Mobile Home Park Investing With Glenn Esterson!

ON THIS EPISODE OF PEAK MARKET WATCH...

We are excited to have Glenn D. Esterson, Vice President Investments at Marcus & Millichap on as a guest speaker! Peak Market Watch host and CEO of Peak Financing, Anton Mattli will dive into what Glenn is seeing in changes to seller and buyer behaviors. Glenn will provide tips for buyers to negotiate/win deals in the current environment and give you insight into his specialty market: Mobile Home Park Investing!

ABOUT OUR GUEST SPEAKERS

Glenn Esterson – Guest Speaker

Glenn Esterson has been a commercial real estate broker since 2001, has sold hundreds of parks nationwide, and continues to be one of the industry’s most active brokers. Since 2018 he sold 47 MHP & RV parks across the country, with a focus on the southeast. In 2019 Glenn joined Marcus & Millichap as a Vice-President of Investment and has built a national MHC/RV team with an emphasis on the east coast and sunbelt markets. Most recently Glenn has authored a new book called The Mobile Home Park Manifesto which is now available on Amazon.

Anton Mattli – Peak Market Watch Show Host

Peak Financing CEO, Anton W. Mattli, has decades of experience in commercial and investment banking, private equity, and commercial real estate. After graduating from Zurich Business School in banking and finance, he held senior management positions at major financial institutions in New York, Tokyo, Hong Kong, and Zurich. During that time, Anton was heading a bank branch, managed cross-border teams, financed and restructured commercial real estate worth several billion U.S. Dollars, and oversaw loan portfolios consisting of aircraft and ocean transport vessels. Anton also directed the structuring of complex cross-border commodity and trade finance transactions for Fortune 500 companies. Over the last 15 years, Anton has been advising family offices, high net worth individuals, as well as private investment funds, facilitating their direct investments in commercial real estate across Europe and the United States, including several hundred million dollars in multifamily developments and acquisitions.

LINKS IN THIS EPISODE

https://www.themhpexpert.com/
https://www.marcusmillichap.com/advisors/glenn-d-esterson
https://peakfinancing.com/
https://quote.peakfinancing.com/quote-request

VIDEO TRANSCRIPTION

00:00
mobile home park investing welcome glenn
00:03
it’s a pleasure to have you on today uh
00:05
why don’t you give us a little bit of a
00:07
your background and your career path to
00:10
mobile home park investing and brokering
00:14
sure sure well anton thanks for having
00:16
me on here i really appreciate it i’m
00:18
glad to speak to you and your audience
00:20
uh and as you would mention you know i’m
00:22
a broker
00:23
but i’ve been doing this about 20 years
00:25
and
00:26
i’m a i’m a former park owner i no
00:29
longer invest
00:30
in manufactured housing uh but i used to
00:32
own a park and used to
00:34
you know be in that world now i don’t
00:35
like to compete with my clients
00:37
so i provide a stronger advisory
00:40
approach
00:41
where you where my clients don’t have to
00:43
compete with me on deals because to me
00:44
that would be aggravating if i was a
00:46
buyer
00:46
or a seller for that matter um so i’ve
00:49
been selling parks for a long time
00:51
i sell hundreds and hundreds of parks
00:53
you know i mean
00:54
i typically sell one to three parks a
00:56
week um we’ve sold
00:58
you know over 100 million dollars with
01:00
the parks this year alone
01:02
uh we typically sell parks that are in
01:04
that two to five million dollar range
01:06
sometimes they’re as small as you know
01:09
250 000
01:11
sometimes they’re as big as forty fifty
01:13
million dollars um and we have a lot of
01:15
different types of deals and a shoe for
01:17
every foot if you will
01:19
but we really bring an advisory approach
01:21
and within the advisory approach that we
01:23
bring
01:24
to the table is you know we bring an
01:27
advocate approach
01:28
to affordable housing because you know
01:30
i’m a strong believer
01:31
uh in affordable housing just being a
01:34
necessity for our country
01:35
period you know there’s not supposed to
01:37
be an exception to that and yet there’s
01:39
become a lot of exceptions to that
01:41
and my industry uh is really the bottom
01:44
level
01:45
of affordability it doesn’t get much
01:47
cheaper than our industry
01:48
and yet we still have homeless people
01:50
out there and we still have these kind
01:51
of rigorous guidelines that
01:53
were based on maximizing profitability
01:56
in a park
01:57
through the easy type of stuff instead
01:59
of the hard work stuff that has a longer
02:01
lasting more impactful
02:03
type of uh an account uh for you know
02:06
for our community and for our culture
02:08
that all said at the end of the day i’m
02:10
a broker
02:11
and i broke her a lot of deals i have a
