-2013 in Review; Outlook Good for 2014-
Presented by David Harley, BluePoint Commercial
2013: Recovery Year
Lending conditions improved in 2013. Although banks remained cautious, we observed more competition and interest in financing 2, 3, and 4 star quality parks, properties that would not have been approved in 2012. Many of these parks had a ‘story’ and their owners have a few scars from the Great Recession. Our careful loan packaging and strong oversight of both the underwriters and the appraisers made for successful outcomes.
Appraisals had to be monitored closely…in one example we successfully rebutted a low valuation, arguing that rent increases during 2013 should be the basis of an income analysis, not a simple average based on previous year’s tax returns. Final result: an additional $1 million in value, making it possible to complete the high leverage refinance.
In another case, we interceded when an appraiser based his report on land value only (vs. an income approach) because 100% of the homes are park-owned and technically they are considered chattel. The lender listened to us, and redirected the appraiser to consider the homes as apartment units for income purposes. Final result: our client received a loan supported by the property income that would otherwise have been denied.
2014: Positive Outlook
The gradually improving economy and changes at the FED point to rising interest rates. Property values should also rise as the need for lower cost housing continues. Lender’s appetites for MH and RV Park projects is increasing; many of our lenders are asking us to show them loans for good parks in secondary and tertiary markets. For the larger, better located, higher quality parks needing non-recourse debt above $2 million, the Commercial Mortgage Backed Securities (CMBS) market will continue to expand. Conventional lenders will remain the primary sources of financing for mobile home parks as the SBA fills the gap in financing RV parks.
The following examples illustrate how we help bring complicated transactions to completion by knowing our clients so we can best tell their story, and by knowing the guidelines to point the lenders in the right direction.
Santa Cruz, CA – RV and MH Park, $3,100,000: This refinance had many hurdles: 80% RV component, personal credit issues and high loan-to-value. The owners were saddled with an over-market interest rate and mortgage payments were draining most of their profits. Maximum leverage was required to make this work and the best solution was to refinance the existing SBA 504 debt with a new SBA 7A loan. Most lenders mistakenly assumed it could not be done. We found an SBA lender who took the time to listen, and in the end we saved the ownership $6,000 per month, providing a long term solution for one of the oldest family-run RV and MH Parks in the country.
Anchorage, AK – MH Park, $1,000,000: Despite the location and sparse pool of lenders we overcame many obstacles. One hurdle was a lack of comparables as very few MH parks in Alaska have traded. There was a messy title history that required attention along with some other prickly issues. In the end we arranged a 75% Loan-to-Value, fixed rate loan, while lowering the owner’s rate and providing cash out for additional investments.
For a Confidential Review of Your Park, Call or Email
Dave Harley, BluePoint Commercial
Dave Harley has over 15 years of industry specific experience.
BluePoint Commercial Mortgage● 655 Redwood Hwy, Suite 311, Mill Valley CA 94942 www.bluepointcm.com