Ladies and gentlemen, thank you for standing by, and welcome to Ingenia Communities Group first half 2022 results teleconference and webcast. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Simon Owen, CEO and Managing Director. Please go ahead.
Good morning, everyone. As my mentor, Homer Simpson would say, "Don't bore us. Get to the chorus." The first half of the current financial year has been incredibly challenging for Ingenia. Our holiday parks were essentially closed to short-term guests for the first four months. We are working through unprecedented supply chain challenges and are being forced to swallow 20% cost increases over the past 12 months in our development business. Compounding that challenge with development, we're also experiencing delays in home construction, which are pushing out average build times by approximately four weeks. We are experiencing real shortages of available people in the regions, and the war for talent in the key metro markets, particularly across development, finance, and cap trans is unrelenting.
Notwithstanding the above, and these are only a fraction of the challenges facing many businesses across Australia today, it's pleasing to be presenting another strong result and reconfirming our prior guidance. 475 settlements this year, growth in EBIT of 20%-25%, and underlying EPS growth of between 3% and 6%. At its essence, Ingenia's business is underpinned by owning land and collecting cash rents. A significant component of this rent is supported by Commonwealth pensions and rent assistance. This is supplemented by the low risk, high velocity, and profitable development of regional and outer ring metro lifestyle communities geared towards the rapidly growing number of downsizers and young retirees across the east coast of Australia.
COVID has certainly impacted and disrupted elements of our business model, but it has also accelerated macro trends and consumer behaviors which are hugely positive for both Ingenia's immediate and longer-term growth aspirations. Pre-COVID, our business model was uniquely leveraged to the intersection of three key thematics: the aging population, a continuing housing affordability crisis, and several generations of Australians downsizing or retiring with limited savings beyond the family home. Through COVID, we have seen a few more longer-term thematics emerge. A flood of people, both downsizers and families, are flocking to the regions, and especially the coast, seeking space, quality of life, and to release capital.
In a CoreLogic report released last week, it was noted that the top three regional house markets with the highest price growth over the past 12 months were the Shoalhaven region in New South Wales at 38%, the Gold Coast at 36%, and the Sunshine Coast at 35%. It is no coincidence that Ingenia has live development projects in all three of these markets. Secondly, several generations of Australians holidaying at home, many for the first time ever, and appreciating the amazing experiences that our country has to offer. Pre-COVID, approximately 1.2 million Australians went on a cruise, and as a nation, we spent AUD 65 billion on overseas travel. With overseas borders just beginning to open, many Australians are choosing to holiday at home, and our holiday parks are proving to be huge beneficiaries.
Joining me on the call today are a number of the Ingenia executive team, including Scott Noble, our CFO, Donna Byrne, who heads up Investor Relations and Sustainability, Natalie Kwok, our Chief Investment Officer, Justin Blumfield, who heads up our Residential Communities business, Matt Young, who leads our Holiday Park business, and Von Slater, who leads our Development business. I would like to start with the cover photo of our lifestyle community in Hervey Bay, about three hours north of Brisbane, where I was last week. I think this is a great example of what we are seeing in the coastal regions, particularly in Queensland and the New South Wales North Coast. Since our first resident moved in barely two years ago, we have now settled nearly 150 homes, and demand hugely exceeds our capacity to supply.
The median house price on the Gold Coast and Sunshine Coast, which are the traditional retiree hotspots for many Australians, now both exceed AUD 1 million for a house, which has priced many people out of the market. Hervey Bay, like many similar locations, is a key beneficiary of this key market trend. I'll now move on to slide two, which is executing on strategy. Ingenia has utilized COVID as a once in a decade opportunity to build long-term sustainable market share and slingshot past the competition. While multiple parties announced plans to enter the lifestyle and holiday community sectors, we have focused unrelentingly on executing and on building our market-leading platform. Ingenia has unrivaled networks across the sectors that we operate in, and our ability to originate and execute upon M&A opportunities is unrivaled.
Since June 2021, we've increased our total assets under ownership or management by 48%. In the last six months alone, we've increased the size of our development pipeline, which is the key driver of future growth, by over 50% to 6,270 new home development sites. The holiday domestic thematic will be with Australians far longer than many of us are thinking, and Ingenia is strongly leveraged to this story. Our forward bookings through to 30 June this year are up over 30% when compared to the same period last year. Caravan sales are very strong at the moment, and a 12-month wait for a new caravan is not unusual. The two most popular regions in Australia for caravanning and camping is the New South Wales North Coast and the New South Wales South Coast, where Ingenia has the market-leading position.
