GIC, Singapore’s sovereign wealth fund, is reportedly in talks with Stockbridge Capital Group to acquire Yes Communities, its manufactured housing business, in a deal that would value the company at more than $2 billion.
Spokespeople for GIC and Stockbridge declined to comment. Denver-based Yes Communities currently owns or operates 178 communities across 17 states, according to its website. San Francisco-based Stockbridge Capital Group created the platform using capital from its 2007-vintage fund, Stockbridge Real Estate Fund III, according to media reports. Major investors in the $1.01 billion opportunistic fund included New York State Common Retirement Fund, which allocated $400 million, and Pennsylvania Public School Employees’ Retirement System and the Teacher Retirement System of Texas, which each invested $180 million, according to PERE research.
The Wall Street Journal first reported the story yesterday.
While the deal is not yet finalized, it underscores the increasing attractiveness of manufactured housing, a niche housing sector that some investors have negatively associated with trailer parks. Despite the connotation, as yields are increasingly difficult to find in a heated US property market, investors are considering the property type. GIC’s initial yield from Yes Communities would be more than 6 percent compared with trophy property yields that have hovered under 5 percent, according to the WSJ.
In May, the Employees’ Retirement System of Texas (ERS) said it would consider investing in niche fund types such as medical office, self-storage, manufactured housing, student housing and senior housing. Such property types “may provide significant yield premiums,” Dan Krivinskas and Mark Bartmann of RVK, the pension plan’s real estate consultant, wrote in a presentation to ERS.
There is often limited new supply in manufactured housing compared with other single family and multifamily properties because local governments view the communities as less desirable, leading investors to buy existing communities rather than build them. For manufactured housing community owners, costs can be low since residents typically live in the same community for long periods of time, and some communities have renters pay for upkeep of their homes.
GIC has been investing in various niche and more institutionalized real estate sectors through portfolio-level acquisitions across the world. In January, the sovereign wealth fund partnered with the Canada Pension Plan Investment Board to buy a US student housing portfolio for $1.4 billion. GIC also has a sizable US industrial real estate portfolio after its 2014 purchase of The Blackstone Group’s IndCor Properties for $8.1 billion.