December ARC MHP Auction

mobile home university
#1

As many of you know, ARC is auctioning off over 70 MHPs through Sheldon Good & Company in December. This is the largest single auction of MHPs in history, I believe. Dave Reynolds has been working with Sheldon and Good to get every property listed on his site (www.mobilehomeparkstore.com). I’m in the process of trying to get as much information as possible to distribute to everyone that is attending the Mobile Home Millions conference in Anaheim this month.

If there is anyone who is interested in a specific property, please let me know and I’ll try to get the information to you.

One last thing, this auction is being handled very differently than those in the past. It is strictly capitalization rate based and the first 30 properties sold at the auction will be absolute.

Happy investing.

Steve

#2

Hi Bob,

Thanks for the kind words. Now, we just have to let everyone know that it is up and running.

The parks in Wichita KS? Are these on the ARC auction list?

Corey has been speaking with someone at Sheldon Good & Company about giving us more information on all of the parks.

Post Edited (11-13-05 17:32)

#3

This auction is going to be very different than any other I’ve seen. The first 30 properties sold will be absolute…and the bidding is going to be cap rate driven.

A full 80+ page circular offering can be viewed at:

http://www.mobilehomeparkstore.com/p4sale/sheldon/ARC%203%20brochure.pdf

Corey has spoken with a Sheldon Good & Company representative and depending on the outcome of the first 30 properties sold, ARC might extend 10 more at a time under the same absolute format. However, that decision will be made real time.

In my opinion the true bargains are going to come in the last few properties. Only bad thing about that is ARC will have 5 days after the auction to decide whether or not they will let the last properties go at bid prices.

This auction could be a total bomb or set a new standard for some of the REITs who want to unload properties within the next year.

I can’t wait to see what the outcome is.

Steve

Post Edited (11-13-05 17:33)

#4

Jefferson,

I once heard a good quote, “the only dumb question is the one you don’t ask”. These are great questions.

An absolute auction is where the property will “absolutely” sell, regardless of the final bid price.

A capitalization (cap) rate in it’s simplest form is the rate of return. It is derived by taking the net operating income (NOI) divided by the sales price.

The NOI does not include any debt service (mortgage payments) you might have on the property.

Steve

#5

Betsy,

I look forward to meeting you in Anaheim, it’s going to a great event.

You are right about not knowing which properties are going to be auctioned off first. Basically, the way the auction will work is that they will start at some number and go down from there. I have a feeling that the first few properties will be somewhere between 5-7 cap rate.

Once the winning cap rate is established, let’s say it is a 5, then the winner will pick one or more properties. If the NOI on the bid package is $50,000 then the purchase price will be $1M PLUS the buyer’s fee (6.5%).

As far as when the best deals will be bought, it’s hard to say. Some of the parks have very high vacancy rates. Buying something at a 5 cap rate that is 75% vacant could be a great deal, it all depends on the condition of the park and the market.

It’s going to be fun to see what happens.

Steve

#6

Charlie,

I wouldn’t suggest the ARC auction as the venue for your first MHP, especially if you haven’t completed the full due diligence.

On your first deal I would look for a small park in your local area that you could cut your teeth on. On something that is at least 80% occupied, I wouldn’t buy for less than a 10 cap rate, but would be looking at closer to a 12 cap to make sure you had room for any small mistakes made during the due diligence.

I hope this helps.

Steve