02:13
national team you know
02:15
east coast the west coast you know
02:16
border the border and
02:18
uh we hustle we hustle a lot we evaluate
02:21
you know
02:22
easily over a billion dollars worth of
02:23
parks a year uh we transact on a couple
02:26
hundred million dollars of parks a year
02:28
and you know we we sit here and build
02:30
relationships and kind of teach some
02:32
best practices
02:33
explain to current owners how to
02:36
optimize
02:37
their p l’s you know for to be able to
02:40
get to the best values
02:42
we help buyers understand that this is a
02:45
an industry that’s not meant to sit here
02:47
and squeeze squeeze squeeze and get all
02:49
the profits out of it because you’re
02:50
actually
02:51
you know hurting you’re hurting your
02:53
food chain when you do that
02:54
that’s where we differ a lot from a lot
02:56
of the other brokerage shops that are
02:58
out there
02:59
and there’s some excellent so my
03:00
competitors are excellent and have the
03:02
highest of respect for them
03:03
but they just go about it at a different
03:05
approach than i do um and
03:07
and the way that i teach my team how to
03:08
do it uh so that’s kind of how we’ve
03:10
carved our little niche into this
03:12
into the scene um i’ve been through
03:14
recessions with these parks i
03:15
you know i know how painful this stuff
03:17
can get and through this
03:19
most recent time you know it’s been it’s
03:21
been interesting to see
03:22
just how insulated our industry is very
03:25
similar to how insulated we were
03:27
during the great recession years and
03:29
years ago
03:30
um so you know that that’s kind of me in
03:33
a nutshell i wrote a book
03:35
you know it’s kind of you know the
03:36
easiest thing in the world to read and
03:38
you
03:38
you kind of get some best practices out
03:40
of it that’s actually actionable
03:42
there’s no upselling in the book you
03:44
know if you don’t like it write me a
03:45
letter and you i’ll give you your money
03:46
back
03:47
you know but uh we sold thousands and
03:49
thousands of copies now and it seems to
03:51
be something that that was uh well
03:53
received
03:54
you know we farm information you know
03:56
day in and day out we have
03:58
um you know 50 000 parks 20 000 plus
04:01
owners and
04:02
uh you know we have you know down to the
04:05
nitty gritty details on you know 10 000
04:07
15 000 parts
04:08
uh and you know we we we really focus on
04:12
the data teaching us
04:13
what the future is kind of going to look
04:15
like on a transaction and how to most
04:17
optimize a transaction
04:18
whether you’re a seller or whether
04:20
you’re a buyer
04:22
yeah very good thanks for that intro
04:25
i would say a book like that is is
04:28
really crucial
04:29
right for for investors to to have
04:32
access to
04:33
uh as uh as many of you know right we
04:37
are very active on the financing side
04:39
for multi-family properties for all
04:41
commercial
04:42
real estate it’s only a lot of
04:43
multi-family properties
04:45
we also have a lot of clients that
04:48
invest in workforce housing like the
04:50
typical c-class
04:52
multi-family property and they
04:56
naturally also have an interest in
04:58
mobile home parks they want to know how
05:01
what is the difference right what are
05:03
the risks what is
05:04
what are the benefits and i think
05:07
writing a book like this
05:09
and for them having an access to that
05:11
type of information is really
05:13
very valuable right you know
05:17
it’s strange to think this industry that
05:19
everybody all of a sudden really loves
05:22
the last you know significant books that
05:24
have been written on this are you know
05:25
15 20 years old
05:27
and you know i’ve been doing this so
05:28
long i just sat down and said well i’ll
05:30
just put my thoughts out there
05:31
you know you can go to a course and pay
05:33
a few thousand dollars
05:35
you know and get some upselling in there
05:37
and buy another course from another
05:38
course and stuff like that
05:40
for the average joe that’s you know only
05:42
got a couple hundred thousand dollars in
05:44
their pocket and they’re trying to
05:45
maximize that
05:46
and get into something my book you know
05:49
fulfills that essentially for you it’s
05:51
just step by step
05:52
all the way through it’s the good bad
05:53
and the ugly i don’t know back
05:55
it’s filled with deal stories of people
05:57
who failed in this business that i’ve
05:58
transacted with
05:59
filled with the old stories of people
06:01
who are you know wildly successful that
06:02
i’ve transacted with and
06:04
kind of the broker’s opinion on on this
06:06
on the whole
06:08
you know how it could have gone one way
06:09
or another way and this is
06:11
you know sort of the best practices that
06:13
i’ve seen and
06:14
it’s uh you know like i said it’s been
06:16
received well i
06:17
i do not claim i i do not agree with
06:20
