Stockland has added Queensland lifestyle villages group Halcyon to its retirement living portfolio in a deal worth $620 million.
Stockland, advised by Moelis Australia, will debt fund the acquisition across two tranches—the first next month and the balance of $310 million in mid-2022.
Based on the US land lease model, Halcyon operates a manufactured housing estate (MHE) business model—buying large plots of land and building houses, which are exclusively sold to people older than 50.
Its nine communities, on the Sunshine Coast, Gold Coast, Moreton Bay and Logan Region, are home to more than 2500 residents.
The revenue from land lease communities is linked to an underlying rental return on the land that residents—who own the dwelling they live in—continued to pay the landowner.
Newly appointed Stockland chief executive Tarun Gupta said the acquisition would increase Stockland’s land lease communities portfolio to 7800 sites.
Gupta said the business would continue to run separately to its retirement holdings and land bank, where more land lease estates could be built.
“There are synergies we can leverage to grow the business at scale nationally and achieve our ambition of becoming a leading operator in this space,” he said.
“Land lease communities deliver attractive returns as the demand for high quality, affordable housing solutions grows.
“This demand is driven by Australia's ageing population and baby boomers reaching retirement age.”
Stockland, still the country’s second-largest retirement accommodation operator after Lendlease, currently has land lease communities as part of its Aura project on the Sunshine Coast in Queensland and Minta development in Melbourne.
Its acquisition of Halcyon will align it with established retirement living players such as the ASX-listed Lifestyle Communities and Ingenia Communities.
In April, Stockland sounded out plans to focus on third-party capital partnering for office developments and the retirement living sector.
It also noted a potential shift towards the CBDs and higher value markets and customers through apartments and build-to-rent products with a renewed focus on structure—costs, reporting lines and technology.
UBS analyst Tom Bodor said Stockland's MHE strategy would allow the company to increase sales velocity in new residential estates by targeting an additional growing customer demographic.
“The acquisition is on strategy in the favourable MHE sector and Halcyon has a well-established brand and operating model and a pipeline of seven development projects,” Bodor said.
“While the price is elevated, Halcyon’s villages are unique and in our view arguably deserve some premium for quality and location.
“Stockland has built a pipeline of 3000-plus MHE units which we estimate will add 4 per cent, or $37 million, per annum until 2025.
“MHEs are affordable retirement communities where residents own ‘relocatable’ houses and pay ground rents to the operator—Stockland.
“Rents cover council rates and shared facilities and are low, around $200 per week, with most residents claiming government rent assistance.”
Its latest acquisition could now also re-rate Australia’s manufactured housing sector.