|Shares Out. (in M):||1||P/E||0.0x||0.0x|
|Market Cap (in $M):||27||P/FCF||0.0x||0.0x|
|Net Debt (in $M):||0||EBIT||0||0|
Green Courte Partners (GCP) is selling its entire manufactured housing portfolio to Sun Communities (SUI), including the American Land Lease (ALL) REIT purchased in 2009. As part of the deal, ALL’s Series A 7.75% Cumulative Preferred Stock (ANLDP) will be redeemed. This presents a low-risk opportunity to capture a decent IRR over a short holding period (while some of us cross our fingers for a real pullback in asset prices). Liquidity is limited, though, so this might be a p.a.-only opportunity.
After GCP took over ALL in 2009, they stopped SEC filing and suspended the preferred dividend for 5 quarters. Had they skipped a 6th payment, preferred holders would have had a chance to elect new board members, so GCP resumed the preferred dividend, but they never did pay the back dividends totaling $2.42 per share.
Per ALL’s press release, “the proposed transaction…is expected to close in two stages in 2014 and 2015”. Thus, it seems that the likely redemption date range will fall between or at least close to the 11/30/14 or 2/28/15 dividend payments. There is about $0.36 in the current quarterly dividend already accrued, so liquidation value right now is approx. $27.78 vs. a $27.00 market price. If we assume regular payment of the $0.4844 quarterly dividends starting on August 31, with a par value redemption of $25 and $2.42 arrears payment on the final date, we get the following IRRs.
11/30/14 redemption: 17.4% IRR
2/28/15 redemption: 12.9% IRR
So there’s the return part of the story. Is there a risk of the deal not going through? Not much, I say. No shareholder votes are required. SUI is in the same industry, this is a big one-of-a-kind deal that was shopped by Eastdil to 80 interested parties, and the deal is accretive to FFO in 2015, so I don’t see SUI backing out. SUI will be raising new capital to finance the transaction, but they noted on the conference call last week that they could fund the entire purchase on their existing line of credit. Thus, the deal can still get done even if we enter a shaky capital raising environment. GCP will purchase a minimum of $12.5 million in SUI equity and GCP execs Randy Rowe and James Goldman will become board members of SUI.
So there you have it, a teens IRR with minimal risk while the stock market tanks (there I go hoping again).