myself with being any kind of real smart
06:22
guy who knows how to write a book
06:23
okay so you know it’s i’m speaking to
06:27
hopefully you know the widest possible
06:29
spectrum of people that just
06:30
they got some extra money they’re
06:32
looking where to place it they’re
06:33
looking at our industry being told oh
06:35
hey it’s easy peasy
06:37
and i’m here to tell you it’s not easy
06:38
peasy it’s hard as hell
06:41
unless i guess maybe the super smart
06:42
guys make it easy i don’t know but for a
06:44
guy like me it’s it was a very hard
06:45
business
06:46
and you know i i nearly lost everything
06:49
when i invested first in this
06:50
and managed to turn it around and now
06:53
the date nowadays the market’s so good
06:55
everybody’s thinking they’re so great at
06:56
what they’re doing
06:57
but you know times change and things
06:59
change and you go from hey
07:01
i’m feeling great and got all this great
07:02
easy money from other people’s money and
07:04
i’m making all this you know
07:05
this crazy returns and then all of a
07:07
sudden you’re on this weird slippery
07:08
slope and you’re sitting there going
07:10
like
07:10
oh my gosh what am i gonna do now and
07:13
you know this book you know in my
07:14
opinion was
07:15
was to help with guys like that because
07:17
there’s so much overselling people doing
07:19
our industry
07:20
especially the gps and the lps telling
07:22
everybody how great this industry is and
07:24
have these gps and newbies and they
07:25
don’t know what they ever been to a full
07:27
cycle yet
07:28
and it’s it’s kind of you know bringing
07:30
some light on to that
07:31
uh with i understand this this business
07:33
is not easy it’s in fact
07:35
really hard you know and and way too
07:38
many people think it’s easy and then
07:39
they come crying to me a couple
07:41
you know months or years after the
07:42
acquisition saying help help get me out
07:44
to help me turn this thing around what
07:45
do i do
07:46
and you know that’s that’s what i’m
07:49
hoping to help people avoid
07:50
you know yeah yeah very good point we
07:53
see that also on the
07:55
on the traditional multifamily side
07:58
right
08:00
there has been a massive influx of of
08:02
new gps
08:03
syndicators right that come from
08:07
different
08:07
industries they do not really have any
08:10
alternative facet management experience
08:13
acquisition experience but they go
08:15
through
08:16
through all the training classes right
08:18
with all the
08:19
coaches that are out there and they jump
08:23
in
08:23
and because they are able to raise all
08:26
the equity from all the passive
08:28
investors
08:30
they now turn into gps and
08:33
we only see there in that segment also
08:36
quite the difference between the good
08:38
ones that really
08:40
spend time and effort and also build
08:42
their
08:43
systems and the ones that still try to
08:46
do it kind of on the side
08:48
treat it as a as a side business
08:51
and those were successful in the past
08:54
because the market
08:55
helped them so much right everything
08:57
moved up but we saw we have seen over
09:00
the last year or so
09:02
uh the difference between the good
09:04
operators and the not so good operators
09:06
so it’s good
09:08
to see some pictures happening and for
09:10
my industry
09:11
it’s it’s the difference is you know
09:14
it’s an easy upsell hey i’ll pay you 20
09:16
percent higher and
09:17
well you know we’ll make you know 3x on
09:19
our money in a five-year
09:20
you know span right well most of these
09:23
guys
09:24
are not you know they’re not doing
09:26
anything more than optimizing a p
09:28
l and squeezing the revenues
09:32
on the poorest of the poor so they can
09:33
justify this this
09:35
cockamamie 20 percent irr stuff they’re
09:37
trying to achieve for these lps that
09:39
they oversold them on
09:40
and it puts this negative downward
09:41
pressure on the tenants
09:43
who can barely afford a 50 anything much
09:46
just a 50
09:47
a month increase in their rents and the
09:50
justification is
09:51
well they’re still below market or hey
09:53
this is way below market and you know
09:55
there’s still a lot of value here
09:57
and i i i really get a almost a little
10:00
offended on it and i understand they
10:01
have a capitalist through
10:03
but at the same time i as i claim to be
10:07
an advocate of affordable housing when
10:09
you come through and put these kind of
10:11
you know pressures on your tenants and
10:14
you’re still sitting on vacant units or
10:16
vacant lots or vacant homes or vacant
10:18
whatever and you haven’t applied for
10:19
expansions
10:21
and you’re just growing your revenues by
10:23
increasing
10:24
rents but not increasing occupancy
10:27
you’re going to have
10:28
you know yeah you might have some happy
10:29
lps for a minute but you’re going to run
10:31
out of lifeline on squeezing that stuff
10:33
and you’re bringing more regulation to
