Mobile Home and RV Park Financings Closed in 2015

BluePoint Commercial Mortgage

BluePoint Commercial Mortgage

David Harley, SR Loan Consultant (415) 250-5300

 

    • ·       February: 25 Unit Family RV Resort construction-to-perm financing for $1,000,000.  Provided funds for development project in downtown Tucson, AZ at 6% interest-only for construction phase and then adjustable 6% takeout/perm loan with 20 year term. Loan-to-costs was 90% with high leverage provided by a specialized SBA loan program.

     

    • ·       March: Refinanced with cash-out 94 lot MHP in Soddy Daisy (Chattanooga) TN, with a 5%, 7-year fixed rate and 20 year amortized loan at 45% LTV. $675,000 loan to pay off private loan for improved rate and terms and provide funds to complete upgrades.

     

    • ·       April: Portfolio purchase of 3 parks in Greenville, NC. Loan of $1,200,000, 4.75%, 7-year fixed rate on 20 year amortization with 56% LTV. The parks consist of 172 combined units, 98% occupied. Loan term is 7 years on 20 year amortization.

     

    • ·       May: Refinance MHP in El Paso, TX. Arranged $1,650,000 CMBS financing at 73% LTV loan on 122 lots + two SFRs for improved rate and term and provide additional cash out for upgrades and to bring 12 new lots online. Unit mix included 10% park owned homes and 25% of homes sold and financed on contract. Cash out was $280,000 for improvements.

     

    • ·       September: Two MHP portfolio refinance of 60 units in Kalispell MT. $1,400,000 loan@ 4.75%, 7 year fixed rate on 20 year amortization with 60% LTV.  Worked with a regional lender to provide cash out for personal debt restructuring and payments. Owner’s residence was also refinanced with same bank at 4%, 30 year amortized home loan.

     

    • ·       November: Mobile Home and RV Park cash out refinance in West Central Valley of California for $1,770,000.  Rate is 4.00%, fixed for 5 years, 10 year term and 30 year amortization on 103 Units, 47 mobile home and 56 RVs with high % of transient RV income and 22% park owned mobile homes. Loan provided $800,000 cash out.

     

    • ·       December: Mobile Home Park refinance, 65 units in rural South Western NY. $950,000, 4.75% fixed rate for 7 year on 25 year amortization and 74% LTV. Worked with local lender to lower interest costs and payments for a long term fixed period.

     

Overview of Mobile Home Park Lenders

BluePoint Commercial Mortgage

Presented by David Harley, BluePoint Commercial Mortgage

 

Regional and Local Portfolio Lenders (Local Banks)

Usually will only loan for properties and borrowers within a certain geographic area in their “footprint”. Loans are funded and serviced by the lender from deposit account reserves or interbank credit sources. Most financing for mobile home and RV parks come from local lenders. Many are chartered to only loan to community residents but some will accept outside investors. Terms are typically:  5 year fixed rates of 5%, LTVs of 70% to 75%, amortizations of 20 to 25 years. Personal guarantees are expected with global personal income ratios evaluated. Overall 680 minimum scores and clean credit history is needed with net worth equal to or exceeding the loan amount and liquid cash reserves of 10% after purchase and real estate investment experience is required.

 

CMBS Lenders (Nonrecourse)

Conduit loans can be the best type of financing if nonrecourse is required.  Our CMBS lender can go down to $1.2Mil loan amounts and offer flexibility for issues such as lower occupancy, less desirable locations, high percent of older and/or park owned homes, etc. CMBS lenders require $35k upfront deposits for 3rd party reports (appraisal, environmental, engineering and survey as well legal and underwriting fees). These costs are industry standard to qualify the loan for inclusion into a portfolio of mortgages that will be securitized and sold as bonds. Terms are very attractive with 75% LTV, 10 year fixed rates at about 5% currently on 30 year amortizations. Underwriting is rigorous but overall more flexible than many other types of financing. But the loans carry “defeasance” prepay penalties and should be used primarily for parks you intend to hold for a 10+ year term.

 

Government Agency Lenders

For higher quality parks only “Agencies” (Fannie Mae or Freddie Mac) can provide some of the most desirable loan terms and nonrecourse debt. Parks usually need to have half double-wides, paved, curbed streets with ample off-street parking, no more that 5% park owned homes, 90% + occupancy , city services and be near major metro areas. Loans have yield maintenance prepay penalties which are similar to defeasance but will consider step-down prepays for a cost to rates. Typical rates are low 4%s on 5 year and mid 4%s on 7 year fixed loans with 10 year fixed rates near 5%. LTVs are commonly 75% with 30 year amortizations.

