IL MHP Portfolio
Northern, IL | Off-Market Acquisition | Dec 2021
Overview
Rolling Meadows & Mancuso Village MHPs are all ages, affordable communities totaling 362 spaces in north central Illinois. Both communities were acquired from long-time, legacy owners who managed the properties for decades and had kept lot rents hovering around $350 for years, despite the fact that market rates are north of $480.
About the Project
With no broker involved, this portfolio is a true off-market deal. Our intent is recapture the loss-to-lease over time and provide higher-quality affordable housing for residents along the way.
The Challenge
Over time, the owners had become tired. When Sunrise took over management, abandoned homes were scattered throughout the community and physical occupancy had slid to 78%. The financials were wrought with hefty expenses across the board, inflated payroll and unnecessary vendor contracts. The poorly managed assets were also in need of general cleanup.
The Plan:
Sunrise negotiated a combined $13.5mm purchase price for the properties, and will begin the turnaround by demolishing unsalvageable abandoned homes, renovating salvageable park-owned-homes, and power washing units. Sunrise will bring in additional homes to increase occupancy and supply more affordable housing to the marketplace. Once renovations have been completed, Sunrise will begin to recapture the loss-to-lease and move lot rents to just beneath the market rate.
The Outlook
Acquired with a nice margin of safety, the assets appraised significantly above the purchase price at acquisition (by several million dollars). Sourced via long-term relationship and negotiated direct-to-owner, these properties currently charge 29% below market rents. Per the appraisal, these assets have a stabilized value over $23mm. This property epitomizes our traditional light value-add transaction, and implementation of the business model will drive further value for Fund 3 investors during the holding period.