Orchard Leases former ABC Centres

01 June 2009

Orchard Capital Investments Limited (Orchard) as the Responsible Entity for the Orchard Childcare Property Fund (the Fund) today announced that it has completed new leasing arrangements for 46 child care centre properties that were previously leased to ABC Learning Centres Ltd (ABC).

Orchard CEO David Hinde said ‘The transition of these 46 centres to new operators is a significant achievement, especially when the child care industry has just experienced a collapse of such magnitude. This evidences the renewed strength in the child care sector with other operators stepping in to take over the centres affected by the demise of ABC.’

‘This outcome is beneficial for investors in the Orchard Fund and also ensures the continued provision of child care services for the families involved as well as employment for staff.’ Mr Hinde added.

Orchard has entered into long term leasing arrangements with three existing operators in respect of 11 child care centres previously operated by ABC Learning Centres Ltd (ABC). These centres were part of a group of 13 centres owned by the Orchard Childcare Property Fund which were closed by McGrath Nicol, the Receivers and Managers of ABC, in late December 2008 and January 2009.

The Fund will be further strengthened by these new lease arrangements with terms of 15 years (plus 2 x 5 year options) agreed at the same rent levels as those paid by ABC. Some short term incentives will be provided to assist operators in reopening centres. Orchard remains confident that the two remaining centres will be leased or sold to other child care centre operators.

Orchard has also entered into arrangements with two experienced operators for 35 child care centres which formed part of the ABC Learning Centres Government funded portfolio (ABC2).

PPB, the Court Appointed Receivers undertook a thorough marketing process to find new operators for these centres. Orchard has been actively involved with PPB in this process which has resulted in new lease arrangements for all 35 centres owned by the Orchard fund.

Kids in Care, through associated entities, is an existing tenant of child care centres owned by the Fund. Kids in Care has taken over 22 centres in three eastern states as well as three centres in Western Australia. NurtureOne, which is based in Wagga Wagga, NSW has taken over a group of ten centres, located in regional NSW and Victoria as well as Devonport, Tasmania.

The Fund now has 119 centres leased to ABC in Australia, 25 centres leased to ABC in New Zealand, 55 centres leased to other operators and only two centres that are vacant. The Fund also holds 11 development sites.

Orchard looks forward to working with McGrath Nicol to find new operators for the remaining centres in Australia that are still retained by the Receivers. A sale process is expected to commence in the second half of 2009.

Summary

  • Total of 46 centres now re-leased to new operators on 15 year (plus 2 x 5 year options) lease terms at the same rent levels;
  • 11 former ABC child care centres closed by McGrath Nicol in December and January have been leased to other operators;
  • All 35 former ABC child care centres included in the ABC Government funded portfolio have been taken over by two experienced operators on new long term lease arrangements.