Airlines, like many industries, have used COVID to rebase their operating model and cost structure and have deliberately, significantly curbed capacity. Last week, travel website KAYAK noted that prices for economy class international travel departing Australia are 54% higher than pre-pandemic travel. Of course, not that anyone on this call flies cattle. ESG is a critical priority for Ingenia, and I'll ask Donna to make a few comments on our achievements in this space shortly. Moving on to slide three, the results summary. As noted previously, today, Ingenia announces a strong result, but not without its challenges. Our revenue is up 8% to AUD 131.4 million. Our underlying earnings per security is down 20%, noting that the impacts of the recent capital raise.
Our operating cash flow is down 35% as we attempt to restock inventory levels to meet surging demand for new homes. During the period, we completed over half a billion AUD of acquisitions, adding 26 communities and development projects, and we grew the size of our business by approximately 48%. In November 2021, we announced 20 acquisitions alone, of which 16 have closed to date, and we think a further three will close in the coming weeks. Our development pipeline has expanded by over 50% in the past six months, and we are sitting on a record 465 new home contracts and deposits, which underpins our second half settlements. Building upon what we've experienced in the first seven weeks of this calendar year, we expect a very strong second half. I'm now on slide six, and I'll talk briefly about Seachange.
In November last year, the group acquired the high-quality Southeast Queensland-based lifestyle business, Seachange, for AUD 275 million. At the time, this comprised 676 occupied homes and a development pipeline of a further 557 new home sites. Seachange significantly expanded our footprint in the Southeast Queensland and provided us with additional development, operations, and origination capabilities. The integration is progressing well, with approximately 50 new home settlements expected this financial year on the Gold Coast and up in Toowoomba. Last week, I was in Queensland, and it was great to see the Seachange development site in Brisbane's Victoria Point, breaking ground. I'm now gonna hand over to Scott to talk through the financials, capital management, and valuations.
Thank you, Simon. Good morning. Thank you for joining us on the call today. I'll start at slide eight. It's been a period of transformational growth for Ingenia, with over AUD 500 million invested in new acquisitions over the last six months. We've continued to grow the rent roll through acquisition and development and made a significant investment in future growth, increasing the group's development pipeline by approximately 50% from 30 June. During the half, we added 23 individual assets to the Ingenia balance sheet, with a further two greenfield development sites added to the joint venture. We now own or manage 109 individual properties. Recurring rental income in lifestyle and holidays grew 38% on prior year through acquisition, strong rent increases, and investment in new rental stock.
While our holidays business was materially impacted by government mandated COVID-19 restrictions, our holiday communities bounced back strongly once those restrictions eased. We ended December with a record level of forward holiday bookings. We've increased our investment in inventory by 83% on the prior year to meet demand for a strong forecast of second-half settlements. The group's statutory result was up 23%, driven by positive valuations as cap rates continue to compress across the portfolio, partly offset by transaction costs and stamp duty on acquisitions. Underlying profit reduced by AUD 4.7 million from prior year, impacted by lost earnings from tourism and development due to the impact of the COVID restrictions. An interim distribution of AUD 5.2 cents per security has been declared.
This is a 4% increase per security on prior corresponding period, and the distribution is estimated to be 51% tax-deferred. This represents a higher payout ratio than prior year due to a strong second half outlook and an increase in stable rental income. Moving to slide nine. When comparing comparative results, please note that the prior year result includes AUD 5.1 million of JobKeeper recognized in EBIT across the portfolio. Our lifestyle rental business benefited from new acquisitions and rent increases linked to inflation, with lifestyle rental EBIT growing 26% on the prior year result. The Ingenia Gardens result benefited from the acquisition of a new Victorian village and continued to deliver strong cash flow and margin to the group, ending the year with occupancy of 95.5%. COVID restrictions unfortunately impacted the group's development and tourism results.
However, the second half outlook for both businesses is extremely positive. Our development business currently has a 92% increase in sales deposits and contracts on hand from prior year, which will set the group up for a strong second half result. As we've materially increased our asset base, corporate costs have increased to support this growth. With cost growth driven by increases in wages and incentive plans, investment in IT transformation, ESG initiatives, recruitment, and the integration of new acquisitions. Approximately 10% of these costs will be transitory. Turning to slide 10. The group's had a transformational six months, growing total assets by 48% from 30 June. This growth in asset base was funded through an AUD 475 million rights issue to existing shareholders and an increase in debt.
We increased debt facilities by AUD 200 million on attractive terms, reducing the cost of drawn debt. We're very conscious that we're in a rising interest rate environment, and while our hedging percentage reduced to 37% at the end of the period, as we increased debt to fund acquisitions, we're actively monitoring the market and will seek to extend the group's hedging profile in the short term. The balance sheet remains in a strong position with an LVR of 22.1% at 31 December. The group's pro forma LVR is forecast to grow to 27%, post the announced acquisitions from the equity raise that are yet to complete, leaving further capacity to fund growth and future acquisitions and development.
