Mobile Home Parks have long been attractive investments due to their steady cash flow stemming from the regular payment of lot rents. National park operators, real estate investment trusts and pension funds have been buying “mom and pop” parks over the last several decades leading to an overall industry consolidation. As the industry becomes more and more consolidated, investors have turned their attention to purchasing cooperatives. And they are selling for big money! As posted in the Sarasota Herald Tribune, the Country Lakes Village cooperative recently sold for close to $70million dollars.
The transaction usually begins with a “Letter of Intent” mailed to the association officers. The Letter of Intent presents the purchasers interest in purchasing the park. The purchase price will usually be broken down into a “per share price” of, say for example, $200,000 per share. Note that once the association sells the park, the cooperative is terminated and all residents will transform from shareholder owners to lot renters. To address this change, the Letters of Intent will usually present a proposed annual lot rent, capped to a fixed annual increase for the lifetime of the current residents. The interested purchaser will usually promise to provide community-wide amenity upgrades, in amounts upwards of several millions of dollars as well. Those upgrades might include clubhouse renovations, new landscaping, pool renovations, installation of pickleball courts, and the like.
On receipt of such Letters of Intent, Association officers have some big questions to answer: what is my fiduciary duty to the shareholders in connection with this offer? will the other shareholders be interested in selling? what is the appraised value of the park and is that value accurately reflected in the proposed purchase price? what shareholder and director approvals are required in order to sell the park and terminate the cooperative?
In follow-up posts, we will dive into those issues in greater detail. In the meantime, if you receive a Letter of Intent to purchase your park, you should contact your legal advisor without delay to help you begin working through the various issues a Letter of Intent presents.