New ethanol plant discovered in DD process - Posted by Anne_ND

Posted by Tim on July 25, 2007 at 09:09:10:

I am assuming this is the park we emailed back & forth about a couple weeks ago…the things that turn up during due diligence!! I would be considering very carefully how this would affect the whole deal. The numbers looked good for you from a cashflow standpoint, but what really made the deal was the potential to resell at a considerable profit in 10-15 years. One of the few things I regret in my REI was buying properties that really cash flowed, but didn’t have much of an increase in value.

I don’t think you will have problems getting the park full before the ethanol plant comes on line. However, if the plant goes online & smells bad enough, your pool of people willing to live there will be smaller. That would have to affect future lot rent increases.

I don’t know how the ethanol plant will affect the future value of the property. There is the possibility it will change the highest & best use to commercial/industrial. Could the area support enough commercial development to use up all the available property? In other words, will the potential commercial property be in short supply? If you are stuck with a residential property in an industrial district you are probably looking at several years of minimal(or no) appreciation. This looks like one of those situations that could go either way.

I guess I would be double checking all my numbers, & asking myself would I be satisfied with the level of cash flow if I knew that my resale value could be very close to my purchase price.

New ethanol plant discovered in DD process - Posted by Anne_ND

Posted by Anne_ND on July 24, 2007 at 08:11:59:

Any advice appreciated:

I have a nice MHP in GA under contract. I have significant seller financing, and all due diligence is going well. I discovered yesterday that an ethanol plant is planned across the street from the MHP- maybe 500 yards down the road.

Grain will arrive by rail, ethanol will be removed by truck. I’m familiar with the kind of road damage and impact that the truck traffic will cause, and have experience with living with the kinds of smells that come from potato and beet processing plants (in ND)- it’s very bad. Some days the whole town smells like dog p00p (from the rotting beets and the fumes from the processor)

However, I’ve only ever read about the fumes from ethanol plants, and being so close, it will be an everyday thing I suppose.

I’m not worried that I won’t be able to fill the park with occupants, people who live there are not going to move because of it, but rather, the resale value of the park in 15 years when I want to sell.

Anybody have experience with the smell or other problems associated with being near ethanol plants? Or what impact, if any, they would have on a residential investment?

I plan to drive by some ethanol plants next week.



Re: New ethanol plant discovered in DD process - Posted by Bob Smith

Posted by Bob Smith on August 08, 2007 at 21:12:13:

Any chance they’ll want to expand in 10-15 years? You could always sell to them then, or maybe get a substantial option payment from them now for some guaranteed upside later.