While we are facing cost growth pressures through higher inflation, pleasingly, our residential rental contracts are linked to inflation and delivered a 3.9% like-for-like rental growth. Slide 11. Strong valuation gains were delivered in the half, with growing demand for lifestyle and holiday assets driving cap rate compression. Average cap rates in lifestyle compressed by 36 basis points to an average of 5.44%, with our premium Latitude One project now valued at 4.72% cap rate. While the average cap rates also compressed in our holidays and Ingenia Gardens portfolios, the cap rates still remain high at 7.59% and 9.12% respectively. The positive impact of valuation uplift to the result was partly offset by transaction costs and stamp duty on new acquisitions. Thank you very much.
I'll now pass back to Simon.
Thanks, Scott. I'll now move to page 14 and discuss our development platform. Our development business has absolutely been impacted by supply chain disruption and labor shortages in the first half, and demand currently strongly exceeds our near-term ability to supply. However, we are sitting on the highest level of deposits and contracts that we've ever had. We remain confident of our ability to deliver 475 settlements for the year. However, it all comes down to our builders at the moment, and we are working very closely with them. The incoming purchases are ready. There is a small element of risk to the downside and to the upside. The reduction in margin in our development business is a combination of surging home construction prices, product mix, as we fully sold down Latitude One, and settlement volumes.
On page 17, we have mapped out the median house price and price growth achieved over the past 12 months in our core development projects, as well as a few new planned communities. 13 of these 16 projects in market or soon to launch have experienced price growth over the last 12 months of at least 20%, with several materially above that level. Our sector remains supply constrained and the demand continues to escalate. I'll now touch briefly on lifestyle operations, which is on page 19. Across our lifestyle business, we have 4,824 permanent rental homes and villas, which is up 48% on a year ago as a result of acquisitions, development and community expansions.
Total earnings from our rental business were AUD 22.5 million, which is up 38% on the prior year, and we've also been able to slightly expand our operating margins. Touching on our holidays business, which is on pages 22 and 23, Ingenia now owns and manages one of the largest portfolios of holiday parks in Australia. On the East Coast, we have a network which extends from Torquay on the Victorian Surf Coast, right up to Cairns in tropical North Queensland. While revenue was up over AUD 6 million for the period, both earnings before interest and tax and margin were down, reflecting the impact of park closures in New South Wales and Queensland and restricted domestic movements in the first four months of this year.
As noted previously, forward bookings through to 30 June are up approximately 30% when compared to a year ago, and it is our expectation that demand for domestic travel will remain very strong for at least the next three-four years. There are now over 772,000 caravans and campervans registered in Australia, which is an all-time high, and waitlists for new caravans typically extend beyond 12 months. On page 25, we discuss our development partnership with Sun Communities, who is the largest owner, operator, and developer of lifestyle and holiday communities in the U.S..
Our partnership is progressing very well, and we're reporting strong sales at our first development project, Freshwater, and we have several new projects set to break ground shortly. Once a community has been developed in the JV and it's been sold down, then Ingenia has an option to acquire Sun's interest at market value, which continues to feed our origination machine. I'll touch briefly on funds management, which is on page 26. Funds management will be a key growth driver moving forward as we look to launch a new AUD 100 million fund in the coming months. Funds management provides Ingenia with additional capital flexibility in terms of how we fund our growth. It's highly accretive to earnings, and we also retain the first right of refusal over the communities within each of the existing funds should they ever be wound up.
I'm now gonna hand over briefly to Donna, who leads our increasing focus on ESG, to provide an update on the significant progress we have continued to make over the past six months.
Thank you, Simon. Turning to slide 28. It's pleasing to note that over the half we continued to make good progress on our ESG program, and it was very pleasing to see the increased level of engagement across our business as we progressed some of our initiatives. We were proud to once again be ranked number two for women in executive leadership team roles in the 2021 CEW Senior Executive Census, which is a strong acknowledgement of our ongoing commitment to gender equality across the group. Key milestones for the half included the publication of our first sustainability report and our second modern slavery statement, which allowed us to increase our disclosures and meet a growing need for information from many of our stakeholders. We also disclosed our emissions reduction strategy and provided our first report to the Clean Energy Finance Corporation.
We are continuing to evolve our reporting over the coming year with an increase in our disclosures around water and waste planned for the next sustainability report. Pleasingly, we are making good progress towards our goal of a carbon neutral operation by 2035, with solar now installed across more than 40 of our communities. Ingenia Gardens, where the program is most progressed, is already reporting solid reductions in emissions and some initial cost savings. New developments are targeting sustainable outcomes, including more efficient homes for our residents. Projects such as our Parkside community at Ballarat in Victoria, which is shown on slide 29, are utilizing innovations which are enhancing both home and clubhouse designs in line with this objective. Across our developments, we are trialing ways to continually improve sustainability of our communities and their ongoing operations.
