- Investors are eyeing profits in campgrounds and RV parks as Americans flock to the great outdoors.
- Amenity-rich campgrounds and professional management are also attracting investors.
- The trend follows the institutionalization of mobile-home parks and single-family rentals.
In January, a new Florida vacation destination began offering fruity cocktails, a pool with a 147-foot water slide, and the kind of boozy, relaxed lifestyle that’s helped draw visitors from all corners of the nation to similar locations. But it’s not a trendy beach resort or luxury hotel.
It’s the latest iteration of Camp Margaritaville, a chain of four RV parks developed by the entertainer Jimmy Buffett for the mobile set, including his “Parrothead” followers, a boomer-rich crowd seeking the good life that he’s been singing about since the mid-1970s. WiFi, fire pits, and a nine-hole putting course round out the offerings of the new campground in Auburndale, about an hour’s drive from Orlando’s theme parks.
The cult figure’s vision was made possible with backing from an unusual source: Wall Street investors and bankers better known for their financing of towering office buildings, apartment complexes, hotels, and warehouses.
Camp Margaritaville was constructed with a $37 million loan from ACORE Capital, the company founded in 2015 by former executives of Starwood Property Trust, the largest commercial real-estate investment trust in the nation. The financing from ACORE, whose other recent closings include a $265 million mortgage for a sprawling north San Diego beach resort and hotel, is the latest example of how sophisticated investors are planting their flags in the corners of US real estate heretofore dismissed as small potatoes, or just too risky, for their capital.
“There’s been a shift in who the investors are” in campgrounds and RV parks, said Norm Sangalang, a senior vice president in the CBRE capital-markets group overseeing manufactured housing communities, which, per industry norms, include mobile-home and RV parks. “Originally it was the owner or family business that built the park, usually with one or three locations. Now it’s being handed over to the investment groups.”
The stars seem aligned for their success.
First off, RV campgrounds with the right amenities are increasingly being sought by people who’ve found themselves untethered because of retirement, the “Great Resignation,” or jobs that allow work-from-home arrangements.
The trend is also driven by demographics. Cash-strapped or just curious boomers are increasingly searching for more affordable vacations for their leisure years, and through their numbers, they’ve made themselves invaluable to local communities. Outdoorsy millennials who’ve started families are also adding to the demand as they gravitate to the freedom that campgrounds can provide.
Veteran operators and analysts told Insider that campground investors were indeed multiplying. They believe investments racked up so far are probably just the tip of the iceberg for big investors, based on inroads they’ve already made in mobile-home parks and because they need to amass huge holdings to achieve better economies of scale.
Investors such as Invitation Homes, Tricon Residential, and Pretium Partners have done just that with single-family rental properties, an asset class that was once thought to be a short-term profit center for Wall Street firms buying homes at depressed prices after the financial crisis, rather than a mature, sustainable business.
“We’re used to slow growth, but it’s got to the point where, after the pandemic, there are so many more eyeballs on this space,” Jim Westover, who was the vice president of product development and sales at Yogi Bear’s Jellystone Park, the campground franchising chain founded in 1969, told Insider early last year.
Westover’s observation proved prescient. Months later, Jellystone was absorbed by Sun Communities, a real-estate investment trust that owns mobile homes, 55-plus housing, and RV resorts across the country. Jellystone brought 75 franchised locations to Sun Communities, growing its total number of owned and franchised locations to nearly 250.
Sun has been more aggressive with RV-park acquisitions over the past two years than any of the other properties it targets. The company increased its portfolio of RV resorts by 30% over that time to 161 properties, while its mobile-home communities grew by just 6% to 283 properties.
“Within the RV business, robust demand continues as many new guests discover the joy and affordability of an RV vacation, which has only accelerated over the past two years,” Gary Shiffman, Sun’s CEO, said on the company’s first-quarter earnings call. He added that Sun acquired $1.6 billion in properties over the year and saw more revenue from its existing properties.
Sun’s first-quarter RV-park revenue increased 20.5% compared with the same period in 2021. For its manufactured housing communities, revenue rose 4.4%.
Sam Zell’s Equity Lifestyle Properties, another large capping off a year in which it bought five RV properties outright.that invests in RV parks alongside mobile homes, has also been busy. In the fourth quarter of 2021, it took an 80% stake in the six RV properties owned by RVC Outdoor Destinations for $49.2 million,
While it’s not clear how much big investors have thrown into RV campgrounds, manufactured housing communities as a whole have seen a burst of Wall Street financing. For example, lenders that package their loans in commercial mortgage-backed securities financed 211 of the properties in 71 deals totaling more than $3 billion in 2021, up from just 28 properties in 38 deals totaling $197 million in 2020, according to the data provider Trepp.
