GREENWOOD VILLAGE, CO-Chateau Communities, one of the nation’s largest owners and operators of manufactured home communities, plans to pay $570 million in cash, stock and assumed debt to buy rival CWS Communities Trust based in Dallas. When completed, the acquisition will bring Chateau’s portfolio to 220 owned communities, representing approximately 71,220 existing home sites and 38 managed communities representing 8,262 existing home sites.

CWS, a subsidiary of Security Capital Group Inc., is one of the largest private operators of land lease manufactured home communities in the US.

Its portfolio consists of 46 properties with 16,600 home sites in 12 states. The majority of these communities are in Florida (41%), Texas (21%) and Georgia (17%). In addition, the company has 1,518 expansion sites available for future development and three RV communities with 481 RV sites.

Chateau notes the high quality and attractive geographic concentration of the CWS portfolio primarily in areas where Chateau already has a predominant market position. The company anticipates the increased presence in high growth areas of Georgia and Texas will add to Chateau’s overall rate of growth and increase its management efficiency.

This is how the $570 million purchase price breaks down: $325 million in cash, the issuance of $65 million in operating partnership units, and the assumption of about $180 million in liabilities, including $160 million in mortgage financing.

The financing has a weighted average of 7.62% and an average maturity of 7.3 years. About $500 million of stabilized manufactured home communities will be purchased at about an 8% cap rate, with the balance of the acquisition of consisting of $35 million of communities under development and $35 million of assets.

Bank One will provide the initial financing.

Ultimately, Chateau intends to replace the Bank One loan with a combination of long-term, unsecured debt, disposition of assets, and or equity issuances.

Chateau reiterated its commitment to a strong balance sheet and intends to achieve a debt to market capitalization ratio in the low 40% range within a short period after the closing.

UBS Warburg Inc. maintains its ”buy” rating on Chateau following the announcement, with a $34 per share target price.

”In our opinion, Chateau did pay-up a bit to get this portfolio, as recently the company has been acquiring assets in the mid 8% cap rate range for communities,” according to UBS Warburg. ”That being said, given that not many institutional grade communities have been changing hands, and the overall size of the portfolio that is being acquired, we think a modest premium should be expected.”

UBS Warburg goes on to say that it appears the purchase will be a good fit with Chateau’s existing communities.

”Overall we view this transaction as a positive as this will make Chateau by far the largest owner of manufactured housing communities with a portfolio of over 70,000 existing home sites.”

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