This includes construction of our first green home under the Green Building Council of Australia pilot program, which is currently underway at Plantations. Thank you. I'll now hand back to Simon.
Thanks, Donna, and we're on the last couple of slides now. On slide 32, we've provided some information on how migration patterns and the incredible run-up in residential house prices are driving how and where Australian downsizers are choosing to live. COVID has seen significant migration ex-New South Wales and Victoria moving to Queensland and also from the capital cities to the regions. Over 80% of Ingenia's development sites are located either in Queensland or in the regions, which provides the group with incredible leverage to these migratory patterns. What we are also witnessing and taking advantage of is that many regional locations, particularly on the coast, have seen their median house price move upwards to the extent that it is now feasible for us to consider development of a new lifestyle community in this location.
In the past six months, we have actively commenced optioning up land in many of these locations. Finally, I'll now close on page 35 with the group's outlook. Supply chain challenges, including time delays, labor and material shortages and escalating prices, continue to impact our business, particularly the construction and handover of new lifestyle homes. However, given our strong relationships with the incumbent builders and the current status of new homes under construction, we remain confident of achieving our previous forecast of 475 new home settlements for the year, including a contribution of some 50 homes from the newly acquired Seachange portfolio. There is both some modest downside and upside risk to this target, noting that we presently have over 350 homes under construction, and we have some 500 contracts and deposits on hand.
Similarly, noting the above and based on forward holiday bookings in our holiday communities and occupancy levels in our residential business, we remain well placed to deliver on our FY 2022 guidance of growth in EBIT of 20%-25% and underlying EPS growth of 3%-6% on the prior comparative period. That's all Scott, Donna and I were going to present today. Now we're delighted to hand over for Q&A.
Thank you. If you wish to ask a question please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request please press star two. If you're on a speaker phone please pick up the handset to ask your question. Again, to ask a question please press star one. The first question is from James Druce from CLSA. Please go ahead.
Hi. Good morning, Simon and Scott. It's pleasing to see the settlement guidance staying strong. Could you make some comments around the margin and the price for the full year? Has there been any change from how you're thinking about things six months ago?
Hi, James. Yeah, it's a good question. What's really happened over the last six-12 months is we've really had to change our release strategy. In years gone by, when we were releasing a new community or a new stage, we would typically release pricing at the same time as we would start going to tender. We lock in, I guess, confirm the demand, and we lock in the pricing. However, what we're seeing now is with construction prices surging, we've really had to, you know, basically build the homes and then start releasing them to the market or releasing them earlier but without locking down a price.
That's been a way that we've really changed our pricing model to ensure that, you know, with the run-up that we've seen in pretty much every regional market of between 20%-25%, to make sure that our pricing of our communities is keeping pace with what we're seeing there. In the second half, you know, we are continuing to see cost inflation coming through. You know, talking to our two largest builders last week when I was up in Queensland, they're not seeing any near-term catalyst for prices to stabilize. The demand for trades, particularly in Southeast Queensland, remains very strong. I'm very confident that we'll be able to continue to maintain our margins.
The margins did come back a little bit in the first half, but that was predominantly because we'd fully sold out of Latitude One, where the homes in the last couple of stages were typically selling at between AUD 600,000 and AUD 800,000. I'm very confident that our margins will remain intact into the second half. Over the next couple of years, I do think that there'll be a great ability for us to continue to expand our margins based on the volumes, based on procurement efficiencies and, you know, we're now able to achieve prices in our communities that are, you know, pushing above AUD 500,000, AUD 600,000. Generally, the higher we're selling the homes for, the higher the margin is.
That makes sense. You're still seeing good price pressure, basically. Is there any change in or shift in mix that's different to what you were expecting three months ago, given the challenges that you've been facing?
No. I mean, we always flagged that this current financial year, there would be a little bit of a drop in the average sales price, reflecting that, Latitude One and to a lesser extent, Plantations would fully sell out. In the coming months, we'll be commencing construction on a number of new, you know, high-end premium communities, including Bobs Farm and Fullerton Cove up in Port Stephens, and also, Morisset, on the Central Coast there, and Bargara, up in Queensland. You know, moving into 2023, 2024, I would expect to see the headline sales price increase, maybe by 15%-20%. For this year, the mix in the second half will broadly be in line with what we've seen in the first half, but the volume will be considerably higher.
That makes sense. Maybe just touching on your underlying guidance of 3%-6%. You mentioned there was some risk around both upside and downside. Are you suggesting that there's risk outside of that 3%-6%, or are you still saying it'll just land somewhere in between there? Just remind us the assumptions that you have that's sort of reflecting that range.
Yeah. With the risk around the number of home settlements. I did make it quite clear that it was, you know, modest or a small element of risk. Based on everything that we're seeing at the moment, the EBIT and EPS target, the ranges we've provided, remain intact. We gave an absolute number for the settlement numbers, and I can see. You know, the last couple of weeks, I've gone to every single one of our development projects, spoken to the builder, sat down with our development teams, looked at the progress of the homes getting constructed. All the frames are up, you know, the slabs are down. I'm very confident that we'll be able to achieve that.
