NOW THE BIG GUNS WANT A PIECE OF CHILDCARE BOOM

THE Australian childcare sector is fast becoming hot property, with US funds manager Morgan Stanley the latest to join the chase for riches with the aid of Gold Coast partners.

Morgan Stanley Real Estate Investing has teamed up with Southport-based Affinity Education Group (ASX: AFJ) following a buyout deal that saw the US giant snare the assets of Broadbeach-based Australian Childcare Projects.

ACP has a management deal in place with Affinity Education and that agreement is set to continue with Morgan Stanley in the wake of the buyout.

Affinity says the agreement will allow it to increase childcare centres under management and deliver a pipeline for future growth.

"It's a testimony to the strength of the Affinity Education platform that we have joined with ACP and Morgan Stanley to pursue further opportunities together," says Affinity CEO Justin Laboo.

ACP is a relatively new player in the market, established in 2013 with a focus on developing and operating childcare centres. Last week it affirmed its commitment to an "aggressive growth strategy".

"ACP aims to be the pre-eminent developer and operator of childcare centres in Australia and Morgan Stanley's involvement will assist this process on a number of levels," says ACP's CEO Craig Napier.

However, both ACP and Affinity have a way to go to match the growth of the Gold Coast's biggest listed company, G8 Education (ASX: GEM).

ACP, which operates the Petit Early Learning Journey and the Master & Miss Early Learning Academy brands, has 12 childcare centres on the eastern seaboard with a total of 1300 childcare places. Affinity owns 152 centres with 11,600 childcare places but has yet to post a maiden profit.

G8 Education, which reignited the corporate push back into the childcare sector in the turmoil that followed the collapse of Eddy Grove's ABC Learning Centres in 2008, has 437 childcare centres with a daily licence capacity of 31,156 children.

G8 Education has a market capitalisation of around $1.6 billion, while Affinity is sitting around $250 million.

The Australian head of Morgan Stanley Real Estate Investing, Chris Tynan, says the childcare sector is showing strong fundamentals, backed by government policy to provide quality childcare services for working families.

"Morgan Stanley Real Estate Investing is excited by the opportunity to invest in ACP at this relatively early stage of it evolution," says Tynan.

"Though ACP is a young entity it has already built an excellent pipeline of development projects under a strong management team that have a track record of success and deep operating knowledge and experience in the sector."

Affinity's shares hit a high of $1.53 in early trading today.