Farallon Capital to buy mobile-home business

Hedge fund manager Farallon Capital Management said Tuesday that it had agreed to buy the manufactured-home unit of Affordable Residential Communities Inc. for $1.8 billion.

Affordable Residential owns and operates about 57,264 home sites in 275 communities in 23 states.

Farallon, based in San Francisco, already has a 10% stake in Englewood, Colo.-based Affordable Residential.

Analyst Paul Adornato, of BMO Capital Markets in New York, said Farallon might profit from the crisis in sub-prime lending, which has reduced the ability of low-income Americans to buy their own homes.

“The sub-prime fallout could positively impact this business. More folks will have to downsize their housing aspirations, and mobile home parks offer a more affordable alternative,” Adornato said.

Adornato said he expected Affordable Residential to invest the proceeds in financial services for low-income customers, in keeping with its January acquisition of NLASCO Inc., which insures mobile homes.

Affordable Residential’s manufactured-home operation lost $17.4 million last year on revenue of $207 million. In 2005, it lost $184.5 million.

Affordable Residential shares slid 65 cents to $11.75. They are down 34% since the company’s initial stock offering Feb. 11, 2004.

The purchase price being paid by Farallon includes debt. Founded in 1986 by Thomas Steyer, the firm manages about $26 billion, mainly for pension funds, university endowments and foundations.

This month, Farallon and Simon Property Group Inc., the largest U.S. mall owner, completed the $1.64-billion acquisition of mall operator Mills Corp.