This article is from the Australian Property Journal archive
MIRVAC is betting on difficult residential market conditions to continue, as well as an ageing population, and has teamed up with Pacific Equity Partners to acquire land lease communities Serenitas in a major play for the affordable housing market.
Mirvac follows the lead of ASX-listed rival developer Stockland, which entered the land lease sector in 2019 and last year acquired existing operator Halcyon Communities.
The model sees purchasers buy from the operator a modular or demountable home that sits on land owned by the community operator – who also provides amenities – and rent the land underneath. It is typically targeted at downsizing over 55s.
Mirvac and Pacific Equity Partners will each hold a 47.5% ownership in Serenitas. Mirvac’s outlay will total about $600 million, comprising a $300 million initial investment with $240 million funded on settlement and $60 million deferred for 12 months.
Existing co-owner Tasman Capital Partners is also involved in the deal, which will total $1.01 billion.
Settlement is targeted for 3Q of 2024.
Serenitas is a pure-play land lease operators, with a portfolio of 27 communities with over 6,200 sites, including over 4,200 occupied and around 2,000 sites to be developed, 98% of which are development-approved.
As part of the transaction, the 100-plus Serenitas team, led by Serenitas CEO, Rob Nichols, will continue to manage the 27 communities.
“This acquisition expands our residential offering, propelling Mirvac to become one of the largest owners in the attractive land lease community sector,” Mirvac’s group CEO & managing director, Campbell Hanan, said.
He said Mirvac’s expansion into the living sectors comes “against a backdrop of critical housing undersupply, and tailwinds including rising population growth, record low rental vacancy levels and affordability challenges”.
“Our existing apartment and master-planned communities product are beneficiaries of these fundamentals, and our build-to-rent portfolio and expansion into land lease are natural adjacencies to our residential capabilities.
“This transaction immediately scales our exposure to the land lease communities sector across Australia and reinforces our position as the only residential developer in Australia delivering across the spectrum of housing typologies from rental housing, build-to-rent, land lease, house and land, medium density and high-density living.
“This depth of capability leaves Mirvac well placed to benefit from the structural tailwinds supporting the broader living sector in Australia.
In its residential portfolio, Mirvac settled 2,298 residential lots in FY23 and exchanged 1,638 lots across apartments and master-planned communities, which was in line with its revised settlement target of circa 2,200 lots.
This was impacted by the high interest rate environment, although pre-sales were still up to $1.8 billion from $1.6 billion in FY22.
Mirvac residential delivered an EBIT of $156 million, down 34% from FY22’s $236 million EBIT.
“This transaction is well aligned with our strategy and capabilities, delivering affordable housing solutions, investing in high-quality recurring income streams, and providing an opportunity to unlock value from our existing and future master-planned community landbank,” Hanan said.
He said there is an estimated 7.5 million people over 55 years old in Australia in 2023, with that population projected to almost double over the next 40 years.
“This affordable housing solution, offering a community-driven, secure, low-maintenance lifestyle for over 55s, is expected to see the current 2% market penetration rate increase over time.”
Serenitas CEO, Rob Nichols said: “We are excited at the opportunity to join with Mirvac and PEP, and we are thrilled to be able to grow and elevate the Serenitas portfolio of brands and lifestyle experiences for our customers.
“There is certainly a growing awareness of modern land lease communities across Australia and the benefits available to customers, which will no doubt drive future demand.”
