S&P/ASX 200 Index (ASX: XJO) real estate stock Lifestyle Communities Ltd (ASX: LIC) is having another day to forget.
The Lifestyle Communities share price closed yesterday at $11.05. In earlier trade today, shares were down 17.8% at $9.08. Shares have since regained some ground, currently changing hands for $9.29 apiece, down 15.9% in intraday trade.
That sees shares down a painful 25.9% since last Friday's close of $12.57.
The stock closed down 18.1% on Monday following news that some residents of the retirement communities company were taking legal action, alleging misleading marketing practices and questionable exit fees
So, why is the ASX real estate stock under pressure again today?
Why is the ASX real estate stock crashing on Friday?
Investors are hitting the sell button after Lifestyle Communities withdrew all its previous forward-looking guidance. The ASX real estate stock said media coverage of the pending legal action had caused uncertainty on its future sales and settlements.
Commenting on the guidance withdrawals, Lifestyle Communities managing director James Kelly said, "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 added:
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.
FY 2024 sneak peek results
Lifestyle Communities also released some unaudited FY 2024 results.
The ASX real estate stock likely isn't catching any tailwinds from its expectations of operating profit after tax in the range of $52.4 million to $53.4 million. Even at the high end, that's down 25% from the $71.1 million in operating profit after tax achieved in FY 2023.
New home settlements in FY 2024 declined to 311 from 356 the prior year, while resale settlements in fell to 151 from 178 in FY 2023.
"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.
However, he noted that the results were still historically strong for the ASX real estate stock.
"Despite these challenges, we achieved 376 new home sales, which is the fourth highest result in our history," he said.
The company also noted that the average time on the market for established homes sold in FY 2024 was 63 days, and the average annual capital growth on those sales was 10.02%. On average, homeowners made a profit of $86,000 after paying the Deferred Management Fee (DMF).
"We have always preferred the DMF model because it lowers the upfront entry cost for people buying into one of our communities," Kelly said. "This enables customers to release more equity to supplement their lifestyle. Capital gains made over time typically assist with paying the DMF."
With today's intraday losses factored in, the ASX 200 real estate stock is down a precipitous 47% year to date.
