Mike Nissley

Mike Nissley

Editor’s Note: Michael Nissley, vice chair of the Colliers Manufactured Housing and RV Group, focuses exclusively on MH and RV/Campground transactions in the U.S., Canada, Australia and Europe. Park owners can email mike.nissley@colliers.com or MHRVgroup@colliers.com for more information on his team’s services. You can also learn more at https://www.colliers.com/en/services/manufactured-housing and follow his team on Linkedin at https://www.linkedin.com/company/themhrvgroup/.

Around the world, the outdoor hospitality industry represents a rare real estate sector still primarily consisting of owner-operators, rather than large institutions. The heart of the industry still beats with the local, deep-rooted expertise of individual owner-operators with a community connection. Owner-operators have used their hard work, creativity and deep dedication to grow the industry over the years. This niche, non-institutionalized asset class encompasses a variety of business models, from park model RV communities designed for permanent, long-term stays to highly-amenitized resorts intended for transient, short-term visits.

Many RV parks and campgrounds have a rich history, with a majority having been built over 50 years ago. Therefore, the infrastructure, naturally, is past its useful life and needs repairs. Historically, securing capital for enhancements has been challenging. This meant owners, at times, had to postpone certain upgrades or rely heavily on local banking relationships and seller financing. However, the landscape has shifted in recent years, and accessing capital has become easier.

The Appeal of the Industry to Investors: Exceptional Growth

Institutional investors are drawn to the outdoor hopsitality industry for several key reasons. There’s less competition and a lot of properties are still owned by families/owner-operators, often leading to higher initial capitalization rates. The sector has plenty of upside potential and very little rent control. Seller financing deals are common, and there’s an opportunity to bring more debt and equity capital to a traditionally under-capitalized space. The many value-enhancing prospects in the industry are unmatched making it a prime target for those looking to optimize returns. Enhancements include technological improvements in reservation and accounting systems to pricing optimization software and digital marketing strategies, alongside rent increases, infrastructure, amenities and expansions.

Franchises and brands such as Kampgrounds of America Inc., Camp Jellystone and Margaritaville have also played a big role in industry growth. These recognizable brands bring standardization, generate more revenue through their marketing and focus on customer experience utilizing new technology. Some investors choose to add value to a park by converting a non-branded park into a branded franchise.

Over the last fifteen years, Sun Outdoors and Equity LifeStyle Properties (ELS), the two largest public REITs in the MH/RV space have entered the outdoor hospitality industry in a big way. They have established themselves as experts in the asset class, educating new debt and equity investors who have entered the industry. Today, significant global investors have stakes in RV resorts and campgrounds across the world, and many pension funds, banks, private equity and family offices are now looking to invest.

Capitalizing on Unprecedented Values: The Need for Expert Representation

This is all great news for park owners today, especially if you’re looking to sell in the near future. With a noticeable uptick in investor interest and available capital in the industry, it could be an opportunistic time to explore the market and perhaps, reap the rewards of your hard work.

While owner-operators bring invaluable hands-on expertise in managing parks, focusing on occupancy, software, reservations and customer relationships, they may find the business side of buying, selling and refinancing these properties somewhat unfamiliar terrain. Terms like cap rates, NOI, operating expenses and IRR, not to mention strategic selling approaches, might be less second-nature to them than to institutional investors, who are immersed daily in buying, selling, financing, and consolidating ventures. These investors, adept in financial analysis, due diligence, and with robust capital resources, often bring a strategic advantage to transaction negotiations. Thus, for owner-operators to level the playing field, they should enlist a professional team — comprised of a broker, accountant and attorney. This is crucial to ensuring the owner’s interests are represented.

A Real Owner’s Story

For 35 years, a dedicated owner-operator family managed their 400-site RV park. It began with the grandparents, who poured their heart and soul into building and running it for 20 years. Eventually, as they slowed down, they passed the baton to their children, who after managing for 15 years, began feeling the weight of daily operations. The younger generation showed no interest in taking over. The park, while a testament to their hard work, began showing its age. Electric infrastructure, roads and the clubhouse all required significant upgrades totaling well over $1 million. To add to the family’s worries, they discovered their septic system wasn’t up to code and needed upgrades. Most of the income had been used to support the three generations, leaving little for essential repairs. The family faced a dilemma: invest heavily in updates or sell.

An investor had been consistently presenting them with unsolicited offers for some time. Several brokers had approached the family, but they saw no point in paying a commission if they already had a buyer. They didn’t grasp the full role of a broker, not just in finding buyers but in evaluating the property, analyzing financials to improve the NOI and creating a competitive offer environment to maximize value. So, the family accepted the investor’s $6 million offer, which came out to $15,000/site, while the true market value was significantly higher. A mere two years later, that investor resold the property for a staggering $24 million, four times the purchase price. This tale underscores the need to engage a specialized team of outdoor hospitality industry representatives. Even the most experienced owner-operators often unwittingly undervalue their most valuable asset and family legacy — a situation that, sadly, is all too common.

The Significance of a Professional Team in Preparing to Sell

When an owner-operator decides to sell, a specialized team of outdoor hospitality industry professionals — an accountant, broker and attorney — is invaluable to level the playing field. Navigating a transaction is a big step, but having a strong team makes the journey smoother and more profitable. The accountant, who usually helps owners minimize income taxes, produces detailed profit and loss statements that will be the key to getting the valuation right. These financial reports become the foundation for underwriting.

Choosing the right broker is the next step in this process, and this is paramount. There are three kinds of brokers: a seller’s broker, a buyer’s broker and a transactional broker, not representing either. It’s essential to hire a broker who’s not only experienced but also dedicated to representing sellers. Upon selecting a broker and providing them with all necessary property details and financials, they craft a compelling presentation highlighting the property’s financial strengths and growth prospects. A seasoned broker offers precise valuations, deep industry insights and a vast network of potential buyers. They efficiently handle every stage of the sales process, from marketing to due diligence and play a pivotal role in leveling the playing field against astute investors eyeing a favorable deal.

Finally, having an attorney who knows the ins and outs of park contracts and real estate transactions will protect sellers’ interests. This three-pronged team approach ensures the sale not only reflects the property’s current worth but also its potential, ensuring the owner collects on the hard-earned value.

The growing interest from investors in RV resorts and campgrounds presents both opportunities and complexities for owner-operators. The attraction to the asset class offers a prime chance for owners to capitalize on their efforts. To navigate this terrain and ensure their property’s value is fully recognized, partnering with a specialized professional team — accountant, broker and attorney — is essential. When dealing with savvy buyers, this team supports owner-operators to maximize the value of their property and make sure nothing is overlooked with one of the most important decisions of their lives.