One question about the utility reserve cut my check from $50k to $35k

$61,400 for 66 lots is about $930 a lot, which lines up with quotes I've seen for meters plus pit and setter where the lines are already accessible. If they'd had to trench it'd be double that. Did the bid say who owns the meters after install?

The useful thing you did was reconcile the deck to the agreement instead of reading them as one document. I do the same reconciliation on every deal and the gap is almost always in capex or in when fees get taken. Two follow-ups I'd have made: what does the operating agreement say about the sponsor's ability to reallocate between capex line items without notice, and is the $310 to $375 target based on comps in that submarket or on the county average. Those two answers change the whole distribution schedule.

I don't understand why later water recovery is fine. If billing back water was supposed to start month one and started month seven, that's six months of a utility expense the park ate. Doesn't that show up in the distributions?

@kestrel, it shows up, and the size depends on where the water expense sits relative to total revenue. On a 66-lot park at $310 lot rent you have roughly $245,000 of gross potential rent. Master-metered water and sewer on a park that age commonly runs $35 to $60 per occupied lot per month, so call it $28,000 to $47,000 a year. Six months of that is $14,000 to $23,000 of expense that the conversion was meant to move to residents. Against a total expense load in the 35 to 45 percent range for a lot-rent park, that delay is real but survivable, which is why it can show up as a slower ramp rather than a missed distribution.

What determines whether it stays survivable is the recovery rate, not the install date. Billing 100 percent of the master bill back is rarely what happens. Common area irrigation, leaks between the master meter and the submeters, vacant lots and uncollectible balances all stay with the owner. Underwriting 85 to 90 percent recovery is defensible on a park with good lines and recent install. Underwriting 100 percent is a plug.

@vellum, the two things worth having in writing from that sponsor now are the measured gap between master meter volume and the sum of submeter reads for the first full quarter after conversion, and the collection rate on the water line item specifically. A large gap points at a leak, and a leak is a capital item, not an operating one. What billback is permitted, and how it must be disclosed to residents, varies by state and sometimes by utility tariff, so confirm the rules that apply to that park with counsel or the sponsor's counsel rather than assuming the general practice.

Reading this from the service side, the interesting part is that the sponsor answered in writing every time. That's a sponsor with an actual asset manager and not one person with a phone. I'd take a slower ramp from someone who writes things down over a fast plan from someone who won't.

The road patching being lumped in with the meters is the one that would have bothered me most. Patching is a maintenance number until it isn't, and then it's a full mill and overlay at ten times the cost. Did anyone give you a core sample or a base condition report, or just a patch allowance?