On this episode of the Mobile Home Park Lawyer podcast, Ferd speaks to Ray Mazzie of Southern Waters Capital. Ray gives some great insight as to what a developer does and shares some figures which can be really useful for anyone looking to get into the development business!

HIGHLIGHTS:

0:00 – Intro and background to Ray Mazzie
5:03 – People like Ray make Ferd look like a liar when he says no one is making trailer parks
7:10 – Ray talks about his pursuit costs and that he caps it at $150,000
9:06 – Ray talks about what’s a go or a no go and what his process is
13:21 – Ferd asks about what he promises the authorities in the parks to get approval
17:10 – Ray talks about how he’s going to lay down concrete pads, but is looking into alternative’s
18:34 – Ray discusses how he uses an equation for valuations and how much he puts into a pad is dependent on the property
22:09 – You want to be right around $30,000 for a pad
22:31 – Ray has pro-forma’d the rents at about $600-$650
23:10 – Ray says the biggest he was given is to be able to talks to people and suggests the best thing you can do is really understand the person on the other side of the table
27:15 – You can find Ray on LinkedIn or reach out to him on email at ray@southernwaterscapital.com 

FIND | RAY MAZZIE:

ray@southernwaterscapital.com
https://www.linkedin.com/in/raymazzie/

FULL TRANSCRIPTION:

Ferd Niemann: Welcome back mobile home park nation. Ferd Niemann  here again today with an episode of the mobile home park lawyer podcast. My guest today, he hails out of Florida. Who’s a MHP expert, financial expert. He’s also an attorney. Excited to have him on here  [00:16 inaudible] this conversation, please help me welcome my guests. Ray Mazzie. Ray, Thanks for coming on man.

Ray Mazzie: Of course. Thank you for having me. I appreciate it. And it’s good to be on the podcast. So I’ve seen a few of them and you’re doing good work. So thank you for that first and foremost.

Ferd Niemann: You got it man. Talking about earlier, I’ve never met you in person, but it feels like I know you because we are always, we’re always seeing each other on LinkedIn and you know, and everything like that. And I follow what your fund is doing and it looks like a lot of good stuff, especially in the MHP. Tell us more about your background and how you got into MHP world and what you guys do over there.

Ray Mazzie: Yeah, so like a lot of other people, I’m sure it was a  winding road for me. Originally graduated from law school and business school, spent a little bit of time working in the government sector or the government side, I should say. And then jumped from there into the private side where I was an attorney for about a year and then ended up in small agricultural startup in south Florida. Fast forward a year and a half, My time there was complete. I did all I needed to do and I was happy to move on and start my own thing. I’ve always wanted to do real estate. So basically got together with a few, with one other partner of mine. We went around created a thesis that we thought work in regard to real estate and also a little bit of public securities trading as well. And then we went and raised a little bit of capital and decided that we wanted to really focus on workforce housing. And really the reason we ended up in that manufactured housing space was, I mean, to be quite Frank with you, the yield was there a couple of years ago a few years ago, and it was really attracted to look at existing parks and all that kind of stuff. But what ended up happening was those yields compressed really quickly. And then we decided, you know, with my legal background, my partner is also a lawyer, but we both are lawyers by education, not really by trade. We knew we could navigate the entitlement process and everybody out there knows how little the new developments are coming around and how apparently, you know, 1% or more parks disappear every year. Everybody knows the stats. So long story short, we saw the yield in the sector, and then as the yields began to compress, we figured let’s go to the part where, you know, this become niched. That’s where the yield still exists in forest. And let’s use our unique skills as attorneys, underwriters for lack of better terms and sponsors. So you know, it’s really, I talked to other people it’s really just a big management game when it comes to development or any real large-scale business venture. So as much as I want to take the credit for everything that we’ve been able to accomplish, really, it’s the team under [03:09 inaudible], just smart enough to make sure that I hire the right people.

