The North Carolina 1,229 Lot MHC Portfolio is a cornerstone portfolio with multiple upside opportunities in one of the nation’s strongest and fastest growing state economies. The portfolio has been strategically built around five major growth markets in North Carolina (Raleigh-Durham-Chapel Hill, Greensboro, New Bern, Fayetteville, and Burlington) and provides operating synergies in the management and marketing of the 16 individual parks situated in 12 locations surrounding major highway corridors (I-40/I-85 and I-95).
The portfolio has 1,225 MH lots with 2 single family homes & 2 apartment units. The lot rent only tenants current pay an average lot rental rate of $315 per month, which is considerably below current market rent estimated at $425 based on rent comparable surveys and multiple JLT reports. The POH rents are also well below market, currently averaging only $683. There are 335 vacant lots, providing significant infill opportunity. Current occupancy is roughly 72% and has been steadily increasing with limited marketing. All markets support substantially higher lot rents, POH rents and project to 95%+ occupancy based on limited affordable housing supply in growing demand markets.
All parks are year-round, all-age communities and have a combination of public and private utility systems. All systems are in good working order. Ownership does anticipate that two of the treatment plants (WWTP) will need eventual replacement. We have accounted for this in the provided future capital expenditure budget and is reflected in our pricing. The parks are currently managed by a third party management company who employs the park managers. The management company is flexible to remain as manager of the parks; in the event they are not retained, the park level managers would convey with the parks.
There are 119 park owned homes with an average year of 2002, of which 58 are 2020 models. There are also 101 Rent-To-Own units with an average year of 2008. A full NADA report is available upon request. The privately maintained roads are paved at all but one park and most roads are in average condition as our offering price and capital expenditure schedule reflect.
Two parks are located in opportunity zones. All parks are located in excellent locations near amenities and employment centers. Only three parks are affected by a flood zone, two of which only affect 37 lots. Only Myrtle Grove is situated in a 100-year flood zone but most of the lots and homes are above the flood line.
North Carolina remains one of the strongest markets in the U.S. across all real estate verticals. The state’s population grew 10%/+1.0 million people from 2010 to 2019 (4th largest numerical population growth nationwide, surpassed only by Texas, Florida and California, and 68% attributable to net migration) and has over 10.5 million residents (9th most populated state, projected at 10.7 million people as of this summer). North Carolina ranks high nationally for qualities such as population growth, workforce development, state incentives for companies, tax climate, and access to a large pool of job talent, according to Site Selection, and recently ranked #4 in Chief Executive Magazine’s CEO survey of “Best State for Business.”
This portfolio is being offered as a value-add investment with an entry 3.5% (current lot rent only) & 4.0% (current total rent) CAP using a 45% expense ratio, that increases to a 10.8% CAP (lot rent only) / 12.4% (total rent) once the portfolio has been optimized. The levered 7-year IRR is 20.1% assuming market level debt financing and achievable business plan execution of infill and rent increases over a multi-year period.
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