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Welcome to the Mobile Home Park Mastery Podcast where you will learn how to identify, evaluate, negotiate, perform due diligence on, finance, turn-around and operate mobile home parks! Your host is Frank Rolfe, the 5th largest mobile home park owner in the United State with his partner Dave Reynolds. Together, they also own and operate Mobile Home University, the leading educational website for both new and experienced mobile home park investors!
There are roughly 44,000 mobile home parks in the United States. Yet there's a misconception that most of these are owned by big companies, which could not be farther from the truth. This is Frank Rolfe, from The Mobile Home Park Mastery Podcast. We're going to talk about why the mobile home park industry is so fragmented. There's 44,000 mobile home parks, yet only roughly 4,000 of those are owned by the top 100 owners. Now, if you look at the self-storage industry, in contrast, they are nearly the same size, roughly 44,000 self-storage facilities. But a few dominant players control roughly about 40% of the market. So that would mean in our industry, rather than having 4,000 parks owned by a few of the bigger players, you would have more along the lines of 16 to 18,000 parks. But that then begs the question, why, why are mobile home parks, why is the entire industry so fragmented? Well, the first reason may simply be the stigma that poisons every aspect of the mobile home park world. That negative concept of most Americans against mobile home parks. And in many ways, that is probably flavored how many larger entrants go into the industry.
Private equity groups, other large players, public companies, many of those executives, people that make the investment decisions, may harbor the stigma that mobile home parks are somehow bad or not a good industry to be in. And on top of that, you have the Elizabeth Warren effect, now become the Maggie Hassan effect, which is that the folks in Washington, D.C., the Senate and House representatives, for some bizarre reason, have this perpetual grudge against the mobile home park industry. Elizabeth Warren sent out a letter in roughly about 2019, very public letter, to all US private equity groups, warning them, don't you dare buy a single mobile home park or basically, I'm coming after you. That was the vibe that her letter sent out for no apparent reason. She was obviously just pandering to voters, trying to be the champion of the common man, which we all saw in her pathetic beer commercials and stuff.
But nevertheless, when you send things like that out, it causes damage, because again, a lot of the larger players would look at that and say, "This is getting weird. We've got Elizabeth Warren declaring war on an industry for no apparent reason. So I don't know about that." And then that all died out and Elizabeth Warren became politically kind of irrelevant. But now a new woman from New Hampshire, of all places, a place where there's virtually no mobile home parks, named Maggie Hassan. I don't know if she's a senator or a House of Representatives member, but here she is in a state that has virtually no mobile home parks, but she needs some publicity, she needs a spotlight. So she literally copies almost verbatim what Elizabeth Warren did. Sends out a letter to these different groups saying, "Don't you dare buy mobile home parks."
And this does have an impact. There can be no question of that. But there's more to it than just that. It's more than just the stigma and the wacky political leanings of a new woke America. One of them, I think, is that many mobile home park buyers simply buy one park or two parks and they stop. And that's a testament to how good the industry is because many people are able to satiate their goals, their desires, their needs for income with just one or two properties, and after they've hit their goal, they have no further desire to buy more. I know so many operators that could have much bigger portfolios, 10 parks, 20 parks, 30 parks. But they hit just that first or second one and it hits all of their dynamics of what they were trying to achieve with their life, and they stop. And I'm all about quality of life. So when someone tells me, "Hey, I bought this mobile home park, it worked out incredibly well and I have a happy life now," I would be the last person to urge them to grow. There's no reason to grow unless that improves your quality of life.
But many times that's what happens. In other industries, people don't do as well. Many people go into the single-family home rental business, for example, and they find after buying a house or two, they're not hitting their targets, not hitting the numbers. So in desperation they try and add on to the volume. But with mobile home parks, that's not only the case.
Also, we had a weird thing going on in America which real estate people know all too well. Between 2021 all the way up to just about the end of 2023 and even beyond, the Federal Reserve went on a rampage of raising interest rates. And people who are not in real estate are unaware of this for some reason. But we had 11 straight increases. That was the fastest number of increases in 40 years. It was all at the hands of good old Jerome Powell. Powell just apparently hates real estate and hates the markets, and he decided to take interest rates which had been at historical lows for the longest time, rather than trying to feather them in with moderate little adjustments over time, maybe an increase here and there. He just put the pedal to the metal. Why not? He's not a real estate owner. He's not really even a business person, He's more of an academic. And he just thought, "What the heck, let's just go crazy, let's just see what happens." And of course the casualty was the US real estate industry.
