land lease communities business model

Land lease communities seems a really interesting business model for the operators.
In fact, they have 3 sources of profit :
- the development profit when they build the houses and sell them to individuals,
- the rent they get from the owners of these houses, as they do not own the land and has to rent it (rent also covering the cost of maintenance for these communities),
- the long term profit the owner of land can get.

For Aspen, this translates into the following figures for their lifestyle business :
- development margin of 30 % in FY 24,
- net yield from their rents of 9.6 %*(4.7 % if we include the land for development and the spare land).

Of course, there are less financial benefits for the people who buy houses in these communities :
- it may take some time to sell their house if they want to do it (ex.63 days for Lifestyle Communities residents in FY 24),
- not obvious that they can make a profit when they sell, as it is mainly the land which appreciate in the long term (and not so much the construction).
Anyway, people who go and live in these communities are probably not focused on potential capital gain** and more on the quality of their daily life.
The main financial interest for these residents is to have more cash available thanks to the price difference between the price they sell their previous home and the price they buy their home in these land lease communities (no stamp duty).

So far, the main financial problem for the people choosing to live in these communities was the exit fees (also called deferred management fees or DMF) which could be significant.
The regulation has changed and they are now banned in several states (Victoria has kept them for now).
Among the 4 listed companies in this sector, my understand if that LIC is the only one to have a substantial amount of exit fees.
Eureka and Ingenia do not have exit fees, while Aspen has still around 100 customers which have DMF.

The main problem I see for land lease owners (and operators) is that this business is highly capitalistic as the owners need to buy the land and keep it.
That's probably the reason why groups specialised in land lease (LIC, Eureka) have a problem of cash flow and need regular recapitalisations.

The potential of growth for land lease communities remains significant as it is estimated that only 2 to 3 % of the 50+ Australian live now in these communities.

One of the interests of this asset class is also that vacancy rate are very low, based on the figures given by the 4 listed companies in this sector (Ingenia, Aspen, Eureka and LIC).
Rents are also regularly increasing (trend of 3 to 4 % per year, now) while there is a low level of arrears.

The development business looks also much less risky than usual for different reasons :
- customers usually selling another property to finance this purchase,
- my understanding is that no mortgage option seems available for land lease communities (so low risk of default).

* using average rent per week, net rental margin and book value per site.
** in 2023, Lifestyle communities indicated that the average age of people moving in their communities was 71.3 years.