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For years, RVs have been associated with retirees who spend their golden years traveling the country. But that’s changing, and real estate investors have noticed. Encouraged by these changes and seeking higher returns than those offered by traditional property types, these investors are putting more of their money toward RV parks and campgrounds.

“We have seen investor demand for outdoor hospitality properties explode as other sectors have continued to erode,” says Yogi H. Singh, partner of National Land Lease Capital (NLLC), a private investment firm that owns close to a dozen campgrounds, RV parks and marinas across the nation. “The national shortage of professionally developed, resort-quality assets, along with the high barriers to entry, provide insulation to the sector that we find attractive.”

New generation of RVers

Since the start of the pandemic, a growing number of Americans have vacationed in RVs or gone camping. After being cooped up for months, people craved wide open spaces and the opportunity to see new places. Today, RVing and camping remains a popular alternative to other types of travel.

While the traditional RVing retiree segment has expanded, due to the aging of the baby boomers, it’s younger generations that are currently driving most of the growth in the outdoor hospitality sector. Valuing experiences over possessions, millions of millennials and Gen Z are choosing to spend their money on travel, both domestic and international.

“Underlying consumer demand drivers for outdoor hospitality are strong,” says Carl Kruelle, chief investment officer of Blue Water Development Corp., an Ocean City, Md.-based firm that develops, acquires and operates resort-level outdoor properties, including RV parks and campgrounds. “There’s heightened interest amongst consumers to get outdoors and experience nature. That’s been a consistent trend over the last several years.”

Moreover, younger people are also taking advantage of remote work opportunities that have emerged throughout the pandemic. For many people, this newfound freedom means visiting new places. An increasing number of Americans are adopting a transient lifestyle that RVing offers and taking their work on the road.

“Because younger generations don’t have to be in an office every day from nine to five, being in one location and dumping their money into a home is not necessarily the American dream anymore,” notes Tristan Farrell, president of Sunlight Resorts, a Georgia-based RV resort developer with 30 years of real estate development experience in the housing market. “I think the American dream now is traveling.”

Few similarities between old and new properties

Older RV parks were mostly just a place to park, and campgrounds were just a place to set up a tent. Beyond communal bathrooms and showers, these properties rarely offered any additional amenities.

Today’s new and updated RV resorts and campgrounds couldn’t be more different. They often offer a level of comfort and convenience that was unheard of in the early days of RVing. Some even offer a range of luxury amenities, including swimming pools and fitness centers, as well as daily activities such as yoga classes, kayaking, and golf.

For example, Sunlight Resorts has implemented fresh design concepts for its two new luxury RV parks in Florida, Farrell notes. The firm’s Champions Run Ocala Luxury RV Resort features 482 oversized RV sites combined with park model cottages for short-term and long-term stays, high-end landscaping and a 12,000-sq.ft.- clubhouse with a state-of-the-art fitness center and a ballroom with a performing stage.

Other luxury amenities include a resort-style swimming pool with two hot tubs and a rock waterfall, as well as tournament style recreational courts for pickle ball, bocce ball, shuffleboard and more. There’s also a signature Tiki Bar.

Both Champions Run Ocala and Resort at Canopy Oaks have received the 10/10/10 rating from Good Sam, a leading RV industry membership organization. The three-number rating is earned based on the property’s superior amenities, cleanliness and environment. Less than 1 percent of all RV properties in the U.S. receive this recognition.

Sunlight Resorts plans to develop several more luxury RV parks across Florida and the Southeast. Currently, the firm has two parcels of land in Florida under contract and expects to develop at least two new properties annually, Farrell says.

Ultimately, Sunlight Resorts’ goal is to sell its RV properties once they’ve reached stabilization as the firm has no desire to become an owner/operator, Farrell notes.

Now that Resort at Canopy Oaks has celebrated its first birthday, Sunlight Resorts is starting to attract investor interest. Farrell says he’s getting a lot of phone calls and unsolicited offers to sell off-market.

