In 2016, London real estate mogul Robert Bull had his credit card cut up in front of his kids at a London Kentucky Fried Chicken.
He was bankrupt due to an over-leveraged property portfolio gone south.
Yet by the summer of 2023 he was worth $1.9 Billion.
This is Mr. Bull, his posh home and soon to be 3rd wife.
Bob doesn’t do slow.
He owns RoyaleLife, England’s largest portfolio of mobile home parks,
aka: “Caravan Parks”
aka “Holiday Parks”
aka “Bungalows”
…as they’re called in the UK.
The British are much better than us at branding. “Holiday Parks” sounds a bit more welcoming than trailer parks.
So, Mr. Bull went from nothing but a bucket of finger-licking chicken to $1.9 Billion in seven years flat.
Hot Damn.
How in the world did he do this?
Well it helped being a 3rd generation MHP owner, (Dad apparently came out of retirement to help him emerge from the ashes to raise $10mm for RoyaleLife).
But mostly, it was wild bets and big swings, backed by mountains of high octane debt.
Which is why his empire is at risk again.
Because Mr. Bull was recently sued by another mobile home park operator over a broken deal to acquire another park portfolio.
The lawsuit triggered a bankruptcy petition, which is forcing RoyaleLife to restructure its debt.
RoyaleLife owns a ton of entities (presumably many of which are not distressed), but thanks to the UK’s bankruptcy rules and strong creditor protections, the BK proceeding seems to have triggered a cascade of technical loan defaults, which likely gave all of Bob’s lenders rights to accelerate his loans.
That, or he crossed (cross-collateralized) all his loans via a portfolio credit line with strong loan covenants (i.e. lender protections).
Either way, not good. And now the lenders are lining up for their claims.
This is when we learned of our friend Bob.
Because Mr. Bull owes the largest mobile home park operator in the world, SUN Communities (“SUN”) the tidy sum of $350mm.
Why would the extremely savvy, battle-scared, and competent management team at SUN stroke this man a nine figure check??
Loan-to-Own
It’s fuzzy, but this loan was somehow related to SUN’s entry into the UK park business via their purchase of Park Holidays for $1.3B a few years ago.
This loan is comprised of mortgages backed by a number of Bob’s best properties and several liens on UK mobile home manufacturers owned by RoyaleLife, which presumably help infill their various parks.
Given Mr. Bull’s volatile track record, I strongly suspect this was a “loan-to-own”, investment where the lender is either excited or at least indifferent to a possible loan default.
Because now - thanks to the default - SUN has a path to own the real estate at a much lower basis than if they bought the properties at market prices.
It sounds like they might also end up owning a local mobile home manufacturer or two as part of the foreclosure, which would be a boon to their new UK park operations.
Major park owners in the US are extremely dependent on home manufacturers. SUN probably loves the idea of controlling more of their supply chain as they look to infill and expand in the UK.
That’s why you see a lot of owners buy or start mobile home moving or install businesses - to control costs and timing.
Plus, SUN collected a TON of interest on the loan (~$30M this year alone) before it defaulted.
It might take awhile, but SUN will probably come out way ahead when all is said and done.
It’s good to be the bank.
But don’t don’t worry too much about Bob. I’d bet he’ll work something out.
Bigger than life characters tend to claw their way out of hairy problems that would paralyze others.
Borrowers with good assets (and bad balance sheets) in loan-to-own situations, will often work out a side deal with the lender, who doesn’t want to drag out the foreclosure process in BK proceedings.
Lessons
Like the recent insane spike in interest rates, this is another reminder to not take on nosebleed levels of debt to build a real estate empire.
It works until it doesn’t.
Your market cycle timing has to be flawless to pull it off.
Also, be careful who you take debt from.
If you take debt from a much larger operator, there is a good chance they would rather own your property than the note. This adds a weird incentive layer for the lender when negotiating a mountain of loan docs. Often they’ll toss in extremely favorable loan covenants that give them a much higher probability of controlling your asset someday.
I’m looking forward to Bob’s next venture. The man does not go small.
Reminder to self: never let your wife talk you into a magazine home photo shoot.
Happy Trails,
MHP Weekly