The coronavirus is changing the lifestyle of many Americans profoundly. As more people work from home, learn online and engage in social distancing, they are buying products and services that cater to their emerging needs. As a result, dealmaking is surging in some sectors, including mobile homes.
In our November/December cover story, Mergers & Acquisitions identifies and explores five sectors receiving strong interest from strategic buyers and private equity firms: exercise equipment, cleaning products, food delivery, pets and mobile homes.
Here’s our look at the trends driving M&A in mobile homes.
Home on the Range
The pandemic has increased the demand for manufactured homes, or mobile homes, as millions of Americans remain out of work, and mobile properties offer an alternative and more affordable way for people to live. At the same time, mobile home parks can provide a reliable income stream for commercial real estate investors.
A manufactured home is a home built in a factory and then transported to the final home site, where it is assembled. The factory-built process allows for more consistency, quality control and accuracy that is seen with individually site-built homes, which can be plagued with delays and disruptions. Today, most mobile homes are more modern and can resemble styles of traditional houses, according to industry reports.
“Demand for affordable housing options that are within close proximity to major metro areas has been on the rise for years, which makes manufactured home park investing a useful and viable option that not only helps to alleviate the affordable housing crisis but can also be a profitable asset for investors,” states a report from real estate firm TFS Properties.
Blackstone is one investor that is interested in mobile homes, a subsector of the real estate industry that has been performing well during the pandemic. The firm is in exclusive talks to acquire roughly 40 parks from Summit Communities for about $550 million, according to Bloomberg News. During the pandemic, transactions involving mobile home parks have outpaced other corners of the commercial real estate market as investors steer clear of harder hit sectors such as retail and hotels, reports Bloomberg.
“Manufactured home park investing can certainly be a good asset for the right investor circumstances, especially when investors understand their investment needs, have taken the time to do due diligence about their target areas, and have chosen the manufactured investment homes with care,” TFS says. “Despite being a new concept to many investors, rented manufactured homes in quality manufactured home parks can be an excellent way to invest in the real estate market in a profitable way without large capital requirements. Manufactured homes typically generate higher near-term returns on investment than a comparable rented residential home rental investment does.”
According to real estate website Buildium, more than 20 million people live in mobile home parks. There are more than 50,000 mobile homes in the U.S., and only one in five are professionally managed. The majority of mobile homeowners are older people who are close to retirement, creating an ideal buying opportunity for real estate investors.
Buildium points out there will always be a need for mobile homes, no matter the economic cycle, because they are affordable. Mobile homes can be rented for less than $1,000. “If the economy gets stronger, home prices go up, making it harder for low-wage workers to afford housing; and if the economy takes a downturn, even more people need access to affordable housing. This means that mobile homes—the ultimate affordable housing, since they can be mass-produced in factories—tend to retain their value regardless of the economy,” the website says.
In another deal, the BoaVida Group, owner and operator of mobile homes, has acquired the Lamplighter Mobile Home Park in San Antonio, Texas. BoaVida founder Eli Weiner says the company will continue to look for acquisitions. “The rapid pace of acquisitions is continuing through the Covid-19 scare, with the company looking for fewer, but larger opportunities this year.
For more on Mergers & Acquisitions’ The New Consumer cover story, see:
- The New Consumer: Deals Thrive in 5 Key Sectors, as Covid Changes the Way We Live Now
- The New Consumer: Staying Safe, Keeping it Clean
- The New Consumer: What’s for Dinner?
- The New Consumer: Happiness is a Warm Puppy
- Number of Retail Bankruptcies in Covid Era Rivals Great Recession