Institutional investors target Manufactured Home Estates

​Sydney, 1 July 2013 - The residential park sector has moved onto the radar of institutional investors, with rental increases and expansion potential drawing buyer interest.

The latest deal occurred this week when the Oaklands Village Manufactured Home Estate, in Wollongong changed hands in an off market transaction for $13,400,000.

Previously owned by Oaklands Village Trust Pty Ltd, the Wollongong estate was purchased by Alceon as part of its Residential Parks Trust established with Gateway Lifestyle Residential Parks. It was the ninth acquisition for the Trust which has a portfolio valued at $115 million.

Andrew Jackson of CBRE Hotels, who negotiated the Oaklands deal, said the Manufactured Home Estate (MHE) sector had expanded rapidly over the past few years.

“What was traditionally the domain of ‘mums and dads’ is now on the radar of institutional investors, with several larger players actively scouring the space for quality assets,” Mr Jackson said.

“There are several major groups in this sector now, including some major institutional investors such as Ingenia and Alceon who have been active in the market over the past few years.”

Mr Jackson added; “What is really encouraging is that there is now a new wave of both institutional investors and cashed up private investors entering this sector of the market, chasing the secure income afforded by these assets. The depth to the market is evident by the firm yields being paid for quality parks, with upside potential such as revenue uplift through rental increases or further expansion potential.”

MHE’s are a widely accepted form of housing in the US, Europe and Canada where the industry has already been corporatised. However it is only a relatively recent phenomenon in Australia, housing around 2% of the population.

“This is changing though, as many recognise the growing need for affordable housing options,” Mr Jackson said.

For investors, one of the drawcards is the security of the income streams that MHE’s and Mixed Use Caravan Parks offer, according to specialist adviser Stuart Strong from Herron Todd White.

“In a risk adverse environment, investors were recognising the security of income streams that these assets provide and their resilience to fluctuating economic environments,” Mr Strong said.

“Current investment consortiums and wealthy individuals are seeking circa 10% yields for assets ranging from $5,000,000 to $25,000,000 in value. Given the demonstrated income resilience of MHE’s, specialist investment groups have been able to offer reasonably secure income profiles while meeting a community and social need.”

Mr Jackson said the demand for MHE’s had also led to increased investor interest in traditional caravan parks, which generally offer large landholdings and a strong underlying holding income with the ability to explore alternate uses such as the viability of conversion to a permanent residential village.

“Caravan parks appeal to a broader, more diverse buyer type, with smaller parks still dominated by ‘mum and dad’ buyers who can buy themselves both a business and a lifestyle which in most cases is in a fairly desirable location,” Mr Jackson said.

Larger caravan parks are meanwhile being targeted by institutional investors seeking investment grade assets, where they can inject capital into the park to reposition it in the market, enhance its appeal to a broader audience of traveller and drive profitability.

Mr Jackson said the higher proportion of institutional owners in caravan park sector had led to a dramatic improvement in the type of facilities on offer and a shift towards the use of professional management companies.

“Many parks were now offering four or five star bungalow style accommodation, alongside the more traditional holiday park style facilities, to appeal to a broader cross section of the tourism market,” Mr Jackson said.

“This along with the general economic climate, favouring affordable holiday options, augers well for the ongoing viability caravan parks as an asset class.”

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue).  The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com. About CBRE Group,Inc.