Elevation Capital Group’s MHPI VII LLC, better known as Fund 7, attracted more than 500 members and raised $100 million in subscriptions since launching in April 2017.
That’s a fast raise, and fund managers have announced they have raised the maximum offering amount by $50 million, to $150 million in total. Elevation, a real estate investment company based in Orlando, Florida, expects to close the fund by April 2020.
Investors have proven fond of the fund’s only two investment interests: self-storage facilities and manufactured housing. Fund 7 allots about 50 percent to each sector.
“They come to us because they like self-storage or they like mobile home parks and know we can do a good job for them,” said Brian Dahn, president of the Dahn Corporation and one of three principals along with the married couple of Ryan and Jamie Smith.
“They like the fund structure and they like the team that stands behind the fund. The size of the fund offers a better balance sheet and better diversification,” Dahn added.
Newport Beach, CA-based Dahn Corporation was founded in 1970 and has decades of experience in the self-storage industry, operating properties under the Mini U Storage name.
Is it normal to raise so much money so quickly?
“The amount is more dictated by how long the fund is open,” Ryan Smith said. “I don’t see the raise slowing or accelerating; it’s been pretty consistent.”
Dahn tossed some credit Smith’s way.
“To raise $100 million in two years is extremely successful,” he said. “Ryan is doing all the work and is very successful – and fairly modest about it.”
Who’s investing in the fund?
Smith said the majority of people make direct investments, and many have invested with Elevation in the past. Financial advisors also are a source of investors.
“Most investors believe that both sectors can produce income,” Smith said. And Dahn noted that, “They believe there’s a possibility the income can be more predictable than retail or office, other types of real estate. They like the tax benefits.”
“A lot of our clients like both mobile home parks and storage, as they have been out of the view of institutional capital until recently,” Dahn said.
Challenges and strategies
Fund 7’s biggest challenge is finding good-quality property, Smith said. “It’s very competitive; there’s a lot of money chasing properties. That’s probably the hardest part,” he said.
“Demand has been very strong. We’ve been very fortunate. We have been able to look at properties across the country,” Dahn said.
He outlined the fund’s strategy: Buy larger properties costing from $10 million to $20 million, “then leverage them around 60 percent when it’s all done.
“In the end, you’ll probably have around $300 million to $400 million in property,” Dahn said.
Dahn Corporation has built some self-storage facilities from scratch as well as worked with Fund 7 to purchase other projects that were previously under-managed and suffering from deferred maintenance issues.
Fund 7 likes to buy larger mobile home parks, those with 150 or more lots.
”Most parks are relatively inexpensive, less than $10 million,” Dahn said.
Fund 7 is Elevation’s seventh investment offering since 2013. Fund 7 controls more than 7,500 units spread among 19 assets in seven states. Also, it has made monthly distributions to its members “and expects distributions to continue for the foreseeable future, though distributions are not guaranteed,” it said in a news release.
Overall, Elevation and Dahn Corporation have been involved with investment funds which have bought properties with a combined worth of more than $475 million across 175 assets in 30-plus states.