In this issue of The SOURCE we cover the fact that relatively little known Brisbane investment group GreenFort has decided to jump into the land lease sector with $800 million to establish a new operator called Liven Communities (backed also by Hong Kong's Gaw Capital Partners).
Two weeks ago we covered that WA resi developer Everland is committing big to land lease.
It feels like a gold rush.
It was two years ago last week that Stockland bought Halcyon for $620 million, giving it 3,800 land lease lots. Today Stockland has 12,728 land lease lots.
And it was eight months ago that Mirvac paid $1 billion for Serenitas.
Those with long memories will recall that between 2000 and 2007 a similar gold rush occurred in the retirement village sector, principally led by Macquarie Bank convincing a group of superannuation funds for the first time to invest, based on the principles of an ageing population and property.
Stockland rushed the sector, Babcock & Brown bought its way in, Prime Trust twisted the numbers to capture a large footprint, Lendlease woke up its sleepy village business, emerging the largest player.
This all came to tears with the GFC, demonstrating how one fundamental (property prices) can kill a gold rush overnight.
I don’t think this will happen with land lease for two reasons. Australia’s population growth has been turbocharged by immigration, meaning it will be a long time before supply matches demand for homes. And baby boomers are living longer and will be running out of cash in far greater numbers, requiring them to downsize to get cash to live on.
The land lease model, where they retain 100% of capital growth, is palatable (compared to retirement villages).
In fact, we are experiencing two once-in-a-lifetime business phenomenons, with Build to Rent actually attracting more capital than land lease. But its business proposition is perhaps a bit more shaky, requiring tax incentives and the belief that large numbers of Australians will accept being renters for life. (It is entirely possible, given property prices, that they/we won’t have a choice).
Interesting times.
Browse villages.com.au for the latest on Seniors Living including availability.