“RV parks and campgrounds are cash cows, and they almost run themselves,” he says. “That’s what makes them so attractive to investors.”

Industry veterans active acquirers

Recent entrants into outdoor hospitality ownership such as Sunlight Resorts are joining a handful of investors that have been active in the space for quite a while. For example, the two largest outdoor hospitality investors—Equity Lifestyle Properties Inc. (ELS) and Sun Communities—have been investing in RV parks for decades.

ELS owns and operates a portfolio of manufactured home communities (MHC), RV resorts, campgrounds, and marinas in North America across 35 states and featuring 170,245 sites, and Sun Communities owns and operates a portfolio of 662 developed MH, RV and marina properties comprising more than 180,500 developed sites and over 46,100 wet slips and dry storage spaces in 39 states, the United Kingdom, Canada, and Puerto Rico.

Similarly, Blue Water has been active in the outdoor hospitality industry since 2002. The firm prefers to invest in properties located on water—hence the name Blue Water. Additionally, it gravitates toward assets close to population centers, which provide a strong demand base.

Most of Blue Water’s properties range from 200 to 700 sites each, which provides scale and allows for significant investment in resort amenities to further drive demand, according to Kruelle. It looks for assets that are either under-managed or have significant expansion opportunities.

During the second half of 2022, Blue Water made two significant acquisitions: Endless Caverns, an RV property located in Virginia’s Shenandoah Valley, and Badlands/White River KOA Holiday, an RV resort and campground located near Badlands National Park and two hours from Mount Rushmore in South Dakota.

At the time of purchase, Endless Caverns offered 148 pull-through & back-in RV sites, nature trails for hiking and biking, a zero-entry pool, and a catch-and-release fishing pond, as well as kayaking, rafting, and tubing on Shenandoah River.

Kruelle says Endless Caverns was an attractive investment for numerous reasons. “There are many levers to pull by applying strong operational expertise,” he notes, adding that the firm expanded the property by more than 300 sites.

Meanwhile, Badlands/White River KOA Holiday, known as the “Oasis of the Badlands,” presented an opportunity for Blue Water to add a “unique destination getaway” to its portfolio. The area is a popular dark skies location for stargazers and photographers, and visitors can view the Northern Lights from the site in late fall and early spring. The property’s 146 sites offer a mix of RV sites and unique glamping options including a yurt with a skylight for prime star viewing, teepee and camping cabins.

Like Blue Water, most outdoor hospitality investors usually don’t disclose deal amounts, perhaps because those numbers would be misleading without digging into operating metrics. Indeed, it’s difficult to compare these properties on a per site basis, given the differences in the types of sites they might offer. To that end, buyers always use cap rates to assign value.

NLLC’s Singh, who tapped Blue Water to manage its outdoor hospitality portfolio, says that valuations for RV parks and campgrounds have been shrouded in darkness for the past six months as the Fed raised interest rates.

“We are just now getting a sense of where values have settled,” Singh says. “A-plus assets in A-plus locations still garner 6.0 percent cap rates or lower. Cap rates for transitional or value-add opportunities have widened by 200 to 300 basis points.”

However, rising gas prices and inflation are beginning to take a toll on the industry. “Inflation is a concern on both fronts,” Kruelle notes. High inflation means consumers take shorter stays or visit less frequently. Typically, RV resorts offer an inflation hedge, given their ability to re-price on a daily basis. “That works unless demand drops way off due to an economic downturn.”

As fuel costs increase, the price of RV travel goes up as well. This makes it more difficult for people to afford to take trips, and many are cutting back on their travel plans as a result. In addition, inflation is driving up the cost of RV parts and accessories, making it more expensive to own and operate an RV.

“When gasoline and diesel prices are higher, there is a tangible softening in transient camping activity,” Singh notes. “However, the fundamental fact remains that camping is the cheapest way to recreate domestically, so the prospects for the industry remain strong in the face of inflation.”

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