Ferd Niemann: No, that’s great. And those of our listeners that don’t understand, entitlement. I mean, by entitlement, you’re meaning getting the approvals, development approvals, permitting approvals, zoning approvals, and [03:25 inaudible] approvals for creating new mobile home parks. Manufactured housing communities.

Ray Mazzie: Exactly. Exactly. It’s usually, you know, you get the land, that’s either ag or some type of other, you know, an unfavorable zoning for what we want to do. We go in there, we tell a good story. And we let the commissioners know that we’re here to bring them something that they need. And especially with the more importantly that the community needs and you know, we get it rezoned. Then we go in for construction permits or do whatever mitigation we have to before then, whether it’s, you know, over here in Florida, we got a lot of gopher tortoises and other types of protected species, whether they be trees or actual animals, but you know, we get all that stuff out of the way and then we get it shovel ready, and we decide whether or not we want to be the end developer as well. Or if we’d like to pass on the property to somebody else who’s is ready to develop it. We take our cash off the table there.

Ferd Niemann: That’s a great business. You’re one of the few guys in the industry that make me and other guys look like liars. Nobody’s building trailer parks, It’s like, you guys are building them. There’s not very many, right? There’s not, you’re not building 500 this year. You might [04:40 inaudible] in one park, but you’re not building them. Nobody’s building 500 this year.

Ray Mazzie: No, you wouldn’t to be able to bring in the units anyway. So we have three, well, let me correct myself. We had three properties under contract that we really liked, like since when we first started them, raised our capital, and deployed it, we have since closed on two of those properties. And then we have the third one  we had to like go, it was just too costly. The numbers didn’t work. We really try to keep our site development under about 200 units or pads max, just because the supply chain risk and the stabilization risk and all that comes along with doing that. Now don’t get me wrong. We’re buying properties that are set for 600 pads. We’ll get them, you know, all entitled and everything. But we would phase out in phases maximum of 200. So anyway, this property only allowed for around 200 and it just didn’t, the numbers didn’t work. So sadly I had to fork out my security deposit and all the capital I pursuit capital as some people call it. But well worth it. Just part of the game.

Ferd Niemann: Right. No, I used to do development, retail development and pursuit costs were intimidating, right? It’s a big number in a lot of projects. We had projects [06:00 inaudible]  remember it was, $450,000, $500,000. It was a $50 million project. So it was and the other guy was putting up the cash. I had a minority interest, but it was not for the faint of heart. And he left it all on the table and was like, this is part of doing business. It was hard to get that mindset, like, you know, [06:20 inaudible] regular mobile home park buyer, you’ve got pursuit costs, they are just less, right. It’s, you know, I made 0 phone calls yesterday, cold calls. Well, none of them worked out, that was pursuit costs, opportunity costs. You’ve got engineering costs, architectural costs, legal costs, you know, etc.

Ray Mazzie: Yep, exactly. And we do our best. I mean, for people out there, I’m sure everybody’s wondering, or not everybody, a lot of people are interested in doing the side, like how much pursuit costs do I really factor out? I’ll be honest with you. I really, it’s hard. You know, every project is different, but really, I like to cap it at $150,000. If I’m pursuing something due to the fact that I want to do a lot of these obviously if I want to do less than that would be different.

Ferd Niemann: Right. And so take us through that, that go no-go decision process. And I’ve been involved in projects where it’s the last wire. And we had a project approved by the city council and then the mayor vetoed it. So even though we were that far along and then they order to overcome the mayor’s veto, we had to go back and get a super majority and we couldn’t get the super majority. So it’s like we went through all that process, engineered plans, architecture, survey, legal you know, bank approval, lots of politicking. I don’t know that every jurisdiction, [07:41 inaudible] Florida, but typically on the planning commission stuff, it is usually volunteer citizens. We cannot lobby them, but on a city council, typically you’re allowed to lobby them and give them your dog and pony show, you kind of count the votes. I used to work for a guy who was COO in Jackson county here in a Kansas city. And I was a math guy, right. And I was doing all these development for assumptions and proformas and all this stuff. And he just said, the only number that counts is five, out of nine city councils. He goes, if I get the five, I don’t care what the rest of the numbers look like. And I learned that on smaller projects. How does that process look? I’ve not done a new MHP development. I’ve done, we’re in the middle of an expansion, but I’m not doing a new MHP developments. So I’m interested in how that’s worked for you and what jurisdiction, because I know you’re in Florida, are all your parks in Florida?

