In this episode of The MHP Broker’s Tips and Tricks podcast, Maxwell Baker, president of The Mobile Home Park Broker, interviewed Kevin Caiaccio, a closing attorney who represents multi-family and mobile home park investors and sponsors.
This and every Tips and Tricks podcast episode is brought to you by The MHP Broker’s’ proprietary Community Price Maximizer. Use this four-step system to get the highest price possible for your mobile home park or RV community when you sell it through The MHP Broker. Guaranteed. Ask Max for details.
Here Are the Show Highlights:
If you’re a sponsor or investor in a real estate deal, reach out to Kevin Caiaccio at Robinson Franzman in Atlanta for deal closing legal issues. If buying or selling, contact Max Baker at email@example.com or give him a call at (678) 932-0200.
Power Quotes in This Episode:
“As soon as you get a lender involved, you’re going to have loan covenants and obligations, there’s going to be personal guarantees (and) leasing restrictions.” (Kevin, 4:46)
“The most important concept to remember is as soon as you take someone else’s money, you have a fiduciary obligation to act diligently and prudently with that money. It’s no longer you making whatever decisions you want, you have an obligation to these investors.”(Kevin, 6:08)
“I would say that if if you haven’t had any deals that didn’t exactly work out, you haven’t done enough deals, because ultimately over your career, you’re gonna have some that might lose money. And when that happens, investors are unhappy. And there are lawyers out there, that will come in after the fact.” (Kevin, 6:40)
“So it’s always extremely important to not go cheap on your attorney in the people creating your paperwork if you’re raising hundreds of thousands or even hundreds of millions of dollars.” (Max, 9:14)
(On the economic state of the mobile home park industry) “I think if you take the kind of mid–term or long–term view, things will be fine.” (Kevin, 11:29)
00:19 Maxwell Baker
Hey y’all welcome to a another beautiful episode of the mobile home park brokers tips and tricks, podcast. As always, this episode is brought to you by the community price Maximizer. It is our proprietary system that will guarantee you a higher price. When you exclusively list with us four step programme give us a call 678-932-0200 And today, y’all, I have a long standing friend that has been in the industry ever since I’ve started and he is an attorney that specializes in a lot of different things that help park owners syndicate and transact. Really anything that has to do with the capital stacks as well as transitioning from being an owner to not being an owner, Kevin Caiaccio. Welcome to the show, man. It’s good to talk to you finally on this thing,
01:19 Kevin Caiaccio
Max. Thanks for having me. Always enjoyed speaking with you.
01:21 Maxwell Baker
Yeah, so y’all, Kevin is is with Robinson Franzman and they’re based out of Atlanta, he actually partnered with them, he had his own firm. And now he’s with a pretty large firm now beautiful office actually went there, here in downtown Atlanta. Tell us a little bit about kind of what you do for park owners and just specifically like, kind of your in’s and out’s of the industry.
01:48 Kevin Caiaccio
Sure thing. First, let me just give give you a little bit of my background. I was born and raised here in Atlanta, attended Georgia State for undergrad went to University of Georgia for law school, graduated law school in 1995. So coming up next month, it’ll be 28 years I’ve have been in private practice and really all I’ve ever done is commercial real estate transactions and the corporate work that goes along with that. As you said, I joined Robinson Franzman last year to have a little bit bigger of a platform. We all have a pretty similar practice. And then it involves commercial real estate, transaction work and also the syndication work and other corporate work that goes along with it.
02:30 Kevin Caiaccio
We really work in all asset classes, but have a primary focus in multifamily. And as a part of that really kind of a subset of the multifamily practice. I represent a lot of MHC sponsors and investors. And I’ve done that for many years and really enjoy that. We handle transactions all over the country not just limited to Georgia, to really our goal for someone buying and selling commercial real estate assets is to be kind of a one stop shop. Once we have the relationship with the client, I can follow the client wherever the deals, take them. And you know, really we try we strive to be really deal making attorneys you know, you hear so much about attorneys, you know, telling you why you can’t do things. And I get tried to be a deal maker and try to be practical, I view my role is to analyse the legal risks, explain them to the client, and my clients are smart people and they know what they’re doing, they can take that information, and then make their own decisions. And I just tried to guide them from the, you know, from the legal kind of risks and aspects of those decisions.
