Emphasizing that Hometown America Communities is in the business of “owning and operating” property rather than flipping it for greater profits, its president sees his latest deal to buy Laguna Terrace Mobilehome Park as “a perfect fit.”
“We’re long-term operators,” said Stephen Braun, president of the Chicago-based company, which owns 45 communities in 11 states. “We’re not necessarily a flipping company.”
If the buyer accepts the park as it is and financial qualifications are met, Braun said his company will keep the park as a residential mobilehome park community, making necessary improvements. “It’s a beautiful property,” said Braun. “Laguna is a fabulous community and to be able to actually have a property in Laguna that operates the way our core business does is a perfect fit for us. We’re in the business of owning properties and operating them, it’s as simple as that.”
His company, established in 1997, operates like any other property-purchasing company, he said, upgrading new acquisitions if needed to increase the property value. “It makes absolute sense to invest capital in older communities to make sure you maintain a certain level of quality,” Braun said.
The company placed a purported $62 million bid on the 158-space Laguna park, which covers 14 acres of a 46-acre plot. Braun said escrow is expected to close this month. If purchased, Laguna Terrace Park will become Hometown America Communities’ eighth acquisition in California.
Braun said his company is in the due-diligence process, inspecting the grounds and infrastructure as well as residential leases and financial records. Eighty-five percent of the people who live in the mobilehome park have long-term leases, said Gary Skeen president of the Laguna Terrace Park Residents’ Assn. All long-term leases, with some at 30 years, are fixed at a maximum annual increase of 3 percent, he said. All leases and rental agreements also include a provision to pass any increases in property taxes onto residents, he added.
Divided among the 158 spaces at the park, current tax bills amount to approximately $400 per unit per year, based on current property tax bill by the county assessor’s office, which lists the assessed value of land and improvements at $6.1 million. If the purchase price is $62 million, the current tax rate of 1.25 percent could put the total annual tax bill at $775,000 or $4,900 per space. But Braun said there’s no need to worry.
“I can tell you people are going to be very happy,” said Braun. “We’re a nice company.”
Braun won’t discuss specifics until after the deal is finalized. “We don’t even know we have a deal yet so there’s nothing to talk about or surmise about,” he said. “When we buy something and then we take it over, we have meetings with the residents and talk about these issues.” Speculating at this point, he said, will upset people more than help them.
Residents are conducting their own due diligence about the potential new buyer, said Skeen, but generally there’s been a communal sigh of relief.
“We can at least say, unless this falls through, that it’s not going to be a big corporation that’s looking at developing this into something else,” said Daga Krackowizer, past resident association president and 10-year resident who holds a 30-year lease. “There’s some feeling that that’s over with now.”
Braun confirmed that his company intends to abide by current lease contracts. “Everybody has a lease,” he said. “That’s the way I understood it. You’ve got to live by people’s leases.”
Owner Amy Esslinger, whose late husband was the grandson of the park’s developer, rejected the residents association’s $52.5 million bid on the park last fall. The association was never permitted access to the park’s financial records but some of the leases are substantial income sources, said Skeen. “There are people paying up to $4,000 a month,” he said. “I assume the park is making money or they (Hometown America) wouldn’t have bought it. These people aren’t stupid.”
Skeen said residents have learned that the company treats its tenants well and keeps the community property at high standards, increasing resale value. “We’ve been in limbo for a long time and they virtually have not done a lot to this park,” he commented. “We’ve lived there eight years and we haven’t had communication since we lived there. At least we’re going to have that option to be able to have some kind of dialog with somebody who has an interest in this park. I think it’s a good thing.”