How this business unlocks upward growth via downsizing

How this business unlocks upward growth via downsizing

Date of Report: Market close on Tuesday, 15th February
ASX: LICPrice: $17.57

52 Week Range: $12.350 - $23.850

Market Cap: $1.853 billion

Sector: Real estate

Every second week we invite a leading fund manager to present at The Insider: Meet the Fund Manager. In June, Ed Prendergast from Pengana Capital Group selected Lifestyle Communities as one of his three favourite stocks because of what he considers a well thought out business model and scope for further growth.

4 June, 2021

24 November, 2021

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.

The Insider: Meet the CEO sessions feature a selection of company leaders who provide a succinct overview of big things their companies are doing. 

Two years under some of the world’s strictest coronavirus lockdowns has left many older Victorians eager to free up the capital locked in their homes and work through their bucket lists.

For Lifestyle Communities, this new lease on life that many Baby Boomers are currently experiencing has driven demand for the business’s properties – and the lifestyles they afford their tenants.

Lifestyle Communities owns 24 ‘communities’ across Victoria. These communities consist of affordable retirement housing options and access to club houses and communal luxuries (like boats) for residents to use.

“Really, they’re like resorts,” managing director James Kelly said.

The houses are sold for 75% to 80% of the median home price, and those moving in typically free up $212,000 from the equity in their previous homes – money they can put towards living the life they want.

“They’ve lost two years of their lives to tick off their bucket lists, and we’re seeing this renewed energy and push around people wanting to get on with downsizing and seize the moment,” Mr Kelly said.

Unlike other retirement communities, residents moving into one of Lifestyle Communities’ homes purchase their house outright, but do not buy the land, and instead pay a leasing fee to the company – generating revenues for the business.

There’s also an exit fee – roughly 20% of a home’s resale value – applied when a resident moves out, creating additional earnings for Lifestyle Communities.

This model also means the money invested in developing land into a community is eventually recycled and can be put back into purchasing and developing new sites to expand the business.

It’s so effective, Mr Kelly said, that the company has only had to undergo one round of capital raising back in 2012, with that capital and some of the additional funds generated through fees supporting the business’s growth since then.

Pengana Capital Group senior fund manager Ed Prendergast said Lifestyle Communities’ predictable growth and solid management team made the company an attractive option for his fund.

Mr Prendergast noted the company’s leasing fees have created strong recurring revenues, while the addition of new communities to the overall portfolio means there is a strong potential for further growth both in these fees and from the exit fees.

“That’s why we’re invested, because there is that potential,” he said.

Click here to view more videos from Ed Prendergast’s  Meet the Fund Manager’ session, or click here to view the full ‘The Insider: Meet the CEOs’ session.

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.

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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.