This article is from the Australian Property Journal archive
INTEREST rate rises and high inflation hit many parts of Lifestyle Communities’ (ASX: LIC) business in the first half, and the ASX-listed group has launched a $275 million raising as it looks to go deeper into the land lease residential sector.
LIC said the fully underwritten 1 for 6.08 pro-rata entitlement offer is being undertaken to “provide funding for strategic growth initiatives (identified land acquisition pipeline, and associated development capex), and provides LIC with funding capacity to support an expansion of its greenfield development strategy.”
The land lease model sees purchasers buy from the operator a modular or demountable home that sits on land owned by the operator – who also provides amenities – and rent the land underneath. It is typically targeted at downsizing over 55s. It has attracted increasing attention from major developers, with Mirvac recently teaming up with Pacific Equity Partners in a billion-dollar deal to acquire operator Serenitas, and Stockland launching a batch of new Victorian communities early this year after it acquired operator Halcyon in 2021.
LIC said the proceeds of the raising will be used to fund a “strong pipeline of identified land acquisition opportunities of high quality and strategically located assets currently at various stages of negotiations and due diligence”.
James Kelly, LIC managing director, said, “We are seeing a number of opportunities to buy further sites on top of the four that we have already purchased in FY24 year-to-date”.
“The entitlement offer will create a step change for the business and allow us to recycle capital over time from more projects as we continue our organic growth model.”
The acquisition opportunities include five identified land sites, he said.
LIC yesterday announced an interim net profit after tax of $20.8 million, compared to $25.2 million on the prior corresponding period, due to lower new home settlements (124 compared to 141 in 1H23) and increased pre-sales and marketing costs for new projects which have not yet commenced settlements.
Annuity revenue increased by 16% with higher rental revenue from an increased number of homes under management and inflation-linked 6.6% rental increase year-on-year.
“Market conditions were challenging during 2023. Rapid interest rate rises, and persistent high inflation flowed through the economy impacting many areas of our business,” Kelly said.
“A significant number of insolvencies in the construction industry fuelled a lack of consumer confidence and this has had an impact on our new home settlements with some customers waiting until their home is completed before listing their existing home for sale.”
Lifestyle Communities is currently holding 420-plus presales contracts worth $287.4 million and expect new home settlements in FY24 to be similar to FY23, both underpinned by strong referral rates of up to 50% of new sales.
Lifestyle Communities has ten projects in active development and two additional projects planned for launch in FY24 which have all received local council planning approval and are on schedule for launch in the second half. The company will have twelve projects in various stages of completion by the end of FY24.
