Case Study #7
Huron Estates MHP
Cheboygan, MI | Off-Market Acquisition | July 2018
Huron Estates MHP is an all-ages, affordable community consisting of 111 spaces immediately juxtaposed to the local Wal-Mart. The community was acquired in an off-market, deed-in-lieu of foreclosure transaction.
About the Project
Sunrise received a tip from a podcast listener about a community bank that was interested in selling a non-performing MHP note. In order to take title to the property, we purchased the distressed note from the bank, inserted a court-appointed receiver, performed a deed-in-lieu on the note holder, and took ownership at a deep discount to market value.
Huron Estates experienced years of mismanagement and needed attentive care. A friendly community with fairly modern infrastructure and municipal utilities, the asset had good bones. But the former owner ran the property into the ground, operating at a 74% expense ratio. Massive water leaks went months without attention, landscaping was unkempt, and potholes littered the pavement.
What We Did
Sunrise purchased the note for less than $1mm and began renovations by trimming overgrown trees, planting fresh landscaping, repairing damaged roads, rectifying deferred maintenance, replacing on-site management, stabilizing poor collections, and installing water meters to promote conservation. After significantly improving the community, Sunrise began billing residents for their individual water usage and moved lot rents to just below the market rate.
Sunrise increased the NOI, boosting revenue and lowering the expense ratio to 48%. Within three years, the property value increased by 126%. Having created significant sweat equity, Sunrise decided to sell the asset for $2.25mm, providing investors with an exceptional risk-adjusted return.
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