Ray Mazzie: Yeah, that’s right. That’s where I’ll stay for the rest of my life if I can, when it comes to business. See if I can plug for anything here for the state of Florida. I definitely think that there’s tons of  room to grow here. There’s tons of land in Florida, whether is great, you know, the climate for businesses even better. So when it comes to really figuring out a go or no go decision for me, just so everybody knows, I used to work for the governor here in the state of Florida for a little bit as a fellow and worked at a few state agencies as well after that. One of which being Florida housing finance corporation, which is affordable housing tax credit allocation agency for the state. So anyway, that’s one thing that we also do that’s uniquely, we would attempt to do Lytec credits on properties if the situation was right, but to go back to your question, the go or no go decision is really simple. It’s just asking that really looking at why they would turn it down and, you know, you just have to put your commissioner hat on or council member hat on. And what we look at is for properties and I don’t ever look to walk uphill. So I’ll just go and find a property that’s in a place where I know they’re on their strategic plan. They’re looking for workforce housing, or they have opportunity zones, which are obviously meant for affordable housing and business opportunity. You know, I kind of go to where the legislation is already tilted in my favor in one shape, or form. And from there we begin to ask the questions of, you know, every council, whichever official county city, whichever one it is that’s in charge. So it is the first thing you need to do is figure out who’s in charge. We just go check out exactly, quickly contact them right away until you put in some type of zoning application, you’re still allowed to speak to these individuals about your project. And you’re just, we’re just very blunt and very honest, and we tell them, this is why we think it’s a good idea. Can you please tell us, you know, why you would think it would be bad, or why wouldn’t be good for the community or why it wouldn’t be good for your district or whatever it is. And I tell everybody, I’m like, I’m just looking for certainty, whether or not, you know, certainly that we can do it, or certainly that we can’t do it. I really, I don’t want to sound [10:56 inaudible] here, but I just don’t care. I mean, one way or the other I’ll move on and find the next project, if it were up to, you know, making a certain project work or not, it’s really me not being able to bet on myself to go find another one. You know, I’m young, I’m only 28 and definitely trying to do these for a long, long time. So we don’t ever like to work Uphill  when I say, and it’s pretty easy to find out if you’re honest with the commissioners and council members, which is huge to have, to be honest, even if you know, they’re going to hate your idea, you need to know cause trying to be the guy who pushes through and getting vetoed and, and all these types of things, it happens all the time. Because people usually portray a story that isn’t exactly true or has the ability to change, you know, at the tip of the hat. So simply put is contact who’s ever in charge of that district immediately tell them your exact plan, you know, go from there, they’ll tell you whether or not, whether or not they think it’s a good idea. They have no reason to fib, you know, they get nothing out of that. So that’s how we approach it. It’s with the honesty, a good story, and then listening very, very well to what they’re concerned about.

Ferd Niemann: No, that’s good stuff. I’m curious, you know, too, as you’re pitching the city officials and county officials, what level of product are you promising?  My assumption is new build, new construction. You probably got more double-wides, more double-wides, more amenities, less dwellings per unit. Just higher class, maybe even senior only, I don’t know, I’m curious. What you promise them, I am curious what’s your cost per pad typically is for emphasis, maybe take land out of it because that’s going to be location specific, but just infrastructure and things of that sort.

