Uncertain times are driving interest in manufactured home parks by institutional investors in a market traditionally dominated by mom-and-pop operators.
“With the uncertainty around tariffs, lots of people are looking at stable cash flows for mobile home parks. Inquiries are up 400 per cent,” said Eugen Klein, a manufactured home park specialist with Royal LePage Westside in Vancouver.
The uptick in engagement is exciting following last year, which saw sales 70 per cent below 2023, when data Klein analyzed showed 16 transactions in the province valued at $42.6 million.
This year, there’s way more engagement and activity from his mailing list, with inquiries rising as threats to global trade took hold in January with the inauguration of U.S. President Donald Trump.
“We were up over 200 per cent in inquiries after January- February,” Klein said.
This has set the stage for strong activity this year, so long as buyers meet owners’ high expectations of value. Many owners are long-time investors who know the 900-odd parks in B.C. are irreplaceable given the land base they require and the long entitlement timelines for new parks.
“The biggest issue is buyers coming to terms,” Klein explained. “Sellers are not prepared to move from what they figure is a fair price.”
Park value is increasingly determined less by cash flow – which remains important – but replacement value.
“Every park that I have is way under replacement value,” Klein said. “The one I have in Fort Nelson is $799,000, not even the cost of a condo in Chilliwack, and the replacement cost is $2.2 million. It’s 48 units on city services. Today those prices for servicing are between $60,000 and $70,000 per pad.”
The result has been parks staying on the market longer than in the past, with Klein now holding 17 listings versus the six he usually has.
“I’ve never in my career had 17 parks listed,” he said.
One park has received 13 offers, but the seller won’t budge from the list price. Such scenarios have put downward pressure on cap rates, as buyers are having to pay more for assets that have lower turnover rates than other segments of the multi-family market.
Klein estimated that cap rates are down 30 to 50 basis points versus historical levels.
“Where we were selling for five on [Vancouver] Island, I’m seeing 4.7, 4.8 per cent cap rates,” he said.
Cap rates in Alberta are stronger, with a well-maintained, fully-curbed park in Hinton checking in at closer to 7 per cent.
A higher, more consistent rate of return makes the parks attractive to institutional investors.
San Francisco-based private equity group TPG Real Estate Partners acquired a portfolio of 12,138 sites across 75 locations from Canadian Apartment Properties REIT (CAPREIT) last year for $740 million. TPG subsidiary Compass Communities of Mississauga is the new operator.
The deal made Compass the second-largest park operator in Canada after Parkbridge Lifestyle Communities Inc., part of QuadReal Property Group, which operates 100 residential and RV camping and cottage resort communities across the country.
CAPREIT sold its portfolio, assembled over the course of 16 years, to refocus on purpose-built multi-family rental properties. This created an opportunity for TPG, which manages US$11.4 billion in assets.
“They have more funding and they’re going to look to grow this community over the next 10 years and try to double it,” said Kirk Kuester, managing director in Vancouver with Colliers, which advised on the sale to TPG. “They’re going to look to do more with the assets that they’ve acquired, but they’re also going to look to acquire substantially more.”
But with small operators accounting for 95 per cent of the sector, TPG will have to do so five to 10 parks at a time. Big portfolios “are just not out there,” Kuester said.
“TPG won’t start with one and try to get to 20; they’ll wait for someone else to get to 20,” he said.
With markets exhibiting greater volatility, manufactured home parks are good to come home to.
“These things are probably even more attractive in times of uncertainty – economic uncertainty, regardless of political uncertainty – because generally it’s a more affordable investment for the occupier,” Kuester explained. “Once people buy into them, they don’t generally leave. And as the owner of the park, what any owner looks for is stability, low turnover.”
They’re also relatively hassle-free because occupants own and are responsible for their own dwellings, while the operator is primarily responsible for the underlying land and amenities.
“They offer extensive value-add opportunities. If you own one of these parks, it’s all about the amenities. There’s multiple ways to drive additional cash flow,” Kuester said.
These can include laundry services and community amenities such as a pool, fitness facility or coffee bar.
This makes park ownership a numbers game, especially in B.C.
“The numbers make a difference. That’s also why the parks in B.C. hold very well,” Klein said.
Better margins, a smaller volume than in other regions and opportunities for appreciation all support values in B.C., with investors from Alberta looking to B.C. for acquisitions.
While rents for trailer pads are regulated by the B.C. Residential Tenancy Act, basic land value and rising replacement costs make them appealing.
“Our parks in some ways outperform the parks in Alberta because they’re rarer,” Klein said. “While you can’t increase the rents because of the rent controls, when you have new tenants, some of the areas in B.C. have seen fairly significant rent increases. The rents remain strong, and I think you’re going to see more parks being bought.”
There’s also a convenience factor that drives performance for investors, especially next to purpose-built rental properties, because residents own the dwellings located on each site.
“If you had a $2 million park and a $2 million multi-family in the same community, the park will 100 per cent out-perform the multi-family hands down,” Klein explained. “First of all, the park has no toilets, no drywall, there’s no dine-and-dash. Every single person in the park is a homeowner – they’ve invested $100,000 to $200,000 in the park.”
Speaking from his own experience as an owner of various asset types, Klein said parks are largely hassle-free.
“I get more calls on my duplex in Vancouver as a rental than I do on the 100 units in Merritt. From a maintenance point of view, I would have the park five to one,” he said.
This is also what makes them attractive to immigrant investors seeking a foothold.
“If you’re an immigrant coming to Canada and you need cash flow here in Canadian funds that are stabilized, mobile home parks are very, very strong,” he said. “That’s where a lot of the demand is coming from.”
