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ARVC: High Qualify RV Parks Defy the Recession

December 14, 2009 by · Leave a Comment 

arvc2.giARVC logofBetween 2000 and 2005, as real estate prices rocketed to unprecedented levels, developers pulled out their wallets and encouraged owners of RV parks and resorts to sell their properties because they wanted to replace them with shopping malls – all more lucrative uses of these properties, or so they thought.

As the real estate market has tumbled, however, many developers have not been able to get very far with their plans, and several of the RV parks and resorts they acquired have not only survived, but prospered during the current economic recession, according to a release from the National Association of RV Parks and Campgrounds (ARVC).

In fact, one lesson that developers have learned is that high quality RV parks and resorts are more economically resilient than hotels, shopping malls or condos, particularly when investments are made to improve these parks.

“Camping is a recession-proof business,” said David L. Berg, ARVC chairman, adding that most of the nation’s campgrounds, RV parks and RV resorts have reported stable to slight increases in income this year, despite the recession.

Berg cited his own campground as a case in point. The park, Red Apple Campground in Kennebunkport, Maine, scored an 8.5% increase in business compared to last year, while hotels and motels in his area saw their business drop by as much as 25%. “Camping is more family oriented and more reasonably priced than other travel and tourism options,” he said, adding, “The state of affairs of our economy has not hurt the camping business at all.”

Developers, on the other hand, have mistakenly assumed that land is always more valuable when it’s used for hotels, shopping malls and condominiums. While this kind of thinking may apply to poorly maintained RV parks, in resort destinations, high-quality RV parks and resorts remain economically resilient, even when times are tough.

Consider the story of Emerald Desert RV Resort in Palm Desert, Calif., one of the top winter vacation destinations in the country. Several years ago, Scottsdale, Ariz.-based Taylor Morrison bought the park with plans to replace it with high-end housing. But the recession pulled the rug out from under the real estate market before Taylor Morrison could finish its project. And while Taylor Morrison had converted portions of the RV resort to housing, the rest of the resort remained standing, including all of its RV sites, clubhouse and other core buildings, which prompted the company to put the RV resort back on the market.

La Jolla, Calif. based SunLand RV Resorts bought Emerald Desert last summer and plans to keep as a resort. “I’ve had my eye on this property for 20 years,” said Reza Paydar, SunLand president and CEO. “It is very valuable. There is nothing like it.”

SunLand, in fact, has already invested more than $1 million in improvements to the 251-site property and plans to operate it as a year-round luxury RV resort. It’s newly designed 1,200-square-foot lobby features a custom designed floor mosaic and reception desk with inlayed stone. Luxury furnishings are also being added to the newly designed fitness center and swimming pool area.

Meanwhile, the economic downturn has given La Pacifica RV Resort in the San Diego, Calif. suburb of San Ysidro a chance to assert its economic resiliency. An investor purchased the property several years ago with the idea of re-selling it to a housing developer. But as the real estate market tanked, the investor’s plans evaporated and he wound up selling the property to another investor, Bart Thomsen, who plans to make improvements and keep La Pacifica as an RV resort.

“The park is in very good condition already. But we’re absolutely intent on making it an even better place,” Thomsen said. “We’re putting money into fixing up the bathhouse and clubhouse and investing in better utility pedestals and making improvements to its streets. We’re planning on it being an RV park for the long haul.”

Developers’ plans to convert RV parks and resorts to other uses have not only been put on hold by the recession. In some cases, local residents and businesses and city officials have discouraged them from replacing RV parks and resorts, which they value as important pillars of a tourism economy.

Consider Holiday Cove RV Resort in Cortez, Fla. A few years ago, the property was purchased by an owner who wanted to replace it with condominiums, but the developer ran into opposition from local residents, businesses and city officials. “They claimed the plan was out of character for the community and they were concerned that residential use wouldn’t support the local businesses that are geared primarily to the tourist and vacation business,” said David Gorin, who recently purchased park from the developer. “The previous owner was simply unable to get the zoning and planning commission to approve his plan. He fought with them for five years and then gave up and sold the property to us.”

Gorin and his business partner have since invested $1.4 million improving the property and making it into a high quality RV resort.

These investments in RV parks and in RV park improvements are paying off because camping and RVing enthusiasts have shown a consistent willingness to pay for parks that offer high quality facilities, amenities and service, said Linda Profaizer, ARVC president and CEO. RV parks and resorts are also aided by the fact that they offer the nation’s most affordable vacation option, she said.

John Grant, owner of San Diego-based Park Brokerage Inc., said growing consumer interest in camping and RVing is also helping RV parks and resorts to retain their real estate and business value during the worst recession since the Great Depression. “RV parks are holding on to their value because people are downsizing their vacations, taking their RV or tent and going camping,” he said. “This translates into higher property and business values for parks.”

