Sell, sell, sell and cut, cut, cut

Frank Rolfe, already well-known for his predatory approach to mobile home park investing, has been preaching the same gospel to RV park investors in his RV Park “University” offerings and in regular podcasts and email broadsides. I’ve written about him before, mostly as a warning to others, but lately he’s upped his game to such an objectionable level that he’s worth a return mention.

His most recent screed is titled “The three best methods to improve RV park net income,” and it kicks off by turning to “Chainsaw” Al Dunlap for inspiration. Dunlap was “a well-known corporate raider and business efficiency stalwart,” Rolfe would have you believe, and Dunlap’s guiding motto of “sell, sell, sell and cut, cut, cut” is “not a bad mantra for RV park owners, as well.”

Rolfe goes on to write that there are three “key areas” that have maximum impact on the bottom line, the first being an unremarkable emphasis on improved marketing. It’s in the second and third key areas–“increase rents and occupancy” and “cut operating costs”–where Rolfe shows his true colors, and RVers should not be surprised to learn that in this zero-sum game, whatever benefits Rolfe and his acolytes will not benefit them at all.

Step one, “increase rents. Yes, it’s that simple.” Step two, “bring in extended stay customers,” taking advantage of “a large and growing category of customers who want to live in their RVs full time.” Moreover, Rolfe adds, there is a growing fleet of tiny homes “that can only be placed in an RV park by law,” providing campground owners “an extremely dependable (read: captive) source of income.” Step three, put more emphasis on park models and glamping, creating “more of a ‘hotel’ format, where the customer brings no RV of their own.”

Having thus jacked up rates while decreasing the number of transient RVing sites, Rolfe moves on to the expense side of the ledger, starting with “horribly bloated and completely unproductive” payrolls that must be slashed. That non-specific analysis is followed by the equally vague observation that a “simple line-by-line review of each cost item may yield huge dividends,” especially if approached with an “analytical and creative” mindset.

And there you have it: sell, sell, sell and cut, cut, cut.

Oh–but one more thing. Al Dunlap, who earned his “Chainsaw” moniker after cavalierly firing 11,000 employees at Scott Paper, for which he received $100 million in compensation, went on to try the same “analytical and creative” tactics at Sunbeam. He eventually got fired by Sunbeam’s board of directors–¬†creating the memorable headline, “Board Cuts Chainsaw”–and subsequently settled a civil suit, filed by the Securities and Exchange Commission, accusing him of several counts of accounting fraud that misrepresented Sunbeam’s financial results. He paid a $500,000 fine and agreed to be barred from ever again serving as an officer or director of a company.

Three years after it fired Dunlap, Sunbeam filed for bankruptcy. Two decades after that, Frank Rolfe has found his mentor.

Bubble, bubble: part two

Sometimes, it seems scarcely a week goes by without yet another announcement of an investment group with deep pockets jumping into the RV campground business, adding to a bewildering mix of players that can’t be kept straight without a detailed scorecard.

Last week, for example, Halmos Capital Partners announced the formation of Cedarline Outdoor, “an outdoor hospitality investment platform focused on the RV park industry.” Cedarline says it wants to create a “diversified portfolio of properties unique to the industry in terms of infrastructure, scale and visitor experience.” No telling yet what that means, but use of the word “unique” is always a grabber, especially in this context. We’ll have to stay tuned.

Just a couple of days later, NAI Global–a commercial real estate juggernaut that “maintains its competitive edge through a well-established culture of learning that informs decision making at all levels” and thereby demonstrates why it will never ace the SAT verbal section–declared it has “expanded its offerings” via a “brand-new service,” NAI Outdoor Hospitality Brokers. The Colorado-based “team” will specialize in purchasing and selling RV parks, campgrounds and glamping resorts across the U.S.

And so it goes, week by week.

What’s intriguing about all of this belated attention is that it’s coming just as interest rates have started an upswing, with inflation worries overshadowing the markets. For those with a cautious bent, this might be seen as a good time to pull back from any real estate investing, especially in as overheated a niche market as RV campgrounds, as briefly described in my last post. In times of economic uncertainty, goes the timeworn refrain, cash is king. Keep your powder dry, and wait for valuations to tumble.

Not so for the folks at the circus known as RV Park University, however, which mercilessly flogs a “home study course” aimed at middle class Americans yearning for a lucky investment break. Head ringmaster Frank Rolfe–who most assuredly is not speaking to the likes of Cedarline or NAI Global–contends that the stock market currently “is more overvalued than at any other moment in American history,” making this precisely the right time to invest in a niche “that is built on the fundamentals of income and cash flow and not PR and logo design”–that is to say, in “the simple RV park.”

The key to this great opportunity, Rolfe wrote in a recent broadside titled, “With the stock market collapsing, time to buy an RV park?” is that campgrounds are “a very simple business that anyone can understand quickly. You rent spots to park RVs–it’s simply renting land.” Even an idiot presumably could grasp that once you own an RV park you can just settle back and watch the money roll in–and to help you get there, Rolfe is ready to sell you a bunch of CDs and an outdated paperback for $400 or so.

Of course, nowhere in this come-on does Rolfe intimate that the campground biz is every bit as overvalued as the wider stock market. Or that whatever their other shortcomings, the rapidly swelling ranks of real estate investment pros are not going to leave much more than bleached bones for the small investor to pick over. That wouldn’t help his business one bit.

When a lot is not a lot

If you’re thinking about getting into the campground business and start looking online for resources, make sure you understand the background and possible motivations of those you encounter. While not necessarily underhanded or sleazy, those you find may have a different but not immediately obvious frame of reference that isn’t compatible with yours–especially if yours is still at an embryonic stage. You’ll save yourself some grief if you understand that before you begin wading in.

What brings this to mind is the latest emailed dispatch from Frank Rolfe, one of two partners (with Dave Reynolds) in the promisingly named RV Park University. “RV Park University” certainly sounds like it should be chockablock with hot tips and good advice for prospective RV park buyers and operators, and indeed its web site offers such resources as a $40 paperback book and a $400 “home study course” for anyone trying to learn the ropes. RV Park University is, in turn, affiliated with RVPark.com, which among other things operates RVParkStore, a bulletin board of campgrounds for sale. Sounds like a good place to start getting educated, isn’t it?

Yet it’s probably wise to understand that despite all the RV references, Rolfe’s and Reynolds’ main line of business is trailer parks and their entire perspective on RV campgrounds is deeply colored by that outlook. For Rolfe and Reynolds, RV trailers and fifth-wheels are just different incarnations of mobile homes, and RV parks are attractive investment opportunities as cheap residential facilities, not as recreational ones.

There’s nothing wrong with that, of course–there are quite a few RV parks filled with long-term residents and only a smattering of short-term sites, if that. But a sea of asphalt or gravel without trees or even the most fundamental amenities is not what most people imagine when they think “RV park,” and an investment philosophy based on a “contrarian bet on a poorer America,” as Rolfe was quoted as saying a few years ago, is not what drives most prospective campground owners. For that majority, it’s prudent to take anything coming out of RV University and its various off-shoots with a large dose of skepticism.

Oh–and about the emailed dispatch that prompted these thoughts? It’s the red flags it was waving, starting with its reference to growing demand for “RV park lots.” They’re not “lots.” They’re sites. Trailer parks have lots, and people stay on them for a lot of time, for which they pay rent. RV parks have sites, and site fees. That may sound like a trivial distinction, but in fact it’s a fundamental difference that tells you volumes about the speaker’s attitude toward his business. As always, caveat emptor.

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