Yes, I know.
It has been a while since my last Blog.
In my defense, I have been really (really) busy. The nature of Resident Park Purchase deals is that, when they come along (which is seldom) one really needs to respond and try to determine if there really is a possible deal and if it can get done.
So what did I do in June? (I’ll get totally up to date in subsequent blogs.)
1. A big category of activity was responding to inquiries from resident groups that are exploring whether they can purchase their park. This is really ‘laboring in the vineyards’ since many (most) of these inquiries will not result in a purchase – the owner doesn’t want to sell, the group can’t get it together, or there are problems with the park such that the financing would be really tough. (Financing for resident park purchases is tough to begin with, but some problems with the park real estate compound the problem – many vacancies, really poor maintenance, really small parks, difficult locations, major infrastructure issues, etc.)
There were six such inquiries this month.
It is always very interesting to talk with residents on the situation in their park and why they want to try to buy it. Usually there is some sort of issue motivating them – rising rents, poor maintenance, onerous rules. You can probably figure out that if park residents are happy, happy, happy, they are NOT motivated to put out the effort to purchase their park. One insidious issue is that, unless a group organizes NOW, while everyone is happy, happy, happy, there will not be time to organize when the real problems occur, and the group will lose it’s opportunity to buy the park.
2. Another big category of activity was responding to resident groups who have an IMMEDIATE problem. Problems like the park is being sold to a new investor and the group really wanted to buy it. Or, the owner has an offer from a real estate developer for a lot of money. The catch is that the owner has to close the park, get rid of all the tenants/homes and sell the raw land.
There were two such inquiries this month. One park wanted to exercise their ‘right of first refusal’ to buy the park.
Rights of First Refusal, which allow resident groups to match an offer from an investor on their park and buy it, are generally worthless. They are a nice gesture on the part of the City (through regulation) or the park owner (by agreement), but in truth, they don’t work and serve only to let the owner know the group is interested in the purchase. A park in southern California got a notice that the park was being sold. That was followed by the notice of their ‘Right’, which notice required the group to put up $175,000 into a non-refundable escrow, and then perform due diligence on the park in the next seven (7) days, at which time the $175,000 was gone. No sane investor, let alone a resident group, would do such a thing. All that says is that the owner already has a deal and the other investor already has done the due diligence, located the financing and is ready to close. The resident group just got it’s chain jerked.
The other inquiry is pretty serious. A park called me and said their owner has an offer to sell the dirt for $30,000,000, if he can close the park. Result: 110 units, about 350 people — old, handicapped, single moms, the working poor — have to move, and, you guessed it, there is no place to move. I’ll write more about this situation in the future.
3. Finally, there is a somewhat unusual category when a park owner, who is interested in selling his park to the residents, contacts me. These inquiries generate mixed feelings. (For you old “Lost In Space” fans, one can hear in one’s mind the Robot’s voice “Danger Will Robinson, Danger.)
On the one hand, getting an owner to agree to sell to the group is a rare and wonder thing. However, on the other hand, they usually don’t do it unless there are other issues – the park is a dump, the price is really high, the park has problems that the owner wants to avoid by selling to the group – you get the idea.
There were, would you believe, four (4) such inquires this month. One wonders what market forces are at work to cause this flurry of activity. In any case, the trick with these deals is to figure out how bad are the issues and can they be overcome to get to a closing.
We’ll talk more about this stuff in future blogs.
Deane Sargent and PMC Financial Services have been helping mobile home park resident groups and cooperatives to organize and find financing to buy their parks for over 20 years.