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Residential Park Living The Affordable Alternative for the Over 50s - - PowerPoint PPT Presentation
Residential Park Living The Affordable Alternative for the Over 50s - - PowerPoint PPT Presentation
Residential Park Living The Affordable Alternative for the Over 50s July 2013 Investment Capital Halcyon Investment Capital halcyon is a perpetual, inflation linked, low risk, asset backed cash flow, with potential to mark to market with
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Gateway Lifestyle - Current Status
Gateway Lifestyle Residential Parks (GLRP) offer an alternative living option for the Over 50’s
- demographic. The group has sold in excess of 100
new homes across 4 parks. Ten (10) Parks along the eastern seaboard valued at $115m + with 1,700+ sites Development pipeline of over 400 homes for delivery
- ver the next 3 years
Proven sales and marketing. Strong desire to acquire more parks to establish critical mass and operational efficiencies Our strategy has been to focus on metropolitan locations where the demand is based purely on location and affordability rather than on services and amenities
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Background to Strategy – 2010/11
There is five million Australians age 55 and over. Within the next 40 years that number is expected to exceed 11.5 million, with projected growth of 150,000 people per annum. Within a generation, a 1/3 of Australians are going to be >55 years and close to a 1/4 >65. Assuming that all those aged 55 and over were to move into a new dwelling, there will be a need to create 90,000 new homes each year across the country for our target market. However, most 55 plus households can’t afford to move into retirement living arrangements. The high entry and rental costs of current retirement and aged care facilities prevent them from doing so. The more practical requirement is for around 15,000 new retirement dwellings per year, 3/4 of which are needed across the eastern seaboard. This market segment is undersupplied. Estimates suggest that new retirement housing construction has ranged between 3,500 to 4,250 new starts each year over much of the last decade. About 80% of 55 plus households own their home outright. When 55 plus households do move, it’s primarily for lifestyle reasons (35%), affordability (25%)
- r the desire for a smaller and more hassle-free home (20%)
Source Michael Matusik
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But, as the population ages, the Government’s ability to pay for the extra places needed will decline as its taxation base is eroded. Where the government can’t do the job, the private sector will have to step in, says Mary Wood, the newly appointed executive director of the Retirement Living Council. Another shift is in the average age of entry into retirement communities. Ten to 15 years ago, people moved to villages in their early 70s. But now they’re closer to 80 years old, says Jason Anderson, chief economist at property sector forecaster MacroPlan Dimasi. PCA Press
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About Gateway Lifestyle Residential Parks
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Retirement living options OPTION 1: To remain in the home OPTION 2: To relocate to a Retirement Village
- r Residential Park
Locks away the asset/cash value Ongoing maintenance and expenses Poor maintenance will affect value Renovations to support ageing process Need for increased security Releases cash to invest, to live on and to provide a financial buffer Lower operating costs with co-op purchasing Replaces old house with a new house Designed for retirement, lifestyle and ageing Emergency support at no extra cost
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What is a Residential Park
The fundamentals of this style of development embrace the principle that it is a combination of traditional land development in regard to civil and infrastructure works, together with a cash-flow business over time, incorporating the social agenda of affordable metropolitan community schemes Land is not subdivided in title. It is held englobo and
- wned/operated by the developer or a corporate vehicle or
a Fund. Residents lease an identified area within the englobo parcel and locate a home (manufactured off-site) upon that designated area or site Regulated by state based Acts – (MH Act Qld – Residential Parks Act NSW soon to be Residential (Land Lease) Communities Act )
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Key Difference - Governance
The whole premis to the legislation addresses fundamental issues with current RV legislation. Extracts from the recent draft Bill
- The draft Bill sought to provide appropriate protections for home owners, while
also recognising the needs of operators to develop and sustain efficient and effective business operations.
Recent proposed NSW changes have introduced the potential to also incorporate DMF arrangements, however as a group we will strongly resist introducing these measures as they dilute the benefits of the current arrangements. The strength of the legislation is its simplicity and fairness
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Target market
Semi-retired, retired singles and couples aged 50 and over who are looking to lower their cost of living and free up capital Study by Monash University identified the following to be most important to our target market:
- Wellbeing;
- Financial position and cash flow;
- Achieving lifestyle aspirations;
- Living options that are affordable;
- Home and garden maintenance;
- Social and family connections.