10:34
our industry
10:35
whether you know it or not because every
10:37
time that happens
10:38
somebody’s getting pissed off somebody’s
10:40
writing a letter and eventually you know
10:42
the
10:43
the municipality is going to crack down
10:44
on you the the state government might
10:46
crack down on you
10:47
or as in the case of new york they might
10:49
just throw a whole new
10:50
you know broad sweeping rule about hey
10:52
now you’re stuck with this three percent
10:54
you know uh rent growth maximize you
10:56
know and or in california where they got
10:59
vacancy control
11:00
and stuff like that we do that for
11:02
ourselves that’s our own fault when that
11:04
happens that’s not the congressman
11:05
people that’s our fault
11:07
because we got too aggressive in our
11:08
approach to selling to the lps
11:11
about the kind of returns we can do them
11:12
because we didn’t actually have a real
11:14
education getting into this business a
11:15
lot of times
11:16
and we we just said hey i know a few
11:17
people got some money and they’ll give
11:19
me that money and i can make my
11:21
my car out and i’ll just jack it up on
11:23
these other people this is not
11:25
industrial it’s not retail this is not
11:27
class a apartments
11:28
this is people that struggle to live
11:30
with five six hundred dollars a month
11:32
sometimes you know
11:33
and that’s that’s painful you know just
11:35
because you can’t do something
11:37
it doesn’t mean you should do something
11:38
kind of stuff comes into play with this
11:40
that’s kind of how we look at it so you
11:42
know we really teach the approach of hey
11:43
there’s
11:44
all these other avenues to increase
11:47
solid sticky revenue into your streams
11:50
that you need to maximize first before
11:53
you go beyond a three or five percent
11:55
rented
11:55
you know rent increase and yeah some
11:57
states have you know
11:58
the warning signs of rent control coming
12:01
in and you might be in a race to try and
12:02
get your rents up to market before that
12:04
happens
12:05
and yeah i understand yes there’s always
12:07
caveats to what i say
12:08
i mean literally there’s always caveats
12:10
to everything we do in this business
12:12
but you know in general the general
12:14
practice of
12:15
you know hey there’s rents that are 200
12:18
below market and i have 50
12:20
vacancy it sounds like a home run but at
12:23
the same time
12:24
you know i if you’re the guy that
12:26
reaches for the quickest easiest thing
12:28
you’re probably taking those rents up
12:30
before you’re filling up those vacant
12:31
lots
12:31
even though those vacant lots are worth
12:33
a hell of a lot more once they’re filled
12:36
then your than your rent increase
12:38
because you can’t keep
12:39
raising rents it’s just it’s it’s
12:41
unsustainable
12:42
you know you’re gonna have you know
12:43
maybe three percent is sustainable keep
12:45
up
12:45
you know a little bit above inflation
12:47
and keep up a little extra but when we
12:49
start seeing
12:50
operators come in and jack up rents you
12:52
know 150 bucks you know on rent that was
12:55
already
12:55
only 150 just because the market can
12:58
support
12:58
350 but you didn’t increase your
13:01
occupancy
13:03
you know it’s going to bring regulation
13:05
and that’s man we don’t want regulation
13:07
let’s regulate ourselves
13:08
let’s let’s be the good let’s be the
13:10
good stewards of our of our parks and
13:12
our tenants
13:12
build communities but let’s let the
13:14
poorest of the board know that they have
13:15
a safe place
13:16
to always live that they’re not going to
13:18
get priced out just like we’ve done with
13:20
so much of the inner city stuff in
13:22
in all of our you know big urban
13:23
populations you know it’s
13:25
it’s our own fault and we’re here at
13:27
this bottom baseline to provide a safety
13:30
net
13:30
and if we keep pressing we’re going to
13:32
affect you know we’re going to affect
13:33
change and it might not be the kind of
13:34
change that we’re hoping to affect
13:36
and legislation is is a fair to deal
13:39
with when it comes down
13:40
and you know financing is a big part of
13:43
this factor you know
13:44
if the banks would open up a little bit
13:46
more to our industry
13:47
and understand that hey just you know
13:49
credit scoring everything
13:51
income levels aren’t everything looking
13:52
more at the trajectory
13:54
of a tenant’s ability to pay especially
13:56
in affordable housing
13:57
and how the banks are going to loan on
13:59
those tenants in place you know help
14:01
them get a good house
14:02
or help a park order buying in an
14:04
affordable way that doesn’t
14:05
force the hand in the rent to increase
14:07
right out the gate
14:08
you know is all part of the factors you
14:10
know and thankfully fannie mae and
14:12
freddie mac have really opened up this
14:14
year with us
14:15
and given us a lot more you know ability