As I noted, a lot is in the hands of our builders at the moment, and if we experience some inclement weather, if there was a shortage of materials getting to site, if some trades, for whatever reason, don't turn up on site when we're expecting them to, you know, put in the gyprock or do the painting or the tiling, then, you know, we could have a few homes that rather than settle in May or early June, drift into July. Equally, there's homes that currently we're thinking that won't be ready for residents to move in until, you know, July or August. If everything goes well, they could potentially move into June.
You know, we're not talking about a huge number, but you know, there could be you know, maybe 20 homes that could fall into July or 20 homes from July that could drift into June. You know, that's sort of, I guess the range of what we're looking at. You know, we remain very confident based on everything that we're seeing, based on the discussions with our builders. You know, we've got many residents who've already sold their homes, who are in our holiday parks or who've grabbed a caravan and holidaying around Australia, who are just waiting to move into their newly constructed homes. You know, for the first time ever, our business is you know, the number of homes we can sell is determined by what we can build.
In almost every other year, the number of homes we build is determined by what we can sell. It's an interesting paradox that we currently face.
That makes sense. All right. Thanks very much. That's it for me.
Thanks, James.
Thank you. The next question is from Michael Peet from Goldman Sachs. Please go ahead.
Oh, hi, Simon, Scott, Donna, and team. First one, just on holidays if I may. Could you just give us a sense of what capacity was shut during the period? I think you mentioned most for four months, but if there's any sort of quantitative guide you could just to get a sense of what capacity was shut, weighted average over the period or the occupancy weighted average over the period would be interesting.
Michael, thanks for the question. Basically, it was Victoria and New South Wales. All our parks were basically mandated from late June through to the end of October, some into November, where they were closer to the Queensland border. Queensland, all our Queensland parks continued to operate and operate well during that period and actually saw increases on prior year. In terms of impact to the group, at our update in November when we released our guidance, we said that the impact of those, I suppose, mandated lockdowns was approximately AUD 10 million to revenue and AUD 7 million to EBIT.
Okay. Thank you. Just flipping onto the development side, just to follow up on James' question. Just thinking about your comments there, Simon, about that sort of risks in the second half, can I confirm it's probably more around labor. You've got construction materials and appliances, et cetera, to fill out these homes. Is it more the labor content that's the risk? Also just on build costs, can you sort of quantify what build costs have done and just confirm that you're able to move price to offset that?
Yeah. It is a combination, Michael, of labor and materials. Particularly at the moment, the materials for the homes and in our larger communities, we're typically commencing, you know, three or four homes every week. Materials are delivered to site on a just-in-time basis. The frustration is that if the materials aren't delivered and the trades are there, then the trades will just go to another project, and they may not come back to you for a couple of weeks. It is. I wouldn't say it's just labor. It is absolutely a combination of the materials and the labor availability. It is really a highly sequenced operation at the moment to make sure that our builders, you know, are matching the arrival of materials with their labor teams.
Because particularly up in Queensland, but, you know, even in coastal New South Wales and down in Victoria, there's so much home construction underway. You know, in Southeast Queensland, you've got the casino underway, and that's taking a whole lot of builders who would typically be working on residential homes out of the pool. You know, similarly, down in Victoria, major infrastructure work. That is a real challenge. We put a slide together there. I crudely drew a house and showed some, it's on page 18, which based on the discussions with our key builders, you can see the sort of cost increases that we've seen over the last 12 months. It does vary by region, and it varies by state.
You know, timber frames in particular, you know, which would constitute, on a typical home build of, you know, say AUD 230,000, the frame would be around 10%. Going back a year ago, that frame price might have been 6% of the home, but it's really increased. In Queensland, where we'd previously been using timber, we've now moved to steel. Even there, we're looking at, you know, with our Stoddart's framing solution, we're looking at 10%-20% increases in frames. It really is across the board. You know, talking to our main builders last week, you know, the rate of increase is not slowing down at this point in time.
Fortunately, we've also pointed out that house prices across nearly every market we're in have increased by between 20% and 25%. We've been able to broadly absorb those cost increases by increasing our revenue line.
I guess I'm just interested in, you know, that bottleneck in getting, so it's a settlement. I mean, people can't stop the settlement on their old home. I'm just thinking, are you offering sort of, I think you've done in the past, some spots in your tourist accommodation where possible. But what sort of things, how many people are involved here in terms of people that have settled homes and may not be able to get into their home? Is it meaningful?
