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Home > Investing > Spotlight on REITs: Chateau Communities INC

Spotlight on REITs: Chateau Communities INC

Money Manager | Monday, February 20th, 2012

Chateau Communities INC: This was a real estate investment company that specialized in mobile communities and parks. This company was headquartered in Colorado, but it owned properties all over the nation. Before it was bought by Hometown America LLC the company owned over 201 mobile home communities and parks, totalling over 67,900 units and sites in over 36 states, making it a quite large mobile home company.

Hometown America at the time of the merger was one of the top 10 mobile home owners in the country, over 14,000 families lived in a Hometown America owned community. They owned 45 communities before the merger and operated in 13 states.

Chateau Communities INC was bought in 2003; the buyout was an agreement for Hometown America to buy all of the shares, for $29.25 per common share which was over the market price of the shares at that time. The transaction would cost about $1.82 billion; Hometown America also acquired Chateau Communities debts that totalled over $1.2 billion. Share holders were happy with the merger, saying it was the best way for them to get liquid cash out of the stock, and make a profit at the same time.

Chateau Communities was founded in 1997 when the company joined forces with ROC communities, a company that was founded in 1966. The merger created a company that owned a huge portion of the mobile home market, and in 1999 it was awarded the community operator of the year for the sixth straight year. And the communities owned by the company enjoyed a 95% occupancy rate. Before the merger of the two companies they both went public in 1993 and were both traded on the New York Stock Exchange.

In 1998 the merged company Chateau Communities, bought over 16 mobile home communities, totalling over $100 million in auctions and secured debt, this raised the stocks considerably and put the company on a higher level of trading.

Chateau Communities made most of its profit by the rent paid by its tenants, which was a monthly income for the company. The shareholders and investors were all given a portion of the profit as set out on the REIT rules and tax benefits, which state that 90% of the real estate investment income must be given to shareholders rather than income taxes.

In 1999 the company had 130,000 residents in its units and by 2002 the company had over 200,000 which was an explosive growth rate at the time. When the company was sold to Hometown America in 2003, the company felt as if it had taken the properties and units as far as they could take it, and they were excited to see how Hometown America would grow with the properties.

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