fees to exit the property, in some cases up to 40%.

And AVEO has added to the financial benefits for themselves, by changing ownership status from freehold to leasehold, retaining themselves the ownership of property. Many residents were recently surprised – and dismayed – when AVEO decided to sell, then re-lease, properties which residents believed they owned outright.

AVEO charges an initial purchase price of the home, a periodic fee that is charged for the services that are received at the retirement community, and a Deferred Management Fee (DMF), which is paid in the future when your home is resold. It covers the costs involved in providing all the ‘wonderful amenities’ enjoyed as a resident.

Lifestyle and community spirit are some positive reasons to enjoy life in a retirement village, avoiding some of the downsides of living at home. But they come with a cost, so look carefully at the plans and options and understand the financial implications before you decide which direction retirement takes you in.

Choice.com.au offer some sage advice when it comes to retirement villages, and even a little research can pay off.

Moving in costs vary between area and level of facility. Ongoing fees may change, and usually in an upward direction. And the services provided can also change, such as lessening of facilities or decreasing availability of services.

The financial impacts can be significant when moving out – if capital gain is low, there may be equivalent results when comparing retirement units to villages. But the exit fees and management fees can significantly erode potential finances when overall capital growth moves upward over time.

Again, choice.com.au offers some wise advice – read contracts and understand them, before accepting the terms of retirement village accomodation.

In the end, it should be fair for all concerned. If in doubt, back it up with investment…in retirement village company shares! AVEO reported statutory profits of 82% for the six months to February 2017!

www.retirementliving.org.au has a clear brief of the ins and outs of the process.