Yeah. We would probably have 40 or 50 couples at the moment, you know, across the East Coast where they're staying in our holiday accommodation at the moment. Equally, our holiday parks are booming at the moment. You know, typically once the kids go back to school, it would start to ease off. Our coastal holiday parks, particularly those within an hour or two of the capital cities, every weekend, they're full. I was staying at our BIG4 Lake Macquarie holiday park Saturday night two weeks ago, and it was fully booked out. It was basically people from Sydney. A lot of them pulled their kids out of school on a Friday afternoon and headed up the coast. That's what we're seeing.
In years gone by, we probably would have had a surplus of holiday accommodation available. At the moment, you know, people are holidaying for longer. They're pulling their kids out. Gray nomads are hitting the parks. They're heading up and down the coast, moving freely. Yeah, it's a real challenge for us at the moment. You know, over and above all of the deposits and contracts on hand, we've got great visibility on what next year looks like, because there's a lot of people who are just waiting to make sure that the homes can get built before they start listing.
You know, beyond what we've got in terms of deposits and contracts on hand, we've got, you know, significant interest in future stages of projects where we haven't even started thinking about release stage yet.
Thank you. That's all I've got for now.
Thank you. The next question is from the line of Andrew MacFarlane from Jarden Australia. Please go ahead.
Hi, guys. Thank you for your time today. Just a couple from me. Just one on acquisitions. I know you've identified in the past about AUD 100 million of acquisitions secured and AUD 100 million you're sort of essentially reviewing. I think you had about AUD 150 million or just under that at the Seachange acquisition. Just wondering how much of that AUD 150 million is sort of still to go and you know, how much of that comes under this, you know, extra AUD 100 million you're looking at go forward.
It's a great question. With the capital raise we did in November last year, that was to acquire 20 communities and development sites. To date, we've settled on 16 of those 20. I would expect that in the next two-three weeks, we will announce the acquisition of three of the remaining four that are outstanding. There's one final acquisition where that may not proceed. That's, you know, broadly a little bit over AUD 100 million, those four. On top of that, you know, we have good visibility, good line of sight on at least another AUD 100 million of acquisitions, which is predominantly land lifestyle communities and one or two holiday parks, which would be funded through.
At the moment, we have around AUD 360 million of committed but undrawn debt.
Excellent. You also mentioned in terms of options that you're looking at. Can you just comment on sort of how you're thinking about that kinda go forward and what that sort of looks like, obviously from a development perspective, but just kinda get some more color on that?
Yeah, no. We have three dedicated people just focused on land acquisitions on the East Coast. We're constantly looking at every coastal market up and down the East Coast, you know, from Cairns right down to, you know, the Victorian South Australian border. What we've really seen through COVID is, you know, broadly for us, if the median house price in a local market is less than AUD 350,000, it makes it very difficult for us to make a new land lease community stack up, because by the time we put in the infrastructure, we pay for the land, we build the home, we're typically trying to sell that home for, you know, around 70% of the median house price in that local market.
If the median house price is below that sort of AUD 350,000 or even at AUD 350,000, it becomes very challenging. What we've seen is in a lot of these coastal regions is that median house price has moved from, you know, AUD 300,000 or AUD 350,000 often to AUD 500,000 or AUD 600,000. Just as people are moving out of Sydney and Melbourne and, you know, moving to the coast, or in the case of Queensland, people exiting New South Wales and exiting Victoria and moving to Queensland.
You know, now that the median house price of the number one and number two retiree destinations in Australia, which is the Gold Coast and Sunshine Coast, now that those median house prices for a standalone home are both over AUD 1 million, it's pushing people into markets like Hervey Bay and Bargara, and Ingenia's got communities or sites in both of those. Yeah, up and down the coast, yeah, we've been very busy looking at these smaller regional locations that previously weren't viable, and we've been looking to lock up land in those communities, you know, to really take advantage of this migratory drift that we're witnessing.
That's helpful. Thank you. Just one final one from me. Just in terms of funds management side, you touched on your prior plans, I guess, in terms of the AUD 100 million fund. Can you ever just, I guess, you know, just touch on what you think about in terms of, you know, types of category you're talking to, timing, and the sorts of assets you think you might target for that launch in the fund?
We were very well poised to launch last year, and we had some very positive discussions with a number of investors who were gonna cornerstone that fund. At the same time, though, we had Halcyon, and then Seachange came to market, and we ultimately proceeded with Seachange. Just from a management bandwidth, given that we announced 20 acquisitions in the month of November alone and a AUD 475 million capital raise, we didn't have the management bandwidth to push forward on both. We've deferred the funds management launch into the coming months. The first iteration of that fund will be somewhere between eight and 10 existing Ingenia holiday parks.
Those will be put into a new unlisted fund of which Ingenia would, you know, maintain a, you know, perhaps a 15%-20% interest. You know, the capital that's recycled from that we would use to, you know, reinvest back into our development business or potentially look at the acquisition of some additional lifestyle communities. Yeah, I would expect that over the next, you know, two-three months, depending on market conditions, that we would look to launch that.
