$30M Opens Doors in Manufactured Homes for FCP

CHEVY CHASE, MD-Federal Capital Partners, a company that has made a name for itself in the Mid-Atlantic for its savvy, value-add investments in multifamily, is branching out into a new asset class--manufactured housing. The company has acquired a stake in a 1,358-pad manufactured home portfolio located in North Carolina, Maryland and Pennsylvania for $29.5 million. The portfolio, which is 88% leased, will be owned by a newly created joint venture between FCP and the portfolio’s current owner, Horizon Land Co.

Manufactured housing is a departure from FCP’s focus on multifamily—but not as great as one would think, FCP managing partner Thomas A. Carr tells GlobeSt.com. “This is a logical extension of our multifamily strategy,” he says. “The customers for manufactured housing are similar to the folks we serve in multifamily.”

The economic case for both property types is also similar, he adds. Namely, homeownership is declining, and a still-recovering job market makes it difficult for many young adults to qualify for mortgage financing. At the same time there’s a growing shortage of affordable housing. Manufactured homes, Carr says, sit squarely in the middle of all of these trends. “It has a strong kinship with our core business,” he says.

The business model itself is complementary with FCP’s strategy of investing in assets that offer, or are expected to offer, stable cash flows. Carr declined to discuss the investment’s IRR or cap rate or related financial markers for competitive reasons. “We have found, in our research, that because the market is so fragmented there’s a lack of good pricing information about manufactured housing.”

There are other attractive fundamentals to the space, he says—more attractive, in some cases, than with multifamily properties. Residents tend to stay for a long time and even pass along homes to family members. Also, Carr says, there are high barriers to new development in many communities due to new zoning laws--especially in in-fill locations, where many of the homes of its newly-acquired portfolio are located.

Another difference between multifamily and manufactured housing, Carr allows, are the operating economics and practices. “These are very different, which is where our partnership with Horizon comes in.”

Carr says the company is actively searching for more investments in this sector in the Mid-Atlantic, but given the lack of supply he is unsure what FCP’s ultimate footprint will be for manufactured homes.