We have acquired a MHP siting in a very busy road in MA. the park sits on 3.65 acres of land. it currently holds 22 sites with 9 paying land lease and the other owned by the park. there are two vacant lots and over 2.25 acres room for expansion.
All units are on septic and city has already told the park to convert to public sewer.
The project had a previous approval of a 37 unit expansion plan. All homes in the park are old and the life expectancy is getting to its end… the park is under rent control.
Option 1.
under the current law, the park owners would have to Provide a 2 years notice to the home owners to end its use. Seek a project approval where the city has expressed an interest in allowing a high density project, perhaps 120-140 units.
the draw back to doing this is that the park sits on a busy route and tenancy there may be affected by that and also by abuters, " garage and Methadone Clinic" given that rental income in the area can be high one can conclude that the back portion of the land can also be used for residential development and the front currently being used as the MHP will be a home for: dunkin donuts, car wash, strip mall… the opportunities are endless…
Option 2.
begin the expansion as mentioned above…
Option 3.
Sell.
I have run the business models and it seems like option two is the easiest of them as it would take about 1.6 Million to have 37 new homes including the clearing of the land, Pad installations, water and sewer as well as roads. however, the cashflow it generates given that the park is located under rent control is somewhat low for efforts spent and the time it takes to develop that idea…
given the above and knowing that the partnership is not very liquid under 2 Million in assets, what would the best route be ?
All indication seem to point to the fact that the community is at it’s natural end and the only value is in the land.
I would give notice to close the community and proceed to either sell the land for redevelopment or, if you have the resources, develop the land yourself.
Septic, city requirements, POHs, homes at the end of their life, rent control all point to option 1.
Rent control and the value of the land are the deciding factors…
Option 1: Provide 2 Years Notice and sell the property for a higher and better use. You might be able to start advertising it for sale now and get a contract on the property.
The Rent Control would stop me from placing more money into the Property as it will probably be redeveloped in the near future.
Thank you Greg, I think we will be going forward with Option 1. I know a similar property under 300 feet sold less than two years ago for 2 Million " contaminated Land" Ours is clean, that should give it a lot more value!
Im worried about Unit Owners retaliation if give notice to close the park, however, we are prepared to deal with that!
Your biggest issue will be those that decide they are going to stop paying rent once you give notice. If any one does refuse to pay you will need to move swiftly to send a strong “no pay no stay” message to the entire community.
Fortunately you only have 9 to be concerned with. The POH rentals should carry you even if all the home owners end up getting evicted…