14:17
to to
14:18
to transact than ever before uh so kudos
14:21
to them for making life a little bit
14:23
easier for everybody right now in this
14:24
industry
14:25
yeah that’s that’s definitely helpful
14:28
that they
14:28
that they stepped up there i’d obviously
14:31
want to see
14:32
reasonable quality assets right that are
14:35
also well maintained
14:37
uh which which all make sense right i
14:39
think you you also brought up a good
14:41
point of
14:42
a lot of operators that want to go the
14:45
easy path let’s move in
14:47
let’s raise rents but they do not really
14:49
look at the operations how can you
14:51
improve your noi by actually
14:54
reducing your expenses right to make
14:58
capital expenditures that ultimately
15:00
improve your operational costs too
15:03
uh and just running
15:06
a lot of guys they say hey i’m gonna
15:08
improve this you know
15:10
i’m gonna i’m gonna do this fixing this
15:11
p l stuff and then they essentially just
15:14
build back extra revenue and they cause
15:16
not a red increase i’m just building
15:17
back some extra revenue yeah that made
15:19
your
15:19
your efficiencies look better but your
15:21
actual critical stuff your r
15:23
m you know did you argue with your tax
15:25
people
15:26
did you you know did you get the best
15:28
possible insurance did you get this did
15:30
you get that
15:30
not just did you build back the water
15:32
you know yeah again go back to work
15:34
but at the same time that’s not really
15:36
the type of improvements that i believe
15:38
you’re discussing and that that i’m
15:40
referring to either there’s you know
15:41
you’re rnn you got to get a handle on
15:43
that stuff you know it’s
15:44
like sometimes bananas how little the
15:47
former operator is spending
15:49
and how much you know the next guy might
15:52
spend and they’re still
15:53
way out of whack you got to find that
15:55
that nice healthy number
15:57
you know did you get the best
15:58
landscaping contract that you could did
16:00
you get the best snow removal contract
16:01
that you could
16:02
you know do you have all these other
16:05
vendors available and you know how to
16:08
maximize the efficiency of your p
16:10
l and especially if you’re an
16:11
out-of-state hands-off type operator
16:13
you know or owner should i say you know
16:15
if you’re one of those hands-on
16:16
operators that
16:17
you know that which is a lot of the mom
16:19
and pops and the first-timer investors
16:20
are in there
16:21
you know i i applaud you guys you know
16:23
getting in there and doing the dirty
16:25
work that’s what i
16:25
had to do i used to crawl the trailers
16:27
day in and day out fixing stuff
16:29
and yeah i mean like please i never want
16:30
to do that again but
16:32
there’s there is something you learn
16:34
about operating your own business when
16:36
you’re doing it that way
16:37
that most of these indicator types
16:39
they’re not getting the hang of it and
16:41
then they’re paying through the nodes
16:42
because they don’t understand you know
16:44
they don’t have the right vendor listing
16:46
essentially in place they don’t really
16:47
know what needs to get fixed
16:48
you know and then the lps yell at them
16:51
uh about hey you’re overspending on this
16:53
stuff and then they say oh it’s okay
16:54
we’re gonna adjust here’s another 10
16:56
rent increase you know and it’s it’s
16:58
like
16:59
you know all the speeds into it together
17:02
when you can optimize your p
17:03
l’s that’s that’s just best for
17:05
everybody but optimizing the p
17:06
l does not mean you know adding extra
17:09
red you know revenue to the equation to
17:11
offset
17:12
the optimization on the p l you know in
17:14
my opinion as
17:15
a part owner and i get it i’m not i’m
17:17
not the best you know the best of
17:19
anything in this uh operating class
17:21
i probably did it all wrong when i was
17:22
an operator but my thing was well fix
17:25
everything first you know get everything
17:27
done first
17:29
uh before you go raise anybody’s right
17:31
you know
17:32
because like okay you know who are you
17:34
to raise this guy’s right you just
17:35
bought the park you don’t know you you
17:36
know all you’re doing is hurting his
17:38
feelings he didn’t see that
17:39
you were going to improve the roads he
17:40
didn’t see that you’re going to improve
17:41
the water system
17:42
he doesn’t see that you’re going to do
17:44
all these things later on and
17:46
you’re going to mask it well hey i need
17:47
to be able to afford to go do this for
17:49
your park so i’m going to raise the
17:50
rents now
17:51
i say take the reverse you know the
17:53
money all works out the same over a five
17:55
to ten year run
17:56
do it in reverse you know make you make
17:58
your lp’s take a little bit of
18:00
a pause on the first few months of
18:02
receivables you know when you’re getting
18:04
all this
18:04
initial capex done you know work through
