Any manufactured housing people on here?
Just accepted an offer to work with a large REPE firm buying MH. Anyone else on here in that space?
Wondering what kind of deal flow people are seeing...
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I’m at a bank lender that finances reits and our book is mostly MHC. we’re seeing decent deal flow, but primarily a continuation of institutional clients picking up mom n pop shops that were being run inefficiently. Caps have been in the low 5s to low 7s dependent on asset/location.
I would love to get into the space. I’ve been trying to put it in my personal portfolio and/or work for a firm that does MH. Unfortunately most of the firms that do it are Chicago based. Are you in the Midwest?
In terms of what I’m seeing as I speak to brokers, deal flow is down right now. A lot of operators are waiting it out and seeing where things go in terms of buying. On the selling front, I’m being told by brokers they expect it to pick up in 2021, but it’s been a slow year. On the off market front, pricing is pretty crazy but that’s par for the course until you find a realistic seller.
Are there any tools/guides on how to actually underwrite this property type?
My firm doesn't do a lot of it but we're looking to expand in the space. I have no idea where to start in terms of getting familiar on how to think about underwriting and stuff. Every deal seems to be so unique in how leases and stuff are structured.
For clarity, i'm a lender, so curious how to think about this from a debt perspective as well as a general UW/valuation standpoint.
Bump, it's so unusual I'm curious also
Don’t cap park owned home NOI. But in all seriousness, MH is like an apartment building renting units with a condo component if you need to sell off park owned homes or do infill. No tools I can think of. But you can basically set up an apartment building model with the additionally ability to infill and sell homes, you should be good. Give yourself the optionality to show two business profits - the homes business (park owned homes) and land business (tenant owned homes).
But there seem to be so many nuances to the various deals i've seen. Tenant site lease protections, annual leases, seasonal stuff, lifetime leases. Is there any primer or anything to learn how all of these different things work?
What are the best ways to do market research to come up with underwriting assumptions? Are there any suggestions around finding sales/lease comps for this product type?
Also, i'm really curious how current interest rates are going to impact this product type since from what i've heard, these currently trade in the 3's cap rate...
It’s 100% one of the more nuanced asset classes and there really is no institutional data you can use. Rent comps is simple: call other MHPs in the area. You can use Data Comp for highly covered markets (the larger markets). Since you mentioned different site leases, you’re probably looking at RV parks as well - most RV have transient (read: hotel) and seasonal leases which function more like a year long or 6 month leases.
Regarding regulations - call the local government. For example, some areas say you can’t move a home in if it’s older than 2010. If your goal is to infill $20,000 used homes - Goodluck you’re business plan prob just crashed.
Sale comps - call brokers. Costar has come data as well.
Lots of moving pieces to figure out. It’s a “scrappy” asset class that has inefficiency if you know how to hunt off market. However, the 100 plus site deals - the inefficiencies have mostly gone away as that is where PE focuses. And as those deals get gobbled up, PE firms are pushing for smaller deals (50-70 sites). If you want to find inefficiency, go for 20-40 site parks. They are too small for PE groups.
Lastly, unless you’re buying the parks ELS, SUN, and UMH are buying - it’s really hard to build an operating platform around the asset class. As rents are so low, you just can’t really generate the fees to pay staff. If you look at many of the operators in the space not competing with ELS, Sun, etc., they are buying the naturally occurring affordable space with site rents of $250-$500. ELS rents are $750-$1000. It’s a different level of affordable. But buying with site rents of $250-$500 just means really low PM fees and really low AM fees. So you can’t hire as much staff making it hard to scale. I believe it’s a great asset class if you are a private individual buying a few parks. But trying to role them up, while many people do it, it’s like self storage - it is incredibly hard to build an operating platform which can pay for itself if the deal flow slows down. Many of the operators aim to close 1 plus deals per month - you’re running around like a chicken with your head chopped off. And you’re probably a 3-7 person platform. Super hard.
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