MHP Deal Drought
This probably isn’t a surprise to any broker, lender or buyer in MHP world, but deals are down man.
Fannie Mae’s reports 2023 MHC sales are down to just $1 billion nationwide.
That’s about 58% lower than sales during the first half of 2022.
This is even lower than the $1.8 billion during the first half of the 2020 pandemic.
Ouch.
Now, I’m guessing they are not tracking the 15 pad, dirt road park deals getting done, but still that’s a lot fewer parks sold.
On the opposite end of the spectrum, here is a chart of the major MHP REIT transaction volume.
Couple things of note here.
See the green lines. As you can see, the public owners are not in the business of selling. There just isn’t that many large, high quality 4-5 star parks in strong markets to buy. So when one of the MHP REITs gets their hands on a deal…they turn on the death grip.
Which means buyer be ware when a REIT wants to sell you something. If they are selling, it’s probably for a good reason.
This isn’t the case with large private equity firms that tread in park waters. They tend to have 3-7 year fund life’s. So if they are raising a new fund every 1-2 years, pretty quickly they are also selling parks every year.
Why No Deals?
A: The loan market is bone dry.
Bad news - CMBS has left the building.
Good news - you won’t have loan defeasance penalties from all those securitized loans you didn’t get this year.
Some regional banks are still active, but many have recoiled (not lending) from the fallout of the Silicon Valley Bank blowup and subsequent deposit crisis.
Thankfully, Fannie Mae is still in the game.
Also stepping in to help warm this financing winter: sellers.
We’re starting to see a lot of broker listings highlighting seller financing. This is great for new park investors that otherwise couldn’t qualify for a traditional bank loan (just make sure to get enough term!).
B. Buyer & seller pricing spread is still too wide.
If sellers have a cash flowing park and:
don’t have a loan coming due
a fund closing
or a divorce pending
Then why sell?
Of course, eventually something will give and buyers and sellers will transact again.
Try as fathers might, there are a lot of kids out there that stand to inherit parks that would greatly prefer hard cash.
Happy Trails,
MHP Weekly