Carefree Communities Expands RV Footprints
David Napp is on the road again, looking for choice RV parks and manufactured housing communities to add to the growing portfolio of Carefree Communities Inc., a new company formed on June 2 when Centerbridge Capital Partners LP purchased Napp’s National RV Communities LLC (NRVC).
Now Napp, a veteran of the RV park & campground sector who, with partner Colleen Edwards, had already been doing business under the Carefree RV Resorts brand, has fresh backing and appreciable capital to pursue an expansion strategy for his regenerated company — and to become an even more potent player in the RV park and campground business.
“Our mutual goal is to grow the business’s assets to $1.5 billion over the next three years,” said Napp, That’s more than double the present size of the company — which, with the acquisition of four parks earlier this month, now oversees 65 properties with 18,500 sites in seven states and Ontario.
Those holdings, according to Napp, make Carefree Communities Inc. the nation’s second-largest RV park owner-operator behind Chicago-based Equity LifeStyle Properties Inc. The new company will operate under the Carefree RV Resorts and Carefree Communities brands.
Napp remains CEO while Edwards is still president. The two co-founders owned approximately 23% of NRVC prior to the Centerbridge investment, which, Napp contends, is a positive signal and “validation” for the industry in general.
Napp and Edwards in 2005 established NRVC, a Scottsdale, Ariz.-based company that historically had sought properties in key destination vacation spots with a proven record of attracting both leisure travelers and retirees seeking warm-weather destinations. NRVC since then had grown to become the 10th-largest owner/operator of destination RV and MH communities in the U.S. and Canada.
Napp all along had been open about his company’s long-term game plan, even announcing last summer that his firm was seeking to finance an aggressive acquisition plan by tapping the private equity market for up to $400 million in new capital. Once the capital was secured, Napp said a year ago, he planned to expand Carefree’s portfolio with an eye toward a “priority list” of potential acquisitions in locales like Florida, California and Arizona as well as the Eastern Seaboard — looking for “great opportunities” in popular tourist areas like Myrtle Beach, Cape May and Cape Cod.
Now Napp, by all appearances, is making good on that pledge.
Of course, this anticipated growth spurt would not have been possible without the injection of a more than $250 million capital investment on the part of Centerbridge Capital Partners, which announced on July 11 the acquisition of NRVC from Almanac Realty Securities IV LP, the former majority owner, making Centerbridge the lead equity holder of the newly formed company.
“Centerbridge is going to add a tremendous amount of value to our business. Not only do they have an expertise in the institutional capital markets but they also support the companies they invest in through a host of ‘value added’ services such as procurement, health and property insurance, executive management resources, and a team of professionals with a wealth of practical business experience,” said Napp. “We are now able to access a high level of business services that would not otherwise be available to a company of our size. That’s a huge positive. Centerbridge has already proven themselves in accessing the capital markets on our latest acquisitions and structuring Carefree as a private Real Estate Investment Trust that will allow us great flexibility as we move forward.”
Coinciding with the recapitalization announcement was the disclosure that the new company had completed the acquisition of four additional properties: Sun-N- Fun RV Resort in Sarasota, Fla., Sherkston Shores RV Resort in Port Colborne, Ontario, Regency Heights in Clearwater, Fla., and Ocean Breeze in Jensen Beach, Fla., in addition to acquiring a leasehold interest in a fifth property, Tropical Palms RV Resort in Kissimmee, Fla.
All of this follows a fast-paced year-and- a-half during which Napp and Edwards took their story to the private-equity markets. “The last six months have been the busiest we’ve ever been in in our lives,” said Edwards. “We had a lot of things coming together at once — the recapitalization of the Carefree portfolio and the acquisition of four properties worth $235 million, all great properties, all that unfolding together was pretty aggressive. Our management team did a tremendous job in completing these transactions while still operating our business at a very high level.”
Napp and Edwards briefly considered a public stock offering to raise capital, but quickly concluded that their firm was too small to attract proper attention on Wall Street.
“The decision David and I made came down to finding the right partner who shared our vision of how the company should run and where it should go and what our growth strategy is,” said Edwards. “That narrowed the field of potential partners, and we are very fortunate to have found someone of like mind who puts a premium on the talented people who work with us.”
“The gentlemen at Centerbridge absolutely understood our business from the first phone conversation we had with them,” Napp added. “For us, it wasn’t who has the money to do a recapitalization and buy the four parks, but who is the perfect partner to grow our business to the next evel, which is what Colleen and I wanted the opportunity to do.”
Centerbridge Partners L.P. is a private investment firm headquartered in New York City and had approximately $20 billion in capital under management as of May 2013. Focusing on private equity and credit investments, it says it’s dedicated to partnering with world-class management teams across targeted industry sectors to help companies achieve their operating and financial objectives.
This is Centerbridge’s first foray into the RV resort market, but it has considerable experience in a relatively like-minded sector — extended-stay hotels. “They saw a lot of similarities with respect to branding, marketing and sales,” said Napp. “They were familiar with some of our business fundamentals.”
William D. Rahm, senior managing director for Centerbridge, seems to agree with Napp’s assessment.
“We believe this investment represents a compelling opportunity to back a strong and highly experienced management team in an attractive sector,” said Rahm. “Carefree is well-positioned to acquire additional senior manufactured housing and recreational vehicle communities in what remains a very fragmented industry. We look forward to working with the Carefree team to build the leading franchise serving active adults in the destination RV and senior MH resort sectors.”
Napp, meanwhile, is quick to point out that these were not simply spontaneous or spur-of-the-moment acquisitions by any measure. Sun-N-Fun RV Resort and Sherkston Shores RV Resort in particular were fa- cilities — held by the same core principals who own Bourne Leisure Holdings Ltd. in the United Kingdom — that Carefree had considered prime acquisition targets for more than 15 years.
He said those parks are two of the best RV resorts in North America. “You can take anybody’s list of the Top 5 and both Sun-N- Fun and Sherkston Shores will be there, along with Ocean Lakes (Myrtle Beach, S.C.) and Newport Dunes (Newport Beach, Calif.),” said Napp, adding that Sun- N-Fun and Sherkston Shores now become the “flagship” properties of the newly revised Carefree system.
“Since we met John Cook over 15 years ago,” he told WCM, “we have held Bourne Leisure up as the best company in the industry. We very much modeled ourselves after them and hold them in the highest regard. The management at Sun-N-Fun and Sherkston Shores has always placed a premium on customer service. They create a great lifestyle experience. A lot of the things we do at our Carefree properties are modeled after what Bourne has been doing both in the UK and at Sun-N-Fun and Sherkston Shores. We are honored to be able to continue a great legacy these gentlemen created over the last 25 years.”
Regency Heights, in turn, is a manufactured housing co-op community owned by the community’s residents.
“Charles Ellis has been working with Regency for more than three years and at the end of the day we were not the only bidder for the property,” Napp noted. “Eight different firms made presentations to the co-op shareholders. It was like a beauty contest. I don’t know if we were the highest bidder, but it came down to a qualitative decision by the sellers made on the presentation that Charles gave. In our business I think more than in most real estate sectors, the manner in which you operate has a lot to do with the opportunities you have to acquire parks. The lifestyle that people want and desire is an integral factor in people deciding to sell their park. Most people (sellers) care about how it will be operated going forward. They care about how their customers will be treated and their property handled. It’s not always who is putting out the highest dollar amount. Our reputations in the industry have been developed and proven for over 17 years. We are well re- spected, our management team is a family that trusts and respects each other, and we provide the highest level of customer service in the industry — these factors provide a great competitive advantage in the market place.”