The Madison Group (TMG), a leading source of mobile home
park financing nationwide, arranged the $3,825,000 loan for the purchase of a mobile
home park in Wichita, Kansas. The
borrower, a repeat client of TMG, needed to satisfy a 1031 exchange and
requested a long term loan on an underperforming park. TMG secured the
financing with a 5-year fixed rate of 5.75% and a 30-year amortization with two
years of interest only payments.
The buyer was selling another park and had chosen this as
the replacement. The park is located in
an excellent neighborhood of Wichita and is surrounded by country clubs and
$300-400,000 homes. The only competition
is a neighboring park, which is 100% occupied.
This 360-pad park currently has occupied homes on only 140 pads in the
park. The buyer will begin to add homes
as soon as she closes on the park and plans to add tenants quickly. The park has an excellent upside, as it is
being sold at the existing occupancy. It
should perform very well with this buyer’s experience in turning around this
type of Mobile Home Park.
All the homes in the park are park owned and rented to the
occupants. This creates a challenge for
most lending institutions, as they typically underwrite off of pad rents. TMG was able to find a bank that would use
the income from the existing pad and home rents to achieve the debt service
coverage required. TMG also was able to
structure two years of interest only to help mitigate the mortgage expenses
while the property is being stabilized.
“The buyer can cash flow the property ‘as is’
with the interest only payments and will quickly move to increase the cash flow
in this well located park,” said Angela Kesselman, TMG’s
Associate Director of Finance