Largest Private Owner of Mobile Home Parks Sells Portfolio

Industry News

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. 

Park Street Partners (“PSP”) announces the acquisition of the Desert Trails Mobile Home Park in Green River, WY

(PRWEB) JULY 22, 2015

“This marks the first acquisition in our 2015 mobile home park fund. It is very exciting to both have a few dozen accredited investors backing our partnership and co-owning parks with us, and to be able to reward them with such a strong initial acquisition. The property’s occupancy increased during our closing period, and we look forward to upgrading the quality of the mobile homes in the property. We acquired Desert Trails (http://www.DesertTrailsMHP.com) at a 10% cap rate, and specialize in improving this type of commercial property. We can’t make guarantees about profits, but feel we will likely generate a better than 50% annual return this first year for our limited partners. Many of our investors are becoming increasingly nervous about valuations in the public markets, and would prefer to invest in lower volatility real estate niches that still offer annual returns that are likely to be in the upper teens over a long-term holding period. Judging from some of the large manufactured housing REITs we estimate manufactured housing communities have a beta of around 0.65, and we feel PSP can generate consistent annual returns in the high-teens for our early co-investors. Also important to note is that this asset class is not correlated with stock markets or other real estate niches,” said Jefferson Lilly, Co-Founder of PSP.

“Park Street Partners is about more than just making money for our investors; we are increasing the supply of affordable housing for American families. We rehab and purchase mobile homes to fill vacancies, while improving property operations through professional management.” remarked Brad Johnson, Co-Founder of PSP.

“We were very happy to lend money on this acquisition because of Park Street Partners’ deep and focused experience in the manufactured housing industry. They specialize in improving mobile home park investments such as Desert Trails and we hope to work with them on subsequent acquisitions,” commented Tim Ostic, Branch President at FirsTier Banks.

About Park Street Partners 
Park Street Partners is a private equity real estate investment firm (PERE). Our mission is both financial and social. We seek to deliver to our investors superior cash flow returns by acquiring and investing in undervalued and underperforming mobile home parks. We do this while helping to solve America’s affordable housing crisis by enabling families in the bottom 1/3 of income distribution to get out of the game of paying rent forever in apartment complexes, and into 3- or 4-bedroom mobile homes that they will own for as little as $550/month. Park Street Partners is actively raising capital from accredited investors and institutions to acquire additional manufactured housing communities through our 506 Reg. D fund. Information on how to co-own manufactured housing communities with us is available at http://www.parkstreetpartners.net/fund.