18:07
things that way
18:08
because in the long run it’s going to
18:10
build better attendance for you they’re
18:11
going to trust you more
18:13
and it’s going to help your bottom line
18:15
because they’re going to pay their rent
18:16
more often
18:17
and they’re they’re going to know that
18:18
hey this is a guy who’s actually
18:20
you know putting in the work to give me
18:22
a safer environment
18:23
and that’s that goes a long way with
18:25
this level of tenant class that we have
18:27
maybe not in class a stuff
18:29
i don’t know but in in the lower end of
18:31
stuff as a person who
18:33
who was you know had significant housing
18:36
issues when i was you know
18:37
living my my life and always kind of
18:39
being like worried about you know rent
18:40
increases
18:41
as i became more successful and more in
18:44
tune with with this policy that i have
18:46
of how i look at these parks
18:48
i i see it as a win-win-win for
18:50
everybody lps the tenants
18:51
the operators because yeah it’s a little
18:54
extra
18:55
money up front and yeah it’s a little
18:56
extra long on the timelines
18:58
but at the end of the day by the time
19:00
you’re turning over your seven year fund
19:02
it’s all balanced out you’ve made better
19:04
money you got better tenants stickier
19:06
tenants you got a better looking park
19:08
you got a better reputation the county
19:09
is probably willing to give you an
19:11
expansion at this point
19:12
you know and it go it feeds itself that
19:15
way if you
19:15
if you do it the other way well you’re
19:17
always kind of chasing your tail and
19:18
justifying what you’re doing
19:20
because you know what if you didn’t have
19:21
it in the budget even after the increase
19:23
to do this repair because a different
19:24
repair came up
19:25
you know and then when you’re gonna
19:26
charge you know another rent revenue
19:28
you know another ramp up again next time
19:31
but now you’re gonna double that rim
19:32
pump because of this
19:33
you know you see how it could feed
19:35
itself negatively that way
19:37
absolutely but again plenty of guys who
19:39
prove me wrong and they’re real nice
19:41
guys and they make a lot of money and
19:42
they have some hell of a parks it’s just
19:44
not necessarily
19:45
how i think moving forward in the future
19:47
of our business is
19:48
is the best approach you know the money
19:51
all washes out at the end
19:53
you know i bring this this other theory
19:55
into here what what we’ve kind of coined
19:57
is
19:58
being an empathetic capitalist okay uh
20:00
which is bringing a sense of empathy
20:02
to our industry because we are dealing
20:04
with the poorest of the poor you know
20:06
it’s not like you’re dealing with some
20:07
you know corporate guaranteed lease in
20:09
an industrial building
20:10
or you know some tenants who are making
20:12
you know two hundred thousand dollars a
20:13
year but living in a high class
20:15
you know a apartment in a downtown
20:17
suburban area
20:18
you know or urban area you know
20:20
oftentimes we’re dealing with people
20:21
they’ve been removed from society so
20:23
many times
20:24
that you have to know your client you
20:26
know first and foremost in this industry
20:28
is no
20:28
no you know you’re affected because
20:30
that’s important
20:32
yeah it’s a good point right we see that
20:34
also in the
20:36
c-class multi-family space and in
20:38
particular right
20:40
the operators that really take care of
20:42
their tenants
20:44
uh in the best possible fashion they get
20:46
the best
20:47
better quality tenants that are also
20:50
loyal to them
20:51
right and obviously everyone is in this
20:54
business ultimately to make money
20:56
but if you are just squeezing every cent
20:59
out without providing value
21:02
short term you may be able to raise
21:04
rents but your
21:05
the quality of your attendance goes down
21:08
right today from a
21:09
from an income perspective they
21:11
definitely cannot afford
21:13
higher rents and the better quality
21:16
tenants that potentially can afford it
21:18
they don’t want to live in that property
21:21
because
21:21
the quality isn’t there yet right so
21:24
that’s
21:24
a very important point if you want
21:26
higher rents
21:28
provide more value and the better
21:30
quality and you can attract better
21:32
tenants that
21:33
are able to afford a little bit more
21:36
it’s a it’s a good point yeah and being
21:38
that we’re different than apartments you
21:40
know with apartments
21:41
you know you’re kind of fixed on this
21:43
one there’s one block of building and
21:45
x amount of units and x amount of you
21:48
know
21:49
ways you can maximize that thing with
21:51
with
21:52
manufactured housing it’s not as fixed
21:55
you know
21:55
and the tenants they’re either there
21:57
because they got no other options
21:59
or they made a very conscious option and
22:01
decided to move