 

National Banks

A handful of national lenders can finance parks: mostly in larger metro areas, 3+ star, higher quality parks, limited tolerance to park owned homes, RVs, non-city services, etc. LTVs are 65-75%. Typical rates are 4.50% for 5 year fixed and 4.75% for 7 year fixed on 30 year amortizations. These types of lenders will mostly only finance parks of similar quality to Agency Lenders but with a bit more flexibility. A couple of national banks break the mold with super low rates, lower costs and better prepay penalties and can be the best alternative if they can do the deal.

For a Confidential Review, Call or Email David Harley
(415) 250-5300 ● dharley@bluepointcm.com
BRE 01334092

BluePoint Commercial Mortgage ● 655 Redwood Hwy, Ste. 311, Mill Valley, CA  94941● www.bluepointcm.com

How to Turn around a Mobile Home Park

When you buy a Mobile Home Park that needs to be turned around (and most parks need some type of turnaround), the first thing you need to do is disengage the prior ownership/management. Face it, if the park is not running like it should be, you will most likely want to start over with a new management team. Even though the prior owner is usually to blame for the poor operations of the park, it is difficult to keep the prior managers that have been trained poorly or incorrectly. So, in most cases, fire everyone and start over. There are always exceptions to the rule, but they are few and far between. I have found that it is easier to train a new manager than to retrain the existing one. Continue reading

ARA Newmark Announces Sale of 112-Site Manufactured Home Community Located Just Outside of Champaign, IL

Buyer Pays Off Existing Mortgage to Secure Attractive Long-Term Financing Rantoul (August 2015) —

ARA, A Newmark Company (ARA Newmark) announced the sale of Maplewood Estates, a 112-site manufactured home community located in Rantoul, IL 18 miles outside of Champaign.

ARA Newmark’s Managing Director Todd Fletcher and Associate Jon Shay, along with Executive Managing Director Andrew Shih represented the seller David Worth with Ravinia Communities, one of the largest manufactured home community owners in the Chicagoland area. MHP Funds, a privately-held company based out of Cedaredge, CO and led by David Reynolds, purchased the property for an undisclosed price.

With only positive things to say about the buyer, Fletcher noted, “MHP Funds made a very smart move to prepay the existing debt so they could buy the community with a new, long-term mortgage at much more attractive terms than what was in place at the time, despite a large prepayment penalty.”

“Buyer interest in this community was significant because it is getting harder to find opportunities for clean, full manufactured housing communities on public utilities with almost no park-owned homes or chattel loans supporting the occupancy,” added Shih.

Constructed in 1980, Maplewood Estates is a well-maintained manufactured home community that features an attractive layout with curvilinear streets, off-street parking and mature trees throughout. The roads within the park were repaved in 2007 and are currently in great condition. The community is close to a number of public schools and is approximately 16 miles from the University of Illinois at Urbana-Champaign, which was ranked as the #11 top public school by U.S. News & World Report. The University of Illinois comprises 17 schools and colleges with more than 44,500 students enrolled in 2013. An estimated 32,000 students apply annually. Maplewood Estates is also five minutes from the Rantoul Amtrak, a national passenger rail system that travels to over 500 destinations in 46 states.

 The city of Rantoul features eight beautiful parks with groomed landscaping and more than nine miles of bike and pedestrian paths throughout. Notable entertainment options include the Octave Chanute Aerospace Museum, the Illinois Skydiving Center, Korean War Veterans Museum and the Rantoul Theater Group. Rantoul is also home to the Rantoul National Aviation Center, which offers a flight school, an aircraft manufacturing base, an import and export facility as well as other services.

The unemployment rate in Rantoul, IL for December 2014 was 5.5%, significantly lower than in July when it was just over 7%; it has since been trending down. Major employers in the area include Easton Bell Sports, Jeld-Wen Windows and Doors, ConAir and Taylor Studios.

 

 

 

 

 

 

 

Financing Options for Manufactured Home Communities

By Joe Evans and Jeff Meierhofer

Mobile home communities are a hot commodity on the investment property market today. We have seen a demand for financing this property type as buyers and investors have been purchasing these properties for as low as a 5% cap rate in some markets. The appeal of a mobile home community is that maintenance expenses can be low and cash-on-cash return can be extremely profitable.  Plus now is a great time to refinance as rates are at an all-time low.

Finding a right lender to provide financing for this property type can be tough without having expertise and contacts in this market.  That’s where working with an experienced team like The Madison Group can help you navigate the system and get you the loan terms to meet your financial goals. Here are some examples of the many lending programs available for manufactured home communities:

Local Bank or Credit Unions:

Bank lending is usually limited geographically to the footprint of the bank’s network as they usually prefer to lend only to those local borrowers to whom they can provide additional banking services.  General loan terms: 3-5 year fixed pricing at a 5-6% interest rate with a loan to value of 60-75% and with a 15-25 year amortization.

