Campground Brokers Cautious in 2012 Outlook
Read this and other stories in the November issue of Woodall’s Campground Management, now on its way to more than 13,000 readers in North America.
Tight financing remains the major stumbling block in the buying and selling of the nation’s RV parks and campgrounds.
Tis a pity because there is great interest across the country to get involved in this business and, for the most part, the rate of return on such investments is very good.
That’s the gist of responses to a survey conducted in October among campground brokers who advertise in Woodall’s Campground Management (WCM).
Their take on the state of the industry was almost uniform on these points. But how they’re faring in this challenging environment yielded varying answers.
“It’s hard to tell – these things are so cyclical and seasonal,” said Don Dunton, a veteran broker based in New Hampshire who also brokers deals in Maine, Vermont and New York.
He started the year on a strong note, experienced a soft summer but then noticed an upturn after Labor Day. All in all, he said it was a good year.
Conversely, Waynesville, N.C.-based Darrell Hess, who has brokered more than 270 campground sales in his 29-year career, said his business has been down 50% the past three years, compared to the good years of 2002-2008.
“It still can get worse and quite frankly I think it will,” he said. “We’re in for some tough times. From my perspective two issues I don’t see getting resolved anytime in the next year: it’s the uncertainty in the economy and the banking crisis.”
Hess, who brokers deals in the region including North Carolina, South Carolina, Tennessee, Georgia, Virginia, West Virginia, Indiana, Kentucky, Pennsylvania and Florida, said bankers “are not sure whom they want to loan money to and what kind of risk they want to make. They are in the business of loaning money but they really don’t want to do it. I’m sensing the banking industry has come under tremendous regulations and scrutiny. They’re being watched and being controlled. I had deals turned down this year that were ‘no brainer’ loans, great buyers, great cash flow, and banks still turned them down.”
On the West Coast, John Grant of Park Brokerage said, “Investment sales of RV parks and campgrounds are still very slow due to tight financing in the market. Some of our better lenders in the Southwest are no longer financing RV parks. They had the lion’s share of the business five years ago.”
Lenders that do make loans for park purchases are offering short amortization schedules of 15 years or less in some cases, he noted.
Even the federal government can’t seem to help. The Small Business Administration will underwrite loans for RV parks, Grant noted, but 51% of the guests must be transient or overnight visitors. The vast majority of RV parks in the Southwest get the majority of their income from extended stays, so most don’t qualify,” he said.
In Texas, where the economy has remained strong, the pulse of the campground market is good, says Russell Baehre, the state’s largest campground broker.
The Kerrville-based broker agrees financing is tough but not insurmountable.
“It’s harder to get financing but I wouldn’t say it’s impossible,” he said. “The only park that I couldn’t get financed had to do with the area. But if the park is in a good area where there is a selection of banks, we have been able to get it financed.
“If you’re a buyer, it’s a good time to buy. If you own a park and it’s doing good, it might be time to look at getting another park,” he said.
Mary Bedford, a broker with Parks and Places, a national firm with offices in Michigan, Missouri, Georgia and Florida, said the market for campgrounds is good “but our challenges are the pricing of it. The sellers are not getting the prices they were getting before the recession and they are expecting those prices, and the buyers are expecting prices just like what happened in the housing industry.”
Further, “The banks are giving us trouble. They are not releasing the money they were given to stimulate the economy. The ideal sale is with seller financing or with a bank that understands this industry, which has done well during the recession.”
That said, Bedford said, “We’re seeing more lease options rather than out and out sales. That’s new to us, anyway. It’s one way to get the sellers out and the buyer into the park to establish themselves before they go to the bank for their loan.”
The practice gives the buyer some equity in the park and shows the bank the buyer has a proven track record, she said. The firm has done just a handful of such deals but has additional ones in the works and is hopeful the practice will catch on.
“I think the recession put off some sales but now we have older owners who need to sell,” she added. In a companion development, “We’re seeing a lot more foreclosures in this industry.”
“There seems to be a renewed interest; quite a few people are looking for campgrounds,” said Ron Pisano, a broker with Coldwell Banker in the Lake George, N.Y., region. “Investors are looking for larger parks with 250 or more sites.”
In his area, there are three campgrounds on the market, one of which he recently entered a contract to sell. The 60-site campground on the Champlain Canal has been closed for five years, but the prospective buyer hopes to reopen it next season, Pisano said.
Among the campground networks, two of the more aggressive buyers in the current market are Arizona-based Carefree RV Resorts and Memphis-based RVC Outdoor Destinations.
Carefree RV Resorts is a privately owned company that manages high-quality RV resorts and manufactured home (MH) communities for its own portfolio and for third parties. Carefree currently owns 58 communities containing over 13,000 sites located in Florida, Texas, California, Arizona, Massachusetts, New Jersey, North Carolina and Ontario, Canada.
Carefree has purchased six parks, all in the Florida Keys, in the past 18 months and plans to spend between $50 million and $100 million on RV and MH parks in 2012, says Charles Ellis, vice president of acquisitions.
“Carefree is the most aggressive buyer of RV and MH parks in Florida,” he contends. That might hold true for all of the U.S., as well.
A frequent WCM advertiser, Carefree fields calls regularly from prospective sellers, but remains selective in what it will buy, limiting its purchases to major markets and waterfronts, Ellis said.
Carefree is well capitalized: Most of its purchases are for cash, and closings are usually done within 60 days. “We have a very large line of credit with GE Real Estate and we are one of GE’s largest borrowers in their real estate division,” he said.
Like Bedford from Parks and Places, Ellis finds what he calls “a material disconnect” between what owners think their parks are worth and what the current market will pay.
RVC Outdoor Destinations has entered the market in recent years with an eye on acquiring existing RV parks and campgrounds and bringing them up to match the company’s upscale footprint of excellence.
The company’s holdings at present are all in the Southeast, but the goal is to expand nationwide.
“We’re looking all over the country from the Oregon and California coast to Jackson Hole, Wyo., and elsewhere,” said Yale Spina, operations manager. “We are going to expand in the states we are in now but we are looking at Texas as well.”
Spina said RVC is well capitalized and is unfettered by lending practices that stifle others’ purchases.
Outlook for 2012
Brokers appear mixed on prospects for campgrounds.
“I don’t think next year will be much different for me,” said Dunton.
Says Pisano, “A lot depends on the price of gas. If it continues to go down, it will benefit a lot of campgrounds. The other part is the economy. Sometimes when the economy is not as strong, campgrounds tend to do better because it’s a cheaper way to go on vacations. If the price of gas stays or goes down and the economy improves, I think campgrounds are a really good prospect for people to make money.”
Grant had little encouragement for a loosening of bank lending practices anytime soon.
“Banks have to recognize that RV parks and campgrounds are good investments,” he said. Until they reach that conclusion, he said, tight conditions will remain.
Baehre agrees with Grant’s assessment.
“Election years are never good years,” he said. “Being an election year, business will be off because people don’t know what’s going to come down the pike. Long-term is what’s scaring people and the banks. No matter who gets in, it usually busts loose after a presidential election.”
And RVC Outdoor Destinations will remain in its expansion mode.
“ In 2012, it’s safe to say we’re looking at as many as eight properties, but realistically there might be three or four we will add,” said Spina.
And Bedford said, “I’m positive about next year. I know of several park owners who have put off selling. They will wait it out a little more, but they can only wait for so long. That’s also true on the buyers’ side. I’m feeling good about 2012. The banking industry is going to have to put more money into the economy. I do think that will change and will loosen up a little bit more.”