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Shares in Lifestyle Communities (ASX: LIC) have reached their lowest levels since 2022 after the Melbourne-based company announced a large reduction in the number of new home settlements expected this financial year, cutting more than $250 million from its market capitalisation in one day.
As recently as 22 February the land lease community developer and manager had forecast similar settlement numbers to the 356 recorded in FY23, but a slower than expected take-up for its beachside and northwest Melbourne locations led to a downgrade to a range of 290 to 310.
Lifestyle Communities insists that the fundamentals of its new home settlement pipeline remain unchanged from the range of 1,400 to 1,700 over the course of FY24 to FY26, and it currently has 432 new homes that have either settled, are contracted or will be construction complete and available for settlement by the end of June.
But the reduction in transactions set to get over the line in FY24 has spooked investors, with shares dropping 14.67 per cent to $12.16.
The news comes less than two months after institutional and retail shareholders tipped in $275 million at $16 per share, itself a discount to levels above $17.25 before the capital raise announcement. The funds will go towards land acquisitions and associated capital expenditure for greenfield developments.
The investor reaction is in contrast to the group's intended positive message today that it had agreed commercial terms on three of the land opportunities identified in its capital raising presentation in February, and was currently in an exclusive due diligence phase on each site.
"This is a great outcome for the business. The additional capital and these acquisitions sets us up well for future growth in FY27 and beyond as we bring these new sites to market," said Lifestyle Communities managing director James Kelly.
"Subject to successful completion of due diligence and execution of binding contracts, these sites will add approximately 740 homes to our development pipeline.
"We continue to assess a number of other opportunities but will remain disciplined in our deployment of this capital."
Regarding the pipeline of new homes, Kelly said the construction program remained "on track".
"We have no issue delivering homes for settlement when needed," he said.
"We were pleased to achieve 110 new home sales in the first quarter of calendar year 2024 which indicates that demand for our product remains. It’s a matter of external timing for customers to sell their homes which remains difficult to forecast.
"Resale settlements for FY24 are expected to be between 145 and 155. Average capital growth remains strong at 9.8 per cent for FY24 to date, and average time on market in our resales business remains steady at 65 days. Resales homes are transacting efficiently but our sales volumes are limited by stock available for sale."
He added the operating business continued to perform well with the first homeowners welcomed to the group's communities at Riverfield and Phillip Island.
"The clubhouse at Lifestyle Woodlea has been completed and has set a new standard of design and amenity at Lifestyle," he said.
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