Victorian-based Lifestyle Communities has revealed a surprising upsurge in its homeowners selling their properties in the buoyant property market in its Half Yearly results.
“50% of our homeowners, who are moving out, are moving out for non-health reasons. Lifestyle Communities is not a final destination, more a stepping stone,” said CEO James Kelly.
He cited a recent case of a homeowner selling their home at its Ocean Grove community for $720,000, with a Deferred Management Fee (DMF) of $60,000. Lifestyle Communities has had average capital growth of 7.3%.
“They were left with $180,000 profit and used it to move to buy a property at our St Leonards community, which is 20 minutes away, for $450,000,” said James.
“Unlike all other land lease operators, we have this unique model where we do not make cash profit on developing communities and effectively some of this profit is deferred down the track when the homeowner sells their home and pays us the DMF. We believe it is better for them to have the money upfront so they can live a bigger life rather that charge a big upfront price and leave them with less cash when they downsize.
“Also, as we don’t raise equity from the market, we are capital recyclers and the velocity of recycling drives our growth. For example, the more projects that we can do each year. So, the cheaper we sell them, the faster they sell and the quicker we get our money back to build the next project.
“The statistic I like the most is that we have only ever raised $46 million from shareholders since the get go and have created a $2 billion business through just recycling this capital. Incredibly accretive for shareholders!”
Half-Year Financial Results show why Ingenia, Stockland and Mirvac all see the LLC model as a revenue winner.
Lifestyle Communities reported to the ASX last Tuesday that it had sold 166 homes, made 68 resales and has agreed to buy three new parcels of land – for a 260-home LLC at Phillip Island, approximately 187 new homes at Merrifield and a 7.9ha 290-home LLC at Ocean Grove (3.5km from its existing LLC) over the six months to 31 December.
Founded in 2003 by James Kelly, Dael Perlov and Bruce Carter, the business has increased its debt facility by $100 million to $375 million to fund the three land purchases.
Over the six months to 31 December, the company’s 68 resales – up from 32 in the same period a year earlier – more than doubled its DMF revenue to $4.7 million.
Lifestyle Communities is the only large land lease operator to charge a DMF.
The group reaffirmed it would sell 1,100 to 1,300 new homes and achieve between 450-550 resales over the next three years as it announced a half-year after tax profit, to 31 December 2020, of $27.5 million.
This compares to $14.1 million (during the Victorian lockdowns) in six months to 31 December 2020 and $15.1 million in the six months to 31 December 2019.
Lifestyle Communities charges couples $222 a week for site rental with annual CPI increases of 3.5%.
To top off the year, its shares on the ASX have risen 27% in the past 12 months and were trading at $16.83 yesterday afternoon.
