ASX Code: GTY
Security price: $2.32
Industry: Post-retirement accommodation
CY17 forecast distribution: 12 cents per share
This week Dividend Detective looks at Gateway Lifestyle Group (GTY), one of Australia’s largest Manufactured Home Estate (MHE) providers operating within the broader aged accommodation industry. With a current 5% yield supported by stable and growing cash flows, GTY is an attractive investment option for income-oriented investors.
GTY provides affordable community living options to over 55’s. Listed in 2015 with 36 communities, its strategy is to acquire and convert mature and mixed-use MHEs in the highly fragmented market. This year the company acquired 17 communities, bringing the total to 53, which are spread across eastern states.
To generate revenue GTY makes a margin on manufactured home sales and charges residents weekly rent for the right to occupy sites and for facilities maintenance. GTY owns the underlying land and residents own the manufactured home. The average sale price is about $245k, typically prices are 40% and 60% of the median house price in the surrounding areas. GTY generates a $100k margin on purchases from the manufacturer of the home. Rent averages $146 per week, and rises each year at or above the rate of inflation.
GTY should see steady demand in coming years as Australia grapples with housing affordability and the growing population of underfunded retirees.
According to the ABS and the 2015 Intergenerational Report, the median superannuation balance of for persons over 60 and not yet retired is $95k, while the mean household wealth of lone persons aged over 65 is $620k The majority of wealth is tied up in home equity.
The average retiree, who retires at 60 and lives to 83, is expected to run out of savings and investments 10 years into retirement. This represents a 13-year funding ‘gap’.
Meanwhile, Australia is in the midst of a housing affordability crisis after two decades of house price appreciation at double the rate of median wage growth.
For underfunded retirees GTY provides a way to release equity in the family home while maintaining the ability to live independently in a community of like-minded residents. On our figures the typical retiree won’t see a reduction in their annual pension after the transition. In fact, he or she would be eligible for rent assistance in addition to investment returns on newly released capital, resulting in a boost to annual income post land lease fees.
With over 5,600 occupied sites generating recurring, long tenure rental income and more than 3,500 sites in the development pipeline, representing over 13 years of current sales, GTY has a stable platform supporting long term growth. It has a capable management team that owns a meaningful stake in the business and substantial balance sheet capacity to fund acquisitions. Shares are trading at modest prices around $2.32.
ASX Code: GTY