Lifestyle Communities appeals a VCAT ruling while degearing ahead of schedule

An unexpected adverse tribunal ruling on its Deferred Management Fee structure wiped more than a third off Lifestyle Communities' share price, but HMC Capital has stayed the course, pointing to faster-than-planned balance sheet deleveraging and a discount to net asset value.

31 Mar 2026 · 5 min read

Lifestyle Communities Ltd (ASX: LIC) was hit with one of the more dramatic single-day valuation shocks on the ASX in mid-2025, when an unexpected adverse ruling from the Victorian Civil and Administrative Tribunal on its Deferred Management Fee structure sent the stock down 37% in July. HMC Capital detailed the impact, estimating that if the company's planned appeal proves unsuccessful, the post-tax value impact from writing down the accrued DMF would be approximately $1.44 per share, though the fund noted the stock appeared oversold on that metric, trading close to its adjusted net tangible assets in contrast to listed land lease peer Ingenia Communities, which was trading at a more than 35% premium to NTA.

Notwithstanding this disappointing outcome, we continue to have high conviction in the long-term fundamentals of the land lease sector, which provides real asset backed exposure to the residential thematic, with favourable demand tailwinds from downsizing baby boomers.

HMC Capital, Monthly Report, July 2025

An appeal is lodged as the balance sheet is repaired

Rather than wait passively on the VCAT outcome, Lifestyle Communities moved to shore up its financial position while pursuing its legal options. HMC Capital reported in September 2025 that the company lodged an appeal with the Supreme Court of Victoria, with a decision expected to take 6-12 months, while simultaneously pursuing a clear plan to de-lever the balance sheet below $360 million by December 2025, supported by $114 million of contracted non-core land sales due to settle over FY26, materially reducing the risk of a dilutive equity raise. The fund also pointed to early signs of stabilisation in new home settlements, with 35 already completed and 162 contracted for FY26, still below the historical average of more than 300 but recovering from the FY25 trough.

Deleveraging arrives ahead of schedule

That balance sheet plan delivered faster than expected. HMC Capital reported in October 2025 that Lifestyle Communities had reduced net debt to $348 million from $460 million as at 30 June, ahead of target, aided by several completed land divestments including Ocean Grove, alongside a steady operational start to FY26 with 54 new settlements and 237 contracts on hand. The fund characterised the update as operationally sound and directionally positive, even as the stock underperformed on low trading volumes following the resignation of CFO Darren Rowland, to be replaced by Deputy CFO Angela Farbridge-Currie.

We view the update as operationally sound and directionally positive. We remain constructive on the outlook, underpinned by signs of an improving Victorian property market which should drive settlement momentum, balance sheet deleveraging, and broader demographic trends as baby boomers downsize.

HMC Capital, Monthly Report, October 2025

A valuation discount that continues to attract engagement

Throughout the episode, HMC Capital has repeatedly emphasised that Lifestyle Communities continues to trade at a discount to net asset value per share, excluding deferred tax losses, even after the reduction in carrying value of the DMF, at roughly a 14% discount as at October 2025. The fund said it would continue to actively engage with management and the board to drive value creation for shareholders, viewing the ongoing VCAT appeal outcome as a key swing factor offering potential upside to both earnings and valuation should it succeed.

What managers are watching next

With degearing running ahead of schedule and settlement volumes showing early signs of recovery alongside a broader improvement in the Victorian property market, the catalysts fund managers are tracking most closely are the Supreme Court of Victoria's decision on the VCAT appeal, expected to take 6-12 months from lodgement, continued progress toward the sub-$360 million net debt target, and whether settlement volumes can climb back toward their historical average of more than 300 per year as new leadership settles in under incoming CFO Angela Farbridge-Currie.