Manufactured home communities (aka mobile home parks) are increasingly being viewed as part of the spectrum of solutions to the affordable housing challenge. Parks are also an increasingly popular investment for real estate developers due to their strong cash flow and lower management costs. Nonprofit housing organizations are also becoming more engaged in the acquisition and revitalization of these communities. The panelists in this session are all experienced practitioners who will describe the opportunities and risks that these projects offer.
Charlie Einsman, Board member, Catholics for Housing
Mr. Einsmann has 25 years of real estate work experience and is a licensed real estate agent in VA. Mr. Einsmann jointly owns a holding company, Clear Sky Properties LLC (CSP), for residential rental properties that are acquired, resold, or retained in portfolio. CSP has done over 350 renovation/flip properties including a condo conversion in Washington DC. CSP owns 50 residential rentals and a couple of commercial properties. In November 2013 Mr. Einsmann launched a jointly owned subsidiary of Clear Sky Properties, LLC called Clear Sky Financial (CSF). CSF is a hard money lender that does “asset” based lending. CSF currently has over 25 Million in outstanding loans. Mr. Einsmann has been on the Board of Directors for Catholics for Housing (CFH) for 7 years. He has served as Vice President/Treasure during his tenure as well as chairing the Investment Committee for 8 years. Mr. Einsmann was solely responsible for the purchase of a distressed trailer park for CFH. The trailer park is called the Manassas East End Mobile Home Park (EEMHP).
Suzanne Taylor, President and CEO, Augusta Communities
Suzanne Taylor is the founder and CEO of Augusta Communities, a California-based 501(c)3 nonprofit that serves over 1,100 lower income households. Prior to founding Augusta, Suzanne held various positions in the affordable housing industry, and was the architect of the nonprofit ownership model that is today’s industry standard. Suzanne is also the President of ACG, a consulting firm that supports the manufactured housing industry, including nonprofit community owners, and provides federal and state housing compliance services.
Terry McDonald, Executive Director, Lane County St. Vincent de Paul
Terrence R. (Terry) McDonald became the executive director of the St. Vincent de Paul Society of Lane County, Inc. (SVdP) on June 14, 1984, and is the visionary hands-on leader of the agency. With degrees in Political Science and History and a Masters of Education from the University of Oregon, Terry’s energies are focused on social services, homeless services, affordable housing and economic development projects that create jobs while improving the environment and the community. As the largest non-profit humanitarian agency in Lane County, Ore., SVdP has nearly 600 employees, 1,500 units of affordable housing, five emergency service programs, ten retail thrift stores, online book and jewelry shops, a vocational services department, an appliance shop, a mattress recycling operation and a used car lot.
Lee Housholder, CEO, project:HOMES
Lee Householder is the CEO of project:HOMES, a nonprofit community development organization serving 10 cities and 21 counties in Central Virginia. With over 20 years of experience in urban planning and real estate development he leads the agency’s home rehabilitation, weatherization, volunteer, and home construction programs in improving the lives of 1,500 homeowners and family members each year. He has been an adjunct faculty member at L. Douglas Wilder School of Government and Public Affair since 2006.
Is there an optimal unit count when a nonprofit considers purchasing?
Lee Householder: I think, more than 10 units and less than 100. I realize that’s a big range. The number one thing we are looking at is infrastructure and then looking at good county partners. The best way is to offer cash.
Suzanne Taylor: It depends on the purchase price, financing costs and NOI. Nonprofits do not have a lot of money for down payment, so we need 100% financing. Also proximity to others for your properties matters. We focus on parks of 100 units or more, but again it depends on a lot of factors.We look at the coverage and see how much you have after your debt ratio.
Terry McDonald: 40 plus. My organization has its own private resources.
Charlie Einsman: Bond financing the cost of issuance is in the 100s and as low as 75 units.
Have you been establishing relationships with the tenants beyond the initial purchase? How did you earn their trust, and do you have any active stakeholders that aren’t paid staff who work with you to actively maintain and develop these relationships?
Terry McDonald: It depends. If the park has a resident association then it is important to work with them, but if it is a crime ridden neighborhood then you will have to clean up the area. Overall when there are stable tennants building a strong relationship works, but if not then it is hard to build a strong relationship.
Suzanne Taylor: Encourage the property management to be an advocate for its residents. We continually reach out to the unstable residents to get them involved with their resident organization and community events.
Charlie Einsman: We talk to the tenants quite a bit and we also show up to events that residents put on even after purchase. Lee: is new to the process but wants to be involved and wants to develop a community when it is a resident owned community.
Experience in the park relative to what can the current residents afford for a placement unit? How do you improve housing and keep it affordable?
Terry McDonald: The population I work with is medium income. We are replacing them and keeping the housing affordable, but many of those individuals will not become homeowners.
Suzanne Taylor: We worked with a local NGO who received financing from the state to do replacement of homes, it was really based on a maintenance issue. We found that every time they went into the homes, they had some criteria for the improvement or that the home had to last 10 years otherwise they would not reinvest in it. The criteria is sort of high in the sky, they would decide that the home would not last for most of the improvement process. We were able to replace two homes but it was not a successful program.
How do you think about pricing and how do you arrive at a conclusion as to what you are willing to pay as you think about a park acquisition?
Suzanne Taylor: It depends on our financing, right now in the tax exempt bond world, we do not look at it as a cap rate. We instead look at it as a coverage and how much we would have left over after we pay our debt service. There is a ratio called the coverage ratio, we look at a 30 year long term.
Charlie Einsman: We look at it by determining the NOI (net operating income), rule of thumb is take 60% -65% of that, and the rest that is left over is the amount of money you can afford as debt. As interest rates fluctuate the lower they go the more you can afford to purchase.
Lee Householder: we compare the different ratios, but the number one thing is the infrastructure and then we look at our partners. The position for us in the future is cash.
Terry McDonald: It depends on the strategies. If you’re in a place like Portland you have a big stick to deal with a mobile park owner. You can’t sell a park here without city council approval. You have to do a valuation not on cash flow but based on infrastructure.