22:03
into a park and just own their their own
22:05
home and pay a very minimal amount of
22:07
lot rent
22:08
and live you know live that like a lot
22:09
of fixed income retirement
22:11
you know retiree community type of stuff
22:13
you know a very deliberate choice to
22:15
live there
22:15
but a lot of these other parks that are
22:18
you know bcd
22:19
type of quality parks um oftentimes it’s
22:23
not a it’s not a
22:24
deliberate choice it’s a damn i got no
22:26
other option choice
22:28
and you know this this is where i have
22:30
to go because this is about what i can
22:32
afford
22:32
and you know at the end of the day if
22:35
you’re just trying to achieve a
22:36
particular
22:36
return that returns achievable because
22:39
it’s
22:40
it’s not necessarily just by squeezing
22:43
rents
22:44
you know it’s it’s like they used to say
22:45
when we were younger there’s a thousand
22:47
ways to skin a cat
22:48
well it’s no different here you know if
22:50
the point is to get from a to b
22:52
we can show you how to get there might
22:53
not be the straightest line but it might
22:55
make you actually sleep better at night
22:57
give you a more sticky base and you’re
23:00
still going to make the revenues you’re
23:01
still going to make your cash flow
23:02
you’re still going to have an
23:03
unbelievable exit when you’ve maximized
23:05
everything under this way
23:06
and that exit’s gonna offset any
23:08
additional capital that you had to put
23:10
in the beginning
23:11
any you know length of time in that
23:12
contract in my opinion
23:14
and you know when you optimize that way
23:16
just to me it’s a win-win win for
23:18
everybody
23:20
very good so um uh let’s turn a little
23:24
bit to the market environment
23:26
right you touched on very briefly before
23:29
obviously we have had uh uh
23:33
a number of very good years right
23:36
and in 2020 started extremely strong and
23:39
then we had
23:41
kobe 19 hitting us particularly in march
23:44
when
23:45
when the bottom fell out in the market
23:48
and everyone was
23:49
scared like crazy certainly on the
23:51
multi-family side
23:54
they have performed much better than
23:56
than expected
23:58
so it would be interesting to hear what
24:00
you have
24:01
experience on the mobile home park side
24:05
yeah our industries hands down the most
24:09
resilient industry
24:10
in the real estate vertical okay of all
24:12
the verticals
24:13
manufactured housing it’s as resilient
24:16
as gets because because we’re the bottom
24:18
safety net
24:19
right uh it doesn’t get any cheaper and
24:21
more affordable
24:22
and now social distancing it only makes
24:25
more sense
24:26
okay um so we went into
24:30
2020 as if 2019 was the best year we’ve
24:33
ever seen
24:34
okay as we said about 2018 as we said
24:37
about 2017
24:38
okay and we’ve had a real nice run from
24:41
about 2012
24:42
2013 you know through here and every you
24:45
know we started it you know 10 and 12
24:46
caps
24:47
and that cap is compressed and
24:50
compressed
24:51
and compressed where now we’re like
24:53
looking at you know three and a half
24:55
four caps on a day one type of number
24:57
saying you know it’s a good deal
24:58
you know it’s uh it’s a completely
25:00
different dynamic and that’s some
25:02
somewhat due to the new financing that’s
25:05
available out there
25:06
um and of course that’s not every deal
25:08
everywhere but we disclosed the deal
25:10
in little rock arkansas which hey it’s a
25:12
great market but maybe a market nobody’s
25:13
ever heard of before
25:15
um and you know we sold that on day one
25:17
number at a 4.05 cap
25:19
okay but what makes our cap rates
25:22
different than apartment cap rates
25:24
is we have a lot of up left in our in
25:26
our cap rates once you once you go
25:28
through the acquisition
25:29
whereas you know you buy uh you know a
25:32
single tenant lease
25:33
you know you’re probably more or less
25:35
going to ride pretty flat with little
25:36
you know you know a couple bibs here a
25:38
couple dips there
25:40
but with mh it’s you know where you
25:41
start today is not going to be where you
25:43
end up tomorrow
25:44
and you’re going to get to recompress at
25:46
the end so transactional volume for me
25:49
this year so far where we are in this
25:51
year
25:52
we’ve done you know i don’t know i guess
25:56
i’ve sold maybe
25:57
20 21 22 23 transactions this year
26:01
i don’t know how many parks that makes
26:02
up all on each of those transactions but
26:04
a bunch and you know just over a hundred
26:06
hundred and some million dollars worth
26:08
of uh
26:09
value in parks we have about 150
26:12
million or so more under contract that
26:14
is you know ideally gonna close before
26:16
you know the end of the year but you
26:17
know
26:18
december is sometimes it goes pushes
26:19
over to january but for me it’s a banner
26:22
year
26:22
but last year was about a year here
26:24
