Article
In the current uncertain market environment, investment opportunities with highly stable cash flows are particularly attractive. A good example of such investments with relatively low risk is in the manufactured housing sector in the United States.
November 2, 2023
The CSA 2 Multi-Manager Real Estate Global investment group has had exposure to this niche residential sector since 2019. In Q2 2023, a further investment in this sector was decided upon with the same partner, the largest private owner of manufactured homes in the US.
The US manufactured housing market has been experiencing consistently high demand on the part of low-income earners for a long time now. In an environment of rising mortgage interest rates for residential property, low rents make this type of housing even more appealing. The current offering, especially in the area of institutional providers, is very limited. The reasons for this are muted interest from project developers that can generate higher profits with other uses, especially multi-family dwellings, as well as regulatory obstacles at the local authority level.
Cash flows in the manufactured housing sector are extremely stable. When investing in manufactured housing properties, the CSA 2 Multi-Manager Real Estate Global investment group pays particular attention to sustainable capital expenditure. In the joint venture with a Canadian pension fund, compatibility analyses form the basis for rent increases, infrastructure development, and social and environmental compatibility. The CSA 2 Multi-Manager Real Estate Global portfolio encompasses more than 7,300 residential units in 12 US states. The Investment Committee recently decided on a follow-up investment of over USD 50 million in another manufactured housing portfolio with the same partners, which is currently being implemented.
| Government assistance | Institutional managed MH (pad+home) | Multi‑family rental | Single‑family rental | Single‑family ownership | |
|---|---|---|---|---|---|
| Typical costs/month | USD 850 or below1 | USD 1'2002 | USD 1'5003 | USD 1'6004 | USD 1'9005 |
| Relative cost to manufactured housing | 30% lower | 1x | 25% higher | 33% higher | 58% higher |
| Typical employment | Food and services support staff | Services staff, factory workers, retirees | Urban mid‑company employees | Education, sales staff, lower management | Mid-corporate employees/managers |
| Amenities | No | Yes | Some | No | No |
Manufactured housing compared to other residential options in the US, as well as average monthly spending and typical gainful employment. Source: Macquarie, March 2023
1 Bureau of Labor and Statistics, October 2022. Assume 30% income contribution for voucher assistance and based on average individual earned income of ~US$34,000.
2 RHP average costs of brand new 3-bed manufactured home. Institutional MH is even more affordable for residents moving into used homes (e.g. 5 –10 years of vintage which is about ~65% of the brand-home home price).
3 Comparable 3-bed apartment rental (Source: Macquarie research).
4 Comparable single-family rental (Source: Macquarie research).
5 Comparable single-family ownership (Source: Macquarie research).
Revenue growth forecast (2023-2026)1
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1 Average same-store revenue growth based on Green Street Advisors metric combining changes in rents with changes in occupancies.
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