Stockland splashes out $620m on Halcyon Group

Two Queenslanders who turned a chat at a barbecue into a portfolio of over-50s lifestyle villages have struck a $620m deal to sell the business.

A casual conversation about the state of the retirement sector at a barbecue more than two decades ago sparked the creation of a portfolio of Queensland-based lifestyle village communities and a multimillion dollar pay day for its founders.

Property giant Stockland will buy Halcyon Group for $620m, just 17 years since joint managing directors Bevan Geissmann and Paul Melville opened their first gated over-50s community village.

The deal includes the acquisition of 3800 sites across 13 land lease communities, made up of six established land lease communities, four communities in development and three projects in planning.

Dr Geissmann, a doctor, and Mr Melville, a solicitor, met at a barbecue in Beenleigh in the late 1990s and bonded as they discussed the lives of senior Australians and how they deserved to live in active and socially-connected communities.

“The idea was simply to make life better for seniors and provide a housing and lifestyle option that worked better for them,” Dr Geissmann said in an interview earlier this year.

Through first-hand experience in their respective fields of medicine and law, they realised the traditional retirement model did not meet the needs of modern retirees. It was complex, financially onerous and outdated.

They believed there was a better way and that the modern senior deserved and wanted more from their retirement. Sensing the industry was ripe for change, they decided to deliver innovative housing for lifestyle-oriented over 50s.

Halcyon joint MDs Bevan Geissmann and Paul Melville. Picture: John McCutcheon

Based on the US land lease model, multi-award winning Halcyon developed and managed multifaceted communities exclusively for owner occupiers aged over 50 who purchase a stand-alone home and sign a lease to pay rent on the freehold land on which the home sits.

There are no entry or exit fees and homeowners take 100 per cent of their capital gains when they sell.

Dr Geissmann said they have come a long way.

“When we started, every competitor in the country had steps on their houses. We were the first in the country to ramp up homes and make sure people could age in place,” he said.

“Having said that 19 per cent of our homeowners are involved in part-time or full-time work.”

Stockland CEO Tarun Gupta. Picture: Jane Dempster

Stockland chief executive Tarun Gupta said the acquisition was “in line with our stated strategy to grow our land lease communities and will increase the size of our portfolio to 7800 sites”.

Mr Gupta said that the acquisition would position the company as one of the top players in the market in the rapidly growing market segment.

“They’ve been getting a premium above the average house prices in the areas where they are developing,” he said. “The rest of the sector actually operates at a discount, so there is a real secret sauce that the team has which we will be now leveraging across the nation.”

Mr Gupta said that although the business was run separately there was complementary elements with Stockland’s retirement holdings and its massive land bank, where more land lease estates could be built.

Halycon generates development yields of up to 15 per cent and does not require the same overheads that have proven costly for retirement operators.

“Halcyon enables us to acquire a respected brand in the market with a loyal customer base and a knowledgeable team, which will help us achieve scale in the fastest-growing lifestyle segment – the over-50s market,“ Mr Gupta said.

“We see the land lease communities business as complementary to our masterplanned communities land bank and believe there are synergies we can leverage to grow the business at scale nationally and achieve our ambition of becoming a leading operator in this space,” he said.

The deal is accretive to funds from operations per security and Stockland will debt fund the deal. The acquisition price will be paid in two tranches – the first next month and the balance of $310m in July 2022.

“As our land lease communities portfolio grows we will explore opportunities to introduce aligned third party capital into this business to increase growth and build further scale and diversity in the portfolio,” Mr Gupta said.

Originally published as Stockland splashes out $620m on Halcyon Group