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Key selling points
Residential Parks create:
- Financial independence
By freeing up capital, our residents have greater freedom to do all the things they want to do and achieve in retirement.
- Clarity and peace of mind
Our residents can enjoy clarity and peace of mind over their living arrangements and be part of community decision-making on what’s most important to them.
- Low maintenance living
Residents enjoy all the benefits of owning their own home, without spending time and money on maintenance requirements.
- Community lifestyle
Our residential parks provide social and recreational opportunities within a gated community.
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Why buy in a Residential Park?
No stamp duty Simplified contract of sale No entry or exit fees No rates or taxes No strata/community levies No sinking fund levies Single level dwellings Gated entry and community facilities Community relationships
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Residential Park living has now shifted from a caravan and annexe to high quality manufactured homes whilst retaining affordability. Residential park living is transitioning from eyesores into quasi-subdivisions with community infrastructure providing lifestyle aspects not achievable from standard subdivisions.
Residential Park Living options
The Present The Future
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Residential Park Living today
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Residential Park Living today
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Residential Park Living today
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Why live in a residential park?
Lifestyle Residential park living is attractive on an economic and lifestyle front. Modern residential parks provide residents with resort style facilities such as gated security, recreational facilities, bowling greens, pools and tennis courts. Residential parks provide unique opportunities to live in suburban or sea change locations at a reduced cost. A community style of living with residents clubs, activities and like-minded neighbours. Park managers are responsible for maintenance, allowing residents to focus on living. Economic Upfront costs of entering a park are in most cases significantly below the upfront costs of entering a comparable retirement village or residential property. This is due in part to the resident not needing to purchase their land or pay any stamp duty on the acquisition. The ongoing costs of living in a park (site rent) are in most cases less than the ongoing costs of living in a retirement village (service charges) and not much greater than residential property (rates and body corporates). Pensioners, both Centrelink and Veterans Affairs, are eligible to receive rent assistance towards their weekly site rents. Such rent assistance is not available when owning residential property. Simple, plain English purchase contract and site agreement (as
- pposed to complex retirement village lease contracts).
Exit costs are minimal as there are no deferred management fees of retirement villages and residents are able to retain capital gain realised on sale (capital gains are often shared with the manager in retirement villages).
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Why live in a residential park?
Manufactured Home Estate Option for $270,000 Traditional House & Land Option for* $350,000 Strata Villa or Unit for* $330,000 Retirement Village - ILU for $350,000 Lifestyle Home Lifestyle Home
* Based on cheapest possible house & land Option in metro area * Based on non CBD 2 Bedroom apartment
In Village (with Rent Assist) Sale of Current Home $475,000 $475,000 Sale of Current Home $475,000 Sale of Current Home $475,000 Sale of Current Home $475,000 Agents Fees 2.50%
- $11,875
- $11,875
Agents Fees 2.50%
- $11,875
Agents Fees 2.50%
- $11,875
Agents Fees 2.50%
- $11,875
Cost of New Man. Home
- $270,000
- $270,000
Cost of Home
- $200,000
Cost of Home
- $330,000
Cost of New ILU/Lease
- $350,000
Cost of Land $0 $0 Cost of Land
- $150,000
Cost of Land $0 Cost of Land $0 Stamp Duty $0 $0 Stamp Duty 1%
- $1,500
Stamp Duty 1%
- $3,300
Stamp Duty 1%
- $3,500
Landscaping and Site Costs $0 $0 Landscaping and Site Costs
- $20,000
Landscaping and Site Costs $0 Landscaping and Site Costs $0 Settlement & Legal Costs
- $500
- $500
Settlement & Legal Costs
- $2,000
Settlement & Legal Costs
- $1,800
Settlement & Legal Costs
- $2,000
Balance of Funds after Settlement $192,625 $192,625 Balance of Funds after Settlement $89,625 Balance of Funds after Settlement $128,025 Balance of Funds after Settlement $107,625 Holding Costs Rates and Taxes $0 $0 Rates and Taxes
- $2,000
Rates and Taxes
- $2,000
DMF Yr 1 Loan/Lease 10%
- $35,000
Annual Rent $135/ wk 65%
- $7,020
- $4,563
Body Corp Fees $0 Body Corp Fees
- $2,500
Body Corp Fees $0 H&C Insurance
- $1,200
- $1,200
H&C Insurance
- $1,200
Contents Insurance
- $600
Contents Insurance
- $600
Utilities (consumables)
- $3,000
- $3,000
Utilities (consumables)
- $3,000
Utilities (consumables)
- $3,000