Pros:  Some local lenders are willing to work with the property having a higher percentage of park owned homes. Most lenders prefer that the parks are 90-100% “pad rental” and generally require that less than 20% of the total lots be “park owned homes”. Some banks can work with 30-40% of park owned homes.  Banks and credit unions offer low prepayment penalties, however you may get a shorter fixed rate in return.  A personal guarantee is almost always required. Some banks can offer a partial guarantee depending on LTV. Loan fees tend to be generally lower than nonrecourse loans.

Cons:  Rates can be higher on these property types. Banks usually only like to write for a 15 to 20 amortization for manufactured home communities, so that can really restrict your projected proforma on your cash-on-cash return on the property.  Also, your rate might only be fixed for a period of 3 years, 5 years, or maybe a 7 year period.  Bank financing can sometimes take more time to underwrite and close.

USDA or Rural loans

Pros:   It is possible to get loans in a smaller city where most lenders aren’t otherwise willing to lend.  Often you don’t have to have the perfect looking property with smooth paved roads and beautiful facilities to get a USDA loan  The government wants to provide a means to finance affordable housing in smaller towns.  The loan does not have a call or balloon payment. Your rate is usually fixed for smaller interim periods of 1, 3, or even 5 years, and then it will just reprice over whatever index is predicated in the loan terms.  A 30-year amortization is available for Mobile Home Communitys.

Cons:
Fees – There is generally a government fee attached to doing this type of loan of 2-3% of the loan amount up front (similar to an SBA loan for a business) which helps covers government costs.
Availability – The quantity of these loans made available can vary state-by-state and some state USDA offices are not always willing to lend to manufactured housing communities depending on what funds are allocated to their offices.
Time – These loans generally take 75-90 days to fully underwrite, get approved by the state offices, and close. If you are planning to get a Mobile Home Community under contract in a smaller town, plan on making sure your seller is aware of extended closing deadlines.

Fannie Mae

Fannie Mae is willing to finance Mobile Home Communitys as well with a great rate. Some MHC requirements worth noting are as follows:

• Minimum loan amount is usually over $1,000,000
• 50% or more of the sites can accommodate a doublewide
• Amenity package is competitive in the marketplace
• Physical occupancy is 85% or greater
• Maximum density is 12 home sites per acre
• Majority of the property, including the entrance, is not located in a flood zone

Pros:   Nonrecourse loans are available with a 10-year fixed term, and a 30-year amortization with interest rates as low as 4.4%

Cons:  These loans are generally reserved for only the 5-star, best quality, double wide, larger mobile home communities in large metropolitan areas. Generally, the park must have smooth paved roads, skirted homes with less than 10% of the community consisted of “park owned homes”. These loans are reserved for larger parks with a value of $1-3 million dollars or greater.

CMBS or Conduit loans

If a nonrecourse loan is what you need, then this type of lender may be the best option for you.  Nonrecourse loans are made to you and your investors and then are sold and traded on the investor market (secondary market as a security). General loan terms: Nonrecourse loans with a 10-year fixed rate with a 30-year amortization offered at rates of 4.5%-5.3% depending on the market rates with defeasance.

Pros:  Nonrecourse loans are available with longer fixed terms with a 30 year amortization. These loans are assumable.   They are made directly to the LLC entity structure, with a “warm body carve-out signer”.  These loans are much easier to securitize than a Fannie Mae loan described above.   The loans is usually assumable to a qualified buyer, so if you lock in a low interest rate now and the rates go up, your loan can be assumed by a new qualified buyer in the future at today’s low rates!

Cons:
Deposits and Fees – Once your loan offer is made, the lender generally required a $8,000-$15,000 deposit for appraisal, site visit, environmental.  Also a deposit for Lender Legal fees and can range from $10,000-$25,000 range depending on the size of the loan being securitized.
Defeasance – Since these loans are being sold as securities in the investor market, the lender doesn’t want their money back. If you choose a 10-year fixed, low interest rate loan, plan on being in that loan for 9 years and 9 months.

Seller Financing:

Look at the offering memorandum for any Mobile Home Community currently on the market and if seller financing is an option. General loan terms are 50-60% LTV with a 7-8% rate and a seller is willing to take your payment for a period of 3-10 years before they want to be paid in full.

