Opportunities in Mobile-Home-Park Lending

DANA POINT, CA—With GE's recent exit from mobile-home-park lending, ostensibly there is room for small-balance lenders to enter the field, but there are caveats, Dekel Capital's founder and managing principal Shlomi Ronen tells GlobeSt.com. Ronen recently placed a $9.4-million loan on behalf of Doheny Park Associates LLC to refinance existing debt on Beachwood Park & Village, a 96-pad, all-age mobile-home park here. The sponsor recently completed a major upgrade program to the property's clubhouse, pool and landscaping. GlobeSt.com spoke exclusively with Ronen about the transaction as well as the mobile-home-park lending sector.

GlobeSt.com: What stood out for you about the Beachwood Park deal?

Ronen: The location was absolutely remarkable. You're within a half mile of the beach in Dana Point. You rarely get to live that close to the beach and pay the type of rent that the people are paying at the park.

GlobeSt.com: What are the challenges in financing mobile-home parks?

Ronen: From a product-type perspective, it's specialized housing, so very few lenders understand it well. We had to do a little bit of education to lenders to get them focused on the deal. It's unique in that it's relatively stable. You've got leases that are, for all intents and purposes, month-to-month, but the tenants don't leave the park—the owner can't kick them out. It falls under very unique regulatory framework. There's really no rent control in Dana Point, but from a political standpoint, you can't just go in and raise rents to whatever you consider the market to be because the city really looks at this product as affordable housing. In issues of non-payment, you can evict, but as long as the tenant is paying rent, you can't just double it and find someone else to pay the lease if they don't pay.

Beachwood Park & Village is less than a half mile from the beach, and tenants pay a fraction of the cost of a multifamily or single-family renter or owner.

GlobeSt.com: Are there opportunities in this sector that CRE might be missing?

Ronen: On the lending side, GE was one of the biggest lenders in the space, and they exited the market last year. This created some opportunities for other lenders to step in and lend on this category. But it's still highly specialized, a niche product. Size is one reason: loans on mobile-home parks in the bigger context of real estate generally fall below the purview of the group focused on institutional lending. In the case of our client, they are focused on running the park more efficiently, renovating and repositioning, and gradually over time raising rents on the park.

GlobeSt.com: What else should our readers know about mobile-home parks?

Ronen: Barriers to entry are pretty high. You've got brokers who have played in the space for a long time and have focused on some of the existing players in the space as well. You don't see the falling of transactions that you'd normally see in multifamily or other sectors in real estate.

DANA POINT, CA—With GE's recent exit from mobile-home-park lending, ostensibly there is room for small-balance lenders to enter the field, but there are caveats, Dekel Capital's founder and managing principal Shlomi Ronen tells GlobeSt.com. Ronen recently placed a $9.4-million loan on behalf of Doheny Park Associates LLC to refinance existing debt on Beachwood Park & Village, a 96-pad, all-age mobile-home park here. The sponsor recently completed a major upgrade program to the property's clubhouse, pool and landscaping. GlobeSt.com spoke exclusively with Ronen about the transaction as well as the mobile-home-park lending sector.

GlobeSt.com: What stood out for you about the Beachwood Park deal?

Ronen: The location was absolutely remarkable. You're within a half mile of the beach in Dana Point. You rarely get to live that close to the beach and pay the type of rent that the people are paying at the park.

GlobeSt.com: What are the challenges in financing mobile-home parks?

Ronen: From a product-type perspective, it's specialized housing, so very few lenders understand it well. We had to do a little bit of education to lenders to get them focused on the deal. It's unique in that it's relatively stable. You've got leases that are, for all intents and purposes, month-to-month, but the tenants don't leave the park—the owner can't kick them out. It falls under very unique regulatory framework. There's really no rent control in Dana Point, but from a political standpoint, you can't just go in and raise rents to whatever you consider the market to be because the city really looks at this product as affordable housing. In issues of non-payment, you can evict, but as long as the tenant is paying rent, you can't just double it and find someone else to pay the lease if they don't pay.

Beachwood Park & Village is less than a half mile from the beach, and tenants pay a fraction of the cost of a multifamily or single-family renter or owner.

GlobeSt.com: Are there opportunities in this sector that CRE might be missing?

Ronen: On the lending side, GE was one of the biggest lenders in the space, and they exited the market last year. This created some opportunities for other lenders to step in and lend on this category. But it's still highly specialized, a niche product. Size is one reason: loans on mobile-home parks in the bigger context of real estate generally fall below the purview of the group focused on institutional lending. In the case of our client, they are focused on running the park more efficiently, renovating and repositioning, and gradually over time raising rents on the park.

GlobeSt.com: What else should our readers know about mobile-home parks?

Ronen: Barriers to entry are pretty high. You've got brokers who have played in the space for a long time and have focused on some of the existing players in the space as well. You don't see the falling of transactions that you'd normally see in multifamily or other sectors in real estate.