Treeside RV Resort

The demand for more campsites is driving investors into the outdoor hospitality industry like never before. Photo credit: Treeside RV Resort

Rising consumer interest in camping has paved the way for record RV sales and dramatically increased demand for campsites across the country.

It’s a trend that was underway before the pandemic and only intensified as fears of the coronavirus prompted ever-increasing numbers of consumers to not only embrace camping and RVing as the safest vacation option, but to consider the merits of working from the road in the safety and comfort of their RV.

As a result, the demand for campsites has never been greater, and it’s led institutional investors, private equity firms and individual investors to see the private park business as one of the most potentially lucrative investment opportunities available in commercial real estate.

“There is so much demand for RV sites. There’s a huge gap relative to supply,” said Carl Kruelle, chief investment officer for Blue Water Development Corp. in Ocean City, Md., which specializes in investment, development and management, including institutional management of RV resorts and campgrounds, hotels, marinas and attractions.

But record demand for RV sites is also leading other real estate investment trusts (REITs) as well as other public and private investors to collectively channel billions of dollars into not only the construction of new campgrounds, RV parks and resorts across the country but the acquisition, expansion and improvement of existing parks, many of which were built close to a half-century ago when the modern RV industry was in its infancy.

Carl Kruelle, III, chief investment officer of Blue Water Development Corp. in Ocean City, Md.

Carl Kruelle, III, the chief investment officer of Blue Water Development Corp. in Ocean City, Md.

“I’ve never seen such a flood of REITs, private equity and high net worth individuals coming into the outdoor hospitality space,” said Randy Hendrickson, CEO of Westlake Village, Calif.-based United Park Brokers.

Longtime REITs such as Chicago-based Equity LifeStyle Properties Inc. (ELS) and Southfield, Mich.-based Sun Communities Inc. (Sun) have been particularly aggressive with their acquisitions, expanding their respective footprints, while improving and, in some cases, adding more RV sites where they can. ELS and Sun have also been expanding their joint ventures with other companies targeting the private park business.

ELS owns 446 properties, 216 of which it classifies as RV resorts, while Sun owns 477 properties, including 160 RV resorts and 33 resorts with both RV and manufactured housing sites, according to documents on file with the Securities and Exchange Commission (SEC).

Sun has also recently acquired some of the biggest companies in the RV resort business, including Milford, Ohio-based Leisure Systems Inc. (LSI), now known as Camp Jellystone, which franchises 75 Yogi Bear’s Jellystone Park Camp-Resort locations across the U.S. and Canada. In November, Sun also announced its $1.3 billion acquisition of Park Holidays UK, the second largest owner of vacation communities in the United Kingdom.

Many other REITs, institutional investors and private equity firms that previously focused on other types of commercial real estate, such as apartments, self-storage units and hotels, are diversifying their portfolios to include campgrounds, RV parks and resorts.

“Suddenly, the private capital investor who may have been buying or fixing up self-storage units or hotels started seeing an opportunity (in the private park sector),” said Bob Kaplan, of NAI Outdoor Hospitality Brokers in Basalt, Colo.

Bob Kaplan of NAI Outdoor Hospitality Brokers in Basalt, Colo.

Bob Kaplan, of NAI Outdoor Hospitality Brokers in Basalt, Colo.

One of the most salient examples of this capital shift involves The Jenkins Organization of Houston, Texas. Previously a powerhouse in the self-storage business, the company has spent the past five years targeting the campground business, acquiring Jellystone Park locations in several states in addition to launching its own network of RV resorts, which it is marketing under the Great Escapes RV Resorts brand.

The stepped-up pace of public and private investment in RV parks and resorts was underway before the pandemic, Kaplan asserted, adding that the volume of investment in the private park business only intensified with media publicity highlighting record RV sales and rocketing demand for campsites across the country.

“These investors were looking for higher yields,” he said. “They were looking for another category (of investment) to put their money to work.”

Kaplan added that many institutional and private investors who previously put their money in hotels, self-storage, apartments and other sectors of commercial real estate have found a new opportunity with private parks.

“RV parks are heavily mom and pop (owned and operated),” he said. “But (institutional investors and private equity groups) have more capital and can add more amenities. If you’ve been a hotel operator, then certainly you can figure out how to run an RV park. In my eyes, a highly transient park is like a hotel without walls.”

