Two of the world’s largest private equity real estate investors recently made significant bets in a property type that is not typically considered institutional: manufactured housing.
Last month, Singaporean sovereign wealth fund GIC and another Asian institutional investor acquired a 71 percent equity stake in YES! Communities, a Denver-based owner and operator of manufactured home communities. The sellers were investors with San Francisco-based Stockbridge, which formed YES! with capital from its 2007-vintage fund, Stockbridge Real Estate Fund III.
GIC’s manufactured housing deal follows Brookfield Asset Management’s deal in May to acquire a US manufactured housing portfolio comprising 135 communities from NorthStar Realty Finance Corporation (NRFC) for a little over $2 billion. The transaction, which is scheduled to close this quarter, will mark the Toronto-based alternative asset manager’s entry into the sector.
Ownership of manufactured housing is highly fragmented, with approximately 39,000 US communities held mostly by small businesses, while institutional ownership and management has been limited primarily to two publicly traded manufactured housing companies, according to NRFC.
In last month’s GIC announcement, Adam Gallistel, regional head for the Americas at GIC Real Estate, noted the relative lack of consolidation has made it very difficult to enter the sector in scale. For GIC and Brookfield, however, those barriers to entry in manufactured housing could potentially allow them to achieve higher yields than in other property types – giving them an early-mover advantage.