Thanks. Thanks for your time, guys.
Thank you.
Thank you. Participants, to ask a question, please press star one. The next question is from Tom Bodor from UBS. Please go ahead.
Good morning. I was just interested in your thoughts around the impact of sort of higher interest rates across the business and where you see it impacting. Noting sort of your debt is at the lower end of sort of hedging levels, but also, how you sort of see it playing into the residential market for people selling their houses to enter your communities.
Might get Scott to talk about balance sheet implications, but in terms of the residential market, I think a couple of comments I'd make, Tom, would be firstly, every one of our residents who's buying a home is selling a more expensive home, so they're not taking out finance or if they are through the Ingenia-seeded Land Lease Home Loans, it's a very small loan amount. So, you know, pretty much every one of our residents is selling a larger home and downsizing into a smaller home. The people buying their home are typically first home buyers or upgraders. Yes, the housing market will undoubtedly be impacted by interest rates, but it is really interest rates and unemployment.
At the moment, unemployment in Australia is very low and, you know, based on what the RBA is saying, the rate of increases in interest rates over the next couple of years will be, you know, probably low-ish or certainly lower than what we would anticipate to see in the U.S. I think the impact will be pretty modest. You know, our challenge at the moment is that our industry is absolutely supply constrained, so, you know, we could probably sell another 150 or 200 homes this year if we could access the building product. We don't see that changing.
You know, where we've seen this massive run-up in residential house prices across nearly every market, that's really empowering downsizers and retirees to really monetize some of that equity. You know, people who are living in the western suburbs of Melbourne or living in Geelong or living in the western suburbs of Sydney, whose homes are now worth AUD 1 million, they're using this as a great opportunity to move to the New South Wales Mid North Coast or move to Hervey Bay or move to Bargara and free up AUD 300,000-AUD 400,000 and fund a much more comfortable lifestyle. Irrespective of where interest rates are, provided employment levels remain high, we don't see that demand changing in any way.
If anything, like the last 12 or 24 months has made me more bullish on land lease communities than I've ever been since, you know, we bought our first community back in 2012. Scott, maybe-
Yeah, sure. Thanks. Thanks, Tom. I appreciate the question on interest rates, something we're watching very closely. We're absolutely in an increasing interest rate environment, as everyone's aware. You know, we watch the economic forecast and the market pricing pretty closely. You know, our hedging was at 50% at 30 June. It did fall off at the end of the year as we drew down in November and December to fund the acquisitions. You know, we are pleasingly from our point of view, our revenue growth will certainly is forecast to exceed any interest rate growth from a margin perspective. You know, certainly with our rental increases in our lifestyle being linked to inflation.
Our settlements forecast over the next three years is due to grow significantly. We've got sort of guidance in the market of 1,800-2,000 settlements, which will materially sort of, you know, out, you know, increase the revenue will increase above certainly interest rates. Cap rates is something we're watching closely as well. Obviously, you know, a rising interest rate environment has impacts onto cap rates, but we are quite pleased and we're pretty positive with cap rates in the sector, just given the weight of capital that's chasing assets. We think that cap rates will be maintained. They're just a couple observations, but yeah, hope that helps.
No, that helps. Is there essentially no specific plans to increase the hedging on the debt pay?
Oh, no, certainly we are. We're looking at the market. We would like to increase our hedging back up towards that 50% level in the short to medium term.
Okay, thanks. The final one from me was just around that sort of industry supply-demand dynamics that I think Simon mentioned. That there's sort of an underbuilding or an undersupply. I know your chart on page 31 talks about current supply of 1,500-2,000 versus demand of 3.5-4. I'd just be interested in your thoughts about where that supply is going with groups like Stockland, Mirvac now entering the sector and, you know, private equity coming into the space as well.
Yeah, look, there's certainly, you know, a lot of sector interest and, you know, on chart 33, we've sort of updated where the the competitive market set is at. Look, now we've grown the size of our portfolio by 48% in the last 12 months, and the size of our development pipeline by 50% in the last six months. Notwithstanding, there are more competitors out there. You know, we've been doing this since 2012. We have great relationships, great networks. You know, people know when they're dealing with Ingenia that, you know, we'll make a decision quickly. We'll do our due diligence discreetly. You know, we don't try and do a New York close on settlement day and renegotiate the price.
You know, our acquisition team is, you know, flat out. You know, I welcome Stockland and Mirvac coming in. It's not as easy as building a lifestyle community looks. It's not easy. It's, you know, technically quite complex. The planning is quite complex. You've got to operate the community with 250-300 residents in there who live there all day. They're not going to work, so you know, you really need to work very closely with them. They're the things that we're great at. With Mirvac and Stockland and others coming in, they're gonna be spending money on marketing, and that's really raising, you know, awareness. You know, we now have 37 projects either in development or in planning.
