REAL ESTATE INVESTMENT TRUSTS & FUNDSSOCIAL INFRASTRUCTURE

Stockland focuses on emerging land lease sector

Halcyon co founders Paul Melville and Dr Bevan Geissmann
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STOCKLAND has confirmed it $620 million acquisition of land lease communities operator Halcyon Group, and flagged bringing in outside capital as part of plans to further boost its presence in the emerging sector.

The purchase of Queensland-based Halcyon will add to its portfolio 3,800 sites across 13 land lease communities – made up of six established land lease communities, four communities in development, and three projects in planning.

That will give Stockland 2,500 new customers, and a team of over 100 people with sector experience which will add to its existing land lease capabilities.

“This acquisition is in line with our stated strategy to grow our land lease communities and will increase the size of our portfolio to 7,800 sites,” Stockland managing director and CEO, Tarun Gupta said.

“Land lease communities deliver attractive returns as the demand for high quality, affordable housing solutions grows. This demand is driven by Australia’s aging population and baby boomers reaching retirement age.”

Gupta and Stockland had previously gone on the record in targeting the baby boomer market that has shown a penchant for the “horizontal” land lease segment, in which a resident buys a house while renting the land that it is on, and paying fees for access to and maintenance of common facilities and community green areas.

“Halcyon enables us to acquire a respected brand in the market with a loyal customer base and a knowledgeable team, which will help us achieve scale in the fastest-growing lifestyle segment – the over 50s market,” Gupta said.

“As our land lease communities portfolio grows we will explore opportunities to introduce aligned third party capital into this business to increase growth and build further scale and diversity in the portfolio.

“We see the land lease communities business as complementary to our master-planned communities land bank and believe there are synergies we can leverage to grow the business at scale nationally and achieve our ambition of becoming a leading operator in this space,” he said. Stockland last week boosted its residential pipeline in Victoria with the $82 million purchase of 84 hectares of land in the western growth corridor, to build 800 new homes within a new master-planned community.

The Halcyon transaction is accretive to funds from operations per security. Stockland will fund 100% of the acquisition price and associated costs from existing liquidity. It reportedly outlasted Macquarie and ASX-listed lifestyle villages operator Ingenia in the bidding for Halcyon.

The first $310 million of the purchase will be paid on completion in mid-August with the balance deferred until July next year. Gearing is estimated at around 22% at the end of June, at the low end of its target range of 20% to 30%, with liquidity remaining at over $2 billion.

“Stockland’s diversified property experience, balance sheet, landbank and cultural fit make it the perfect business to lead Halcyon on its next phase of growth,” Halcyon Group managing director, Dr Bevan Geissmann said.

Stockland’s group executive and CEO Stockland Communities, Andrew Whitson, said the over-50s, as a market, are “looking for well-designed, personalised housing; security; access to facilities and activities to maintain active lifestyles”.

“This acquisition enables us to offer more customers access to this alternate over 50s lifestyle offering, brings forward our land lease growth plans and enhances our ability to leverage our competitive strengths in master-planned communities to generate quality recurring income.”