For their part, investors who aren’t familiar with running a private park can easily find third-party management companies such as Blue Water, Advanced Outdoor Solutions or Horizon Outdoor Hospitality to do it.

“For the first 10 years of our company history, most of our clients were individual, ‘mom and pop’ owners of single assets that had run the property for a decade or two and were ready to take a back seat but weren’t yet ready to sell,” said Horizon’s CEO Scott Foos.

“In those cases,” he continued, “we’d operate the properties for them to increase value through best practices and put them in a better position to receive top dollar when the time to sell came. Over the last five years or so, we’ve seen a shift in inquiries, where almost exclusively, our clients are professional money groups who have a serious intention of making bigger plays in the space. These groups do not want to operate the locations themselves and are used to partnering with experienced professionals to maximize the value of their asset and reduce their liabilities in the space.”

Hendrickson said investors have also expanded the types of parks they are targeting for acquisition.

Scott Foos

Scott Foos

“Whereas a few years ago,” he said, “the criteria may have been 200-plus sites in the Sunbelt, investors now recognize that perhaps 70-site parks with additional acreage are the best methodology for getting a foothold (in the market), in essence, getting locations now, and extracting internal value later through expansion or repositioning.”

Many companies that own and operate private parks have access to more investment capital than they’ve ever had before, which enables them to not only build new parks from the ground up but to step up their acquisitions of private parks and invest in needed improvements or expansions that the previous owners were either unable to do owing to a lack of capital.

Companies like Blue Water originally made investments using founders’ capital.

“We now have an expanded investor base comprising high net worth and institutional investment,” Kruelle said.

That capital has enabled Blue Water to quadruple its portfolio holdings to 34 nationwide RV resorts and campgrounds over the past three years, of which four resorts are under development, Kruelle said. He said Blue Water has a $400 million development pipeline, including new ground-up development and expansion projects.

Last year, Turnstone Group, which made its first RV park investment in 2015, announced a joint venture with Blue Vista Capital Management of Chicago to pursue up to $200 million worth of new acquisitions and development opportunities in the RV park and outdoor hospitality arena.

Richard J. O' Brien of Athena Real Estate in Orlando, Fla., which owns the Applebrook brand of RV parks and resorts.

Richard J. O’ Brien, of Athena Real Estate in Orlando, Fla., which owns the Applebrook brand of RV parks and resorts.

In April, Boston-based Rockpoint, one of North America’s largest real estate investment funds, announced a strategic partnership with Margaritaville Enterprises LLC, which launched the Camp Margaritaville brand of luxury RV resort destinations last year.

The infusion of investor capital and increasing profit opportunities in the outdoor hospitality industry have also enabled previously small players to build significant portfolios. Examples include Athena Real Estate of Orlando, Fla., which has grown its Applebrook brand of RV parks and resorts from a single park, Cypress Campground in Winter Haven, Fla. 14 years ago to 12 RV parks and resorts in four states, including RV resorts in New Orleans, La., Atlantic City, N.J. and Lake George, N.Y.

Meanwhile, the number of private equity groups targeting the private park sector continues to grow.

Last year, Han Capital established a new division focusing on campgrounds and manufactured housing communities, and recently announced its acquisition of Glenwood Canyon Resort in Glenwood, Colo.

In January, Halmos Capital Partners announced the formation of Cedarline Outdoor, an investment group focused on strategic acquisitions in the RV park sector, starting with the acquisition of two parks in the White Mountains of northern New Hampshire.

The camping consumers are benefiting from increased investments as park operators invest not only in new campsites but in nicer amenities, including upgraded water and power connections and state-of-the-art Wi-Fi.

“We want to make our properties the best they can be,” said Richard J. O’Brien, CEO of Athena Real Estate & Applebrook RV Parks, adding, “We’re finding opportunities to improve the properties that we purchase, and that makes for happy campers. There is strong demand for high-quality RV parks.”

Of course, the more investors improve the existing inventory of campgrounds and RV parks, the more likely they will be able to retain today’s camping consumers.

While RV park buyers have faced bidding wars in recent years, as well as astronomically high prices for building materials and supplies, complicated by supply chain issues, park operators tell Woodall’s Campground Magazine that rising interest rates will soon have a moderating effect, not only on RV park prices but on the costs of improving and expanding their parks.