Gateway Lifestyle Group (ASX: GTY) is one of Australia’s leading retirement village operators. I think it’s one of the more ‘wholesome’ ones because it doesn’t charge entry or exit fees for residents.
Gateway has a portfolio of property locations and a huge tailwind with Australia’s ageing demographics. A lot of people will want to or need to live in a retirement village due to its low cost and friendly atmosphere.
So, it makes sense that Gateway would want to sell some of its underperforming assets and re-allocate that capital towards better assets.
Today, Gateway announced that it has entered into unconditional contracts to sell two of its non-core assets for $18.4 million, which is in line with the book value.
The first one that it’s selling is ‘Gateway Lifestyle Bass Hill’ for a sale price of $10.4 million, which is expected to settle in July 2018.
The other sale is ‘Gateway Lifestyle Rainbow Waters’ for a sale price of $8 million, this is expected to settle in February 2018.
Gateway said that these divestments are consistent with the Group’s asset recycling strategy, allowing redeployment of capital and will continue to improve the quality of the Group’s portfolio.
Gateway CEO, Trent Ottawa, said “We remain focused on growing the portfolio of long-term occupied sites. The divestment of non-core assets is a key part of our strategy, as we look to improve the quality of assets in the Group’s portfolio and ongoing investment in higher returning communities driven by development potential and operating margins”.
It’s expected that these transactions will not have an impact on the Group’s FY18 market guidance.
Gateway is currently trading with a distribution yield of 4.53% and could be well worth a long-term buy for income investors. It is on my watchlist and could enter my portfolio over the next couple of years.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.