Resident mobile home park purchase transactions (“the Deals”) have several general characteristics:
They are precious – they don’t come along very often,
They represent maybe the ONLY chance the group has to buy the park,
The financing is hard to find,
The resident groups are suspicious and scared,
It takes a lot of initial analysis to figure out if a deal can closed, and, last but not least,
The park owner is maybe even more skeptical than the residents as to whether the deal can get closed.
So when I go on a road trip looking at parks, meeting with owners &/or their brokers, and trying to figure out if a Deal works, it is exciting.
On this trip, I started out to look at three parks when the owner is considering selling to the resident group. Now, in early March, I am actively working on SEVEN (7) projects
(Oh my God!). For each project, the owners are considering selling to the groups, and the groups DO NOT yet know that they might get a chance to buy.
At this stage of each Deal, I am trying to figure out if I can come up with a PLAN that convinces the owner it is worthwhile contacting the group.
The analysis at this point involves the following:
Touring the parks (which I have already done) looking at the location, the neighborhood, the homes and the signs of pride of ownership, the amenities (if any), and the quality of maintenance and any potential infrastructure issues (sewer, water, electrical, gas, roads, etc.)
Studying the financial information and rent rolls, looking for unusual vacancies, rental homes, costs out of line with normal, rent levels and range of rents (low to high), and any situations or problems that would impact upon arranging the financing for the Deal.
Determining what the group is able to pay for the park. The owner wants the highest price possible and often has high expectations about what the park is worth. [Generally, the group can pay a ‘fair market price’ and possibly even a premium over the fair market price. The owner often expects a premium price because resident transactions are complex, take a long time and keep the park ‘off the market’ until the deal either succeeds or fails.]
Meeting with the owner or the owner’s representative to discuss the project in realistic detail (covering both the good aspects and the less good aspects). Only when the owner is convinced that the Deal is likely to succeed is he willing to give me the ‘Green Light’ to contact the group.
Developing a strategy for contacting the group is complex. Some parks already have expressed interest in buying. Some already have formed an HOA and have a workable organization. However, some parks have no organization and no existing leadership. Many park residents tend to be suspicious, wary of the owner and fearful about buying a ‘pig in a poke’. They don’t think they can afford the purchase. Often it is difficult to communicate because the project is complex, or there may be language issues.
All these issues can be overcome. I expect that about half these deals can get done, which is a pretty high percentage.
YOU CAN DO IT!
I’ll keep you posted in future Blogs as to my progress.
Deane
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.