Farallon Capital Management LLC, a San Francisco-based hedge-fund manager that invests in cash-strapped companies, is in talks to buy the manufactured-home unit of Denver-based Affordable Residential Communities Inc. for $1.8 billion.
Farallon has exclusive rights through April 16 to negotiate a purchase of the unit, a maker of mobile homes and manager of mobile-home communities, its parent said Monday in a statement. The hedge-fund firm is its second-largest shareholder, with a 10 percent stake.
The manufactured-home unit may benefit from a tightening of lending standards after defaults on loans to borrowers with poor credit histories rose to a four-year high in the fourth quarter, the Mortgage Bankers Association said.
The average price of a mobile home was $66,600 last year, compared with the $250,000 median price of a new home, according to government data.
“ARC has been trading at a very deep discount,” said Paul Adornato, a senior analyst with BMO Capital Markets in New York, who rates the shares “outperform” and doesn’t own any. “This might be a good time to buy the business, as fundamentals seem poised for an improvement.”
The rate of repossessions in the manufactured-home industry has decreased this year, Adornato said. Sun Communities Inc., a real estate investment trust that operates manufactured-home communities, said repossessions of homes by lenders has decreased to an average of 35 per month in the first two months of 2007, down from an average of about 60 in 2006.
Affordable Residential said in the statement it would use proceeds from the sale of its real estate assets to make acquisitions. It said it would make about $520 million to $540 million from the transaction, after taxes, expenses and repaying debt.
