Dale Strom: A True Opportunity to Purchase A Landlord’s overt offer to Tenants and CASA of Oregon

Want access to MHCO content?

For complete access to forms, conference presentations, community updates and MHCO columns, log in to your account or register.

By:  Dale Strom

This is the sixth and final part of a series of a private owner of a Manufactured Home Community willingly attempting to sell that Community to an Association of tenants within that Community. Riverbend MHP is a 39 space community located within the city limits of Clatskanie, OR.

The delays of the purchase by the state agencies approving the sale to the tenants were discussed in the fifth part of this series. The tenants want to push back the closing to possibly March 1 from an original target date of November 1. The author is told that the close will probably be around the middle of January.

The vacation we had planned with our sons and their wives was scheduled for February 16. We have just come into the new year with the signing of the final documents just a few weeks away.

The delay for the November closing date was due to the Oregon Department of Justice. However Oregon Housing and Community Services (OHCS) also played a role in the delay. OHCS is Oregon's housing finance agency, providing financial and program support to create and preserve opportunities for quality, affordable housing for Oregonians of lower and moderate income. I was not aware of the specifics to the causes of the delays. As I learned later, the funding to Purchase Riverbend in Clatskanie came from several sources.

One other delay that occurred at the end of this process came from an easement that I signed with Charter Communications almost 10 years ago. That also needed to be addressed. That wasn’t easy in that Charter’s offices stretch from San Antonio to Southern California to Spokane. Backing out of an agreement that automatically renews every 3 years was not easy. The people at CASA worked with the attorneys at Charter to come to an agreement on either working with the existing agreement or outright termination of that agreement.

To complicate matters, CASA terminated its employment of their Development Manager. This was the one key individual that I relied on to guide this process and to be the main line of communication between myself and the Board of the new Cooperative. Now it doesn’t look like the closing is not going to get done in January and I am coming close to a personal vacation deadline. That wouldn’t go very well with my better half.

In late January, I was contacted by a contractor on a project that I started a year before. The riverbank at one end of the community started giving way which threatened a space with a home on placed on it. Where moving the home to another safe space would cost less than $15,000, this was much less that shoring up a riverbank at an estimated cost of 70 to 80 thousand dollars. My decision to move the home was obvious due to the costs of each of my options.

Apparently the Cooperative decided to pursue the bank stabilization project. Getting together with the Contractor’s Project Manager, I signed the permits that I applied for to give that responsibility to the Cooperative. It would be the Cooperative’s decision to explore the stabilization project. What is going through my mind is how would the Co-op be able to finance that project? Whatever that answer to that question is, the permits for the Army Corp of Engineers and Department of State Lands is now in the hands of the Cooperative.

CASA apparently settled their issues with the DOJ and OHCS to the point where the funds were secured. The sale was to occur. The date to sign at closing was set for February 14; two days before vacation. I was to meet the escrow officer in downtown Portland at 2:00 PM. To my surprise, the Board for the new Cooperative was also there having just signed the closing documents in the hour before I was to sign. Needless to say, they were very excited to make this deal as much as I was relieved to sign it away and move on myself. Now it is time to move on, and I couldn’t be any happier.


During calendar year 2013, State Representative Nancy Nathanson asked the Landlord Tenant coalition to work out an agreement between the Tenants and Manufactured Home Park Landlords. To summarize the conversation of that entire year, tenant associations were to be given an opportunity to compete to purchase the communities where they live when an owner considered selling the community. Especially if that prospective buyer wanted to close that Park. The tenants wanted the opportunity to actively manage their property while gaining equity in the communities where they lived.

The Landlords on the other hand were leery of the information that would be divulged to the tenants, the time it would take for the tenants to form a Cooperative Board to explore the possibilities of a purchase and the possibilities of losing a sale to another private party that was to be based upon the IRS tax code of a 1031 exchange. Landlords were concerned that information that was gathered by the tenants could be used against them in social media or in legal proceedings if the tenants were unsuccessful in purchasing the community.

