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ASX-listed Lifestyle Communities has launched a $275 million raising that will support its growth into land lease residential estates, the latest vote of confidence for the emerging form of affordable housing.
Land lease communities are typically aimed at budget retirees and those seeking affordable housing. Under the model, residents buy a prefabricated home from the estate operator then pay a ground rent for their site.
Lifestyle Communities’ clubhouse at its Lifestyle Berwick Waters development.
Raisings have been relatively rare in the listed property sector over the past year. The $275 million offer, solely underwritten by Citi, will give Lifestyle Communities the funding capacity it needs to expand its greenfield development strategy. Its acquisition opportunities include five identified land sites.
“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,” managing director James Kelly said.
“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.”
AustralianSuper, one of Lifestyle’s major investors controlling 12 per cent of the stock, has committed to take up its full entitlement under the offer.
Major developers are taking greater interest in the land lease model which, as Lifestyle noted, addresses the country’s need for affordable housing options. Underpinning the thesis is the fact that a significant number of senior Australians have insufficient superannuation to fund their retirement.
Disappointing half-year result
Selling the family home and then downsizing into a land lease estate can free up capital to help fund residents’ retirement, according to proponents of the model.
ASX-listed developer Stockland is pressing strongly into the sector, with plans to expand across 12,000 home sites in land lease estates. Last year Mirvac also made a big move into the sector as part of a $1 billion joint deal to acquire a stake in Western Australia’s largest operator.
In another sign of the growing interest for the sector, ambitious fund manager HMC Capital has taken a substantial stake in Lifestyle’s peer, Ingenia.
Lifestyle announced the raising as it reported a disappointing 2024 half-year result, with net profit after tax of $20.8 million, compared to $25.2 million for the previous corresponding half.
New home settlements of 124 for the half, compared to 141 previously, were well below consensus expectations. Lifestyle said the net result was also affected by increased costs for marketing and new projects which had not yet commenced settlements.
Jarden’s Lou Pirenc described the result as ‘weak’ in a client note.
“Whilst the $275 million entitlement offer is presented as an opportunity to benefit from market conditions, this comes after management stating repeatedly that LIC would not raise equity to grow the business,” he wrote.
“Having said that, given the pressure on cash flow and balance sheet, it should help remove a major pushback on the growth story.”
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