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Lifestyle Communities (ASX: LIC), a $1.1 billion land lease community developer that has lost almost half its market capitalisation since the start of 2024, has withdrawn its forward-looking guidance due to uncertainty amidst media scrutiny over its exit fee practices.
The Melbourne-based company's shares went into freefall after an ABC 7:30 report that revealed the grievances of 80 residents at its community in Wollert, especially around the charging of rent to residents who had died, and the exit or deferred management fees (DMF) that rise in increments to 20 per cent of a home's sale price at the five-year mark.
Whilst residents featured in the program alleged the exit fee structure made them feel like "prisoners", In today's announcement Lifestyle's managing director James Kelly doubled down on the practice.
"We have always preferred the DMF model because it lowers the upfront entry cost for people buying into one of our communities," he said.
"This enables customers to release more equity to supplement their lifestyle. Capital gains made over time typically assist with paying the DMF.
"Customers who sold their homes in FY24 did so in an average of 63 days and made an average profit of $86,000 after paying the DMF."
Lifestyle revealed the average DMF valuation at the end of FY24 was $64,000 per home, up $3,000 on the previous year.
The company reports an expected operating profit after tax of $52.4-$53.4 million for FY24, down 25 per cent year-on-year.
Lifestyle has also revealed 311 new home settlements for FY24, which is one home above the upper end of previous guidance in April but is still 12.6 per cent lower than in FY23.
"There is no doubt that interest rate rises, persistent high inflation, and ongoing insolvencies in the building sector impacted consumer confidence in FY24," Kelly said.
"Despite these challenges, we achieved 376 new home sales, which is the fourth highest result in our history.
"The FY24 result, in a challenging market, is a testament to the resilience of our model and how strongly it continues to resonate with customers."
Despite this optimism, the negative press coverage has led the company to withdraw its guidance for the years to come. In April, it had forecast 425-475 new home settlements in the current financial year, and claimed to be "comfortable" with forecasting 1,400-1,700 new home settlements between FY24 and FY26.
"Recent media coverage largely focused on exit fees without considering the lower entry price that our homeowners typically pay, nor the other benefits we offer," Kelly said.
"As noted previously, we reject the allegations made in the Victorian Civil and Administrative Tribunal (VCAT) applications by the group of homeowners at Wollert and will defend them accordingly.
"Given the angst the media coverage has caused homeowners across our communities, we have written to VCAT to request an urgent case management hearing with a view to progressing things as quickly as possible."
He said the group had been "heartened" by the support from homeowners across its communities, "who felt the portrayal of Lifestyle Communities in the media coverage was not representative of our business or their lived experience".
"However, due to the difficulty in quantifying the impact the uncertainty caused by recent media coverage might have on future sales and settlements, all forward-looking guidance previously provided is withdrawn," the managing director said.
LIC shares are down a further 17.65 per cent in early trading at $9.10, representing a drop of 48 per cent since the start of 2024.
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