Utilities (consumables)
- $3,000
Management Fees $0 $0 Management Fees $0 Management Fees $0 Management/Occupancy Fees $115/ wk
- $5,980
Interest Earned 6.00% $11,558 $11,558 Interest Earned 6.00% $5,378 Interest Earned 6.00% $7,682 Interest Earned 6.00% $6,458 Cash Position at end of Year 1 $192,963 $195,420 Cash Position at end of Year 1 $88,803 Cash Position at end of Year 1 $127,607 Cash Position at end of Year 1 $69,503 In a Manufactured Home Estate, after the first year, you are better off by: 119% $106,617 53% $67,813 117% $125,917 Plus you still have funds on deposit of: $192,625 compared to 215% $89,625 70% $128,025 119% $107,625 Estimated Cost over first 12 months* $338 $2,795 Estimated Cost over first 12 months
- $823
Estimated Cost over first 12 months
- $419
Estimated Cost over first 12 months
- $38,123
*Identifies the surplus of interest earned on cash reserves above dwelling holding cost
Less 30-50% of capital gain when loan is resold
A home owner who owns his own property outright in the above example will be better than in all alternate scenarios. Based on a sale price of $475,000 for an existing home.
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Income Residential parks offer consistent and secure cash flow through leasing land. Income is derived from each resident’s site rent. Residents obtain the right to occupy their site by way of a site agreement, which requires the resident to pay site rent until the site agreement is assigned to another resident. This means parks effectively have a large number of tenants, all with perpetual obligations to pay site rent. Whilst rental arrears are extremely rare, the park owner has a right to enforce a lien over the resident’s manufactured home to recover any arrears. This effectively provides the park owner with security for any rental arrears which in some instances is the equivalent
- f 30 year bond.
Site rents are able to be regularly reviewed and increased to account for CPI increases, market movements and increases in the cost of providing services.
Why invest in a Residential Park?
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Development potential providing value add returns Factors driving the continued growth of residential park living in Australia includes:
- the continued focus on providing an affordable housing solution, which is expected to
be ongoing for the next decade
- strong government support
- strong underlying demographics and an ageing population.
Residential parks are a lower risk proposition than other large scale developments as:
- a holding income can be earned on developed/existing park operations whilst other
areas of the park are developed;
- development can be staged over time and individual houses presold from a limited
selection of purpose designed homes to minimise risk
- planning approval is required for the master plan of the park rather than for each
individual dwelling which simplifies the planning process.
Why invest in a Residential Park?
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Securitisation case study - listed US MHE REIT’s
Equity Lifestyle Properties Inc. owns or has an interest in 383 quality properties in 32 states and British Columbia consisting of 142,000 sites (40 parks and 12,000 sites at IPO). The Company is a self-administered, self-managed, real estate investment trust (REIT) with headquarters in Chicago and an enterprise value of $5.7 Bn Sun Communities owns and operates 155 manufactured housing communities in eighteen States - concentrated in the Midwest and Southeast portions of the United States. On March 31, 2010, Sun Communities' portfolio consisted of over 53,500 developed sites. Established in 1975, Sun Communities became a publicly owned corporation in December, 1993 and has a market capitalisation of $750M. UMH Properties, Inc. owns and operates 30 manufactured home communities providing 7,200 sites located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. UMH has been in business since 1968, operating as a public company since 1985 and owns over 500 acres of land for the development of new sites. Market Cap of $140M American Land Lease is a real estate investment trust with over 9,000 operational home sites in more than 35 communities throughout the United States. On December 10, 2008 American Land Lease announced that it signed a definitive merger agreement with affiliates of Green Courte Partners, LLC. to privatise. http://www.suncommunities.com/corporate/ http://www.equitylifestyle.com/ http://www.americanlandlease.com/ http://www.umh.com/
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Stanhope Gardens – Part Passive Part Redevelopment
Stanhope Gardens is
- ur
flagship residential park with a combination of permanent residents and tourists. The property is located in North West Sydney and currently has a total of 412 sites over 10 hectares. The park was purchased for $23.7 million
- n an initial yield of 10% on passing net
income, one of the significant attractions to the asset was the ability to further develop the site using the existing infrastructure and council approvals already in place.
