This article is from the Australian Property Journal archive
STOCKLAND has offloaded four Victorian retirement villages for $89 million as it shifts further away from the sector, with the portfolio selling for a 10% discount to June book value.
The listed developer exchanged contracts with boutique Melbourne-based fund manager Prime Value Asset Management Limited, which manages circa $1.5 billion of investor funds. Assets include retirement villages Cameron Close in Melbourne’s east, Bundoora and Latrobe in the north east, and Long Island in Seaford, in the bayside region.
All four villages will be operated by Centennial Living following completion of the sale. The sale will not impact terms of agreements with existing residents.
Stockland’s retirement living portfolio took a $116 million hit over the 2020 financial year due to reduction in near term growth rates because of COVID-19, increased discount rates to reflect the age of some villages and a reduction in value of vacant stock. Residual goodwill was also written off due to changes in development strategy towards land lease.
Three of the villages in the divestment are more than 30 years old, with the average age being 28 years.
“The sale of these assets aligns with our active capital recycling strategy, as we focus on reshaping our portfolio and look at opportunities to reinvest in our land lease communities and across our broader business,” Andrew Whitson, group executive and chief executive of Stockland Communities said.
“As part of our focus on improving returns, we will continue to assess the future sale of non-core villages where there is limited scope to deliver our customer value proposition to drive demand.”
Over the September quarter, Stockland saw a 9% fall in net sales in the retirement living, compared with the prior corresponding period, largely due to continued government restrictions in Victoria. Excluding Victoria, the figure increased 15%.
Completion for the four villages is targeted in the coming weeks, and Stockland will continue to operate the villages until settlement has occurred.
The divestment arrives just a few weeks after Stockland kicked off construction at its $126 million land lease project on the Sunshine Coast. After announcing it would enter the segment last year, Stockland has identified a pipeline of around 3,000 home sites across Australia within its existing master planned communities.
The model is designed for over 50s, enables customers to purchase their new home outright with no entry or exit fees, and pay a site rental fee which covers council rates, and includes access to community facilities for all homeowners.
Stockland’s newly appointed chief executive officer and managing director, Tarun Gupta, has been expected to further the selldown of retirement village assets and the group’s diversification in the sector. He was involved in Lendlease’s sale of a 25% stake in its retirement living business three years ago to Dutch pension fund APG.
“Ultimately the board made the decision based on Tarun’s breadth of experience across the property sector including in relation to communities development, retirement living, commercial property and investment management.” Stockland chairman, Tom Pockett said on the announcement of Gupta’s appointment.