The new money is bringing changes to campgrounds that may shift perceptions of Americans and make the parks more popular for short- or longer-term stays, and, in turn, make them more popular with big investors. Even small details, such as crushed seashells that give RV operators audible notice that they’ve missed their parking slabs and the placement of dining areas away from the Florida sun, help distinguish the properties for their hospitality, said Christopher Haynes, the president of Broadacre Financial, the broker that coordinated the Margaritaville loan.
Haynes told Insider he hoped this loan deal would help prove RV parks can be as profitable and professionally run as any hotel and pave the way for traditional financing with a popular type of commercial mortgage-backed securities. Bankers are already stitching language about RV parks into deal prospectuses, acknowledging in one with a manufactured housing component that such properties are sometimes RV parks, which could have volatile revenue, rental rates, and expenses due to the seasonality and short-term nature of the rentals.
“It is really a game changer for the quality of these RV parks,” Haynes, a former rainmaker in Merrill Lynch’s commercial real-estate finance group, said.
Based on the institutionalization playbook, interest from big investors means associated services will likely evolve, too. At one point, large single-family rental portfolios seemed impossible to manage at scale, but proptech startups like Mynd Management are now signing $5 billion deals with companies like Invesco to manage massive portfolios of homes.
Camping’s in, and investors took note
RVs, camping, and outdoor lifestyles have been the focus of large investors for a while now, but the actual real estate has mostly avoided institutional interest, as investors chose instead to invest instead in tech companies that serve growing demand for outdoor recreation or the RV manufacturers themselves. The private-equity giant KKR was among the investors getting a piece of the action as the pandemic persisted in 2020 by leading a $100 million investment in a platform that connects RV owners with renters.
One notable exception on the property side has been the ownership of European Camping Group, which operates 310 campsites across France, Italy, Spain, and Croatia. In 2014, it was purchased by the US private-equity firm Carlyle Group, which later shared ownership with the Ontario Teachers’ Pension Plan and ultimately sold it to PAI Partners last year.
RV-industry data reflects the same positive trends. A record 600,240 RVs were sold by wholesale by manufacturers in 2021, with just slightly fewer RV sales predicted for 2022. In 2021, 93.8 million Americans identified as active campers, and camping accounted for more than 40% of all leisure trips in the US, according to a North American Camping report.
Rising demand for RV campsites is colliding with limited offerings, not unlike the core problem of today’s residential housing market. The trend has helped ignite a construction boom, with the National Association of RV Parks and Campgrounds projecting that 81,000 new campsites will be built in 2022, up from a projection of 53,000 in 2021.
“Only recently have we heard that parks are at such occupancy levels that campers can’t book anything now,” Sangalang said.
Institutional money will transform the sector, if investors can wrap their heads around the operational quirks, said Ricky Jenkins, owner of The Jenkins Organization, a privately owned company that manages more than half a billion dollars’ worth of commercial real estate. He’s seen it before in self-storage properties, another niche area of commercial real estate that has become a staple of Wall Street’s CMBS deals.
Jenkins launched his company in 1989 with a simple, repeatable play. He would build self-storage facilities, lease them, and then sell them to a publicly traded REIT that would pay premiums for a leased-out property. At the time, many self-storage companies were owned by local operators, while big investors were few in number, he said.
Three years ago, Jenkins felt like it was time to exit self-storage and try out another asset class. After looking hard at multifamily and industrial, he settled with RV parks.
“At first, it was never really on my radar, but the more I looked into it, it seemed like the storage industry 30 years ago: very fragmented, with lots of mom and pops,” Jenkins said.
There were few third-party management companies that big investors needed to scale their trade, he added.
In early 2019, he bought his first RV park. He’s since been on a tear with acquisitions, with help from a $120 million fund raised for the strategy. His website counts 17 RV resorts that he has acquired and developed since then, including a 120-acre property in Austin, Texas, one of the most popular living destinations since the start of the pandemic, and eight parks that are managed with Jellystone Park.
Smaller companies have also sped up their development plans.
AutoCamp, founded in 2013, operates four campsites across the country, providing each guest with an Airstream trailer as part of a partnership with the iconic American brand. The company, which is backed by $115 million of private-equity funding, builds or redevelops campgrounds within driving distance of major cities, near recreational areas like national parks, and close to “explorable” towns, Tim Trauth, the director of investments at AutoCamp, told Insider.
“It wasn’t really a huge redesign,” Trauth said of the expansion planned during the pandemic. “We just put the pedal to the metal and looked for more locations.”