Firm Capital Property Trust (FCD-UN-T) has deals to acquire 11 manufactured housing communities (MHCs) across Alberta and Saskatchewan comprising 1,752 MHC sites, in a joint venture involving its subsidiary and partner SunPark Communities LP, for $227 million.

The deals involve two transactions, the first involving 10 of the communities being acquired from Phoenix, Az.-based Cove Communities. This transaction is valued at $218 million. The second involves a single site in Alberta for $8.5 million, being acquired from a private owner.

Both are being acquired on a 50-50 basis by Firm and SunPark.

In addition to the properties, the acquisitions include 151 park-owned homes and 192 chattel mortgages which will provide additional cash flow. The partners plan to sell the 151 park-owned homes, so they solely generate cash flow from the site rents and the chattel mortgages.

The chattel mortgages have a weighted average interest rate of 6.46 per cent, a weighted average term of 5.4 years and are fully amortizing. 

The acquired properties also include 79 vacant sites, and additional density that allows for 92 expansion sites which, over time could provide additional cash flow.

Properties to be acquired

The properties are:

All the properties operate year-round and are serviced via public utilities, thus reducing the potential for capital requirements in future years.

The seven Alberta properties are focused along the Highway 2 corridor between Calgary and Edmonton, as well as the Trans-Canada Highway. 

Calgary Village, the largest property in the portfolio with 336 MHC sites, sits adjacent to SunPark’s existing Mountview MHC, offering operational economy-of-scale benefits.

Of the four properties in Saskatchewan, three are concentrated in the Saskatoon area and one in North Battleford to the northwest.

SunPark is partially affiliated with members of the board and senior management of the trust. The co-investment represents Firm Capital’s fifth and sixth acquisitions within the partnership.

“The MHC market is largely fragmented and held in the hands of private owners, acquiring a portfolio of 11 properties with 1,752 sites of this scale is rare and seldom available,” the Firm Capital release states. “Furthermore, the properties are institutionally owned, professionally managed and consist in almost all cases to provide amenities including clubhouses, gyms and play areas making for an all-encompassing living experience and thus keeping occupancy strong.”

The communities have a combined 94 per cent occupancy rate, are not subject to rent controls in either province, and the going-in cap rate is 6.4 per cent.

Financing the acquisitions

Firm Capital will fund its 50 per cent of its equity of approximately $38 million (excluding transaction costs) from existing cash resources including credit facilities. The remaining equity will come from joint venture partners involved in SunPark. The remaining $150.5 million cash is to be funded via: a $145-million, five-year, first mortgage encumbering 10 of the MHCs; and a $5.5-million, five-year, first mortgage encumbering one MHC (the current all-in rate would be approximately 4.5 per cent).

The acquisitions will make the venture one of the largest MHC owners in Canada with a portfolio of 2,572 sites. It also significantly increases Firm Capital’s exposure to Western Canada: Alberta and Saskatchewan will represent approximately 29 per cent of the trust’s pro-forma NOI. Ontario and Quebec will both move to 31 per cent of NOI.

Firm Capital’s MHC and apartments portfolios collectively will represent approximately 31 per cent of its pro-forma NOI. Grocery-anchored retail assets and industrial real estate will move to 41 per cent and 24 per cent of NOI respectively.

Upon closing of the acquisitions, Firm Capital projects its debt-to-gross-book-value ratio to rise from 50 per cent to 58 per cent.

About Firm Capital and Sunpark

Firm Capital Property Trust owns interests in a diversified portfolio of multi-residential, flex industrial and net lease convenience retail. In addition to stand-alone acquisitions, the trust will make joint acquisitions with financial partners and acquisitions of partial interests from existing ownership groups.

SunPark Communities is the MHC land-lease division of Firm Capital. It owns and operates a growing portfolio of MHCs across Canada. Subsequent to these acquisitions, SunPark will own a portfolio of 2,572 MHC sites in Ontario, Alberta and Saskatchewan.