PROPERTY:
Starlight Mobile Home Park is located at 7175 Bishop Rd, in Brighton, Michigan just south of the Lee Road exit off US-23. Starlight is a very quiet Mobile Home Park with many retirees and longtime tenants. The property is bordered by protected woodlands to the West and Island Lake State Recreation Area to the North and East.
Starlight was developed in 1957 and has been held in the same family since. The site encompasses approximately 10 acres consisting of 48 existing pads with 30 owned single-wide two-and three-bedroom homes, and 18 tenant-owned homes. The property features two unit types; 16 single-wide two bedroom/one bathroom homes and 14 singe-wide three bedroom/two bathroom homes. The utility breakdown of this property includes tenant-paid gas and electric with individual gas furnaces, while water and sewer are the responsibility of the Landlord, currently serviced by a septic field and two newer wells.
Starlight offers a significant value-add opportunity with the possible expansion of approximately 32 additional pad sites along the perimeter of the property (as shown on aerial below). For additional information regarding the possibility of expansion within the existing zoning of RMH please refer to the complete Green Oak Township Zoning Ordinance Click Here. The property possesses significant redevelopment potential for townhomes or condos given the strong demographics and household income of the US-23 corridor between Ann Arbor and Brighton. There is tap-in infrastructure at the entrance of the community, enabling a developer to convert water/sewer systems upon redevelopment.
FINANCIAL:
Starlight is performing at a high level of operations with physical occupancy at 93.8% and bad-debt levels at less than 1.5%. The property has shown strong historical occupancy allowing ownership to self-manage by absentee owner with a resident tenant manager and a resident maintenance person. However, even in light of this stellar level of performance, upside still remains for a multifamily investor. Based on our carefully conducted rent comparable study, it was determined rents are considerably below market when analyzed under both the price per square foot and Street Rent metrics. Our study found that two-bedroom units are a staggering $121 below market at average $/Ft.² and three-bedrooms are approximately $20 below market. Such a delta between existing and market rents provides a new owner with the unique opportunity to greatly improve this asset’s cash-flow position without making any financial investment in the property. For example, if a new owner were to increase average rents on all units by a mere $25 per month it would increase this asset’s value by approximately $180K.
However, there remains potential for even greater upside for investors with the addition of approximately 32 pads around the perimeter of Starlight Dr. (expansion shown on aerial below), creating a total of 80 mobile home pads. The 32-additional pads account for an increase in the NOI by over $116K and increasing the value of the asset by more than $1.22M at an 9.5% cap rate.
From an underwriting standpoint, our Pro Forma is based on actual 2018 Operating Expenses, and we have also included a professional management fee, a Replacement for Reserve and adjusted taxes to the SEV. Income was projected with the use of average rents, which does not factor in the previously mentioned “upside” of a rental rate increase. We have also included a vacancy and bad debt factor that is consistent with current property trends. At the attractive $2,000,000 asking price this offering represents a compelling 9.65% cap rate and 17.76% cash-on-cash return.
