What were you doing on the morning of Jan. 17, 2020? While the world was learning about a strange new virus approaching our shores, my business partner, Ben, and I were visiting Louisville, Kentucky. We were meeting our largest operating partner, Mike (not his real name), to walk through a mobile home park his firm was acquiring. Our fund would be the largest investor.
This park looked like many we had invested in, but larger. There were 315 lots, but about 50 were vacant. We saw a typical range of cars—from junkers to Jaguars. People walked their dogs, kids boarded buses, and a maintenance man shuffled around with his coffee.
But this park was different from most parks this size. You see, the owner lived three states away—and she hadn’t visited (or raised rents) for at least five years.
This institutional-sized park was owned and operated by a classic mom-and-pop operator. She had no knowledge of how to maximize income and value. She was distracted by other pursuits.
And she was ready to exit.
Our operating partner pointed out a variety of deficiencies as we toured the park. He told us how the owner funded all tenant utility bills. He explained how she overpaid staff to avoid getting involved. And he described the profitability of setting new manufactured homes on vacant lots—something the seller wouldn’t dream of.
We flew home to Virginia after lunch and started raising capital for this new fund that would invest in this park and over 200 other commercial real estate assets.
Mike closed on the acquisition on Feb. 25 while headlines screamed about the coronavirus that threatened every human on the planet. He paid $7.1 million—about half debt and half equity (including ours).
We raised several million dollars in February and March while U.S. investors watched trillions of dollars of value evaporate in Wall Street’s casinos.
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