before it was abandoned here
26:25
and we’re not seeing that in its site
26:27
going back to the recession
26:29
the the 2008-2010
26:32
you know kind of like uh oh what’s
26:33
happening here you know
26:35
we were again we’re one of the only
26:37
industries that was increasing occupancy
26:40
and increasing rents now during this
26:42
cycle we haven’t seen a lot of rent
26:43
increases
26:44
uh i mean at the cycle cycle we’ve seen
26:46
tremendous rent increases
26:47
but during this coving portion we’ve
26:50
actually seen landlords
26:52
lay off on on a lot of the rent press
26:54
because they were like hey
26:56
we were going to do a rent press it was
26:57
supposed to come out in april or may or
26:59
june
27:00
but with how things are you know we
27:02
don’t really need it
27:04
and we’ll just keep maximizing some of
27:05
the some of the vacancy that’s here
27:08
because right now good luck trying to
27:10
find some vacancy
27:11
in any in any primary market in in
27:14
manufactured housing
27:15
uh even in the market that i live in
27:17
right here you know in wilmington a
27:19
small town
27:20
um hundred thousand people you know uh
27:23
there’s almost no vacancy
27:24
period in manufactured housing but yet
27:26
in apartments you gotta solve 10 you
27:28
know 10 or 12
27:29
vacancy kind of running about but in
27:31
manufactured housing there’s
27:32
you can’t you just cannot find a vacant
27:34
ground and that’s kind of true
27:36
in the secondary cities across the board
27:38
right now and
27:39
that’s that’s nice to see that that
27:42
occupancy is maintained or increased
27:44
while rents have stabilized
27:46
not so much uh but this last couple
27:49
months or two
27:50
now that everybody’s kind of adjusting
27:51
to this new normal
27:53
and you know yeah we know we have
27:54
another big you know winter to get
27:56
through and it could be
27:57
it could be a hard winter it could be an
27:59
easy one to not crystal ball
28:00
but now we’re starting to see people
28:02
starting to push rents again um
28:04
but not as aggressively as maybe they
28:06
did last year
28:07
you know um so our delta for for
28:11
rent collection or our rent collections
28:13
right now
28:14
are more or less on par with pre-coveted
28:16
levels there’s there’s virtually no
28:18
delta there
28:18
uh whereas many of the other industries
28:21
are
28:22
you know close but maybe a little bit
28:25
south of where they were 12 months ago
28:26
and as you change different verticals it
28:28
might drop dramatically
28:30
um but mh during the the great recession
28:32
and during this this coven
28:34
uh period you know smooth sailing so far
28:37
we’re seeing more transactions we’re
28:39
seeing higher pricing we’re seeing
28:41
more velocity and that that’s voting
28:44
really well for our industry and it
28:46
continues
28:47
it continues to make us all feel real
28:48
special because you know hey sometimes
28:50
you know sometimes we haven’t been the
28:52
most special uh
28:53
uh vertical you know going back five
28:55
years ago i’d have to argue with
28:56
everybody
28:57
about hey no 10 caps a really good deal
28:59
you should look at this thing at a 10
29:00
cap
29:01
and uh nowadays you know we’re talking
29:03
about hey you know this is a five cap
29:05
it’s a real good deal
29:06
and it’s a lot easier to sell today than
29:08
it was five years ago even when there
29:09
was twice about the yield on it
29:11
um but the supply and the demand
29:14
is a big factor in ours you know with
29:16
there’s only fifty thousand parts
29:18
of what’s only twenty thousand or even
29:19
anything close to considered
29:21
you know investment grade you know
29:23
that’s anything close is really
29:25
about 10 15 000 parks that actually kind
29:27
of are investment grade
29:28
and of that there’s only you know this
29:30
industry is consolidated a lot you know
29:32
there’s
29:32
at least i’m tracking at least 370
29:35
something people
29:36
that own at least 600 units you know or
29:38
at least six parks um
29:40
and that’s that’s not where these
29:42
numbers look like a few years ago so the
29:44
supply demand curve is really wacky
29:46
right now with you know
29:48
high intensity uh demand for our
29:50
industry and low supply
29:52
um but more supply than we normally see
29:54
you know with the amount of transactions
29:55
we’re doing like i said we’re doing
29:57
one two three deals a week and in
29:58
december i got probably eight closings
30:00
on the books in october i think i had
30:02
five or six closings on the books
30:04
um you know and in november we’re
30:06
looking again you know somewhere you
30:07
know 678 closings on the book
30:10
so we’re seeing more more transactions
30:12
but the supply has not been met yet
30:14
you know or the demand for the supply
30:17
you know is still
30:18
you know very much in the seller’s favor
30:20
which keeps us
30:22
pressing heavier on on purchase pricing