03:31 Maxwell Baker
And that’s very, very important, y’all, because I have run across some overly baring attorneys in my journeys of closing deals here, and a lot of them can be over opinionated. And a lot of them can be deal killers and that deal makers. And Kevin, by all means is always been a deal maker, when it comes to closing the deal. He’s always been upfront about, Hey, these are the risks, but we’re all adults here. So you need to make that decision. But here are all the legal ramifications on each whichever route you want to take. So Kevin, tell us a little bit about the capital stock stuff that you do. I know I have witnessed personally, the rise and unfortunate fall of some indicators of the industry.
04:22 Kevin Caiaccio
04:23 Maxwell Baker
We won’t mention their names, but you’ve seen all ends of the spectrum when it comes to syndication. So I’m gonna ask a top five things to really look out for when you’re raising money and maybe even on the back end. What are the top five things that could cause you to lose your butt, if you don’t pay attention?
04:46 Kevin Caiaccio
Sure thing I think the most important thing and I guess if we’re gonna have a top five, which ought to be subsets of this most important concept, and that’s if you’re using your own money you can make whatever decisions you want, and you can take whatever risks you want, because it’s your own money, right. But of course, most people don’t do real estate deals with their own money, as you said, there’s going to be a capital stack. So the first part of that is going to be your debt part of it, right, which is typically, you know, in the past, it might have been 70, or 80%, you know, these days more fit, like 50 to 60% of your capital stack. But as soon as you get a lender involved, you’re going to have loan covenants and obligations, there’s going to be personal guarantees, leasing restrictions.
05:31 Kevin Caiaccio
You know, one thing I’m seeing lately with Fannie Mae is there might be limits on the number of park owned homes you can have, that’s one example, something to be aware of, in your loan covenants, there’s going to be some tenant protections, sometimes that’s another big topic with the pickly. With the agency lenders, you know, back to the guarantees, a lot of loans are non recourse. Well, what does that mean, there’s always going to be carve outs, very important to understand that. So again, you’re taking someone else’s money, now you got these restrictions in place, and that’s your lender part of the capital stack. And again, that’s only going to be a percentage of it.
06:08 Kevin Caiaccio
Then there’ll be an equity component. Again, typically, you’re going to have a partner or investors and that can, that can take any number of different variations, it could be a full blown syndication, or it could be you and some family and friends, just pulling some money together. But the most important concept to remember is as soon as you take someone elses money, you have a fiduciary obligation to act diligently and prudently with that money. It’s no longer you making whatever decisions you want, you have an obligation to these investors.
06:40 Kevin Caiaccio
Now, if all your deals are a home run, I mean, it’s not a problem, right? Everybody’s happy at the end of the day, but unfortunately, not all the deals are the home run. And, you know, some listeners might be saying, well, I’ve done a lot of deals, and it’s always worked, and they’ve always been homeruns. Well, that’s great. But I would say that if if you haven’t had any deals that didn’t exactly work out, you haven’t done enough deals, because ultimately over your career, you’re gonna have some that might lose money. And when that happens, investors are unhappy. And there are lawyers out there, that will come in after the fact. And they will try to sue the sponsors, right, and say you didn’t act prudently. You didn’t, you weren’t diligent doing everything you needed to do. And that’s where the risk is.
07:25 Kevin Caiaccio
So, so much of what I do, has to do with all these various agreements, the dealing with the lender and their covenants and understanding that, and then dealing with your partners, and in the operating agreements. And in those agreements, you know, we spell out which rights you have, and we disclose the risk to the investors. And that’s, that’s so critical. If you have a deal, that doesn’t exactly work out, in a way I kind of view it as what we’re doing in these agreements is selling a sort of an insurance product almost right.
07:59 Kevin Caiaccio
There’s certainly no guarantee that if you get sued for a bad deal, that you might not have any liability to your investors. But if these agreements are crafted properly, then you’re really throwing up roadblocks to investors to recover. So really, again, it’s kind of like an insurance product. And this is a lot of what we do, it’s not all what we do, but a lot of it is focusing on on these agreements. And you know, this is a lot of stuff that the sponsors really aren’t going to have the expertise and understanding the nuances of these agreements. So this is an example of the kind of stuff where, I would focus on those agreements to try to protect you in the event of any trouble ahead.
08:41 Maxwell Baker
Yeah, and I’ve probably you more than me witness kind of what happens if you don’t have the right stuff. I mean, the SEC will come down. And I don’t want to be a doomsdayer or here, but it’s important to understand kind of what happens, and they will basically tell you to never be able to raise money ever again. That’s just kind of one of the lighter things they can do. I mean, obviously, there’s sponsors, the sponsors can get sued and and sometimes even put in jail if you’re not if you’re not done, right.
