While waiting for the value of the land to rise, “trailer parks” (currently known as manufactured housing communities) were developed as temporary uses in these “middle of nowhere” locations. Today, many of these areas have become thriving urban regions. The cities have caught up to the “nowhere,” and are now prime for developers to take advantage of high-value, large parcels of land. California’s urban-area mobile home parks are actively being sought after for redevelopment into residential, retail, and industrial projects.With the dissolution of California’s redevelopment agencies, it is nearly impossible for real estate developers to assemble large parcels of land in central locations. However, there are more than 1,000 older mobile home properties in California with tremendous redevelopment potential.
The value of these properties under their current use as rental parks are usually substantially less than the value of their land. This makes for a very attractive arrangement for both the park owner and developer.
As the majority of mobile home parks were built in the 1960’s and 70’s, many of these parks’ infrastructures are now failing. Some older properties have small sites that will not accommodate the newer, larger manufactured homes. The cost of replacing obsolete utilities and amenities also commonly outweigh the monthly land rental rates, which are often restricted by local rent control or by the limited income of the tenants.
Existing sites can often be repositioned and enlarged. Adjacent land can also be acquired to expand older communities. However, even an upgraded rental park will not command the valuation of the highest and best use in an urban area with little to no large parcels of developable land available.
Because of a quirk in the state law, there isn’t a well-defined marketplace for buyers (e.g. a multiple listing service) of manufactured home communities. A large percentage of sales occur without a public listing. There are specialized brokers, financial institutions and lawyers that network within the industry to facilitate acquisitions on California, which are highly desired by national development companies.
Depending on its location, a park may be suitable for industrial, commercial, mixed-use or multifamily housing. For the right property and investor, there are a variety of future options for these developments.
Mobile home parks that are ideally located have sold for two to three times their value as a rental property. One example is a 109-space “trailer park” in Santa Monica that was built in the 1950s. It was recently purchased by the Dinerstein Companies. The tenants are being relocated and the property will soon be a multi-million dollar mixed-use project. The new development will include 377 residential units (including 38 low-income apartments), 20,700 square feet of retail, and more than 40,000 square feet of heavily landscaped green space to provide park-like surroundings for resident and public enjoyment. This new development will provide a transit focused neighborhood with creative mixed-use, adding a balance of jobs and housing to the vibrant neighborhood at and around the old trailer park.
There are a variety of business models for these change-of-use transactions and developments, depending on the needs of the city, as well as the long-and short-term investment goals of both the seller and the developer.