The Pivot Has an Address. FG Communities Holdings Buys a 49-Homesite Community Outside Raleigh.
Less than a month after the board signed off on an affordable housing strategy, the company formerly known as FG Nexus closed on a manufactured housing community in Garner, North Carolina. 49 homesites, over 59 acres, Raleigh metro. Price not disclosed.
On September 16 the board of FG Nexus approved a two part plan: buy land lease affordable housing communities directly, and put $10 million into FG Communities, Inc. for roughly 10% of that private operator. On October 1 the company became FG Communities Holdings, Inc. and the ticker moved from FGNX to FGC. On Monday morning the first part of that plan stopped being a plan. The company announced it has acquired a manufactured housing community in Garner, North Carolina, adding 49 homesites on over 59 acres in the Raleigh metropolitan area.
Garner sits just southeast of Raleigh in Wake County, inside the Research Triangle, one of the fastest growing metros in the country for most of the last decade. That is the point. Chairman and CEO Kyle Cerminara put it in one sentence: “This community fits our strategy of acquiring income-producing properties in growing markets.” The company says it intends to preserve the community and invest in improvements for residents, which is the standard land lease playbook: residents own the home, the operator owns the lot, and the lot rent is the income stream.
What the release does not say matters too. No purchase price. No seller, no community name, no occupancy figure, no financing detail, and no Form 8-K on EDGAR as of this morning. That is normal for a deal this size at a company with a market cap in the tens of millions, but it means the only number investors can underwrite right now is the homesite count. The release also does not call this the company's first acquisition, so neither will we. What we can say is that until today the listed company had announced a strategy and a minority stake, and now it has announced a property.
The release also carries a new description of the company and a new combined figure. FG Communities Holdings now calls itself a real estate focused operating company and merchant bank that acquires, owns and operates land lease affordable housing communities. And it says that the company and its associated entities have a combined footprint of 102 communities with over 4,500 homesites. Read that carefully. The 102 includes FG Communities, Inc., the separate privately held company in which the listed entity holds about 10%. The listed company does not own or control those communities. On September 23 the company's own filing used 96 communities and 4,000 plus homesites for the private operator; the private company said 99 and 4,500 plus two days later; now the combined figure is 102 and 4,500 plus. The direction is consistent. The split is not disclosed.
The cap table underneath has not changed its character. The proxy filed October 9 puts the common share count at 4,594,068 as of the October 1 record date, down from 4,707,615 on September 14 and down from roughly 8.7 million before the buyback program started. The company has retired about 46% of its common stock and about 31% of its preferred, per its last published totals. Joe Moglia and his trusts hold 630,500 shares, a bit over 13% on today's count. Officers and directors as a group held about 5.4% at the April proxy, before the latest buybacks shrank the denominator. The annual meeting is set for November 30, virtual, with eight directors up for election and BPM LLP proposed as auditor. Nothing on the agenda about a share issuance.
The bear case is the same one we wrote in September, now with a date attached: acquisitions have to keep closing, the financing has to be there on acceptable terms, the related party structure with FG Communities, Inc. has to stay cleanly managed, and a 49-homesite community is a small step for a company that described a $500 billion market. The bull case is that this is exactly how a small company with a shrunken share count is supposed to compound: one income producing property at a time, in markets where people are moving, with the lot rent paying for the next one.
The desk take: most microcap pivots take a year to produce a transaction. This one took 26 days. The size is modest and the price is unknown, so the market will likely wait for the 8-K and the next close before it decides what FGC is worth. But the company said it would buy communities, and now it has bought one.