Aspen Group is paying $2.36 million for a part-developed aged care investment, about 55 kilometres south east of Adelaide.
Lewis Fields Retirement Village at 29 Parker Avenue, Strathalbyn, occupies 3.7 hectares.
Twenty six of 80 permitted homes have been built, as has some site infrastructure and a garden.
It is the only product of its type under construction in the suburb.
Aspen is expected to settle in June; its fifth FY21 acquisition.
Last May the ASX listed group spent $3.75m on a low-rise apartment block, Elizabeth House, in Newcastle’s Cooks Hill, with plans to repurpose it as a build-to-rent investment.
Not long earlier, it outlaid $3.15m on a 9388 sqm parcel with 18 villa units in Burleigh Heads – about 13 kilometres south of Surfers Paradise.
Elsewhere in South Australia it holds the Adelaide Caravan Park, CREST in Woodside and an asset in Coorong Quays at Hindmarsh Island.
Exit fees will be substantially cut: Aspen
About halfway between Mount Barker and Hindmarsh Island, Lewis Fields operates as a traditional loan/lease community (LLC) retirement village – with a 37 per cent exit fee.
Residents pay for nearly all village operating and maintenance costs.
“Our aim is to provide the accommodation on more competitive terms whilst still generating attractive investment returns,” a statement said.
“We propose to develop and sell the remaining 54 hours under a LLC model as we believe it is a more attractive product for customers,” it added.
Under the LLC the customer owns their house but pays land rent (story continues below).
“For existing village residents, we play to reduce total exit fees to around 20pc which, upon re-leasing, should make the houses more appealing to incoming residents and result in outgoing residents receiving higher proceeds.
“We restructured our fund’s Alexandrina Cove Lifestyle Village at Coorong Quays along similar lines and this has resulted in higher sales prices and volumes, and attractive returns for our investors.
“Strathalbyn is a small but growing market, so we expect the sales rate to be only a handful a year in the near term.
“However, the purchase still makes sense for Aspen as we can manage both Lewis Fields and our proposed new LLC at Mount Barker with the same personnel.
“Additionally, we can offer our customer base the choice between three high quality communities in the region with different lifestyle options”.
Aspen’s purchase price translates to c$30,000 per site.
“The existing dwellings have a current re-leasing value of around $7.8m ($300,000 per dwelling) in our opinion, which equates to accrued exit fees payable under the existing leases of about $2.4m,” it added.
“These fees would reduce to around $1.5m under our proposal to reduce exit fees…assuming the re-leasing value of the retirement village houses does not improve.
“We believe the current market value of the spare land is at least $1.35m or $25,000 per approved site.
“This low entry price enables us to develop and sell quality houses at a very competitive price, while generating attractive development margins and total investment returns”.
Aspen’s development pipeline now includes 261 sites over four projects.
It will fund the acquisition with debt.
The group recently recycled equity from the sale of two Perth homes at an average $425,000, equating to a net margin of about $90,000 per property.