Pros:  Buyers do not have to qualify through a bank, which can help if your credit was damaged or other factors.  Sellers may want to receive a monthly check for a stretched out period of time instead of one lump cash sum, especially in situations where the occupancy is lower or there is a very high consistency of “park owned homes”.

Cons:  Rates tend to be higher: usually 6-8% is the standard interest on seller financing.  The Seller will generally requires a large cash injection or down payment of 30-40% down on the purchase price.

How to select the right loan program for you?

There are an abundance of lenders in the marketplace for Manufactured Home Communities, but how do you determine who is the best fit for your unique situation?   It often takes extensive research to find out who to contact.  By working with a commercial loan broker, you can have access to many institutions and their programs.  An experience commercial loan broker works with the best lenders and already has a relationship with the Representatives on the inside. In addition, the broker can help you assemble your loan documents to make sure you present the best possible loan package.  With an attractive, complete package, you will have the best options for the optimal loan terms.  You are not only hiring a finance expert, but a whole team of associates that will work in your best interest.

The broker submits your package to obtain offers to finance your property.  He will consult with you determine which scenario works best for your financial goals.  He will also help you negotiate with the lender, if needed, for prepayment penalties options, origination fees, amortizations, and an assortment of other loan terms.

The broker and his team will partner with you every step along the way to the loan funding.  They work with the third party reports, and underwriting conditions, to ensure you have a success closing.  Often, unknown conditions pop up, and the team is invaluable to eliminate these potential deal breakers.

I you are needing financing for you Mobile Home Community purchase or refinance, consider hiring a experience commercial loan broker like The Madison Group.

About the authors:  Joe Evans and Jeff Meierhofer are Commercial Loan Specialists at The Madison Group.
TMG have a proven track record for originating and funding MHC loans since 2001.   Joe and Jeff can be reached at 435-785-8350 or
jeff.m@madisongroupfunding.com or joe@madisongroupfunding.com.  Visit www.madisongroupfunding.com to see the recent closed loans and client testimonials.

The Madison Group Facilitates a $2.475M Nonrecourse Loan for Senior Mobile Home Park

Transaction Description:  The Madison Group (TMG), a commercial loan broker, has facilitated the financing  of a Senior Mobile Home Park. The park has102 pads with 96 occupied and was being underutilized with excessive expenses. The park had a somewhat storied history, but was an excellent purchase – with great potential upside for our experienced group of investors

The borrowers took the property under contract with a down payment and a short-term seller carryback note. To finalize this purchase the group looked to enhance their position by creating a larger loan than would be possible at the time of getting the park under contract. TMG was able to provide a funding source that gave them a larger loan amount, based on the increased value from the time of contract to the time of closing the long term financing. The buyers were able to pay back their investors and have a holdback for additional monies upon hitting certain milestones.

Challenges:  The borrowing group required a non-recourse loan to provide a vehicle for the investment team. When the park was purchased, it had below current market rents and higher than normal expenses. The borrower needed to get a loan that would allow for trailing 3-4 month in-place income while they raised the income and lowered the expenses. 

Solutions:
TMG successfully closed the transaction, locking in a great rate of 4.90% with a10 year fixed term, 30 year amortization, and LTV of 78.5%. The final loan amount exceeded normal underwriting standards based on the lenders ability to set aside additional funds that will be dispersed upon the continued reduction of expenses and increased revenues. Once the borrower hits the milestones funding the final tranche will be dispersed. This allowed the borrowers to maximize their loan amount and to capture the aggressive rates available in the market and to avoid refinancing at a future date to recapture equity. It also allows buyers to have monies available for the purchase of other properties.

The financing was arranged by Jeff Meierhofer at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including:  multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States.  Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital.  TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group and Jeff Meierhofer can be reached at 435-785-8350 or by emailing Jeff at jeff.m@madisongroupfunding.com.

Manufactured Homes Best Performing REIT Sector in Q1 2105

Manufactured homes were the REIT industry’s best performers in the first half of 2015 with a 3.75% return, followed by self-storage with a 3.72% total return, according to the National Association of Real Estate Investment Trusts.

Apartments were up 0.82% in the first half of the year with the office sector down 5.25%, retail down 7.24%, and industrial falling 11.33%. For mortgage REITs, the commercial financing sector was down 1.70%, and the home financing sector fell 6.12%.

Read complete article here: http://www.thinkadvisor.com/2015/07/10/manufactured-homes-best-performing-reit-sector-in

How to Build Pride of Ownership in Your Manufactured Home Community

I will never forget my first drive through of one of my communities with a conduit lender. The property was about a one-star in quality, but was a cash-flow wonder. I wasn’t sure what the bank’s reaction would be to my down and dirty “family” community status. As we drove out of the property, I nervously asked the lender “so what do you think?” His response: “well, they seem to have a pride of ownership”. With the loan in hand, that term has grown to sum up what I feel is the most important in any community. Even a lower demographic property like mine can be redeemed and affirmed through “pride of ownership”.