Our pipeline is pretty much unparalleled in the sector. Yes, we have great competitors who might have a dominant or a strong position in one state or two states, but you know, we're across the entire Eastern Seaboard. As I mentioned earlier, the three regional markets with the highest price growth over the last 12 months are Shoalhaven, Sunshine Coast, and the Gold Coast. It's not a coincidence that Ingenia's got communities in all three of those markets. I would hazard to say that we're probably the only one who has that sort of exposure. You know, we have to make sure that we remain disciplined on pricing both for land and mature communities.
We've got a great pipeline and, you know, we're in a position now where we're looking to recycle capital through funds management to fund future growth. In our development partnership with Sun, we only have to pay or invest 50% of the construction cost of a new community. We've got an option, once we've sold down 95% of the community to buy Sun out. We're really building our own product that we can then move to 100% ownership. You know, we're very comfortable with the market landscape at the moment and, you know, we welcome the new participants. You know, I can assure all of those new participants that it's a lot harder than it looks. You know, we've been doing this since 2012.
We're the first to really bring institutional capital into this space. You know, we've made plenty of mistakes along the way, but you know, we've learned very quickly and we've got a great team, and we've got a great pipeline of projects. I'm you know, really excited with what the next three to five years looks like.
Thanks very much. Thank you. The next question is from Michael Peet from Goldman Sachs. Please go ahead.
Just had a follow-up. Thanks, Simon. If I may, I'm just wondering on the mortgage product, how the take-up's been, and just could you remind us of what your exposure to that is or third-party risk?
I guess, you know, over the last eight or nine years, I've been to the U.S., you know, probably 10 times. In the U.S., there is a very vibrant credit market for manufactured homes. The biggest lender into the space, who's also the biggest builder of homes, is Warren Buffett. His finance business makes around three times the amount of money from providing credit than it does from building the homes. There is no credit in Australia. After Natalie and Karen Landy and our team spent a number of years trying to bring a credit product to market.
It's really about, you know, the core market is for, you know, women in their sixties or late fifties, divorced or separated, who can't quite afford the sticker price of the new home, who, you know, don't have the same access to superannuation as their former partner. On a very sensible LVR of maybe on a AUD 300,000 loan, maybe a maximum loan of AUD 40,000, they're still working. You know, we've now brought that product to market. Ingenia owns about a third of that business. Our total exposure, we have a modest equity piece, and then we have provided AUD 2 million of debt finance. But that will be repaid as soon as Land Lease Home Loans refinances and brings in a new debt partner. That's progressing very well.
Any sort of numbers in terms of how many people have taken up the product yet?
Oh, look, we've probably written maybe a dozen loans. Our challenge at the moment, Michael, is that we basically don't have any stock to sell, and so our salespeople have got no sort of incentive to work through with the finance because they've got, you know, a list of cash buyers who are ready to go. There's definitely the demand there. We can see that. As the market stabilizes and as we probably, over the next year or two, move to more of a supply/demand balance, because at the moment, demand very strongly exceeds the supply of homes or the ability for us to bring new homes to market. You know, it's going very well.
It's just, you know, the market conditions are, you know, so buoyant at the moment that we don't have any homes to sell. And then secondly, a lot of people who are selling out of a former home, they're getting far more than for their home. You know, so people who are maybe looking to sell out of Hervey Bay a couple of years ago and might have been looking at selling their home for AUD 300,000, they're now getting AUD 500,000, so they don't need a loan anymore. But no, we remain very confident in the product, and yeah, it's going very well, but market conditions have just sort of meant that it's probably hasn't had the optimal conditions to thrive in today.
Is it exclusively on new homes sold, or can existing homeowners take out a reverse mortgage effectively?
Existing homeowners or people in our communities, they can take out a reverse mortgage-style product. Ingenia's not using our funding for that. The modest loan facility that Ingenia's made available, which I think off the top of my head is AUD 2 million, that's exclusively for new homes. Land Lease Home Loans, if it's writing reverse mortgage-style loans, it has to fund those independent of Ingenia.
Got it. Thanks for the color. Thank you.
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Well, if there's no further questions, I might just make a last final comment. Look, we're in a great position. We've got strong tailwinds supporting our key lifestyle, rental, and holiday businesses. You know, it's worth remembering that approximately 70% of Australians who are aged over 65 own their home outright with no mortgage, and that's really driving our business forward. At Ingenia, we're well-capitalized. We have great capital optionality with our funds management business and our development JV with Sun. Our balance sheet is in great shape. We've got deep industry knowledge across the board in the management team. Demographics remain incredibly supportive, and we have an amazing acquisition and development pipeline in front of us. There's considerable momentum in the business, and thank you for your time today.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.