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Five Star Senior Park Sells for $600,000 Over List Price And Closes In 60 Days

The 55+ mobile home park (manufactured housing community) for sale in the city of Flagstaff, AZ, Coconino County sold on December 15, 2005 for $6,600,000.  The buyer placed new mobile home park financing of $2,260,000. Vince Reynolds and Norman Sangalang of MHRV Advisors represented the Seller in this transaction.

The park consists of 104 mobile home spaces situated on 18 acres serviced by city water and city sewer and direct billed for gas and electric. Many of the spaces have singlewide homes but can accommodate  doublewides homes. Amenities at the park include a pool, spa, changing rooms, maintenance garage, storage lot, clubhouse with workout room and basketball court.  There is no rent control in Flagstaff. Average space rents were $369.50 at time of sale with the most recent rent increase of 3% that went into effect July 1, 2005.  This was the only increase over the last 2½ years.  There are no direct competitors for this park which was 100% occupied at time of sale.  There was only one park owned home.  There is a possibility of further development of approximately 33 mobile home spaces on this property.

Vince Reynolds commented, “There were direct offers on the park below our list price that seemed very appealing to the Seller at the time.  However, after our analysis of the park and the market conditions we felt that a 6.2% cap rate at $6.0 million was realistic.  This price would attract serious investors with the strong possibility of above list offers. Within the first two weeks we had several at and above list price offers with most of the consisting of large down payments and sizable deposits. MHRV’s policy of  open marketing and approachability lead to a successful close of escrow in 60 days at $6.6 million, well over $600,000 above the direct offers”.   

Norman Sangalang added, “The seller kept the park in immaculate condition which would rank in the top 1% in terms of quality.   There was a defeasance (prepayment) penalty that reduced the apparent Sellers profit, but with the interest rates on the rise these types of prepayment penalties are being offset by low cap rates (higher values).  Defeasance penalties are calculated on interest rate spreads which are narrowing, however the cap rates have not begun to rise in reaction to the rise in interest rates just yet leaving a window of opportunity for the time being. In the recent past we have typically discouraged park owners that have these types of loans from selling or refinancing, but the current lending and market conditions are making the sales more possible and in this case very profitable.  When interest rates begin to drive cap rates back up this profit margin will begin to erode.”

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