09:14 Maxwell Baker
So it’s always extremely important to not go cheap on your attorney in the people creating your paperwork. If you’re raising hundreds of thousands or even hundreds of millions of dollars. Obviously, you’ll want to get the best in the biz. And Kevin, in my personal experience has always been the best when it comes to this kind of stuff. I mean, he’s seen it all. So Kevin, what are you seeing in the market right now as far as transactions that and I know you do other multifamily assets, but I’d love to hear kind of what you’re seeing as far as transactions.
09:48 Kevin Caiaccio
Yeah, we still have been very busy. There’s still a lot of trades occurring. But I think there is a sense in the markets that you know, we’re heading into a period of greater uncertainty And of course, there’s always some uncertainty. And if there wasn’t uncertainty in the markets, there wouldn’t be money to be made, right. But we’ve been very fortunate though, really, ever since we came out of the Great Recession in 2010, or so that, you know, commercial real estate, which has been going up and up, and particularly multifamily and, and mobile home communities, the values have just been going up and up and up. And we’ve been so fortunate to lift out it. And even with the pandemic, I mean, when that hit, everybody felt like that was doomsday. And here’s the end. And that really wasn’t the end, things have been trading in and continue to rise in value since then.
10:33 Kevin Caiaccio
But now we’re in this period where all of a sudden interest rates are changing, right, and then they were stable and low for so long. So that’s really a big variable. And it kind of, even though I guess, you could say we should have seen it coming in terms of when it was coming and exactly how it hit, there was so much uncertainty and some shock to the system, when last fall the rates on particularly on the tenure, which is where a lot of the commercial mortgage rates are based on really shot up last fall, and it caused some some concern. And what that means, and we still don’t know what’s happening with interest rates. So that’s a big challenge in the market right now. Because we don’t know what’s going to happen with rent growth, rent growth has been going up so much for so long. You know, when is that maxing out. On the other hand, you know, unemployment remains very low, which is always critical for real estate. So you have sort of those competing forces. And whereas that’s going to lead.
11:29 Kevin Caiaccio
But one of the thing I think that your listeners should focus on that they might not think about, and that’s the insurance markets, too, I’m seeing that as being a big problem in transactions, particularly in Florida. I saw some last year after the hurricanes, there were some disruption in the insurance markets there. So the one thing I would really advise clients to focus on as the insurance cost and don’t assume just because something costs a certain rate in the past, that you know, it’s going to be the same, that’s something really to focus on early in shop for that. So all that’s to say, I mean, I don’t know, I mean, the transaction is still happening. I think the fundamentals are strong. I think if you take the kind of the midterm or long term view, things will be fine. In the coming months and quarters, it’s a little hard to tell. But you know, from my desk, we’re still seeing plenty of transactions, Capital Markets are changing, but there’s still capital out there. So we’re keeping busy and I think most of my clients, again, at least in the midterm are pretty bullish on the markets.
12:32 Maxwell Baker
Yeah. One of the things I was gonna ask you is kind of pivoting. And we appreciate your insight on that. Is the park owned homes. at closing? I know a lot of people struggle with lost titles and an understanding that lenders these days require the titles at closing. Some of them don’t. Can you kind of open that up a little bit? So you know, people can understand, like, what is it that people should look out for these Park owned homes, like, obviously, you know, that we’ve come across it a lot when they’re not around, and kind of some of the tactics that you’ve seen people do to get across the finish line with missing titles and whatnot.
13:15 Kevin Caiaccio
And that can be a big challenge. And part of it is that the sellers oftentimes don’t have great records. Some of the homes might be older, some of the homes might be titled in an affiliate or a prior owner, because the seller didn’t want to go to the trouble and expense of retailing. So the first thing to do is just when you’re buying is just to get a handle on that, you know, the sellers can say, Okay, we’ve got so many Parkland homes, you really need to drill into that as early as possible, and figure out what do they really have? Let’s see what titles Yeah, let’s see what titles you don’t have. And you know, for some older homes, if there’s not a title, not necessarily the end of the world, but a lot of these homes do comprise a pretty good portion of the value. So you need to focus on that. Let’s see what they have. First, let’s get copies of it, and then analyse what we need to do what needs to be re-titled. And what can we take at closing? And as you mentioned, what requirements does the lender have?
