Lifestyle Communities shares tank after VCAT ruling
Make us a preferred source
Make us a preferred source on Google
More news: Shares in Lifestyle Communities dived in early trading after a tribunal ruled against the embattled property developer in a dispute over the disclosure of deferred management fees in some of its housing contracts.
Lifestyle Communities shares were down 31.1% to $4.85 at 10:40am AEST, having slumped more than 34% at the open.
UBS flags earnings risk for Lifestyle Communities ahead of VCAT appeal
The news: UBS has slashed its price target on property developer Lifestyle Communities after the Victorian Civil and Administrative Tribunal (VCAT) ruled on Tuesday that deferred management fees (DMF) in the some of the company's residential contracts were void.
The numbers: UBS retained its 'buy' rating on the stock but cut its price target by 14.8% to $8.83, reflecting lower expected earnings following the verdict. Lifestyle shares last closed at $7.04, but have been in a trading halt since Monday.
UBS analysts said that if Lifestyle Communities appeals the decision and is unsuccessful, its estimated earnings for fiscal 2025 could move 11% lower, and 17% lower for fiscal 2026.
The context: The analysts noted that a failed appeal could see the value of payable DMF written down completely, with some risk of a repayment of previously collected fees amounting to around $47 million.
An appeal would also bring uncertainty and take up to nine months to conclude, they said, potentially impacting investor confidence as well as sales rates.
After the market closed on Tuesday, Lifestyle Communities acknowledged VCAT's decision, which found the DMF clause in certain residential contracts was void because they do not disclose precise amounts.
The company said it intends to appeal the decision and apply for a stay of the orders until after the appeal is heard. It said it will amend its new homeowner contracts in the interim to comply with the ruling.
Chief executive Henry Ruiz also announced a refresh to its strategy, including amending the DMF calculation method to align with VCAT's findings.
What they said: "We respect and acknowledge the rights of homeowners to seek clarity through VCAT on matters that are important to them and where we have been unable to reach agreement via our usual engagement channels," Ruiz said in an ASX release.
"We take our compliance obligations very seriously and have sought and obtained legal advice at various stages in our history to ensure our contracts are compliant with all relevant legislation.
"We are disappointed with the outcome of the VCAT proceedings and intend to lodge an appeal."
The sources: ASX, UBS research