So the whole industry, not just mobile home parks, but everything, there was like a lost half a decade in there. Many people said, "I'm not gonna buy real estate with interest rates going up like this with Jerome Powell at the helm. He's a madman. Why should I bother to buy when I don't know what interest rates are going?" And so you lost a lot of time. That could have been five years of more consolidation for the mobile home park industry, but that's not just our industry. That's really all forms of real estate that were impacted.
And then you have this one item which most people don't know unless you're in the industry, but virtually all of your REITs are focused strictly on one tiny little niche of our industry, which is senior parks. And I think that has a whole lot to do with why our industry is not consolidated, because there aren't that many senior parks. It's not like they're super rare, but they're kind of rare. Most of the mobile home parks in America are all-age family parks, but there's that tiny little sliver of ones that are all about 55-plus communities. And since the REITs were only focused on the retirement stuff, they ran out. Today, it's very, very rare to find any senior property that hasn't at least been looked at once or twice by one of the REITs if it's of an adequate size. And the fact that it went down that one weird lane that all of the major REITs went into that one little space, that caused problems because the industry would probably be much more consolidated if, in fact, it had looked at all properties and not just the senior.
Imagine the storage industry if the main players in storage went only after some little finite weird subset, like only the high-rise, climate-controlled properties rather than the classical public storage, roll-up-the-door, pull-up-your-pickup-truck variety. So I think that had an impact. Another problem is that there are only maybe 30 portfolios in the United States of mobile home parks that are big enough to attract private equity attention. Because most private equity groups only like to get involved in industries where their initial check, their initial contribution, is around $100 million or more. There's probably only 30 portfolios in the United States that are that big.
And in the self-storage sphere, one thing they did have to their advantage was a lot of the entrants into that industry grew fast enough and far enough that they became on the radar screen of private equity groups. But in our industry, it being so fragmented, there's not that many of them. So what's the future hold? Will the industry grow in consolidation in the years ahead? Well, there's a rumored sale right now of YES! Communities, owned by the GIC, the sovereign nation fund of Singapore, to Brookfield Asset Management, which is a Canadian REIT. And that could be a pretty good icebreaker. We don't know the price of the deal. Some say it's 10 billion. I think it's probably more along the lines of 5 billion. None of us know. They've never publicly admitted the sale is even transpiring. But you do hear in the background from various people reports that there is something brewing. And if that happens, that will certainly set in motion more private equity groups wanting to enter the industry because they'll say, "Wait a minute, if Brookfield, which is highly respected, is jumping in, then we should jump in, too."
I will also add that YES! Communities is not a senior operator. They do have some senior properties, but I think the bulk of what they have is all-age family. And that will give the first major entrant into that sector of the industry if that were to go forward. Also, interest rates are now starting to decline, and Jerome Powell is being ushered out the door in May, at least hopefully. He for some reason wants to hang around the Fed kind of like a cold or something.
But assuming he's out the door in May, then we may start seeing interest rates even accelerate in their decline. That'll help a lot of large real estate players make more buys. Also, the stock market collapse is gonna help a whole lot. The Dow Jones is down 6% just since January 1st. All the exchanges are down. They're doing terrible. It's partly caused by the Iran war, but it's also partly caused by the fact they were massively overvalued. Whereas mobile home parks have PE ratios, price-to-earnings ratios, that typically run 5 or 10 or 15 or 20. A lot of these public companies are at PE ratios today that are in the hundreds, all the way up to unattainable because they don't even have any earnings to do a price-to-earnings ratio indication from.
So the bottom line is the industry will do more consolidation over time, but there's still a lot of time left on the clock. So if you're looking at the mobile home park business saying, "I don't know if I can compete with all these big private equity groups," well, you don't have to. That's not really what's happening. And there's more than enough opportunity out there for people within that realm of 44,000 mobile home parks to fit almost every budget and goal. This is Frank Rolfe with the Mobile Home Park Mastery Podcast. Hope you enjoyed this and talk to you again soon.