NorthStar Closes $345M Manufactured Housing Portfolio

By Barbra Murray, Contributing Editor

NorthStar Realty Finance Corp. continues to build up the manufactured housing segment of its holdings by leaps and bounds with the recent $345 million closing of a $400 million portfolio of 16 communities.

The group of assets, located predominantly in Denver, Austin and Dallas, encompasses 5,900 pad rental sites. NorthStar conducted an underwritten public offering of 50 million shares of common stock at $11.65 per share to finance the acquisition. It’s a big purchase, but it’s only one-third the size of the portfolio acquisition NorthStar made eight months ago. In April, the REIT joined forces with RHP Properties Inc. to snap up a multi-state group of 71 communities containing 17,000 pad rental sites for $865.3 million.

With the most recent transaction, all told, NorthStar has amassed a $1.6 billion portfolio of 123 manufactured housing communities featuring an aggregate 29,000 pad rental sites in roughly one year’s time. The REIT’s holdings include healthcare, net lease and multi-family assets, but manufactured housing has a special draw. The niche multi-family sector, NorthStar chairman & CEO David Hamamoto said in a prepared statement, “has consistently demonstrated stable cash flows, steady rental growth, very low turn-over rates and minimal capital expenditures.”

Manufactured housing investment has been on a roller coaster for the last several years, with community sales peaking at 344 in 2005 and plummeting to a 10-year low of 202 in 2009 before bouncing back to life with the trading of 469 communities in 2012, according to a report by commercial real estate services firm Cushman & Wakefield. And by the close of the third quarter of 2013, activity had already reached an all-time high with the sale of 495 communities.

It’s a positive, if not unexpected, consequence of investors’ seemingly insatiable appetite for apartment assets. As noted in the C&W report, “This record activity is largely due to the increased competition for high-quality, traditional multi-family inventory which drove investors to seek alternative investments, primarily within higher quality, well-performing parks.”

Aside from NorthStar’s transactions, major investment activity in the manufactured housing market this year included Matrix Realty Group’s $165 million purchase of an 11-community portfolio featuring 5,347 pad sites in Michigan and Alabama, and YES! Communities’ acquisition of 64 assets comprised of 14,000 home sites located primarily in the Atlanta and Dallas metropolitan areas.