Saratoga Group, a sponsor of Reg D funds that invest in mobile home communities, plans to launch a yield-oriented opportunity zone fund this month.
Saratoga Group is specifically investing in mobile home communities located in opportunity zones. Currently, they have 12 communities under management with plans to purchase another 15-20 in 2019.
“Almost exclusively, [opportunity zone] funds are oriented towards ground up or major redevelopment projects,” says Sam Hales, CEO of Saratoga Group. “The advantages of an opportunity zone investment for shielding a capital gains windfall are tremendous. However, most development projects are accompanied with significant idiosyncratic risk relative to construction costs, timelines, and economic cycles. These risks are difficult to quantify, even for sophisticated real estate investors.”
Hales continued, “Asset prices are universally near record highs and real estate is no exception. Although there has been some CAP rate compression for mobile home communities, over 90 percent of mobile home communities are owned by non-institutional owners. This is one sector where true ‘value-add’ opportunities are still available.”
The federal opportunity zone program was established as part of the Tax Cuts and Jobs Act and offers capital gains tax relief for new investments in certain economically distressed areas nationwide that are designated as qualified opportunity zones.
Saratoga Group was established in 2011 with the launch of investment funds focused on the acquisition of single-family homes. Other projects include land subdivisions, in-fill urban residential projects, office buildings and a boutique hotel. Since 2017, the firm has been almost exclusively focused on the acquisition and improvement of mobile home communities.