I think Lifestyle Communities (ASX: LIC) is one ASX share to watch after making an announcement today.
About Lifestyle Communities
Lifestyle Communities is based in Melbourne, Victoria. It develops, owns and manages affordable independent living residential land lease communities. Lifestyle Communities has 22 residential land lease communities in planning, development or under management.
What did the business announce today?
It has executed a contract of sale to purchase a 9-hectare site located in Clyde, Victoria. The site has been acquired on 3-year terms and settlement is expected to occur in mid-2023 with construction anticipated to commence soon afterwards.
Lifestyle Communities explained why it was interested in the location. Melbourne’s south east corridor is one of the fastest growing urban areas in Australia. It’s already home to approximately 330,000 people aged over 50 and this demographic is forecast to grow significantly over the next 20 years. The Clyde site is actually located only 5.5km from the recently announced land acquisition in Clyde North.
This will be the 22nd community and will allow for the construction of approximately 230 homes, bringing the total to 4,518 home sites.
Lifestyle Communities Managing Director James Kelly said:”This acquisition is an exciting opportunity for Lifestyle Communities to lock-in our future pipeline in Melbourne’s south-east growth corridor where we have an established brand and a strong referral base…The Clyde project will follow on nicely from the tail end of the recent acquisition in Clyde North which is expected to commence construction in 12 months. This gives Lifestyle a housing pipeline of approximately 8 years in this fast-growing corridor.”
Another announcement
The business also announced it has increased debt facility by $50 million and extended the length of it. That means it has a combined facility of $275 million maturing in 2024 and 2025.
The new facility will be useful if more sites become available because of the economic slowdown.
Mr Kelly continued: “We are seeing a number of high-quality sites come to market because of the change in macro conditions…Our intention remains to continue to acquire two new sites every 12 months with the additional funding available to support the occasional additional site if the opportunity arises.”
Summary
I like the Lifestyle Communities is focused on the long term growth of the business, and that it’s willing to take advantage of the current market conditions.
The company has an attractive model because its residents pay a site rental fee which is approximately 21% to 25% of the age pension after receipt of rental assistance. This rental income is steadily growing each year and will form a larger part of earnings as it grows. In the HY20 result there was an organic rental increase of 3.5% which is a solid growth rate.
It would have been better to buy shares under $7, but I wouldn’t mind buying a small parcel today.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