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Bayside, Tingalpa – Redevelopment
Bayside (currently known as Nestle Inn) is a mixed use (permanent residents and tourists) park situated on almost seven hectares of land, approximately seven kilometres east of Brisbane central business district. The park approval for 204 permanent sites. The asset has capacity for an additional 100 new homes, 40 of which have been sold a rate
- f 2 per week.
GLRPs value add strategy involves converting approved mixed use parks with seasonal revenue fluctuations to perpetual non-cyclical land rents as
- utlined in the latter GLRP parks.
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Brisbane River Terraces – Passive
10 hectare site, 25km south west of the Brisbane CBD. The park has 99 permanent homes. All homes fully developed and owner
- ccupied by the residents.
Park facilities include 300m Brisbane River frontage, six hole private golf course, recreation hall, pool, barbecues, gym, library, craft room, village bus. Average house price $200,000. Average weekly site rental of $135/wk after a 12.5% rental increase in Sept 2012 providing consistent non cyclical cashflows.
20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 36,000 38,000 40,000
EBITDA
12.5% Market Review Sept 2012. The result of this conversion is a perpetual, inflation and market linked cash flow with limited cap ex and vacancy risk.
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The end game: indicative example
A 283 site permanent resident park and features its
- wn
community centre including a library, kitchen, billiards, darts, gym, indoor bowls, pool and spa. It is located 1 hour of Brisbane and is the only “Over 50’s Residential Village” in its catchment. All homes fully developed and owner
- ccupied by the residents.
House prices range from $130,000 to $380,000. Average weekly site rental of $153/week.
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Target assets: indicative example
The resultant target cashflows that are expected to be generated from this asset class can be reflected as per the below: The cash flows are void of significant lease expiry risk, cap ex risk ie no Lifts and Air conditioning provisions and most importantly have limited obsolescence risk as the structure is effectively a land rent arrangement. The costs of park improvements and community facilities don’t have significant cashflow impacts and are often managed by the residents.
100,000 120,000 140,000 160,000 180,000 200,000 01-Jul-12 01-Oct-12 01-Jan-13 01-Apr-13 01-Jul-13 01-Oct-13 01-Jan-14 01-Apr-14 01-Jul-14 01-Oct-14 01-Jan-15 01-Apr-15 01-Jul-15 01-Oct-15 01-Jan-16 01-Apr-16 01-Jul-16 01-Oct-16 01-Jan-17 01-Apr-17 01-Jul-17 01-Oct-17 01-Jan-18 01-Apr-18 01-Jul-18 01-Oct-18 01-Jan-19 01-Apr-19 01-Jul-19 01-Oct-19 01-Jan-20 01-Apr-20 01-Jul-20 01-Oct-20 01-Jan-21 01-Apr-21 01-Jul-21 01-Oct-21 01-Jan-22 01-Apr-22
EBITDA
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In summary
- Increasing pressures of an ageing population and housing affordability,
- Relocatable Housing sector of the residential market utilising ‘factory built’ Manufactured Homes is
just beginning to come of age in Australia.
- This sector only accounts for 1-2% in Australia compared to up to 20% in the US and Canada.
- This is gradually changing with legislative amendments and Local Government attitudes being driven
by ageing, affordability and environmentally sustainable development.
- The sector has evolved over the past decade from caravan parks.
- Manufactured Home Communities developed in QLD and NSW represent a far cry from the old
‘caravan parks’ mentality. These Communities, provide an affordable community environment for not
- nly the 50+ sector.
- To date, manufactured home villages have been developed by non-corporate entities and in some
respects are ad-hoc.
- We have found that there is a positive demand for high quality 3-4 star facilities that are more of a