Would y’all even consider touching a larger park in a great area(great schools, jobs, shopping, close to interstate, close to a large city) if it had a lagoon system and water well in good condition?
That depends, can you connect to the city sewer? Is the cost reasonable? Do the economics of the deal make it feasible to remediate the lagoon over time? Can you connect to the city water? Is there a backup well? Can the lagoon infiltrate the well?
You can do deals like that as long as you can insulate yourself form the risk of the private utilities. Usually the insulation comes from a higher CAP rate in conjuction with the availability of municipal services. Deals like what you’re describing usually present some opportunity (most people turn up their noses without ever even looking at them), but you’ll need to perform really good diligence to stay out of trouble.
We own one lagoon in our portfolio, but the only reason we own it is that there is city sewer available right out in front of the park. Without the ability to convert to another sewage system, you are at a huge risk because lagoons are an endangered species in most states That being said, talk to your state MHA and the state health department and see what the facts are regarding lagoons in your state. It’s my understanding that Louisiana, for example, is very loose on lagoon regulations. But an interesting note from over the weekend was that I went to an exhibit at the St. Louis History Museum and saw that eradicating lagoons was the #1 priority of the St. Louis Health Department in 1875 – that’s how long it’s been hated!
It depends on all the details as suggested already. If it all lines up and the money works then why not.
Why not – is the risk factor. Every investment has risk, is this one within your tolerance level.
1 Like
Hated but that’s a bit slow on enforcing their agenda.