Ray Mazzie: Yeah. So we don’t have any 55 plus communities yet, nothing like that. I can’t really relate to the age group as well as I can’t to [13:03 inaudible] workforce. Yeah, To other types of workforce tenants. But to get to your question, we look at usually like four units per acre. They’re all double wides. They’re definitely, every place out there if you’re buying a new unit they’re going to look, they’re going to look great from the outside. I mean, that’s really what the community is most concerned about. It’s up to the tenant what they want, you know what I mean, and how they want to live on the inside. And that’s a bet that we’re making, it’s not a bet that the community has to make, you know, as the capital providers we are making the bet that the tenant will like the inside. As much as I would believe in curb appeal, when people, when you’re talking about a workforce tenant, if they’re not necessarily as concerned about curb appeal, they’re concerned about value for their dollar.  And we don’t really talk about what we’re delivering as much as people might think. Usually people get stuck up on the whole idea about it. We ended up talking more probably about like the amenities and things like that. The units are kind of like a cursory review because when you show a unit in a pamphlet, it’s beautiful. I mean, they’re all beautiful. It’s really all these units. I don’t think it comes down to, and I’m not as experienced as other guys. Some people would probably think this is a dumb statement, but I really don’t think they’re that different when it comes to the unit as a whole, they’re all certified the same way that the finishes can be upgraded in all of them, I think really it’s durability and craftsmanship that makes the difference in these units. Some people can argue with me on that. But you know, there’s certain companies out there that use like two-by-sixes, or two sets of two by four. That isn’t really, that’s not something that, you know, another company can’t produce. So what I’m saying is that it’s not like anybody has superior inputs. It’s way in which they assemble and manufacture those inputs. And we would obviously never buy units that wouldn’t be zoned, we’re in Florida, we have to be hurricane grade units. So, you know what I mean? Everything’s hurricane grade, all those units are pretty nice. So it’s just really not a big topic of conversation after we show a nice rendering of a few units that we’re looking for. And once you talk about the square footage that somebody gets for that price, it’s a totally different conversation. You’re as much as that could be a red herring. I mean, it’s not that important to the people that I speak to. And maybe that’s because they tell a good story about other stuff, and that’s just not a major concern, but I think it’s key to make sure that that’s why when you start the conversation with why would you not want this and what are the problems that’s where everything stays, that’s where the conversation stays. They don’t have the opportunity, or really, I shouldn’t say they don’t have the opportunity, they have the opportunity, but they don’t have the same impetus to go searching for little things. Like what type of siding are you going to have, you know, are there going to be porches, this, that, and the other thing. They’re more concerned about, here’s the major issues that we’ve all agreed upon the first and last time we spoke, let’s address those first. And then once those are all addressed and you’re arguing over, you know, window coverings and things like that, it’s, you know what I mean? It’s almost a done deal, so that’s kind of how we approach it.

Ferd Niemann: That makes sense. And our listeners that aren’t aware of four dwelling units per acre, and it’s going to be pretty spread out compared [16:21 inaudible].

Ray Mazzie: Quarter acre per unit, you’re looking at a pad that’s, you know, 30 by whatever it depends on a lot of them are different depths, call it 30 by 80, something like that.

Ferd Niemann: Pretty spacious for sure. And highly amenitized. I’m curious, do you block them and skirt them, or you put them on ground sets?

Ray Mazzie: So really I’m not going to sit here and I have to come with the best developer or most experienced. We’re actually going to lay down pads, concrete pads and do it that way. And then block, basically these things have to be anchored down. So they’re blocked up and then the anchor down by all the hurricane straps. But I will say a general partner of mine is looking into this like alternative option that has some type of plant, like hardened plastic component. You don’t have to lay the whole pad. Yeah, honestly, that’s kind of out of my wheelhouse. I always try to make sure that, you know, I don’t speak outside my wheelhouse. But if it was just me, I’d start with pads, but that other options more cost-effective. And if it’s allowed by the county, which I’m fairly certain it is, because I see them all around my neighborhood already. Then we’ll probably go with that option.

