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Commercial Real Estate
Business Observer Friday, Dec. 11, 2020 4 months ago

A Pivotal Pivot

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Real Estate Acquisitions USA Corp. of Naples focused on single-family housing deals until it decided to shift gears in 2015.
by: Kevin McQuaid Commercial Real Estate Editor

Mario Dattilo was brokering residential single-family deals in his native Minnesota when the housing market’s swollen bubble burst more than a decade ago, sending values plummeting nationwide.

His father Doug, meanwhile, had built up a resume filled with construction and related experience, also in the North Star state.

Shortly after stockbrokerage firm Bear, Stearns’ collapse, a friend introduced the pair to Southwest Florida, which became ground-zero for foreclosure filings in the U.S. beginning in 2008.

“I told my dad, rather than brokering all these distressed deals, we should be buying these properties for ourselves,” says Mario Dattilo. “Then when we saw Southwest Florida, at that time there was just blood in the streets. We saw real opportunity.”

For the next five years or so, the pair’s Real Estate Acquisitions USA Corp. focused almost exclusively on buying, stabilizing and re-selling single-family homes.

But by 2015, deals were becoming harder to pencil out. In a crucial change in direction, the Dattilos decided to focus on multifamily residences and limited commercial properties, like self-storage facilities.

Apartments were a natural choice, but Mario Dattilo felt there wasn’t enough upside. What he wanted was an undervalued asset class like the distressed single-family properties he’d been dealing in.

The duo found it in manufactured home projects, a “Wild West” sector that lacked industry best practices but outperformed many residential competitors.

“We took a long time to understand these properties and we’re very careful and conservative in what we buy,” says Mario Dattilo. “We bring in professional management and do a lot of value additions.

“There are a lot of mom-and-pop operators, it’s a real hodge-podge,” Mario Dattilo says. “Typically they’re not managed as well as they could be, but to know that you really have to know the operations side of the business, how these projects were constructed. In many cases, these projects are more than 50 years old.”

To date, Real Estate Acquisitions has acquired 11 mobile home parks — one was sold last December — and a self-storage project in Naples. Six of its manufactured home properties are in Florida, three are in Atlanta and one in the “bread-and-butter state,” Minnesota.

In all, Mario Dattilo says the company has roughly $40 million in assets under management.

He adds that mobile home parks are one of the best examples of affordable housing and historically perform well, as does self-storage, when the economy withers.

Rental rates in manufactured housing communities tend to be equivalent to half the rent of most suburban two- or three-bedroom projects, he says.

Today, the company has a staff of 17.

“We’d like to scale that up, but finding experienced people who know the business has been a challenge.”

The younger Dattilo says working with his father, however, has been a pleasure because they focus on different aspects of the business.

“We don’t step on each other’s toes, and we know how to shut off business and hang together as a family.”

Neither Dattilo is too concerned about the entrance of large, institutional players like Carlyle Group or Blackstone into the mobile home market, either.

Most notably in Southwest Florida, Carlyle Group in mid-2019 acquired the 420-acre Citrus Park mobile home project in Bonita Springs for $72 million. That community, developed in the 1970s, has more than 1,500 units and RV sites.

“I think that brings confidence and stability,” Mario Dattilo says of the bigger players. “They’ve recognized what we did five years ago, that these are assets with good cash flow when they’re run well.”

He contends Real Estate Acquisitions has an advantage over the institutions, though.

“We don’t have to put capital to work because our clients need to generate a certain yield over a certain period of time,” he says.

The company is currently scouring markets in Florida and the Midwest for further acquisitions.

“Coastal communities tend to be more boom-and-bust,” says Mario Dattilo. “The Midwest tends to be a better place to find stabilized yields. We’re looking in Minnesota as well as Kansas at the moment.”

A decade from now, Mario Dattilo hopes Real Estate Acquisitions will be among the largest mobile home park investors and operators in the country, with a portfolio of 40 to 50 properties valued at more than $150 million.

“We’re very selective in our buying, and we’re long-term holders,” he says. “We don’t have to, nor plan to, sell properties in five or seven years. We want to hold properties for the long haul that have good long-term cash low and are great places for people to live.”

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