MANUFACTURED HOME PARK RESIDENT GROUP PURCHASES CALIFORNIA PARK
PMC FINANCIAL SERVICES – DEANE F. SARGENT
The residents of Aptos Knoll Estates, Aptos, California have completed the purchase of their mobile home park through their resident corporation, Aptos Knoll Mobilehome Owners Association, Inc. (AKMHOA). Aptos Knoll is a 76-site, 4+-star, “55 & Older” manufactured home park located at 600 Trout Gulch Road on 13 acres near Santa Cruz, California, about 80 miles south of San Francisco.
The park includes a 3,500 sq. ft. recreation center with assembly room, service kitchen, game rooms, crafts rooms, billiards room, pool and spa. The park has municipal utilities, asphalt streets with concrete curbing, and a small laundry facility. The park was built in 1970 and contains 76 doublewide homes.
AKMHOA was formed a number of years ago to purchase the property. However, prior park purchase efforts failed. The current effort was successful in February 2005, when 62 residents each purchased a membership in the corporation for $15,000. 50 residents funded their membership out of personal funds. The remaining 12 members borrowed 95% of the share price through an AKMHOA funded loan program. The loan program was available to anyone in the park interested in membership. The remaining 14 residents chose to remain on rent control, although several sites are in transition and the new owners will become members in the near future.
This $930,000 in equity, combined with a $3.380 million conduit first mortgage loan and a $380,000 subordinated loan to the corporation by residents, enabled the group to purchase the property for $3.9 million (about $51,300 per site). The County of Santa Cruz provided critical support by agreeing to the request of the park residents to enter into a “friendly condemnation eminent domain” action with the seller, thereby providing the seller with attractive tax benefits and an inducement to deal with the resident group.
AKMHOA and PMC developed an organizational and financing plan.
There were three (3) goals:
- Have a membership group of at least 60% of the occupied sites
- Have a total average monthly member payment (including loan payments) after acquisition of approximately 125% of the prior site rent payment, and
- Have a down payment for those residents borrowing the membership price of less than two months site rent.
The goals were achieved with 82% participation, member monthly payments (including reserve deposits) about 26% over the average member monthly site rent of $437, and a downpayment of $750. Member payments are expected to decline in the future, as the additional residents become members.
The first mortgage loan was originated with an interest rate of 5.71%, a 30-year amortization and 10-year term. The loan amount was approximately 80% of the sum of the purchase price and transaction costs.
PMC Financial Services was pleased to act as organizational consultant and to arrange the first mortgage financing for the project.
For information, please contact:
PMC Financial Services
541-708-5131, 541-708-5132 fax