Elk Creek Mobile Home Park
Madisonville, KY | Off-Market Acquisition | August 2024
Overview
Elk Creek Mobile Home Park is institutional-gem in Madisonville, Kentucky, set to deliver an immediate $2.5 million in instant equity, equivalent to a remarkable 25% return on equity for Fund 4 investors right from the start. This acquisition highlights our continued focus on uncovering undervalued assets and transforming them into high-performing investments for our investors.
About the Project
Elk Creek is a standout addition to Fund 4, and a unique asset in the broader market. This 223-unit, institutional-grade mobile home community is located in Madisonville, Kentucky—a prime location within two hours of three major metropolitan areas: St. Louis, Louisville, and Nashville. The park offers the best affordable housing option in a region with very few alternatives, particularly given that the only other mobile home park in the area is a 1-star community that has most certainly seen better times. With direct-bill city water and sewer, the park also offers operational simplicity, ensuring that we avoid the common pitfalls of utility management.
The Challenge
Our strategy for Elk Creek includes a light value-add approach, aimed at maximizing returns without extensive overhauls. We plan to recapture lost income by adjusting rents, which are currently below market, and by addressing operational inefficiencies—most notably, canceling a $100K annual cable bill. This move alone will immediately boost the park’s NOI, adding 100% of the savings directly to the bottom line. Additionally, the park’s legacy owner, who has over 30 years of experience, is scaling down operations, offering us the chance to step in and modernize management while enhancing tenant satisfaction.
The Plan
Elk Creek was secured for $10.2 million, well below its appraised value of $12.7 million, providing $2.5 million in instant equity upon acquisition. This deal significantly contributes to the cumulative equity in Fund 4, reinforcing our strategy of acquiring assets with a built-in margin of safety. With planned improvements and operational enhancements, we project the park’s stabilized value to reach approximately $14.5 million.
In addition to the instant equity, the property’s location in the best school district in the market, coupled with its proximity to top employers and major retailers, positions it as a highly attractive option for long-term residents. The majority of homes are tenant-owned, which contributes to a stable and “sticky” tenant base, reducing turnover and ensuring steady occupancy.
The Outlook
Elk Creek Mobile Home Park is an institutional beauty in the heart of a market with a critical shortage of quality affordable housing, making it an irreplaceable asset in our portfolio. With its strategic location near major metropolitan areas and its competitive positioning as the top mobile home community in the region, Elk Creek is poised to generate lifetime cash flow for our investors. By capitalizing on the growing demand for affordable housing in a market where such options are scarce, Elk Creek offers a promising avenue for sustained and substantial returns, ensuring that investors can count on both immediate benefits and long-term appreciation.