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Newcastle Acquires $435 Million Portfolio of Manufactured Housing Loans
By James Comtois
New York-based REIT Newcastle Investment Corp. has acquired a $435 million portfolio of seasoned manufactured housing loans. The transaction closed on Aug. 4, 2006.
This portfolio, which consists of 13,300 loans, has a weighted average gross coupon of 10% and a current weighted average borrower FICO score of 705. The portfolio is 90 months seasoned with an average remaining term of 213 months. Of the loans in the portfolio, 96% were current or less than 30 days delinquent and 82% have a fixed rate and 18% adjustable rate.
Additionally, 37% of the 13,300 loans are located in Washington, 24% in California, 21% in Oregon and the remaining 18% located in 15 other states.
Newcastle secured attractive financing due to the diversity and strong credit characteristics of the portfolio. The acquisition is financed with $391 million of five year term debt that adjusts monthly at an interest rate equal to one-month Libor plus 125 basis points. Since the majority of the loans have fixed interest rates, the company entered into an interest rate swap agreement to hedge its exposure to changes in Libor.
"I am very pleased that we continue to source investments with superior risk adjusted returns. This is our second manufactured housing portfolio," said Newcastle president Kenneth Riis. "The first portfolio we purchased in January 2005, which had a similar borrower credit profile, has performed better than expected."
"This new investment, which we closed with term financing in place, is expected to generate a high-teens loss-adjusted return on approximately $37 million of invested capital utilizing conservative underwriting assumptions," he added.
Separately, Newcastle recently declared a quarterly cash dividend on its common stock of $0.65 per share for the quarter ending September 30, 2006. The $0.65 per share dividend is payable on October 31, 2006 to holders of record of Newcastle's common stock on October 2, 2006. The company also declared dividends on its 9.75% Series B and 8.05% Series C Cumulative Redeemable Preferred Stock.
Newcastle will pay dividends of $0.609375 and $0.503125 per share on the Series B and Series C preferred stock, respectively, for the period beginning August 1, 2006 and ending October 31, 2006. These dividends are payable on October 31, 2006 to holders of record on October 2, 2006.
Fortress Investment Group LLC, a global alternative investment and asset management firm with approximately $22 billion in equity capital currently under management, manages Newcastle.
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