Issue link: https://read.dmtmag.com/i/720597
Security Mortgage Group LLC of Rochester, NY has been providing manufactured home community fi- nancing since 1989. Anthony J. DiMarco and Gerard D. DiMarco Jr., managing directors, understand al- most every community owner at some point in time will find the need for financing. The DiMarcos have wit- nessed the ups, downs, and complexities of the finan- cial markets over the past 25 years and the impact these fluctuations have had on available loans. Given this experience, Security Mortgage Group understands the important issues community owners may face during the lending process. Today's Interest Rates remain at all-time lows . Today's lending market, combined with historically low interest rates, is the strongest it has been in years. Lenders are eager to provide long term fixed rate, non- recourse loans with 30 year amortizations on manufac- tured home communities. We recently helped a repeat borrower refinance a maturing CMBS loan with a new 10 year fixed rate loan at 3.97%. Over the past few months we have suc- cessfully closed over a dozen park loans with long term fixed non-recourse terms featuring interest rates in the 4% range. Many of these parks were 3 star communi- ties. Our lenders are remaining aggressive in their ability to finance loans in this asset class. There are numerous lending platforms available for community owners including CMBS, life insurance companies, Fannie Mae, Freddie Mac, credit unions, and traditional bank loans. A wide range of loan prod- uct options are available in today's financial market in- cluding short-term floating rate bridge loans, interest only, and flexible prepayment options. These wide range of lending options and historically low rates make financing extremely attractive in today's market. Minimum Requirements. There are two major components that lenders review when analyzing a loan request; the guarantor and the property itself. On the guarantor side, most lenders look for a minimum credit score of 600 and a sufficient net worth/liquidity figure. Even though most of the loans we offer are non-re- course our lenders still look for those minimum per- sonal requirements. On the property side, our lenders mainly require a minimum loan amount of $500,000, a debt service coverage ratio of 1.25x, and paved roads. There are also numerous aspects to manufac- tured home communities that make them a unique asset class. Every Community may qualify for a Loan! Every community, regardless of some of the property specifics (population, utilities, occupancy, etc.), may in fact qualify for a loan. Having said that, having a better understanding of what lenders typically prefer can be helpful in terms of assessing a com- munity's likelihood of obtaining a loan. The attractiveness of the loan terms can be impacted by a lender's standard "checklist" of criteria: • Community quality • Loan-to-Value (LTV) • Financial and occupancy trends • Infrastructure quality – roads, utilities, lots, amenities • Borrower experience and equity Also, many of our lenders are willing to finance communities re- gardless of their quality, especially if there is a "story" to be told. As an example, we provided long term fixed rate financing on a 2 star community with occupancy issues. Based on the buyer's track record we were able to show that the park was in need of a new owner to improve deferred maintenance, reduce expenses, and add occupancy. Generally speaking, one or two negative aspects of a property do not eliminate the property as a candidate for financ- ing. Lock in a Long-Term Fixed Rate. As previously mentioned, interest rates are still at all-time lows and it's an ideal time to take advantage by fixing your rate for the long term. On loan requests of at least $1,000,000, most of our lenders offer 10 year fixed rates with 30-year amortization schedules. For most acquisition loans, and for the refinance of high-quality communities, our lenders can offer interest-only of up to 5 years as well. A long- term fixed rate can help eliminate market rate risk for an entire decade and help create stability regarding debt repayment. If your loan request is below $1,000,000, most lenders can still provide 5-7 year terms with competitive pricing. Financing for acquisitions that require improvements and value added work. With the strong resurgence and variety of lending platforms in the market, there are programs available for properties in need of stabilization. Lenders are willing to offer float- ing and bridge lending options for borrowers seeking short-term flexibility, including interest only. These programs are a perfect fit for properties that are in need of a turnaround or for guarantors that are seeking limited to no prepayment penalties based on their short-term goals. In summary, current interest rates for MHC loans are still at his- toric lows. Well qualified parks are seeing 10 year non-recourse fixed rates at around 4.5%. In addition, if requested our lenders can offer flexible rates and terms to fit a borrower's specific strat- egy. Anthony DiMarco, Gerry DiMarco, and Pierce Redmond are always happy to discuss any transaction in more detail. (585) 423- 0230 SECURITY MORTGAGE GROUP LLC FINANCIAL Security Mortgage Group - A Leader in Manufactured Home Community Financing SEPTEMBER 2016 11 THE JOURNAL