GemLife’s IPO success comes at a cost to rival Ingenia

The Ingenia development at Gordonvale.

GemLife staged a strong first day of trade on the Australian Securities Exchange as was highly anticipated, but it appears to have come at a cost to its direct competitor.

While GemLife surged more than 7 per cent in the first hour of life on the ASX before closing 4 per cent higher to $4.33, shares in direct competitor Ingenia Communities Group fell over one per cent before closing down 4.9c, or 0.92 per cent, to $5.37.

It was a trend which was anticipated by some experts in the market, betting that real estate investment trust institutional investors would cycle out of listed land lease community operator Ingenia and take up stock in GemLife instead.

Ingenia has a $2.2bn market value and has been trading strongly, due to its exposure to the land lease market and the Queensland market, which was buoyant.

Lifestyle Communities also operates in the space, but it is down over 22 per cent this year with a heavy exposure to the Victorian market, where residential property performance is lagging other parts of the country.

GemLife was priced to be a discount to Ingenia, at 15 times its forecast net profit for the 2026 financial year of $104m compared with Ingenia, which was trading at about 17 times.

Market experts say that real estate investment trust fund managers had only so much money and did not hold much cash, so the funds would be recycled out of other stocks into GemLife.

The dynamics playing out were not a bad reflection on Ingenia, which was a strongly performing business with good management, led by John Carfi.

However, Ingenia offered less direct exposure to the land lease market than GemLife.

In Ingenia’s business was also holiday parks and its retirement rental accommodation unit, Ingenia Gardens.

Institutional investors were keen to buy into land lease opportunities to capitalise on the country’s aging population, issues with housing affordability and national shortage of housing.

Also making GemLife more appealing is that its business is skewed to Queensland and it had a larger development pipeline than Ingenia, which had been deemed in the past a potential takeover target if it were not so expensive.

The business would have 32 communities and projects in its pipeline, expected to comprise 9836 sites across Queensland, NSW, Victoria and South Australia.

This was following the acquisition of the Aliria land lease portfolio in Queensland for $270.3m.

As earlier reported, the IPO size was $750m with shares sold at $4.16 – valuing its equity at $1.58bn.

GemLife was established in 2015 as a joint venture between the Puljich family and Thakral Capital providing land lease community accommodation for the 50-plus aged group.

Working on the float were Highbury Partnership, JPMorgan, Morgan Stanley, Morgans and Ord Minnett.

The Puljich family owners were not selling any shares.

The deal is the latest IPO success story in recent weeks after Virgin Australia closed 11.4 per cent higher on its first day of trade to $3.23 although shares on Thursday closed at $3.06 after the IPO wass priced at $2.90 per share.

Greatland Resources was also up 10.6 per cent to $7.30 on its ASX debut, although on Thursday closed at $7.02 after the IPO was priced at $6.60 per share.