Dutch Gardens MHP
Rome, GA | Off-Market Acquisition | Dec 2020
Overview
Dutch Gardens MHP is an all-ages, affordable community consisting of 76 spaces roughly 65 miles northwest of Atlanta. This three-star community has a nice mixture of single-wide and double-wide units. The asset was acquired in an off-market transaction, and sourced via direct-to-owner marketing.
About the Project
Dutch Gardens was identified through our internal marketing efforts. We make over 4,000 outbound cold calls weekly in an effort to drum up off-market deals. Upon receiving a cold call, the owner requested to speak with our lead principal and was immediately interested in selling the property.
The Challenge
This asset had been owned by a fairly large investor in a small town (i.e. big fish in a small pond). Managing a couple thousand apartment doors in the same market, the owner had shifted his focus away from Dutch Gardens. In doing so, the asset began a slow downward spiral we often see from mom-and-pop owners. The downtrodden asset had below market rents, various cosmetic issues with park-owned-homes, and was in need of general cleanup.
The Plan:
Sunrise negotiated a $2.2mm purchase price and began the turnaround by power washing all homes, trimming trees, repairing potholes, and implementing a water reimbursement policy to promote conservation. Once renovations have been completed, Sunrise will begin to recapture the loss-to-lease and bring lot rents to just beneath the market rate. This plan ensures minimal turnover while maximizing both physical and economic occupancy.
The Outlook
Acquired with a nice margin of safety, this asset appraised for $430k above the purchase price at acquisition. Based on the appraisal of $2.63mm, we were able to achieve a 20% return on equity on day one. Once the business plan has been executed, we project this asset will significantly outpace the metrics necessary to exceed investors’ Fund 3 projections.