The largest private owner of mobile home parks, Northstar has agreed to sell its portfolio. Here is a quick summary of the deal:
- Buyer: Brookfield Asset Management
- 135 Communities
- $2.04 billion sale
- 33,000 pads
Brookfield is a huge ($240 Billion) global asset manager. This is their first mobile home park purchase that we're aware of. It just also happens to be the largest one ever made. We think it's safe to say Brookfield agrees with our favorable views on the industry.
So what does this mean?
The mobile home park industry is starting to enter it’s consolidation phase. However, despite the size of this transaction, it’s still very, early. The mobile home park industry remains extremely fragmented. Large operators are focused on 200+ space, 4/5 star communities, many of which are retirement (55+ age) communities. Of the ~50,000 parks nationwide, the largest players in our industry own less than 5% of the properties. Furthermore, there are only 3 publicly traded firms in our industry (0 that focus exclusively on affordable parks vs. upscale communities). Compare that to the apartment industry, where there are ~30 publicly traded apartment REITs, most of whom only pay a ~3% dividend each year. Many of the apartment investments in these REITs sell in the 3-6% cap rate (unlevered yield) range. Thankfully, we keep finding mom-and-pop sellers willing to part with their lower risk mobile home parks for 8-10% cap rates. This has enabled Park Street Partners to pay its limited partners double digit cash flow yields.
We do not believe this large portfolio purchase will immediately change the dynamics of our industry. Mobile home park cap rates are not going to drop 50% overnight, nor are mobile home park rents going to double anytime soon. However, the Northstar transaction might be the first domino that will lead to further asset consolidation within our industry. This should eventually translate to higher lot rents and lower cap rates for those of us that already own mobile home parks.
Thankfully, Park Street Partners is uniquely positioned to capitalize on the forthcoming industry consolidation. We already have a sizable portfolio and we have the deal flow, management platform and operational expertise necessary to continue our growth for the foreseeable future.
Once again, it’s still early, but as industry consolidation takes hold, we believe our fund investors will benefit greatly from the hard work we've put in to accumulate an attractive portfolio.