SILICON VALLEY MOBILE HOME PARK SELLS FOR $237 MILLION!!
According to reporting by bay area newsgroup and KPIC 5 CBS SF, a mobile home park in Sunnyvale, California, smack dab in Silicon Valley, has been sold for the massive figure of $237 million, the price of the property driven up by its proximity to several tech giants.
The Plaza Del Rey Mobile Home Park is located near some of the most famous and wealthiest companies in the world, Apple, Google, Facebook, LinkedIn, and Amazon.
The 800-unit mobile/manufactured home community was purchased by Plaza del Rey MHC, the affiliate of Chicago-based American Hometown Communities. The transaction also included a ground lease that the Sunnyvale School District granted to American Hometown, public documents show. The value of the ground lease wasn’t disclosed in the county record.
“This deal is indicative of the rent growth in Silicon Valley in the residential sector,” said Dave Sandlin, a principal executive and senior vice president with Colliers International, a commercial real estate firm.
This is not your normal mobile home park. The resident-owned homes, not including the land upon where they are located, generally sell for a quarter-million dollars.
THE PLAZA DEL REY DEAL TAKES “PARK FLIPPING” TO A NEW LEVEL
In 2015, county documents show, The Carlyle Group paid $150 million for the property, not counting the undisclosed value of the ground lease. The Plaza Del Rey complex produced a 58% gain in value in roughly four year period between the two deals, seemingly an unprecedented “big-time profit flip” for a single mobile home community by seller, The Carlyle Group, a private equity company.
During its years of ownership of Plaza Del Rey, Carlyle Group landed on the hot seat over rental increases that outraged residents and stoked demands for rent control rules in Sunnyvale, which never materialized. Carlyle said the rent increases would be used, in part, to finance upgrades at the mobile home park.
It would appear that the seller’s efforts in obtaining the rent increases were a contributing factor in securing the value that attracted the investment by purchasing entity.
RESIDENTS ARE OFTEN DISADVANTAGED BY MEGA PARK DEALS
Today’s manufactured housing is the only affordable unsubsidized quality affordable homeownership available for low to middle-income citizens in America.
Nationwide there are an estimated 45,000 manufactured home rental communities (aka “mobile home parks”), located in every state of the union, except Hawaii, and have traditionally been the ideal placement choice of an affordable lifestyle, with vacancy rates near zero.
Due to housing authorities eliminating manufactured home parks from their residential zoning laws, new manufactured homes are typically restricted to properties away from urban areas, resulting in the near-total elimination of new manufactured home park construction. Only a scant handful have been approved over the last several years.
As a result, existing mobile home parks have become “cash cows” for private equity investors and existing mega park consolidation operators, with park purchaser often immediately and dramatically raising space rents to secure a quicker return on investment. The usual announced justification is to recoup expenses for park facility upgrades, property tax increases, etc.
The rent increases severely impact those residents, especially seniors with fixed non-discretionary income, particularly located in the older mobile home parks.
Presently, there are other mobile park multi-million transactions pending or consummated, with negative consequences for residents of those communities. One of those recently completed manufactured home park sale/purchase drawing a lot of press attention in Orange County Southern California is Rancho LaPaz Mobile Home Park in Fullerton/Anaheim, an age-restricted park sold to a new owner who paid $85 million for the property, who has notified resident homeowners of a projected $200 to $400 rent increase. See our recent report, “City of Fullerton May Consider a Moratorium on Rent Hikes For Mobile Home Park-On Their Side of the Border.”
Image: Plaza Del Rey Mobile Home Community