Ironbridge Capital

On 9th December 2005, Ironbridge completed the simultaneous acquisitions of several aged care facilities in New Zealand. Elrond Group Holdings, a North Island operator, was the largest, and this was supplemented by a number of purchases in the South Island. All purchases had some level of common ownership by Greg Tomlinson, who has reinvested a significant amount of his proceeds and will become CEO of the new group. The business has been incorporated under the name Qualcare Group Holdings Limited ("Qualcare") and will operate 16 retirement villages across New Zealand from its new headquarters in Auckland. Qualcare is now one of the largest aged care operators in New Zealand, with 976 rest home and hospital beds, and 462 independent living villas and apartments. Ironbridge has invested A$36 million of equity for 60% of the business.

Ironbridge views Qualcare as an attractive investment because the business is operating in a growth sector, is backed by strong demographic trends and has a significant level of government backed revenues. Qualcare has both organic growth opportunities through development of its existing land holdings and inorganic opportunities in a sector that is rapidly consolidating. Ironbridge expects to increase its investment in Qualcare as a result.

Ironbridge spent many months working alongside Greg, architects, planners and marketers to create plan to double the size of the existing villages. Greg was attracted to this approach, allowing him to consolidate his aged care assets, provide an exit for minority shareholders, and critically, to provide capital to accelerate the growth. Greg also felt that the presence of Ironbridge would allow Qualcare to hire high quality management to implement the plan, two of whom have already been recruited, including the CFO.

"Ironbridge have already proved themselves as an excellent partner and have backed the opportunity to grow the business in order to take it to the next level."

- Greg Tomlinson, Qualcare, Founder & CEO

Greg was a pioneer in aged care. In the mid 1980's, he constructed 3 greenfield villages. In 2000, Greg acquired 5 homes spread around Christchurch and the upper South Island from Presbyterian Support Services South. In February 2004, Elrond acquired Presbyterian Support Northern. This business comprised 5 large homes to take the current group to 16 sites.

Qualcare is a fully integrated aged care provider with the majority of sites comprising co-located rest homes, hospital, dementia and independent living villas and apartments for the elderly.

Ironbridge conducted extensive financial, legal, commercial and property diligence using PricewaterhouseCoopers, Chapman Tripp, AT Kearney and Klein.

Rest Homes, Hospitals and Dementia: Comprises two thirds of the business, consisting of different levels of care for the elderly. Average age of residents is approaching 90 years old.

Independent Living: Independent free standing villas or serviced apartments for the elderly. The resident buys the right to live in the apartment until they depart, under a "license to occupy". The apartments are typically co-located with the rest homes, and are configured for the elderly. Qualcare charges an annual fee, and retains any capital gains arising from the re-sale of this license to occupy. Average age of residents is around 85 years old.

Market: The aged care market in New Zealand, is worth NZ$1.3 billion, growing at 5.6% pa. The market is being driven by the aging population.

Competitors: In New Zealand, Qualcare is the second largest rest home provider, and the fifth largest provider of independent living apartments. Principal competitors are Guardian (owned by DCA), Ryman and Metlifecare (owned by Macquarie/FKP). The industry is still very fragmented with the largest four making up less than 20% of the market.

Qualcare's has experienced operational management at a site level and this will be augmented with new senior management to enable the business to manage KPI's across the group and realize scale benefits. New management will also be introduced to project manage the development and market the significant number of new independent living units that will be constructed.

Greg Tomlinson, Chief Executive, is a pioneer of the New Zealand aged care industry starting in the mid 1980's and has wide contacts within the relevant government agencies. Greg also has a background in construction and will oversee the development. Greg is a respected leader in the industry.

Earl Gasparich, Finance Director, is an experienced Finance Director, qualifying as a Chartered Accountant with PricewaterhouseCoopers. Most recently he spent four years as Finance Director of Excell, a project management business. Earl will join Qualcare in January 2006.

"Qualcare has the key ingredients of a private equity investment: good market position in a consolidating industry, organic growth and stable and predictable cash flows."

- Neil Broekhuizen, Managing Partner, Ironbridge Capital

Leading market position: Qualcare is one of the largest aged care providers in New Zealand and benefits from operational economies of scale.

Strong market growth backed by demographic trends: The population in New Zealand aged over 85 years old is forecast to increase by 25% by 2010. In addition, the supply of new beds is limited by a government moratorium on bed licenses and available land in prime locations.

Operational improvement opportunity as new operational benchmarking and centralized purchasing are implemented.

Freehold property backing and government revenues: predictable cash flow and downside protection.

Substantial land bank provides opportunity to build a further 500+ aged care apartments and villas around the existing villages.

Good exit opportunities through an IPO or a trade sale as the industry rapidly consolidates. A number of competitors have already been acquired by financial investors whose intentions are to seed investment trusts that will benefit from the stable, asset backed cashflows.

On 9th March 2006, Qualcare agreed to purchase six residential facilities owned and operated by Presbyterian Support East Coast (PSEC) in the Hawke's Bay and Gisborne area, for $21 million. The former PSEC homes comprise facilities in six locations with a total of 331 rest home and hospital beds, and 63 independent living units. Following the acquisition, Qualcare will own 1300 rest home and hospital beds and 535 units located in 22 facilities throughout New Zealand.