The Multifamily Trend Is to Exit Equity, Remain in Mezzanine Business

Ted Patch (pictured), senior vice president and chief production officer, is responsible for originating new loan production from Green Park Financial’s corporate headquarters in Bethesda, Md. In 2005, Patch originated in excess of $200 million in new loan production. He has over 17 years experience in commercial and residential real estate. Patch joined Green Park Financial in 1998 as an underwriter and became part of the production team in 1999. He talks to MHN Online News Editor Anuradha Kher about lending in the manufactured housing space, why this is a good investment for the company and how the mezzanine business is becoming more common.MHN: How much has Green Park Financial closed in 2008 for manufactured housing? Patch: We closed $167,345,000 and currently have $15,535,000 under application. That is a total of $182,880,000.MHN: Why does Green Park Financial think it is a good bet to loan to the manufactured housing sector of multifamily housing?     Patch: Manufactured housing communities have been a strong asset class for Green Park Financial with a substantial increase in volume over last year. As it becomes increasingly difficult to find capital in today’s market, manufacturing housing tends to be a more stable asset class as it is not as adversely affected by the market.  MHN: Which states are the manufactured housing companies mostly based in? Patch: This year, Green Park Financial has closed loans in New York, Florida, Arizona, Pennsylvania, Kentucky, Indiana, Texas, Iowa, Illinois and Minnesota.MHN: Who are the top manufactured housing borrowers for Green Park? Patch: American Land lease and Hometown America.MHN: How many years has Green Park been lending in this sector? Patch: Since 2001.MHN: What is the market share of manufactured housing companies right now? Patch: The market share of finance for manufactured housing communities has been increasing year-on-year, as there is a greater comfort level for the manufacturing housing asset class and operating dynamics. Much of this increased volume is due to the underwriting fundamentals of manufactured housing along with highly competitive positioning in the multifamily financing market.MHN: Does Green Park expect this number to grow? Patch: Green Park Financial expects manufacturing housing lending to grow. As conduits are no longer a viable capital source, and life companies and banks are a select few in the manufacturing housing lending space, increased competition will drive lender volume. In fact, Green Park Financial has closed over $150 million in manufactured housing community loans in 2008, up 76 percent over 2007 volumes. The company projects total 2008 manufactured housing lending to exceed $300 million.MHN: How has this sector been affected in the housing crisis?Patch: Manufactured housing lending, similar to conventional multifamily lending, has been affected by the housing crisis. The decision to lend often is made on the availability of financing.  Manufactured housing is challenged by fewer sources of financing for manufactured housing communities, and tightened underwriting standards.MHN: What are some of the other new multifamily finance trends? Patch: The multifamily trend in the market has been to exit equity but remain in the mezzanine business. The mezzanine business is more prevalent and will continue as credit standards tighten. Borrowers will want or need mezzanine lending to get to the capital levels they expect.