14:14 Kevin Caiaccio
Because you don’t want to get up to closing and feel like you’re comfortable with what you have in the way of titles, and then find out your lender wants more or once everything re-titled or you know exactly what their requirements are. If you get in there, and there’s a big mess, which is not uncommon, then there, of course, are services out there that can help with titles and I think it’s a good idea to use those titling services. But I think the important thing is just to get a handle on early and not necessarily just rely on what the seller is telling you and see what do we really have in the way of these titles?
14:45 Maxwell Baker
Yeah, and some of the times we’ve noticed that will get the bonding paperwork started prior to closing. And then it’ll be an after closing kind of transaction that will start messing with the titles or transfer them after closing, sometimes that works, sometimes it doesn’t work. It just depends on the lender relationship. What about utilities? like, I’m trying to give some of the listeners here some some of these things to look out for I know that sometimes these utility deposits are like $20,000, depending on where you are for, a mobile home community, or if there’s any kind of discrepancies or citations or pending citations. Prior to getting to closing on like I said, discrepancies, do you have any, you know, experience? I know you do, but anything that you can share, when it comes to that kind of stuff?
15:36 Kevin Caiaccio
Well, it varies so much, from jurisdiction to jurisdiction, you don’t always know exactly what kind of issues you’re going to run into. So it just needs to be again, part of the early due diligence. And, you know, really, on both these issues, we’re talking about the titles and the utilities. The key comes back to the timing, you know, that is so critical when acquiring an asset, right? Because the sellers always want to close quickly, there’s a lot of pressure on you to close and quickly, if there’s competitive bidding, you know, how quickly can you close time is such a valuable asset there for all these reasons that we’ve been talking about, you really need to have time to dig into these issues and, you know, when dealing with utility companies, it can take time to get the answers and really make sure you have the correct information.
16:22 Kevin Caiaccio
So there’s no surprises. I mean, that’s really what we’re trying to avoid is surprises when you get to the closing table. And of course, you’re going to have a due diligence period where you can walk from the deal if you uncover big problems, you want to make sure not to go past that deadline where you have some earnest money at risk. And that’s part of what we do is negotiating the purchase and sale agreement to make sure you’ve got access to all the due diligence that you need, and the time enough to analyse it.
16:53 Kevin Caiaccio
Because again, these sellers, sometimes they just are incompetent in their bookkeeping in the record keeping, and that’s part of it. But sometimes even if they are competent, they don’t want any retain liabilities. And their position is going to be, look buyer you have to go figure this out. So we’re not going to necessarily tell you or make representations about utilities, or what the cost is going to be. So it falls back on the buyer and it’s something you have to do between the time you sign the contract, and get to closing and try to avoid any surprises and again, it’s just really uncertain, depending on where you are what you know what that can look like.
17:30 Maxwell Baker
Appreciate that. One of the other big things that I’ve noticed is prorations, especially with some of these communities that have daily, weekly, monthly, semi annually, annually, like with the recollections if that hasn’t been pre negotiated out, what have you noticed that it happens at closing?
17:54 Kevin Caiaccio
Well, yeah, I mean, it’s closing attorneys, we have to take the information that’s given to us and of course, it comes from the seller, which, you know, if the reason we just talked about may or may not be accurate or well kept. And you know, sometimes you also see park owners, once they get it under contract, you know, kind of check out a little bit. So you have to be careful about that. It really is a function of the buyer, and the buyer’s property manager, getting in there and understanding the record keeping understanding the leases, and not being blindsided. Because if you just rely on the seller to give you the data, and I see this so often, then you know
18:30 Kevin Caiaccio
And then after closing, the buyer gets in there, and then really starts getting more down in the weeds and realise their errors were made. And then of course, it’s very hard to go back and collect from the seller. So you just got to get down in the weeds. Get with the sellers, property manager, make sure you understand how the clients are paying, make sure that they are doing property management and good record keeping between the contract signing and the closing. So that, you know you get all the dollars you’re entitled to because the way it should work in closing as buyer, you get a credit for anything that was pre paid. And you want to make sure that’s accurate. And don’t find out after the fact that you’ve left dollars on the table.
19:08 Maxwell Baker
Yeah, because I’ve noticed that the deposits magically disappear. They’re not being handled in the legal way that they should be having, you know, security deposits in a separate account. They’re just kind of thrown them in there. And you know, this is what you get. So we’ve been noticing that with a lot of mom and pops and it’s it’s pretty normal. From what we’ve seen that that’s happening, the proration stuff I mentioned, just because we’ve dealt with some parks that are RV communities or the weekly rentals and they’re like, alright, we’re closing on Friday. But this week’s collections were x, but we want to give you credit to why. And then there’s always a huge negotiation on if it’s through the seller or to the buyer when it comes to which side of the table was getting the proration. So it’s always we try to get that upfront negotiated. Because otherwise, if you don’t, y’all are gonna end up getting with Kevin, Kevin’s time is expensive. So that’s one of the things that we’ve we’ve really tried to see in our contracts. And I know Kevin sees it a lot as well.
