This article is from the Australian Property Journal archive
LIFESTYLE Communities (LIC) saw its share price sink another 13.94% on Friday after the company withdrew its guidance and posted weaker year-on-year numbers just days after a damning ABC report detailing allegations of “immoral” and “ethical” conduct.
In an ASX statement, the land lease community operator said its FY24 operating profit after tax is expected to be in the range of $52.4 million to $53.4 million, down from the previous year’s $71.1 million.
New home settlements in FY24 were 311, down from 356, and resale settlements in FY24 were 151, down from 178.
Last Monday, ABC’s 7.30 reported on a group of 80 residents at its Wollert Lifestyle Community on Melbourne’s northern outskirts that had banded together to lodge a claim the Victorian Civil and Administrative Tribunal (VCAT) over fees they believe are illegal and excessive.
Those included charging dead people rent and exorbitant charges – exit fees, or DMF – for residents wanting to sell their home.
The allegations came a few months after LIC had launched a $275 million raising as it sought to go deeper into the land lease sector, going on just few weeks later to downgrade its new home settlements for 2024 financial year – to which the market responded by wiping nearly one-third off its share price.
“Lifestyle Communities announces that all forward-looking guidance it has previously provided is withdrawn due to the difficulty in quantifying the impact the uncertainty caused by recent media coverage might have on future sales and settlements,” the company said on Friday.
Its share price sank to $9.21 following the announcement, before recovering and closing at $9.51, down 13.94%.
The company’s market capitalisation was $1.53 billion and share price at $12.57 before the ABC revelations. Its market cap has declined to $1.17 billion.
LIC said the media coverage “largely focused on exit fees without considering the lower entry price that our homeowners typically pay, nor the other benefits we offer”.
“We have always preferred the DMF model because it lowers the upfront entry cost for people buying into one of our communities. This enables customers to release more equity to supplement their lifestyle.”
“As noted previously, we reject the allegations made in the VCAT applications by the group of homeowners at Wollert and will defend them accordingly.”
It said the average time on market for established homes sold in FY24 was 63 days and average annual capital growth on those sales just over 10%. On average, homeowners made a profit of $86,000 after paying the deferred management fee.
LIC’s exit fees start at 4% of the selling price and scale up the longer the person has owned the home – to up to 20% from the fifth year. Lifestyle Communities there benefits from capital gains, but doesn’t cop a loss.
Rivals in the sector, such as Stockland, do no not charge similar fees.
LIC said on Friday that following property valuations, the balance sheet valuation of the investment property portfolio is $1.14 billion, up from $962 million. Weighted average rent capitalisation rate lifted to 5.21%, from 5.14% and average DMF valuation at the end of FY24 was $64,000 per home, up from $61,000.
