Alternatives Outlook 2024 Report

MANUFACTURED HOUSING ESTATES

Manufactured housing estates (MHE), also known as land lease communities (LLC) continued to gain traction amongst investors and consumers in 2023. While there is a significant amount of diversity in terms of stock quality, the sector is largely recognised for its relatively affordable nature. In 2023, the MHE sector witnessed its strongest year in terms of investment volumes, with the largest sale on record (Serenitas) to occur across the Australian market. Reflecting the sectors growing appeal, there has been a strong uptick in investor interest, which has been evident in the participation of two prominent ASX-listed managers. These transactions not only underscore the MHE model's stability but also signal its long-term return potential.

the business model, which presents opportunities for both strong development profits (20%+) and ensures a steady stream of rental income, while retaining ownership of the land. The investment case is strengthened by shorter development periods for manufactured houses (compared to urban living product) and minimal post-completion capital expenditures, given that residents own their homes. Looking ahead, we anticipate that yields will remain tight over the near term. This is due to scarcity of individual communities offered on market, coupled with elevated construction costs which have limited significant supply influxes. Portfolios of substantial scale are expected to retain strong pricing, further contributing to the persistence of low market yields. Sector size estimate: AUD 12 billion Prime yields: 4.75%-5.50%

KEY TRANSACTIONS

Size AUD

Buyer/ Investor

Type

Name

Yield

Date

Living Gems Portfolio Serenitas Portfolio

Direct

210m -

Stockland Jul-23

Mirvac & PEP

Platform

1.01bn

4.5%

Oct-23

Institutional investors are attracted to

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