‘We are the Solution’: Land Lease Shake-Up Stirs into Life

Land lease communities heavyweight Adrian Puljich is part of a growing chorus calling for a significant change to lending policy that would open up the sector and provide a salve to Australia’s housing crisis. “We are the solution,” Puljich tells attendees at The Urban Developer’s first Land Lease Communities summit. The burgeoning sector is the hottest ticket since developers and investors turned their gaze to build-to-rent a few years ago, and it is ripe for disruption. In fact, some industry experts are forecasting a tenfold growth opportunity, should the landscape shift. The potential for penetration is huge with land lease communities currently attracting just 1.34 per cent of Australians aged over 55, and with supply outstripping demand, competition is not an issue. There are 280 land lease communities (LLC) in Australia across 52,000 sites and another 25,000 proposed, according to Colliers’ land lease communities research. But it is not just the 30 per cent of the Australian population that is aged over 55 that developers are looking at; it’s the other 70 per cent. ▲ Gemlife’s Adrian Puljich: Land lease is a genuine housing solution. Industry leaders say the model could extend beyond downsizers to mortgage holders, opening the sector to first-home buyers and families, just as it has in the US. A veteran builder-developer in the sector, Gemlife founder Adrian Puljich, says land lease is a genuine housing solution with a diverse product range encompassing homes from $300,000 to $3.7 million. “When we look at these product offerings, I think it’s fair to say that the sector is primely positioned to take advantage of what is a very unfortunate housing crisis, but we are the solution,” Puljich says. “You look at stamp duty exemptions, you’re looking at Commonwealth rental assistance ... we are that sector, we’ve got the answers.” “The door is ajar for this sector to really hit its straps and it’s not just a downsizer market—this can service first-time buyers and everything in between, not just over-50s.” Puljich was among industry leaders to take part in The Urban Developer’s first Land Lease Summit, held in Brisbane last week, which attracted more than 230 people including big names from outside the sector. ▲ The Urban Developer ’s Taryn Paris, Ingenia Communities’ Michael Rabey, AVID Property Group’s Manuel Lang, Serenitas’ Von Slater, and Edwards Group’s Stephen Edwards during the summit. Ingenia Communities executive general manager Michael Rabey says once the banks realise there’s a market they will figure out a way to do it. “You think about the different types of housing available to people, whether it’s private rental through to build-to-rent and other things. This is just another step in full house and land ownership,” Rabey says. “We need people who have money, they can’t get a mortgage, so that’s why I think it’s mostly over-55, but there is definitely a case for market land lease in Australia. “I know a lot of this sector is already looking at it—and the banks.” MA Financial investment director Rodney Norris says if these communities open up to younger people, the market could grow tenfold, but it is not policy or legislation holding it back. “We obviously need to have some security-backed position,” Norris says. “When you’re looking at modular financing solutions for real property there aren’t really a lot of those solutions, either. “I know CBA (Commonwealth Bank) is looking at a particular structure or facility that might be positioned with a certain loan to value ratio [for modular but not yet LLC]. “They’ve got preferred manufacturers that build these modular homes off-site and then move them, but I don’t think the pool is that large ... and I think this [LLC opportunity] would be very well received.” ▲ Greenfort Capital co-founder and partner Adam Vaggelas, MA Financial investment director, real estate credit Rodney Norris, Macquarie Asset Management division director real estate Justin Ayre during a panel at the summit. Norris says they have been looking at financing the development side but opportunities are also opening up for their consumer-based lending stream. “In the US, their financing structures are very much asset finance driven, so you lend to a depreciating asset,” Norris says. “You might have a shorter-term facility with a residual balance at the end, based on what the value of those assets is likely to be.” Colliers national director healthcare and retirement living Chris O’Driscoll says there is a lot working in the favour of the sector. “You’ve got recurring income streams based on ongoing site fees; you’re generally well occupied,” O’Driscoll says. “It’s government backed with the likes of rent assistance, no stamp duty and similar metrics to build-to-rent, it’s known as the horizontal build-to-rent. “Overall, you’ve got a population saturation and a shortfall of supply. The maths is simple, and you support the benefit of both current and future residents.”

‘We are the Solution’: Land Lease Shake-Up Stirs into Life

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