Finance v Wisconsin

Getting creative: CRE investors looking closely at campground investments

  

Commercial real estate offers plenty of opportunities for investors. Distribution centers, downtown office towers and modern apartment buildings all offer investors a safe harbor for their dollars.

But some investors are getting more creative, sending their dollars into real estate that doesn’t quite fit into traditional sectors such as multifamily, hospitality, industrial or retail.

Consider what executives at Jellystone Camp-Resorts are seeing today.

Jim Westover, vice president of operations with Jellystone Park, said that a growing number of REITs are investing in the 80 campgrounds that Jellystone runs, including many in the Midwest.

They’re doing this because they consider the kind of campgrounds Jellystone runs, family-friendly and catering to campers who aren’t exactly hardcore outdoorsy types, to be safe investments, Westover said.

The REITs investing in such family campgrounds find that the revenue they earn from the short-term rentals in which these parks specialize is only one source of income.

“Spending with the park is what we get people to do,” Westover said. “We get more dollars per night. We benefit from the ancillary income generated inside the park.”

Westover said that each Jellystone park gets about 30 percent of its income from visitors buying souvenirs,

Then there are the added attractions. Many Jellystone campground sites feature extensive water parks and laser tag arenas. Others come with high-end cabins with flat-screen TVs and comfortable bedding.

Thanks in part to these amenities, Jellystone’s parks average 1.4 million visitors a year, Westover said. That steady attendance, along with the in-park spending, have made Jellystone campgrounds a top draw for real estate investors, Westover said.

Finding new opportunities

Jellystone, of course, isn’t the only campground operator drawing the attention of REITs. Investors who are interested in alternative investments that offer a steady stream of income are finding that campgrounds are solid choices.

Real estate mogul Sam Zell provides a good lesson here. He operates Equity LifeStyle Properties. That’s a REIT focusing on mobile home and RV Parks.

It’s true that a mobile home park isn’t quite the same as a campground. But it still ranks as an investment class that operates outside of the traditional CRE sectors of industrial, office, multifamily, retail and hospitality.

Zell’s REIT is performing well these days. In February of last year, investors in Equity LifeStyle saw a return of 27 percent on their shares over the previous year. That made Equity LifeSytle Properties the fifth-strongest REIT in the nation at that time.

Jellystone, then, would see to offer plenty of opportunities for investors. According to the company, in 2016, revenue per available room at the campsites was up more than 13 percent. The company credits that increase to a jump in cabin rentals and discretionary spending within the parks.

Investors looking for Midwest-based real estate are in luck, too. Jellystone has a strong presence in the Midwest, operating campgrounds in Oklahoma, Illinois, Indiana, Missouri, Ohio, Michigan, Iowa, Indiana and Tennessee.

No boredom allowed

Camping is growing in popularity today. The 2017 North American Camping Report, a study supported by Kampgrounds of America, said that an estimated 1.3 million U.S. households plan to camp more often this year than they did in 2016. The report also said that 1 million new households have started camping ever year since 2014.

What’s behind this trend? Millennials, of course.

The report said that 51 percent of Millennials plan to increase the number of times they go camping this year.

And often when people go camping they’re not turning to tents and campfires. They want cabins outfitted with TVs, comfy couches, king beds and fully stocked kitchens. Increasingly, campgrounds are investing in these upgrades, something that attracts not just more visitors but more real estate investors, too.

“Campers want to be entertained all day,” Westover said. “They don’t want to be bored, ever. They want the luxury cabins that have all the comfort of home. They want to be away, but not really. They want WiFi and flat-screen TVs. We make sure we offer that.”

Westover said that traditional campground REITs have invested in parks that cater to more traditional, seasonal campers. These campers rent a space for five or six months.

Jellystone parks, though, cater to a more transient type of camper. These are people who camp for a weekend before heading home.

“We get more dollars per that spot in the long run,” Westover said. “We keep turning people over. You make more money with our model.”

To become a Jellystone park, campgrounds need at least five cabins on site and they need at least one water feature, such as a pool or water park.

Campgrounds that can offer this, can join the Jellystone network, Westover said.

“We need to be entertained these days,” Westover said. “When you can offer that entertainment, it puts you in the best position to be successful. It brings in a different clientele. With the Millennials and Boomers more interested in camping, we have to offer a different product mix. People are focusing on the cabins. They want to do the outdoor activities. But they also want to stream their movies and have access to a food court. We give them that.”