Ferd Niemann: Got it. Makes sense. And you mentioned earlier, you may not be the end builder and developer, basically what you’re saying there, you may just get the entitlements on these parts, tee it up, you know, you are a basically land developer, you try to buy by the acre and sell by the foot or in this case, buy by the ag,  ag ground and sell by the [18:00 inaudible].

Ray Mazzie: It’s all a pad equation. You know, it comes down to how much did you know [18:08 inaudible] brokers and things like that. I get my appraisals from a bank that substantiate, you know, the cost I am putting into the property before I even bring it to the market. But you know, it’s about what you can fetch for that pad and how much money you had to put into entitle it. And really what I do is I underwrite the whole thing as if I were going to develop it. And I actually assemble a team to develop it. Cause you need the engineers, the architects anyway, and you might as well bring in a CM, construction manager or a GC to be on board in the pre-construction phase for value engineering and all that kind of stuff. So anyway, we bring in, that we assemble that whole team and I underwrite the deal as if I were going to develop it. Then once I do that, I know how much I can push my land cost up to. And then once I hear what my broker says, if my broker says it’s way higher than what I would need to push it to, then I’m like, yeah, let’s put it on the market and see if I can land in between that spread. So anyway, it’s pretty simple. And when you were talking earlier, I never answered your question on like how many dollars I put into a pad. It is extremely dependent on where you’re at, but obviously directly correlates to how much of a paper lot is worth in your area. But really, I like to look at it all in you. You don’t want to be more than like $60,000 in a pad. And I know that’s maybe high or low for some people depending upon where you are, but I think really what it comes down to for me is, it’s basic real estate in the first place its location and your money is made on the buy. If you ever pay for property, you’re in so much trouble. And I’ve done property that, you know, I got for like dirt cheap to make up on here. And it has helped me so much because that project has gotten away from us in a couple of ways, but it was able to be absorbed because their basis was so strong on a per unit basis. And really that’s how you’re looking.  Everything in economics is unit economics. You don’t understand your unit economics, then you’re in trouble. So it’s, I don’t look at things as how much for parcel or how much for this, you know, what’s my basis in a pay per lot. What’s my basis in a developed pad. What’s my basis in a, you know, a rented out unit. And then I can see where my economies of scale hit, see how much debt I can support, see what type of yield I can get out of it. And we take it from there. And without unit economics you’re flying completely blind.

Ferd Niemann: No, all good stuff, makes sense. 60,000 a lot and that’s definitely going to be location specific because I mean, with the park I’m expanding in Illinois, the parks only worth 30,000 a lot occupant. So obviously I could never spend, I can’t spend 60,000 a lot developing. Now in that case, I already had utilities there. I’m in the county without zoning approvals. I’ve already, [21:11 inaudible] already mine came with the rest of the park. So,  I’ve got an artificial cost center there, but you’ve got to recognize that if you’re going to do development and that’s where [21:20 inaudible] retails, look at the cost and then look at the hidden costs. What did I forget? Oh, I forgot about commissions or I forgot about construction interest or, you know, you got to make sure you got all those costs in the hopper to you know, better analyze.

Ray Mazzie: Definitely. We’re on the coast here in Florida. So it’s a little bit different. But one thing I can say is you want to be right around that 30 grand that you were talking about and everything, that’s where you want to be. 60 is just that max where I think you know, anything over that, I just be like, yeah, no way. That’s just us.

Ferd Niemann: What a lot rents in those markets. 600, 700?

Ray Mazzie: I think we haven’t performed at like, we’re pretty conservative. We try to stay really conservative. It’s just the best way to be. I think we have performed around 600, maybe 650. But that can change really quickly, you know, east or west of 95, east or west of the intercoastal stuff like that.

Ferd Niemann: Got it. Cool. That’s good stuff on development. What other tips or you know, good stories or horror stories, do you have you want to share as far as something that you’ve learned in your MHP business or in your career experience that I think we give our listeners?

