Lifestyle Communities Limited (ASX: LIC) could be one of the best ways to play the ageing population on the ASX.
The idea of the business is to provide an affordable housing option for the half of Australians aged over 50 who have less than $620,000 of total equity. It aims to provide high-quality resort style facilities that exceed expectation and are actively maintained and refurbished.
Since 2007 the company has been steadily growing its site rental fees as it grows the number of homes under its management. This site rental fee is increased at a greater of CPI inflation or 3.5% per year. The actual fee for FY19 is $179 per single and $207 per couple per week.
The company also receives deferred management fees which is calculated as a scaled percentage of the re-sale price, depending how long the resident has been there and is capped at 20% of the re-sale price after five years of ownership.
As the number of people aged over 50 rise, Lifestyle Communities will be hopefully be able to increase its number of residents, leading to higher rental fees and higher profit. In FY19 site rental fees increased by 21.1% to $20.5 million.
The business is steadily growing its dividend whilst also re-investing heavily into new communities.
Just today the company announced that it has executed a contract of sale to purchase a site in St Leonards located on Victoria's Bellarine Peninsula. Settlement is expected to occur at the end of 2020 with construction to commence soon after that.
As a result of the acquisition, it will increase the company's portfolio by around 170 home sites to 3,730 which includes sites in planning, development or under management.
Managing Director James Kelly said "St Leonards will be our second community on the Bellarine Peninsula and our fourth within the wider Geelong catchment. The site is well positioned close to the beach and town centre and will provide an affordable, active and engaging environment for baby-boomers to downsize on the Bellarine."
Foolish takeaway
I think Lifestyle Communities is one of the easiest ways to get access to the ageing population along with Eureka Group Holdings Ltd (ASX: EGH), Challenger Ltd (ASX: CGF) and Ramsay Health Care Limited (ASX: RHC). But there are also dangers with these types of businesses.
