Lowy-backed Assembly joins the land lease rush with $500m estate plan

The venture will be backed by some of the country’s wealthiest families, who are keen to get into the living sector.

Sir Frank Lowy with his sons (L-R) Steven, Peter and David. Picture: David Moir/AAP Image

The Lowy Family Group-backed Assembly Funds Management has invested in a residential land lease joint venture to develop more than ten new estates and up to 2,000 homes across the east coast of Australia.

The move by the Sydney-based fund manager run by former Westfield chief operating officer Michael Gutman shows how the property landscape has shifted in the wake of Sir Frank Lowy selling out of the global mall empire he co-founded in a $32bn deal in 2018.

Assembly is working with developer and operator Elka Capital and the estimated value of the projects, once they are finished, will be more $500m. This will give it one of the biggest portfolios in an area that has already drawn heavyweights like Stockland and Mirvac.

The sector, which has emerged as a relatively low-cost alternative for older retirees, is among the hottest areas of property as land costs are low in the regional areas that are being targeted, and the estates can be staged to match demand.

Other listed companies have already set up in the area, including Ingenia, Aspen and Eureka, as well as Lifestyle Communities, whose business model has come under scrutiny.

The new venture has already bought two sites in Victoria with more properties being evaluated in that state and in NSW, with each estate to have 150 to 250 new homes.

Elka Capital is led by executives Tom McDonald and David Laing who have expertise in the area as real estate and banking executives. They are billing the land lease model as tax and stamp duty efficient, as it allows homeowners to acquire property while leasing the land from the operator. In return for lease payments, the operator runs the estate.

Assembly chief investment officer Tim Meurer said the land lease community business model was aligned with the company’s “high conviction strategy in the living sector”.

“The land lease community sector, in particular, is a beneficiary of positive demographic trends and provides an affordable alternative to the housing market, which is under-supplied,” he said.

The venture is partly banking on the surge in retirees who are not accounted for in traditional housing supply. “The number of Australians aged between 65-84 will more than double in the next 40 years, implying a growth rate of approximately double the wider population. This is creating a large and persistent undersupply in the seniors living space,” he said.

Mr Meurer said that by providing an affordable option for retirees, the estates could also help free up housing in metropolitan locations and noted long term prospects of the sector, despite more developers getting active. “We still see a fair bit of runway,” he said, noting the new sector’s relatively low penetration rate compared to the rest of the world.

Elka Capital director Tom McDonald said the partnership would help “alleviate the chronic under supply of quality housing for senior Australians while assisting with cost of living pressures by providing accessible, secure, and low-maintenance homes to residents”.

He said the new homes would aid older Australians seeking to downsize, with the first estates in the Murray region of Victoria.

“We are currently exploring a number of sites,” he said.

In addition to its land lease estate play, Assembly’s second fund is also focused on counter-cyclical opportunities in other areas and is open for a second close. The balance of its equity will be raised over this year as more deals are identified, adding to its $600m portfolio.