17th March, 2023
The Insider: Meet the Fund Manager sessions are a great way to hear directly from leading fund managers. They share their approach to investing, favourite companies and their market view for the year ahead.
Australians have one of the highest life expectancies in the world. As a result, by 2050, it is estimated that around a quarter of Australians will be aged 65 years or older. With suitable housing being a top requirement, the demand for affordable community dwellings is bound to increase along with the growth of the demographic.
Based in Victoria, Lifestyle Communities Ltd (ASX: LIC) builds, owns and operates affordable land lease communities for individuals and couples aged 55 and older. According to fund manager Jai Mirchandani, the business has a recurring revenue model where the owner/tenant/occupier has ownership of the building but rents the land.
Speaking on Reach Markets’ The Insider: Meet the Fund Manager in March 2023, Mr Mirchandani, Founder and Portfolio Manager at ESG-focused ELM Responsible Investments, selected Lifestyle Communities as one of his favourite stocks. Watch the full The Insider: Meet the Fund Manager session.
“You don’t get that kind of ownership when it comes to a traditional retirement village,” Mr Mirchandani said. “From an investor’s perspective, we get annuity income that comes through in the form of rent for the land that the company owns.” For occupants, it provides a well-managed and maintained community and helps in unlocking equity.
Mr Mirchandani appreciated the fact that Lifestyle Communities is founder-led, pursuing organic growth and focused on its customers and shareholders. “A lot of their sales come from customer referrals which means that the company incurs less marketing expenses, higher profit margins and ultimately higher valuation,” he said.
In its 20-year history, the company has raised capital only once (in 2012) and has been internally funded since which, as pointed out by Mr Mirchandani, indicates Lifestyle’s focus on its shareholders.
“We think that the company has a large addressable market particularly given the ageing population,” he said, adding that there was a low penetration rate in the land lease industry within which Lifestyle Communities is a leader.
As at H1 FY23, the business has a portfolio of 28 communities in planning, development and under management consisting of 5,599 homes of which 3,334 are occupied. In FY22, Lifestyle earned more than $40 million in site rental and management fees.
The company’s focus remains on Victoria, particularly Melbourne and Geelong’s growth corridors, following a ‘just in time’ model that enables the commencement of development soon after the acquisition of the site. Using a mix of debt capital and equity, the business recycles this capital pool into developing greenfield sites to create new communities.
On the ESG front, Mr Mirchandani noted that Lifestyle Communities covered five of the 17 United Nations Sustainable Development Goals in providing affordable and sustainable housing with affordable and clean energy, while also promoting gender equality at board and senior management levels.
“When we conduct our sustainability analysis we think that the company scores well across UN SDGs and across many of its stakeholders,” Mr Mirchandani said.
Click here to view more videos from Jai Mirchandani’s The Insider: Meet the Fund Manager session.
Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets’ position. Any advice contained within this presentation is general advice and does not consider your personal circumstances, you should consider whether it is appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.
Past performance is not a reliable indicator of future performance.
Source published via Australian Human Rights Commission 2017.
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Past performance is not a reliable indicator of future performance.
The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.
Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.