20:20 Kevin Caiaccio
Well, the key is the key is to is to have those negotiations before closing, right? When you leverage and try to get that worked out and figure out whether where the discrepancies are doing it after closing, yes, is when it can be great.
20:34 Maxwell Baker
Yeah, cuz then you don’t want to get to closing and not have all the variables negotiated out. Because you’re literally taking over a business, you all that has probably been with the family for years. And your best asset is the relationship you have with the seller at closing. So as long as y’all are always setting expectations, from the get go, there is little chance that it’s going to blow up on you. And it’s important to hire an attorney like Kevin, and I’m kind of self touting here and a broker, like the MHP broker, because I mean, Kevin, how many deals do you see in a year?
21:18 Kevin Caiaccio
Oh, wow. Four or five a month, it’d be pretty typical. You know, of course, it varies. We get very busy at the end of the year, but something in that neighbourhood that we you know, we get any deals.
21:30 Maxwell Baker
So, you know, call it I know, you said 26-28 years, but the amount of years you’ve been doing this. And then on the other side, having a broker that’s averaging around 40-45 transactions a year, the amount of knowledge that is how important is to hire a professional, especially when you’re buying a business like a mobile home park, or an RV community that has a zillion variables. Don’t go cheap, y’all hire the best, Kevin’s is one of the best out there. And nothing but good things to say about him never had any drama, with over opinionated attorneys on from his end. So obviously, naturally, I’m very, very excited anytime I see Kevin’s name flashing through emails, and one of the brokers is working with him. So Kevin, if people want to get in touch with you, what how do they? How do they reach out to you? Where do they find you? And and we’ll wrap it up here? Yeah, sounds
22:28 Kevin Caiaccio
good. Our website is rfllplaw.com. That stands for Robinson Franzman Limited Liability Partnership Law dot com. And my email is firstname.lastname@example.org And I would like to hear from the listeners. My attitude with the relationship with clients is always a very long term view. And I’m happy to talk to people, whether you have a deal, or you’re just looking at a deal and you want to spit ball a little bit, I’m glad to do it. I really enjoy working with entrepreneurs and you know, again, would love to get into a long term relationship if you’re if you’re looking to do multiple deals over time. And that’s what I do and done for a long time and enjoy doing it.
23:10 Maxwell Baker
Kevin, I’m gonna put your phone number in here, the office number 404-255-2503 404-255-2503. Give him a call, best in the business. I tried to do every deal I do with Kevin, and Kevin, any closing comments here?
23:31 Kevin Caiaccio
Well, just appreciate the opportunity. I always enjoy working with you and your team. Appreciate the referrals you made over the years and looking forward to many more years ahead.
23:41 Maxwell Baker
Yeah, man. Definitely. Definitely. Hey, y’all. Thanks for listening. As always, this episode is brought to you by the Community Price Maximizer. It is our proprietary system that will guarantee you a higher price. When you exclusively list with us, give us a call 678-932-0200 or email us at email@example.com. Thanks for listening and Let’s keep moving forward.
Kevin Caiaccio, founder of Caiaccio Law Firm, has more than 28 years of experience practicing commercial real estate law. His expertise and approaches allow clients and colleagues to be selective and focus on the most important outcomes.
Kevin is recognized among his peers and network as a commercial real estate law industry leader and expert. In addition to commercial real estate law, Kevin has strong ties to the business of real estate investment through years of respected relationships with real estate sponsors, lenders, developers and investors. He is a frequent lecturer on real estate investment and development as well as equity structuring for commercial real estate ventures. In recognition of his skill, integrity, and professionalism, Kevin was awarded an AV Peer Review Rating by LexisNexis Martindale-Hubbell – the most prestigious rating that can be achieved by an attorney.
A native of Atlanta, Kevin is a graduate of Georgia State University. He earned his J.D. degree, cum laude, from The University of Georgia School of Law in 1995, where he was a member of the Managing Board and the Editorial Board of the Georgia Law Review. He has been a member of the State Bar of Georgia since 1995.
When he’s not practicing law, Kevin enjoys spending time with his family, honing his golf skills, and taking advantage of recreation in the north Georgia mountains, including fly fishing and hiking.