Category: Manufactured Homes

Institutional Investors Bet on Manufactured Housing as Occupancy, Rents Continue to Grow

Property fundamentals in the sector remain very strong, making it an attractive long-term investment bet.

There has been stable occupancy and rental collections in 2020 despite the pandemic. As a result, some investors are now betting big on manufactured housing communities.

In the second quarter of 2020, investment sales of manufactured housing communities totaled $821 million, a 12 percent increase compared to the fourth quarter of 2019 and a 23 percent increase over the first quarter of 2020, reports commercial real estate services firm JLL. At the same time, valuations in the sector have continued to increase and cap rates have been compressing. Price per pad in the second quarter averaged $50,792, up 6.6 percent from the first quarter of 2020 and 26 percent year-over-year. During the same time period, prices on multifamily assets have declined by 5.3 percent from the first quarter of 2020 and 0.86 percent year-over-year, according to a JLL report on manufactured home communities. Cap rates on manufactured housing communities averaged 5.84 percent nationally, down seven basis points year-over-year.

“The manufactured housing community sector has overall continued to drive year-over-year occupancy gains, often through investments into new and used inventory to support manufactured home sales and rental programs,” says Scott Belsky, senior vice president and JLL valuation advisory national practice lead for manufactured housing. “Additionally, the stability and growth of homesite rents have generated positive net operating growth even through the pandemic, which has allowed values to remain stable or even rise in some areas due to continued investor interest driven by the sector’s lack of volatility and even rent growth prospects.”

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    Blackstone to Boost Mobile-Home Bet With $550 Million Deal

    The firm is in negotiations to acquire about 40 mobile home parks, most in Florida, from Summit Communities.

    (Bloomberg)—Blackstone Group Inc. is pouring more cash into mobile-home parks, a corner of the commercial real estate market that is holding up in the pandemic.

    The alternative asset manager is in exclusive talks to acquire roughly 40 parks from Summit Communities for about $550 million, according to people with knowledge of the matter. The majority of the properties are located in Florida, said some of the people, who requested anonymity because the transaction isn’t public.

    Real estate investment trust Sun Communities Inc. was among the bidders for the Summit portfolio, some of the people said.

    Blackstone is set to make the investment through a vehicle known as Blackstone Real Estate Income Trust, or BREIT, and plans to spend money upgrading the properties, including shared facilities such as swimming pools, one of the people said.

    “Though our investments in this asset class are very limited, we are proud to partner with a best in class operator and plan to invest significant capital into these communities – which are largely occupied by seasonal residents and retirees – to create high quality housing in places where people want to live,” a representative for Blackstone said in a statement.

    The deal, which isn’t final and may still fall through, comes after Blackstone invested in mobile-home parks earlier this year. The New York firm paid around $200 million for seven parks, mostly in Florida and Arizona, owned by Legacy Communities, according to people familiar with that deal.

    Representatives for Summit, Sun and Legacy didn’t immediately respond to requests for comment.

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      Not Your Grandfather’s Mobile Home Park

      The investment opportunities in the mobile home sector have grown enormously in recent years.

      What other multifamily rental property type enables investors/owners to collect monthly rental homesite lease payments; PITI home loan payments; and when present, apartment rent on homes sited throughout this unique, income-producing community?

      Answer: None!

      That’s the reality of today’s ‘land lease community’–a contemporary trade term used to account for more than six types of shelter commonplace in this property type nationwide. No longer just ‘mobile homes’ & ‘manufactured homes’ on-site, but also modular homes, park model RVs, RVs for a season, stick-built homes erected in-community to imitate manufactured homes; and of late, the occasional Tiny Home or other Accessory Dwelling Unit (‘ADU’).

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        “Mom-and-Pop” Manufactured Home Communities Might Be the Next Frontier for Investment in the Sector

        As institutional players take over larger communities, smaller investors can benefit by looking at communities with under 100 home sites.

        Industry experts see plenty of room for growth in the manufactured home communities sector, particularly among the smaller properties.

        Often referred to as mobile homes or trailers, manufactured home communities are, in fact, a specific type of factory-built housing, constructed in accordance with the U.S. Department of Housing and Urban Development’s (HUD’s) Manufactured Home Construction and Safety Standards Code. They should be distinguished from RVs, trailers and park-model homes.

        Manufactured homes are an important source of affordable housing, particularly for rural and low-income residents, according to experts.

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