Ray Mazzie: Yeah. I mean that point about the unit economics and stuff is the most important thing I’ve ever learned. But I think the biggest gift I ever was given was just my ability to relate to people and talk to people and really put myself in their shoes. So instead of giving some hyper-technical tip that somebody could run with and probably learn from Google. I think really the best thing you can do is just do better to understand the other person on the side of the table that you’re negotiating with, it’s just or talking to, or whatever, you can usually always help somebody in one way or another. And that I’ve found that comes full circle almost every time. So what I would say is, you know, if you can, you should when it comes to meeting people like, whether that’s getting on the phone with them, going to have lunch with them, scary to some these days. But, you know, doing something as simple as connecting them with somebody who they may need or whatever it is doing simple favors for people in your industry and making sure that it’s one way to first and foremost, help somebody, but a second way to signal to them and to other people that, you know, you’re a reasonable person that would do something nice for somebody, if it weren’t too much of cost to you, just like anybody else. And then they’re probably more inclined to reach back out to you and they think, Hey, maybe this is something that they may be interested in, or maybe they can help me on or whatever it is. I’ve found that, you know, being the resource, obviously, you know, that’s why I don’t want to presume too much about you, but I’m sure that’s why you did this podcast as well you know, being the resources, a resource in and of itself to you. So you know, whenever you can attract people’s attention, whether you’re doing it through kind of gestures or just, you know, being a networking, being somebody who’s into networking, it’s going to pay dividends far in advance. And I think that’s what’s happened to me the most is I’ve been able to cultivate on deals and opportunities and capital simply because I pick up the phone or whenever somebody calls me you know, I give them the time of day. I don’t put, I don’t ever push people off the phone. And it’s definitely the best thing you can do for yourself and for your business.

Ferd Niemann: No, I agree. That’s a great tip. Just treat people the way you want to be treated right ? Golden rule and it works so much in sales, for sure. It works in coaching. It works in team development, leadership development. It works with clients. I got a story, my old boss landed one of the biggest five apartment developers in the country. And the guy called him and said, Hey, I’m one of the biggest file guys in the country and my lawyer takes two or three days to call me back. He goes, I feel like I’m kind of a big deal if I called you today and you were my lawyer, how long would it take to call me back? He goes, I’d call you today. And if I got out of meetings late, I’d call you at 8:00 AM. He goes, okay, you’re hired. [25:34 inaudible] that was it. The guy wanted to be treated well and responsive. And it kind of reverted to what you’re talking about.

Ray Mazzie: I mean, it’s just like when you go to a restaurant, you know, it’s not the waiter can’t control the food or anything like that, but they can always control how you feel and how you’ve been treated and all that kind of stuff. So I try to be the same way. I can’t always bring the best deal or provide the service they need or whatever it is, but I can always, you know, speak to them and, and smile and be a good guy. And that’s what I try and do. Definitely burns me a couple of times here and there, but in the end, you know, it’s cheaper to learn up front than it is to learn down the road with people. So that’s kind of how I treat it and how it was raised. And it really is just fared very well because people are more inclined to help me. And it just has really helped build my Rolodex in a short period of time in this industry. I really haven’t been in this industry too long.

Ferd Niemann: Alright, good stuff. Any other tips or comments before we go, if not where else can people find you?

Ray Mazzie: No, no, nothing more. I mean, I’m always available by email and definitely on LinkedIn all the time. And so my emails, Ray@Southernwaterscapital.com, and anybody can go to Southern Waters’s capital.com, fill out an investor form. And you can, we can take it from there. Basically. We’ll set up a time to speak with you and see if we’re a right fit for each other. And if you don’t want to do anything with the fund or anything like that, and you just want to pick my brain or want to show me a deal or whatever it is, please reach out. I’m a normal guy just like anybody else. And I’m always looking to, yeah. I always looking to find opportunities and meet good people.

Ferd Niemann: All right. Sounds good, Ray, appreciate it.

Ray Mazzie: Thank you Ferd. I really do appreciate everything you do for the industry and for me personally, so thanks.