This article is from the Australian Property Journal archive
INGENIA Communities will be able to accelerate the growth of new greenfield developments after securing the support of New York Stock Exchange-listed REIT Sun Communities.
Ingenia will undertake a placement of 23,176,816 securities to Sun Communities at $3.2172 per security, representing a 8.75% premium to 30 day VWAP at 5 November 2018 and resulting in Sun Communities owning 9.99% of issued capital.
The placement proceeds of around $74.6 million will be used by Ingenia to fund the acquisition of two established communities in southeEast Queensland, accelerate new cabin rollout and provide initial equity funding.
Furthermore, the new strategic partnership will see Ingenia and Sun Communities jointly invest in new greenfield opportunities, providing capital light acceleration of development and rental contract growth.
Ingenia CEO Simon Owen said partnering with a leading REIT in the sector was a pivotal moment for Ingenia, and further validation of how much Ingenia has achieved over the past five years.
“We see capital partnering as a smart and logical means to capitalise on the breadth of opportunities within our acquisition pipeline, while retaining our ability to access new rental contracts. We are very pleased to have finalised an agreement with Sun, who bring to the partnership an exceptional track record of over 40 years in the US lifestyle and holidays (MH and RV) market.
“Through this transaction we have a partner who is aligned strategically and economically and who brings market leading skills and experience which will assist us as we expand development activity and pursue further avenues for growth,” Owen said.
Sun Communities chairman and CEO Gary Shiffman will join the Ingenia board. He said the partnership with Ingenia would allow Sun, which currently owns more than 370 communities in the US and Ontario, Canada, to expand into the Australian market.
“We see the Australian market as sharing many similarities with our market 20 years ago and look forward to working with the Ingenia team to grow its leading position as the Australian market matures. We look forward to contributing the skills and expertise we have built over more than 40 years’ operating and developing communities in the mature North American market building a US$12 billion business, to Ingenia and our strategic partnership,” Shiffman said.
Meanwhile Owen said in addition to broadening the development of greenfield communities Ingenia, as manager, will generate fee income, and has the option to acquire 100% of each completed project.
“We will also have greater capacity to explore opportunities in areas such as product sourcing and resident finance.
“Our target is to originate five projects for the strategic partnership within the first 18 months. We expect to grow new home settlements from our existing assets as non-core assets are sold and approvals are achieved, with the strategic partnership expected to contribute settlements as the rate of growth in balance sheet development slows,” Owen said.
Ingenia plans to invest approximately $53 million to acquire two established communities in SE Queensland, increasing its lifestyle and holidays portfolio to 37 communities with a total of over 6,200 income producing sites (from 5,800 sites at 30 June 2018).
The proposed acquisitions comprise a $29.5 million, 380 site community 16kms from the Brisbane CBD, which is anticipated to generate an initial yield of over 7%.
The second acquisition is of a premium holiday park on the Queensland Sunshine Coast. In addition, Ingenia will invest an additional $10.1 million to accelerate the planned rollout of new rental cabins at Ingenia’s Durack and Eight Mile Plains communities and the addition of 22 new tourism cabins. The investment will see more than 100 rental and tourism cabins installed over the 2019 calendar year.
The remaining $22.3 million of placement proceeds will fund Ingenia’s equity investment in the initial greenfield projects to be undertaken by the partnership.
The placement, once fully invested, will result in Ingenia’s Loan to Value ratio (LVR) reducing to 30.6% and NTA per security increasing to $2.60 (on a 30 June 2018 pro forma basis, after transaction costs and including stamp duty).
The placement and subsequent use of proceeds will be marginally accretive to earnings in FY19. Ingenia’s FY19 underlying EPS guidance of 5-10% growth on FY18 is reaffirmed.
Ingenia is on track to deliver 350 new home settlements in FY19. EBIT is forecast to increase by 15-20% on FY18 (up from original guidance of 10-15% growth).
Australian Property Journal
