Milwaukee Mobile Home Park Operations Summary: Year 1

Wednesday, September 14, 2011

In August 2011, St. Paul Group successfully completed the year-1 re-positioning on its Milwaukee Mobile Home Park. The park was a distressed asset which was acquired from Chase bank via note sale in August 2010. We are very pleased to report that we have executed upon and accomplished each of the objectives as set in our business plan for the property. Within the first year we were able to outperform our original financial projections and provide solid return for our investors. [Download PDF Version of the Report]

1. Investor Summary

During the first year of operations our investors earned:

• 19% cash on cash return
• 64% equity appreciation on their investment

Income and Expense Change

	2010*	2011	% Change
Income	$ 597,555	$ 664,339	11%
Expense	$ 445,636	$ 333,022	-25%
NOI	$ 151,919	$ 331,317	118%

*Based on P&L data provided by seller/property manager

**This report gives a high-level overview of our first year. For more detailed information about the performance of the mobile home park, please contact us.

Income and Expenses

The operational changes resulted in 11% increase in the income and 25% decrease in the expenses.

With the increase in income and decrease in expenses, we were able to achieve significant increase in the net operating income of 118%.

Investor Dividends

During the first 12 month of operations, St. Paul Group paid its investors dividends totaling 19.26% of their initial investment.

[Dividends based on $100k initial investment]

	2010 Aug/Sep	2010 Q4	2011 Q1	2011 Q2	2011 July	Cash on Cash Return
Dividend	$ 3,390.20	$ 3,754.38	$ 5,023.45	$ 5,188.19	$ 1,903.40	19.26%

2. Operations Summary

The property was a 132 site all-family manufactured housing community located in the city of Milwaukee, Wisconsin. It presented a unique and rare opportunity to acquire an established manufactured home community in a desirable in-city location.

Excellent Location

The property was situated near a main artery of the city near General Mitchell International Airport, the primary airport for Milwaukee. As a result, the park attracted a large flow of potential residents.

Attractive Sales Price

The bank was motivated to sell because the previous owner had been unsuccessful in finding a buyer due to the terrible lending market. We were able to acquire the bank note and property at under $8k per lot, significantly below the average sales price of $13.4k per lot based on other recent mobile home parks sold in nearby Wisconsin.

Management Upside

Due to health issues of the prior owner, park management was turned over to a 3rd party property management firm and has resulted in sub-optimal cost management. Our ability to improve park management provided an excellent opportunity to decrease expenses and thereby greatly increasing the NOI and value of the park.

High Occupancy

Even with poor management over the past few years, the park has maintained an 83% occupancy rate. With improved management, we raised occupancy levels near 93%.

2.1 Operations

With the support of the community and our experience from previous investments, we fully executed our turnaround plan.

Management Improvement

We set up a more efficient and effective management system to control the expenses and reduce tenant issues.

• Transitioned management from the 3rd-party management company
• Hired and trained a qualified manager - reducing expense and improving operation
• Setup back office and systems to support management
• Implemented a check scanning system in park office for higher efficiency

Occupancy Increase

We have been able to provide affordable home ownership to the residents while increase the occupancy of the park. Furthermore, by providing home ownership instead of renting the homes, we were able to reduce maintenance costs.

• Provided affordable home ownerships by repairing and selling homes
• Implemented marketing program to fill vacancy - decreasing vacancy from 17% to 7%
• Maintained lot rent for most of tenants. Reduced lot rent for tenants who were being overcharged

Safety Improvement

Providing safety, peace and quiet for the residents had always been an issue in the park. We took immediate steps to improve this for the residents.

• Implemented Neighborhood Block Watch Program to address security issues
• Hired a new security company to improve security and reduce nuisance calls to police
• Installed surveillance cameras in the park

Property Improvement

We made numerous improvements to the park to provide better and safer environment for the residents.

• Resurfaced the road and installed speed bumps to improve safety
• Transitioned garbage collections from dumpsters to individual canisters
• Made improvements to the office building with new office and new roof
• Held a spring cleaning event to help residents clean out their homes

Other

• Appealed and reduced property tax bill by 33% (about $20,000)

3. Providing Home Ownership

An overlooked but key facet of this business is being able to operate in a socially responsible manner. Mobile home parks provide one of the few options for our low-income and working class citizens the right to home ownership. Unlike low income apartments which are often run down, unsafe and provide no sense of community or privacy, mobile home parks allow residents the benefit of owning their own homes with their own lots and yards. Below are a few of the residents we have been able to help:

School Bus Driver

We were able to sell a home to a school bus driver who had been living with her parents while working to get a license to drive a bus. Her living conditions were extremely crowded and difficult. With our help, she gained full employment and purchased a nice home in our community. She now has a very quaint 2 bedroom house she can call home.

Construction Worker

A construction worker who had been off work due to medical illness was forced to foreclose on their home. His family of four was not able to find another home and had been forced to live in a motel. St. Paul Group was able to qualify the family for home ownership. He has since regained his health and found a full time job. The children have made friends in the community and now attend the local schools.

4. Summary and Outlook

This property has been another proof that St. Paul Group’s business model of turning around a mismanaged mobile home communities can be profitable while benefiting residents of those properties. With a 19% cash-on-cash return and equity increase of 64%, this investment provides a very attractive risk/return yield.

With the Milwaukee mobile home park stabilized, we plan to look for similar opportunities that will benefit communities and our investors. Our forecast is the next several years will provide exceptional opportunities for value-added mobile home park operators as many park owners will have a hard time refinancing their expiring mortgages.

5. Contact St. Paul Group

For more detailed information about Milwaukee Mobile Home Park or information on investing with St. Paul Group, please contact us.

Howard Huang Managing Member Ph: 510-316-1975 Email: howard@stpaulgroup.net Web: www.stpaulgroup.net Blog: www.mhpguys.com

Jae Cho Managing Member Ph: 510-825-1433 Email: jae@stpaulgroup.net Web: www.stpaulgroup.net Blog: www.mhpguys.com