Continue reading

Overview of Mobile Home Park Lenders

Agency Lenders

For 4 or 5 star parks there are Government Agencies – Fannie Mae or Freddie Mac can provide some of the most desirable loan terms. Notoriously picky: parks must have 50%+ double-wides, curbed streets, not more that 5% park owned homes, etc. and locations near major metro areas. Most parks don’t manage to qualify. Loans are nonrecourse and have yield maintenance prepay penalties but are assumable. Look for rates in the 3%s on 5 year and 4%s on 7 or 10 year fixed, 30 year amortization and 75% LTVs.

National Banks.

A handful of lenders are cautiously active about how and where and to whom they will lend: mostly in larger metro areas, 3+ star parks, limited tolerance to park owned homes, RVs, non-city services, etc. LTVs are 65-75%. Typical rates are 4.00% for 5 year fixed and 4.50% for 7 year fixed on 30 year amortizations. These types of lenders will mostly only do similar parks the Agency Lenders would, but with a bit more flexibility. A couple of national banks break the mold with super low rates and can be the best alternative if they can do the deal.

Regional and Local Portfolio Lenders (local banks- most MHP loans are done this way)

Service a few states or locally within a geographic area and will only lend to either or both properties and/or borrowers in their “footprint”. Loans are held and serviced by the lender. For greater US markets: 70% (usually) up to 75% LTVs, 20 to 25 year amortizations and usually 7 year maximum fixed rate periods at typical rates of 4.75%-5.00%. A few regional lenders offer lower rates of 3.80%, 5 year and 4.25%, 7 year fixed periods and 30 year amortizations. Full personal guarantees required and global income ratios evaluated and overall credit profile (680+ FICO) and net worth equal to or exceeding the loan amount with liquidity of 10% of loan amount and experience in RE investment is needed to qualify.

CMBS Lenders (for everything else)

Conduit loans are expensive – with $35k upfront deposits for 3rd party reports, legal and lender fees. But the fees are the industry standard costs of qualifying the loan for inclusion into the portfolio of mortgages that will be securitized and sold as bonds. What do you get in return? 75% LTV, 10 year fixed rates at about 4.50% currently (3/15/15) on 30 year amortizations. The loans are also nonrecourse. Underwriting is thorough but more liberal than Agency or Regional Lenders for operating structure. Loans can handle large portion of park owned homes (must have adequate lot rent income to support the loan), investor owned and homes sold on contract are not a problem. They can handle unusual ownership structures like co-ops and some condominium hybrids. They can loan most anywhere in the country to 2 star + parks with all single-wides and some RVs. The loans carry “defeasance” prepay penalties. Loan amount minimums are now down to $1.2Mil with our lender.

For a Confidential Review, Call or Email David Harley
(415) 250-5300 ● dharley@bluepointcm.com
BRE 01334092

BluePoint Commercial Mortgage ● 655 Redwood Hwy, Ste. 311, Mill Valley, CA 94941● www.bluepointcm.com

PRESS RELEASE: The Madison Group Facilitates a $1,095,000 Non-recourse Commercial Loan for a MHP in Channelview Texas

PRESS RELEASE: The Madison Group Facilitates a $1,095,000 Non-recourse Commercial Loan for a MHP in Channelview Texas
Feb 2015

The Madison Group, a commercial broker and loan consultant, has facilitated the financing for the purchase of an 84 pad manufactured home community in Channelview Texas, within the Houston MSA. The purchase was deemed a true value-add-potential for the buying entity. The park had shown reasonable income over the course of time, but was in need of updates and capital improvements. The Madison group was able to source a transaction that facilitated a nonrecourse loan to a tight knit group of investors.

The $1,095,000 loan was sized to 64% of the loan to value. The borrowers received aggressive terms of 4.38% with a 10 year term and 25 year amortization. The nonrecourse loan allowed them to have an entity be the borrower with no recourse to individuals in the LLC other than standard carve outs. In addition, future increased cash flows will allow the entity to increase their return on investment.

“All parties involved worked diligently to price and size a loan that made sense for the investors and the lender, said Director of Finance Jeff Meierhofer. “Sourcing the right lender from the beginning that understands the product type in the geography of the asset made for a timely closing.”

The financing was arranged by Jeff Meierhofer, Director of Finance at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

TMG and Jeff Meierhofer can be reached at 435-785-8350 or by emailing jeff.m@madisongroupfunding.com