We all know that Zell’s REIT Equity Lifestyle is the largest mobile home park owner in the U.S. with over 160,000 lots. But now he appears to be investing in the macro industry itself. Sam Zell has announced that he is buying MHVillage (the largest website selling mobile homes) and Datacomp (who supplies mobile home park market data). What does this mean for the mobile home park industry?
Some background on Zell
Sam Zell is the most dominant figure in the history of American real estate, having served as the largest owner of apartments, office buildings and mobile home parks in the U.S. Although he does not give a lot of interviews or speeches, he did write a brilliant book a few years ago called “Am I Being Too Subtle” in which he discusses his strict review of risk in all deals, commenting “if it’s high return and low risk do it, if it’s high return and high risk you should maybe do it, and if it’s low return and high risk you should never do it”. He also talks about his contrarian nature and desire to do the opposite of what other investors are doing and his desire to always maintain decent liquidity in case of a financial crisis.
Why would he make these investments right now?
Zell’s purchase of the industry’s dominant market data research firm and mobile home resale website signals some interesting moves including:
- He appears to have no interest in selling his mobile home parks. Although Zell has sold about half of his office building and apartment holdings over the years, he has never sold a mobile home park. And if he’s even buying ancillary industry service businesses, his commitment to the industry is obvious.
- Zell seems to be taking a long-term position that he believes will be of service to ELS, as he can now control industry data and home re-sales and perhaps skew that dominance to his benefit.
- He clearly believes that the mobile home park industry is about to take off and that will cause more park owners to want to buy data and promote their vacant park-owned homes.
What will the impact be on the mobile home park industry?
While Zell’s motives are clearly to make money and enhance the value of ELS on the information stage, there will be some degree of impact to the mobile home park industry on many levels:
- Loss of confidence in data being non-partisan. It’s a natural reaction when the owners of the largest REIT in the industry take over the information on market comps as well as homes for sale, etc. You can’t help but say “is there some spin to this?” While Datacomp and MHVillage have done a good job to date of being reasonably fair and balanced, it’s a concern nonetheless.
- These purchases will probably lead to more copycat industry information groups going into business. And why not? If smart entrepreneurs see big money being paid for mobile home park industry data and home sales sites, then it’s only logical that more will pop to try and harness that value creation. I would expect there to be at least several new entrants in both industry categories within the near term. The industry has always wanted lots of data, and it will probably now finally get it.
- Maybe the industry will start to take mobile home park data seriously, since it hasn’t for the past 70 years. I have always said that it’s a shame that MHI (the national lobby) only tracked mobile home manufacturing shipments and sales since 1950 and not community rents or occupancy. That lack of factual data has always been a thorn in the side of mobile home park segment of the industry getting the respect it deserves, as well as the information that’s needed today to show that our rent increases are more than fair and reasonable.
As always, anything that Sam Zell does is great for the industry. He has personally brought a level of confidence and respect to the industry that it should always be thankful for. It will be interesting to see how this transaction impacts the mobile home park industry going forward, but it’s almost certain to a positive step in its evolution into a mainstream real estate sector.