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Timid U.S. Lenders Stifle RV Park Development

December 14, 2009 by · 1 Comment 

 

Springs at Borrego resort

Springs at Borrego resort

As winter approaches, campsites quickly fill up at The Springs at Borrego RV Resort and Golf Course in eastern San Diego County, Calif.

The 90-site low desert resort, located minutes from the scenic grandeur of Anza Borrego State Park, is a popular winter nesting ground for Snow Birds from all over the Pacific Northwest and Canada.

“We would love to build another 110 sites and think we could do so for about $1.2 million,” said Dan Wright, the park’s general manager.

Trouble is, Wright can’t get a loan. “Everyone we have talked to tells us that financing for RV park construction and development is non-existent at this time,” said Wright, who also serves as president of the California Association of RV Parks and Campgrounds (CalARVC).

The problem isn’t limited to RV parks and resorts. Despite the billions of dollars in bailout funds that the Bush and Obama administrations have provided to the banking industry during the past year to make credit more available, bank financing remains difficult for any small business to obtain, according to the National Association of RV Parks and Campgrounds (ARVC).

Federal Reserve Board Chairman Ben Bernanke acknowledged the problem last month in a widely quoted speech to the Economic Club of New York, in which he stated that banks’ continuing reluctance to lend is “limiting the ability of some businesses to expand and hire,” effectively delaying the nation’s economic recovery.

From Wright’s perspective, the banks’ unwillingness to lend to profitable businesses is costing millions in lost revenue, not only for his business, but for the community of Borrego Springs, whose restaurants, stores and fuel stations depend to varying degrees on the snowbirds who spend the winter at his RV resort.

“We track every reservation request that we cannot fill,” Wright said. “Since the beginning of 2008, we have turned away over 8,000 nights’ worth of business due to a shortage of campsites. But even with numbers like these, lenders still can’t bring themselves to provide us with a loan. It makes no sense.”

Ken Jeffries, one of the owners of Angels Camp RV & Camping Resort in Angels Camp, in the Sierra Nevada foothills, is facing a similar scenario. The park, with 63 RV sites, 14 tent sites, five cabins and a camp office and store, is in desperate need of expansion to accommodate growing numbers of camping enthusiasts. In fact, between Jan. 1 and July 29 of this year, the park had to decline 513 nightly reservations for lack of space, Jeffries said. But despite the obviously strong demand for campsites at the park, the owners have not been able to obtain even a relatively small loan.

“We need $50,000 to put in 19 more campsites, but the banks are real tight for some reason,” Jeffries said. “The interest rates are down, but they won’t loan any money. Of course, it doesn’t do any good to have low interest rates if they won’t loan the money. I feel the small business man is being squeezed terribly.”

Frustrated with the lack of credit, Jeffries and his partners are paying for his park’s expansion on their own. “We’re taking the money out of our own pocket and are doing the expansion ourselves,” he said. “It’s very difficult to do this, but we have no choice. We’re losing business by not expanding our park.”

Harriette Groth, co-owner of SunBasin RV Park in Ephrata, Wash., said she also is losing business because she has not been able to obtain the $350,000 to $450,000 in loans she needs to make needed improvements to her park. She’d like to put in more campsites, create more pull-through sites, and build a new bathhouse and showerhouse, but can’t find lenders willing to refinance her existing loan and provide her with capital for improvements, let alone provide her with a second loan for improvements. As a result, her improvements are limited to relatively minor cosmetic improvements, such as new signage and landscaping.

John Grant, owner of Park Brokerage Inc., a San Diego company that specializes in RV park sales, said the scarcity of loans is hard for RV park and campground operators to swallow, particularly given the resiliency of the camping business during the recession. “All businesses need access to capital to expand, to improve their facilities. But there’s just no commercial real estate capital available for RV parks and campgrounds,” he said.

Ed Mayer, who has developed four successful RV resorts in Florida in the past six years using the Elite Resorts of America brand name, said he is now seeking financing from private investment groups after failing to obtain loans from conventional lenders. “Everybody is scrambling to find money,” he said. “I’ve dealt with small banks, medium banks and large banks and I’m getting the same answer across the spectrum.”

Mayer said many lenders simply have no experience working with the RV industry and don’t want to take any chances investing in a market segment with which they have little or no experience, despite the financial successes RV parks and resorts have enjoyed throughout the recession. He conceded, however, that while there are many successful, high quality RV parks and resorts across the country that are worthy of loans, there also continue to be sizeable numbers of neglected parks. “Some RV parks are in the hands of people trying to get out of the industry and they’ve allowed their parks to deteriorate,” he said.

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