By the end of 2013 the Tenants and the Landlords were not close to an agreement on the issue. It was a confrontation that went to the legislature in the short 2014 session. This led to HB 4038A that was passed in February of that 2014 session allowing the tenants of a MH Community the opportunity to be forewarned of a potential sale and form a Board to participate in any bidding process.

Landlords were required to inform the tenants of their intent or at least their possible considerations as to the disposition of their community. It was most Landlord’s feelings that in order to accommodate the Tenants, the time to agree with another private party that would use the 1031 option as part of the future transaction would be lost because time would be of the essence in this case.

The “carrot on the end of the stick” to the selling Landlord was the waiver of long term capital gains on the sale of the property. When the 1031 is exercised by the seller, the capital gain waiver is not much of an enticement. While the seller must wait for the tenants to organize and review the aspects of the community, that seller could lose his/her opportunity to make a good deal under the 1031 code because of a buyer getting tired or afraid of waiting.

The reason that I gave the tenants of my community and CASA the opportunity was that I wasn’t interested in exchanging my property in a 1031 deal. I’m not interested in staying in the business. My adult children are not interested as well. CASA has always been interested in properties like mine and the savings of the long term gain in Oregon was also a plus.

This process is for anyone that wants to get out of the business, without a timeline and has the patience to wait out the time to sale. In a private sale to a private buyer, a 6 week to 3 month sale would and should be expected. As mentioned in the previous parts in this series, the communication of the buyers was very poor as to where they were in the process. You would promptly hear from the buyers when there were issues that did come up that needed my attention (refer to Part 4 of this series). In selling to the tenants, the requirements made upon the tenants for this sale far exceeded the requirements of a private buyer. No wonder that the timeline for completion of the sale would be anywhere to a 5 to 8 month process.

My asking price for Riverbend in Clatskanie was $1,700,000. CASA and the Cooperative (now known as Deer River Cooperative) agreed to that price. After the work that was done by the buyers of this deal, Deer River Cooperative received a $1,365,000 grant, a conventional 2% bank loan of $1,000,000 amortized over 30 years and due in 20 and a 5% loan from CASA of $250,000 amortized over 30 years and due in 20.

Where can a private buyer get that kind of financing for the above deal? Business and the free market cannot survive with deals like this. A little private investor like myself drools at this kind of opportunity. At this time in our economic cycle, I cannot see how a privately owned bank can offer any money with a 2% return.

There were 2 homes that I still owned after the closing of February 14. An existing tenant that lived in another space at the time of closing agreed to purchase the manager’s home shortly after the park closed. This tenant would pay for the manager’s unit after her home sold. That home sold last month.

The second park owned home was occupied by a tenant that was on section 8 assistance. Because of her health and the difficulties she was suffering from, she moved from the home leaving it vacant. As in the case above, another existing tenant wanted this unit. An agreement to sell was made last month and the sale was completed last week.

As of now, with the exception of the IRS, I am totally out of this community. It was a long experience sometimes with the feeling that I am on a Carnival Ride. The weight of the responsibility is off my shoulders. I don’t ever think that I will miss it.

I did get to know a few people that were on the Deer River Cooperative Board of Directors. I was impressed with the motivation, intelligence and cooperation that they demonstrated. They were most helpful to me going through the whole process. I did rely on them strongly in certain situations where I felt that I accommodated them as well in other situations. They have mentioned some of the improvements that will be made to the community over the next year. Lighting will be improved in certain areas; an office/board room will be constructed on the site where 2 storage sheds once stood; a sewer line will be repaired near 2 RV spaces and the bank stabilization project will go forward.

This was an article, when started was going to be some basic thoughts. The more I started writing, the longer this article was going to be. What was going to be a 2 part article turned into a multiple part article. It turned out to be 6 parts long, partly because of the length of time of this sale. Although not for everyone, sales to Cooperatives may have their place; time will tell of how successful these communities will be.


Dale Strom is a second generation Manufactured Home Community landlord. He is a Board Member, past President and current Treasurer of MHCO.


Location Tags: