PGP MANUFACTURED HOME COMMUNITY REPORT

SPRING 2009

Understanding MHC Values is Our Business!

States in which we
About PGP Valuation Inc… have recently
appraised

PGP Valuation Inc was established in 1978 and is now –

one of the largest and most successful appraisal firms in Alabama

the world, with approximately 30 members of the Alaska
Appraisal Institute (MAI) and 150 professional appraisers Arizona
on staff in the United States and Canada. Arkansas

California
In November 2006, FirstService Corporation acquired a
controlling interest in PGP. FirstService is the parent Colorado
company of Colliers International (CMN), one of the Connecticut
largest and most respected real estate services Florida
companies in the world. FirstService also acquired a Georgia
controlling interest in MHCM Project Management,
Hawaii
Cohen Financial, and PKF Consulting. The result of this
alliance is a powerhouse of comprehensive client Idaho

services, including appraisal and consulting, commercial Illinois

brokerage and management, and lending. Will rents be able to hold their ground, and can Indiana
occupancies increase while our nation seeks quality
Kansas
affordable housing?
Our Role With the FDIC… Louisiana
Maryland
Many community owners indicate challenges in
PGP Valuation is the contracted Quality Control and
Consulting firm for all real estate related issues for the refinancing communities, and financing homes. The Massachusetts

FDIC. Our Scope of Work is to provide, monitor, and elimination of the CMBS market has effectively Michigan

assist the FDIC in the following areas: removed much of the needed liquidity that the Minnesota
industry runs on. Mississippi
• Appraisal Reviews Missouri
• Establish/Monitor Quality Control Process Have the market ills had an impact on value? Is it Montana
• Appraisal Ordering possible that MHC is a great hedge against a
N Carolina
• Monitor the REO and Loan Process declining market, and therefore values can be
NewHampshire
• Coordinate and Interact with Asset Managers expected to increase? Or will MHC values suffer
losses similar to other residential and commercial New Mexico
and PCAM (P ost closing Asset Managers) to
Establish QC Protocols real estate? We at PGP look forward to talking with New Jersey
you regarding these and other issues facing the New York
This involves the REO properties (non-performing and industry. Nevada
bank owned assets) non REO (performing or troubled N Dakota
assets) under FDIC receivership. INSIDE THIS ISSUE Ohio
Oklahoma
MHC Market at a Glance… Understanding Operating Expenses Oregon
(Bruce Nell, National Practice Group Leader, PGP Valuation Inc.)
Pennsylvania
Conversation on Capitalization Rates and
A lot has changed in the past 12 months. A new N Carolina
National Sample of Recent Sales
president and a shift in the policies of Washington. S Carolina
The S&P fell 40% and then rebounded 25% in the last What Do Those Involved in the Market Think Tennessee
month. The Phillies win a world series; although the of What is Going On Texas
curse of the Billy Goat lives on in Chicago. Utah
Boost Your Value! Ideas to Increase the Virginia
Unemployment has reached a level not seen since the Value of Your Property W Virginia
early 1980s, and the credit crunch has put a pinch on
Washington
residential and commercial real estate. MH REITs Perform Best in 1Q 2009
Washington, D.C.

With all the bad news in the market, what is the impact Meet Our Team *Puerto Rico
on Manufactured Housing? As one of the best
affordable housing options, will this sector benefit from For more information, contact the PGP Valuation MHC Team
the collapse in the housing bubble? (see the back of the newsletter for contact information).

Spring 2009 Newsletter COPYRIGHT © 2009 PGP V ALUATION INC ALL RIGHTS RESERVED
 UNDERSTANDING OPERATING EXPENSES

Accurate valuation is enhanced by solid operating history. However, it is common to rely upon expense comparable data when valuing properties through direct
capitalization. Understanding how operating expenses vary from region-to-region is key, especially for spec ialized lenders and investors looking to expand into
other national markets. The table to the right is a sampling of approximately 100 expense comparables located throughout the country. Possible considerations
for comparing operating expenses are discussed below.
Real Estate Taxes: Every state has its own method for calculating property
taxes. There are several states (like Michigan and California) that reassess
facilities based on sales price. Therefore, since the definition of “Market Value” Operating Expenses
assumes a sale, appraisers are forced to use an amount calculating the value of $1,000
the property and the tax rate. Each local jurisdiction must be reviewed and $900
understood. This can oftentimes cause headaches for refinances . $800

$ Per Space
$700
Insurance: Rates are fairly similar across the nation. Special consideration $600
should be given to flood, earthquake, hurricane, or other natural disaster areas. $500
Typical range for this category is $75 to $125/space. It is typical for lower rates to $400
$300
be achieved through blanket policies. It will be interesting to see if or how much $200
policies rise over the next couple years due to a variety of factors. $100
$0
Utilities: Both location and climate play a role in this category. Densely
populated areas typically see higher energy costs. Utility expenses can range

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greatly from property to property depending on the utilities that are directly

int.

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billed to the residents. Additionally, many owners recapture the utility

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expenses by passing through the costs to the residents.

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Off
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Repairs and Maintenance : This category includes landscaping and any

maintenance associated with the facility. Areas that require a snow removal
expense are typically higher. Long term expenditures are also affected by
climate; however, these expenses are typically covered in the reserves
category. It should also be noted that expenses for this category can range
greatly depending on the number of amenities such as clubhouses, pools,
and playgrounds. This expense is also impacted by whether or not the
community has a well and/or septic system which requires regular
maintenance. The typical range for this category is $150 to $350/space. Age
and physical characteristics also play a part in budgeting for this category.
Off-Site Management: This is typically done on a percentage basis (EGI).
Therefore, areas with higher rents result in higher management costs. Typical
costs range from 3% to 5% of Effective Gross Income. This expense is not to
be confused with General/Administrative expenses.
On-Site Management: This category is greatly impacted by location and
average living expenses. It is common for resident managers to live on-site.
Expenses are often higher for facilities not offering living accommodations for
managers. It is typical for owners to offer one free space for managers of
communities from 20 to 150 spaces and two free spaces for communities
Ge
Re
PGP Valuation Inc
with more than 150 spaces. Typical range for this category is $300 to
$400/space.
General/Administrative: This category is fairly comparable from region-to-
region. This expense includes accounting, legal fees, other professional fees,
and general administrative costs. Typical range for this category is $100 to
$200/space.
Reserves: This category takes into consideration capital improvements over
a holding period. For manufactured home communities, it would typically
include replacing the roofs on clubhouse, resurfacing the streets, and
updating/replacing utility pedestals. Typical range for this category is $30 to
$60/space.
(Data compiled by PGP Valuation Inc MHC specialist Kevin Evers- 916.724.5530)

MHC CAPITALIZATION RATES

There were fewer sales in 2008 than seen in previous years. The reduced number of sales owes in some degree to the lack of credit available and the particular
aversion to risk on behalf of lenders as well as investors in the current market. The uncertainty surrounding the ultimate fallout from the downturn in the national
economy has led to a pullback from both lenders and investors. While buyers view the market with some skepticism and expect an increase in rates, sellers
have remained optimistic or are unwilling to believe that capitalization rates may have risen from historic lows of the mid-2000s when many properties traded in
the 5.0% to 6.0% range.
These rates were driven down by equally historically low interest rates spurned by the Federal Reserve Bank’s lowering of the Fed Rate to help jumpstart the
economy after the 9/11 terrorist attacks and earlier downturn in the dot.com market. While the lower rates did promote more debt by consumers and made
housing more affordable, the subsequent housing boom was not built on solid economic drivers (job gains, increase in exports, etc.) and the run-up in housing
prices was not supported. The hastily prepared, adjustable rate loans were bundled together and sold on Wall Street, incorrectly rated and sold to uninformed
investors. The US economy, that was held up primarily by the housing market (mortgage companies, lenders, developers, home-builders, contractors, etc. all
experienced substantial growth over this period) became very unstable when supply exceeded demand and home prices began to fall. Concurrently, the
adjustable rate loans began to see large rate increases that the unqualified buyers were unable to keep pace with. As housing prices declined, borrowers were
unable to refinance their loans resulting in defaults. The loans sold on Wall Street were spiraling in value and almost overnight, investors in the large conduit
loans stopped buying the paper. Lenders that were not prepared to carry and service the massive amounts of residential and commercial paper were now
burdened with loans that had no buyers at rates that were too low to sustain.

The mounting loans that were going into default coupled with the growing uncertainty surrounding the economic outlook and cras hes in the global economy
caused many banks to stop lending altogether. In late 2008, the Federal Government again interceded to create TARP, a $700 billion dollar bail-out for many of
these lenders that had created the market instability, fearing that these companies collapse would spark further economic decline through job losses, lower retail
sales and a further decline in housing prices. The government’s primary concern was the lending environment had seized up after Wall Street stopped buying
paper. The uncertainty on the part of lenders continues today with some lenders quoting 600 to 2,000 basis points over the historically low Treasury rates for
new loans, with only the most qualified buyers and the safest of loans being written. At the same time, loan to value ratios decreased from 90% to 100% down to
50% to 60%.
Spring 2009 Newsletter COPYRIGHT © 2009 PGP V ALUATION INC 2
 MHC CAPITALIZATION RATES (CONT.)

As a result, only well capitalized buyers even qualify for a loan in the current environment. While sellers have been reticent to sell, since few buyers are even
less credit are available for deals priced below 7.0%, qualified buyers have realized that they now control the market and many also fear the uncertainty
surrounding pricing. Investors have reported equity return requirements near 12% with limited risk to venture from the sidelines. Consequently, a stalemate
between buyers and sellers has taken hold of the commercial real estate market. The standoff will likely continue until sellers, some that have already lost up to
20% in book value on their investments, need to either refinance their existing loans or cannot afford the new payments as rates adjust upwards and, in either
event, are forced to sell.

In a published article by Royce Rowles of PGP Valuation Inc, Royce discusses the ratio between annual net income and sales prices.
“While the NOI may be falling at many properties (due to increased vacancy rates and/or more competitive rental rates), it almost certainly does not
account for the entire value decline in this market. Major value declines also come from the changing status quo between buyers and sellers. Buyers
have become much more patient and are expecting a much more favorable ratio between their NOI and purchase price. In other words, when there
are fewer buyers (as often is the case in a down market) capitalization rates move upward. In situations where there are recent comparable sales,
anyone valuing a property can easily extract and apply very current and realistic capitalization rates to estimate Market Value. This is because during
times of appreciation, the market is usually active. Extracting supportable capitalization rates is easy. However, when transactions are scarce finding
market capitalization rates can be significantly harder. When this happens, oftentimes sellers have an unrealistic opinion of value because they are
relying on dated capitalization rate sources.”
The following is a sample of recent manufactured home community sales collected from across the United States by PGP Valuation.

NATIONAL SAMPLE OF RECENT MHC SALES

Property Name Location Sale Date Sale Price Number of Spaces Price per Space Year Built Occupancy Cap Rate

Pleasant Living MHC Riverview, FL 2/10/2009 $10,400,000 245 $42,449 1976 N/A 5.83%
Greenfield Manor Fenton, MO 1/25/2009 $3,350,000 153 $21,895 1970s 94% 8.21%
Oak Haven MH Park Arlington, TX 12/23/2008 $2,500,000 93 $26,882 1971 82% 9.00%
Safari MHP Avery, CA 12/3/2008 $1,250,000 72 $17,361 1968/1998 N/A 6.60%
The Willows & Willows II Fenton, MO 11/15/2008 $3,160,000 121 $26,116 1984 85% 8.19%
Twin View Terrace MHP Redding, CA 11/14/2008 $6,300,000 178 $35,393 1965 90% 6.30%
Harper Park MHC Le Roy, NY 11/13/2008 $650,000 44 $14,773 1978 82% 9.20%
Coral Isle MHP Hesperia, CA 10/31/2008 $3,350,000 70 $47,857 1966 100% 6.48%
Twin Cypress MHP Oakdale, CA 10/31/2008 $2,100,000 45 $46,667 1968 100% 7.26%
Emerald Acres MHP Colorado Springs, CO 10/21/2008 $5,850,000 114 $51,316 1970s 96% 7.01%
Mt. View Villa Mobile Home Park Mountlake Terrace, WA 10/16/2008 $1,880,280 30 $62,676 1969 100% 5.52%
Western Village West Des Moines, IA 10/15/2008 $6,750,000 270 $25,000 1970 95% 7.48%
Hanford del Arroyo MHP Hanford, CA 10/10/2008 $11,060,100 173 $63,931 1978 99% 6.06%
Terrisan Reste MHC Bridgeton, MO 10/10/2008 $3,825,000 120 $31,875 1960s 98% 7.95%
Nomad Country Club Mobile Vancouver, WA 10/1/2008 $2,400,000 51 $47,059 1960s 100% 6.05%
SierraEstates
View MHP Porterville, CA 9/30/2008 $760,000 33 $23,030 1965 100% 9.72%
Eastwood Manor MHP Mankato, MN 9/20/2008 $4,950,000 267 $18,539 1966 94% 8.54%
College Street Mobile Home Park Olympia, WA 9/8/2008 $1,700,000 20 $85,000 1999 N/A 4.13%
Lakeside Village Highland Mills, NY 9/1/2008 $4,500,000 89 $50,562 1960 87% 7.53%
Skylark MHC Lafayette, CO 8/26/2008 $4,270,000 96 $44,479 1970s 94% 7.86%
Acacia Villa MHP Apache Junction, AZ 8/12/2008 $2,570,000 66 $38,939 1988 77% 6.08%
Antelope MHP Gillette, WY 8/8/2008 $3,620,000 121 $29,917 1970 99% 7.66%
White Oaks Mobile Home New Caney, TX 8/1/2008 $2,075,000 168 $12,351 1970 51% 5.70%
Community
Canoga Mobile Estates Canoga Park, CA 7/30/2008 $21,800,000 200 $109,000 1971 100% 5.75%
Pioneer Pines MHP Bakersfield, CA 7/29/2008 $10,400,000 336 $30,952 1970 63% 6.68%
Skyview Terrace MHP Foresthill, CA 7/29/2008 $6,910,000 135 $51,185 1960s/1975/1987 98% 6.17%
Rockford Riverview Estates Rockford, MN 7/28/2008 $12,350,000 429 $28,788 1973 88% 5.50%
Windy Hill Estates Williamsburg, VA 7/24/2008 $8,000,000 215 $37,209 1958 94% 7.10%
Woodland Terrace Waterloo, IA 7/21/2008 $3,575,000 368 $9,715 1968 77% 7.52%
Verde Plaza MHC Tucson, AZ 7/18/2008 $5,800,000 193 $30,052 1974 76% 6.26%
Bonner Springs MHC Bonner Springs, KS 7/3/2008 $4,917,029 211 $23,303 1972 75% 7.02%
Creekside Estates MHC Kansas City, KS 7/3/2008 $3,215,877 143 $22,489 1975 78% 7.14%
Countryside MHP Cotati, CA 7/2/2008 $1,850,000 36 $51,389 1960s N/A 5.95%
LeBruns MHP Lebanon, NH 6/30/2008 $1,625,000 50 $32,500 1968 100% 8.66%
Puerto Vista MHC Coos Bay, OR 6/26/2008 $5,100,000 135 $37,778 1979 99% 6.30%
El Dorado MHP El Cajon, CA 6/26/2008 $3,175,000 51 $62,255 1970s 97% 8.03%
Holly Ridge Mobile Home Park Conroe, TX 6/25/2008 $1,176,650 58 $20,287 1960 95% 7.52%
Ward Mobile Home Park Sylmar, CA 6/20/2008 $1,730,000 40 $43,250 1947 95% 7.02%
Kakusha MHC Clearwater, FL 6/5/2008 $4,400,000 116 $37,931 1970 100% 6.11%
Wellington Green Estates Clarksville, IN 6/1/2008 $9,300,000 319 $29,154 1968 97% 7.23%

PGP Valuation Inc has compiled capitalization rate trends for manufactured home communities over the past ten years
and broken them down into five different regions. If you are interested in capitalization rate trends in your region
contact a PGP Valuation representative.

Spring 2009 Newsletter COPYRIGHT © 2009 PGP V ALUATION INC 3

 LET’S FIND OUT WHAT THE MARKET THINKS
How have the Capital markets affected
lending for the manufactured home
community industry?
The significant turmoil in the real estate capital markets has resulted
in a considerable vacuum in financing opportunities for Manufactured
Home Communities. Once a favorite of the now inactive
CMBS/Conduit loan industry, the MHC asset class has become
increasingly reliant on Fannie Mae, life insurance company, and
commercial bank loan executions. Many MHC and RV Resort
operators, in addition to borrowers across every asset class, had
found favor in recent years with aggressive Conduit lending
programs and their high loan-to-value and low debt service coverage
thresholds. With the disappearance of this segment of the capital
marketplace, the availability of competitively priced, non-recourse
first lien financing for MHC’s outside of Fannie Mae does exist,
however with comparatively less attractive terms.
Portfolio life insurance companies are still in the market and are
providing non-recourse financing, however their fixed rates range
from 7% to 8%, which is 1.5% to 2.0% higher than Fannie Mae fixed
rates today. Commercial banks will loan up to 75% loan-to-value on
MHC’s, subject to debt coverage requirements of 1.25x typically. The
best bank pricing today is in the low to mid 6% range, and the
borrower must sign a personal guarantee. The bright spot for MHC
financing continues to be Fannie Mae, but they too are getting tighter
in their underwriting and pricing. The highlight of Fannie Mae’s
offerings today includes a variable rate loan program with fully
indexed rates in the high 4% range and a lifetime cap between
6.75% and 7.25%.
Zachary E. Koucos
Associate Director
HFF
858.812.2351 Office
858.552.7695 Fax
Securitized lending for individual properties (CMBS or conduit loans)
emerged in the mid-1990s as a very popular lending option for
commercial real estate including MHCs. Conduit lending was
embraced by lenders as a way to generate lending profits while
shifting the risk of defaults to bondholders who purchased the bonds
that were collateralized by the individual loans.
In some years conduit lending accounted for up to 60 percent of
annual commercial lending volume. Borrowers benefited by having
very attractive (interest rates and leverage) non-recourse financing
available for most properties including MHCs, which had previously
been viewed by many lenders as a special purpose asset. The
existence of conduits also resulted in better terms being available
from non-conduit or traditional balance sheet lenders as they had to
compete with conduits to obtain business. However, the recent
capital market turmoil brought the origination of conduit loans to a
halt as the buyers of these bonds, or CMBS, exited the market. With
conduit lenders gone from the market, many MHC borrowers with
existing conduit loans are facing challenges in refinancing their
properties.
Tony Petosa
Senior Vice President
Wells Fargo Multifamily Capital
(760) 438-2153 Office
(760) 505-9001 Cell
(760) 438-8710 FAX
tpetosa@wellsfargo.com
Spring 2009 Newsletter COPYRIGHT © 2009 PGP V ALUATION INC
To use a Vegas analogy, we went from a "hot" craps table where
everybody is winning, to the desperation of placing your last dollar
into the slot machine on the way out, hoping you'll get lucky. OK,
maybe not that extreme, but close. Over the past several years,
there were many options to finance your MHC; you had the
CMBS/conduit lenders, the life companies, GE, commercial banks
and the Fannie Mae DUS lenders, to name a few, and they all
wanted a piece of the action.
Due to MHCs being a proven asset class within the finance world
(high performing loans and low delinquencies), they were viewed as
favorably as a Class A apartment complex in a strong Southern
California market. At the peak, it was common to see 10 years
interest only, 80%+ leverage and a sub-100 spread on any given
community. Then, much like the economy as a whole, the bottom fell
out and we went from an extremely liquid and aggressive market to a
cautious, selective, downright tough market.
The good news is that we are still closing loans under the Fannie
Mae DUS program. Although the terms are not quite as attractive, it
is still possible, and realistic, to get a non-recourse, less than 6%
fixed rate loan with a 10 year term and a 25 to 30 year amortization
schedule at 75% leverage on high quality communities. Other than
that, you may be able to find a local bank or a life company to
consider something on a recourse basis and/or a more conservative
structure.
Todd Elkins
Vice President
Grandbridge Real Estate Capital LLC
205.978.1920 Office
205.978.1852 Fax
telkins@gbrecap.com
www.gbrecap.com
With the capital market providers still on the sidelines , owners of
manufactured home communities basically have two choices when it
comes to financing – Fannie Mae and everything else. I divide it into
two choices since Fannie Mae is the best option in the market today
and Capmark is actively closing loans through its Fannie Mae
platform. The main issue is having the community qualify for a
Fannie Mae loan from the quality standpoint. The community
generally has to be 3.5 star quality and higher, 50% of the spaces
have to accommodate multi-sectional homes, very little park owned
homes, 5% or less RV sites, good amenity package and has to show
well. Current underwriting guidelines are 80% LTV with a 1.25x debt
coverage ratio with terms ranging from 5 to 30 years. Amortization
schedule of 25 to 30 years. Keep in mind that Fannie Mae has been
tightening their underwriting requirements, so a deal that fit the
program a year ago may not qualify today.
If the community doesn’t qualify for Fannie Mae, then it falls into what
I call “everything else”, meaning Capmark works with the borrower to
try and find a loan. There are several smaller banks that will lend on
manufactured home communities throughout the country. The
underwriting is going to be more conservative than Fannie Mae,
generally LTV of 60 – 70% with 1.30 + debt coverage ratio. The
terms are going to be shorter as is the amortization. Capmark also
works with life insurance companies to fund loans for manufactured
home communities. Some insurance companies will lend on
communities that don’t qualify for Fannie Mae program ; it really
comes down to deal specifics.
4
 LET’S FIND OUT WHAT THE MARKET THINKS (CONT.)
As a community owner who needs financing in this challenging
environment, it is important to allow more time to get your loan
closed and it is very important to work with lenders that know what
they are doing.
Damon B. Reed
Vice President
Capmark Finance Inc.
(205) 991-6700, Ext 8191
(205) 991-9101 Fax
(205) 601-2855 Cell
Damon.Reed@capmark.com
Underwriting parameters continue to become more conservative.
Fannie Mae recently announced that all-age communities (non-age
restricted) will need to utilize a 25 year amortization, as opposed to
the standard 30-year amortization. Fannie is taking a harder look at
asset quality and only wants to lend on the highest quality
communities. That being said, Fannie Mae closed on over $1 billion
in manufactured housing business in 2008, which was a huge jump
from the previous year. Rates are still very attractive for communities
that do qualify, with 10-year loans currently pricing in the 5.75-6.25%
range. With limited other financing options, we expect to continue to
see a large volume of manufactured housing owners seeking Fannie
Mae financing in 2009 for their communities.
Andrew Tapley
Senior Vice President
Multifamily Finance
Phone: (301) 215-5578
Fax: (301) 634-2151
atapley@walkerdunlop.com
www.walkerdunlop.com
In the next 12 to 24 months do you
foresee any new financing sources or
options that are not currently available
for MHC owners?
I have been lending on manufactured home communities since 1995
and it’s hard for me to imagine that the capital market providers will
stay on the sidelines forever. I think we are several months away
before any of the Wall Street firms dip their toe in the securitization
market. I do think by 2010, we will see some “conduit’ lending for
manufactured home communities, albeit on much more conservative
terms that what was done in 2007. Manufactured home communities
as an asset class are holding up well compared to other commercial
property types. If that trend continues, you may have more life
insurance companies and even pension funds start to lend on
communities. Overall, I am optimistic that the worse days are behind
us and that we may start to see “normal” lending emerge in the near
future.
Damon B. Reed
Vice President
Capmark Finance Inc.
(205) 991-6700, Ext 8191
(205) 991-9101 Fax
(205) 601-2855 Cell
Damon.Reed@capmark.com
Spring 2009 Newsletter COPYRIGHT © 2009 PGP V ALUATION INC
Yes, we are seeing the marketplace gradually deepen for MHC
financing as more lenders have taken note that Manufactured Home
Communities as an asset class provide a reliable, low-risk
investment. Life insurance companies as well as commercial and
regional banks that historically have not transacted in the MHC
sector are beginning to realize the inherent value of including this
product type in their investment portfolios. The word is out – low loan
delinquency ratios, high occupancy rates, and consistent cash flow
make MHC’s one of the most attractive options for the deployment of
capital in these uncertain times.
We are also seeing many public and private capital sources raising
debt and equity funds for the origination of first lien, mezzanine,
bridge, and structured finance transactions. More and more of these
capital sources have MHC’s on their list of preferred product types.
The ability to navigate the capital landscape left standing after the
implosion of the MBS/Conduit marketplace is crucial today for MHC
operators who are finding that their go-to lenders are no longer active
or existent. The good news is that there will be capital available and
looking for opportunities, albeit with a tighter strike zone on
underwriting, pricing, and terms.
Zachary E. Koucos
Associate Director
HFF
858.812.2351 Office
858.552.7695 Fax
zkoucos@hfflp.com
For the near future, we see Fannie Mae as the best financing source
for MHCs. Fannie Mae offers long-term fixed rate, non-recourse
financing to qualified MHC's (10-year fixed rates are currently under
6%), and this has helped fill the some of the void left by the conduit
market. For properties that do not qualify for Fannie Mae financing,
portfolio lending programs would be the next option. Borrowers will
find, however, that portfolio lending programs often require full
recourse (personal guarantees) and the terms and rates are not as
attractive as what can be found with Fannie Mae currently. Beyond
that, seller financing may be an option if a borrower is acquiring a
property. In that instance, the financing terms will be the result of
what the buyer is able to negotiate with the seller. Will conduit
lending return? Ultimately we believe it will, but not for the
foreseeable future and likely in a more regulated environment with
tighter credit standards.
Nick Bertino
Vice President
Wells Fargo Multifamily Capital
(760) 438-2629 Office
(858) 336-0782 Cell
(760) 438-8710 FAX
nick.bertino@wellsfargo.com
With the single-family market struggling,
how do you think this will affect the
manufactured home community
industry?
Simply put, the struggling single family market presents terrific
challenges and great potential. The potential is to design creative
and sustaining programs that enable companies like ours to provide
5
 LET’S FIND OUT WHAT THE MARKET THINKS (CONT.)
quality, affordable shelter to families who have challenging balance
sheets and credit histories because they are moving from housing
they can't afford to factory-built homes in community neighborhoods
that present a lifestyle and a value proposition that they can embrace.
The real challenge for our company is developing programs to take
advantage of the baby-boomer population wanting to downsize, but
not being able to sell and capture their perceived equity in the current
home they have occupied for decades.
James A. Reitzner
President & Director
Asset Development Group, Inc
414-507-8057
jim.reitzner@assetdevelopment.com
In the near term, on the 55+ side, the inability of our prospects to sell
their homes has been affecting us for a while now. New home sales
in age restricted communities have dramatically slowed given the
difficulties these prospective residents face in selling their permanent
homes. When houses do start to sell, and there is evidence the
inventory of foreclosures and short sales is starting to move in the
Sunbelt states, we’re going to be competing with some relatively
cheap stick-built product. I think this will force us to revisit the floor
plans and models we’re spec’ing. For a while, when the market was
hot, the homes we were selling kept getting bigger and more
expensive (triples, two-car garages, granite and stainless steel, etc.).
This worked because the cost of alternative housing was increasing
so rapidly and our customers were pulling out large amounts of equity
from their homes in the north. That is obviously not the case at this
point and we are going to be selling in a much more “normal” market
when the ship turns.
The good news is, I think the housing correction has readjusted the
market for the different types of housing. Many of those folks, and
there are millions of them, that could previously have qualified for a
high leverage mortgage to buy a stick built-house, are renters now.
This has translated to fantastic sales results within our all-age
portfolio in all regions of the country. As long as we remain focused
on the overall value proposition this industry is based on, we expect
this success to continue.
William Glascott, CFA
Vice President
Hometown America, LLC
312.604.7503 Office
312.604.3103 Fax
312.523.7584 Cell
bglascott@hometownamerica.net
www.hometownamerica.com
The manufactured home industry is able to offer individuals and
families an alternative affordable housing option during an economic
transition.
Manufactured home communities offer an atmosphere and amenities
that a typical apartment complex does not have. These include
homes with a larger living area than a typical 2 bedroom apartment
unit, individual yards in which pets and children can play safely, and a
similar neighborhood atmosphere to that of a single-family
subdivision.
The RHP Properties portfolio (70 communities, 15 states) continues
to experience an increase in occupancy due to our strong hands -on
management approach during these tough economic times.
Spring 2009 Newsletter COPYRIGHT © 2009 PGP V ALUATION INC
Joshua Mermell
Director of Acquisitions
RHP Properties, Inc.
248.626.0737
jmermell@rhp-properties.com
Many owners have indicated that one of the
biggest challenges of owning MHCs is having
to carry notes of community-owned homes on
the balance sheet. With the lack of
chattel/manufactured home financing, how are
you dealing with home financing issues?
As a company, we recognized years ago that we could not "get
around" the necessity of financing homes in our communities. Our
business model necessitates the three critical components of our
asset class: retail sales of homes, retail financing of homes and
quality communities in which to place those homes all for the
purpose of creating the value proposition for the customer. We
purchased a finance company with an on-going book of business
and solid income stream, and expanded that company's ability to
grow and service our buyers. This approach keeps our balance
sheet on the properties side focused on the traditional method of
valuing properties which is the Net Operating Income tied to the real
estate and not blurred by the necessity to evaluate the "home
inventory", however it is represented on the balance sheet.
James A. Reitzner
President & Director
Asset Development Group, Inc
414-507-8057
jim.reitzner@assetdevelopment.com
We’re doing it ourselves. You are correct though that this is a big
challenge as the capital requirement associated with home sales
has increased. It has worked out for us as we’ve been able to
manage delinquencies and turnover because we’re in the
communities every day. From a capital preservation standpoint, it
has worked out as we’re well capitalized, long term investors with
the critical mass that supplies geographic and demographic
diversity in our loan portfolio.
We do have good relationships with the national lenders that are still
out there lending and work to establish partnerships with regional
and local banks when possible. We are also always looking at
creative ways to add liquidity to this market through industry
initiatives and working with national organizations like the MHI. I
think as investors come back to the market for asset backed
securities (with help from Uncle Sam) and we as an industry can
demonstrate transparent and stable loan performance, more chattel
financing sources will surface. However, that means that we need
to be very disciplined in our lending practices and underwriting so
that we ensure these notes are marketable assets when that time
does come.
William Glascott, CFA
Vice President
Hometown America, LLC
312.604.7503 Office
312.604.3103 Fax
312.523.7584 Cell
bglascott@hometownamerica.net
www.hometownamerica.com
6
 BOOST YOUR VALUE

Ideas to Increase Your Community’s Value

1) Tax Appeal – Do you feel you are paying too much in
taxes? A viable option for some community owners in
today’s market is a property tax appeal. With the help of
PGP Valuation Incyou can take on the assessor’s office to
bring the assessed value of community to where it should
be, reducing taxes and increasing your net operating
income.
2) Get an Insurance Quote – Are your insurance
expenses in line with the market? Many times owners stick
with the same insurance plan and company for their
community for years and years. Don’t get stuck in a rut.
Test the market and shop around to find the best
insurance plan for your community. Doing so could save
you big not only in NOI, but also give you the peace of
mind that your community is adequately insured.
3) Pass Through Utility Expense s – Are utilities
expenses eating away at your bottom line? By passing the
through water, sewer, and trash expenses on to the
residents owners help to protect themselves from overuse
and abuse of the utilities by careless tenants. Passing
through the utilities expenses to the residents can
sometimes be a touchy subject, especially in areas where
vacancy is high, so owners have been known to discount
the space rent to help mitigate a portion of the increased
costs to the residents.
4) Image is Everything – What first impression does your
community give to potential residents? The best tenants
will be looking for high-quality, attractive communities.
Simple practices such as a fresh coat of paint, pressure
washing common area exteriors, and picking up trash are
all affordable ways that please those paying attention to
detail. A few flowers and nice landscaping will also add
greatly to your community’s curb appeal.
5) Put Your Best Face Forward – Who is the face of your
community? Your choice of staff will be the face of your
business. Managers who can give a good impression to
potential tenants with charisma and attentiveness, as well
as capture your vision of professional service, will attract
and retain your tenants and encourage referrals. Capitalize
on the great supply of talent swimming in the current job
market.
6) Space Rental Income Is Not Everything – How much
ancillary income does your community produce? The most
successful owners in this industry have recognized that
income is not limited to the monthly space rent. Additional
income generators include RV/boat storage, pet rent, safe
deposit boxes, and a host of other creative ideas. It is also
important to look at miscellaneous income items which
could include administration fees, late fees, and
merchandise sales.

(by PGP Valuation Inc MHC specialist Kevin Evers - 916.724.5530)

MANUFACTURED HOUSING REITS PERFORM BEST IN 1Q 2009

By Greg Sukenik, Senior REIT Analyst, Zacks & Co.

th st
Despite a slightly rally on April 6 , equity REITs posted a 32% decline in the 1 quarter (FTSE NAREIT Equity Index). In
March, REITs we up about 4%.

Shopping center and Industrial REITs were the worst performing sectors, each declining about 41% in the quarter.
Manufactured Housing was the best performing sector, declining just 2%. Manufactured Housing is viewed as a more
“recession proof” sector, which could benefit as people trade down to less expensive rentals.

We expect continued volatility in REITs over the next couple of months due to commercial real estate fundamentals, which are
falling in most property types. If you jump into the sector, make sure you are diversified and only buy companies that have
enough liquidity to roll over 2009 debt.

Going forward, our favorite sector in 2009 is Apartments and our least favorite is Office. Apartment owners will benefit due to
a growing pool of potential renters and lower turnover. Office landlords are struggling due to the lack of corporate expansion;
many companies are reluctant to take on new space until the economy improves.

Office vacancies are increasing in most regions in the U.S. Among our buys are apartment REITs, Equity Residential (EQR)
and Mid-America Apartments (MAA), two REITs with minimal 2009 debt maturities and attractive valuations.

Spring 2009 Newsletter COPYRIGHT © 2009 PGP V ALUATION INC 7

 MEET OUR TEAM

A core strength of PGP Valuation Inc has long been its Who Do I
belief in specialization. With teams of individual Contact?
specialists devoted to every major asset class, PGP
has redefined the valuation process. In particular, the Bruce Nell
Manufactured Home Community Team has become a National Director
model for the industry due to its sweeping market (Eastern US)
614.540.2944
knowledge, intimate awareness of MHC trends, and
efficiency.
Rob Detling
PGP Valuation’s Manufactured Home Community (Western US)
Team has appraised facilities in nearly every U.S. state. 916.724.5507
Together with our Canadian team, we have complete
coverage of the North American MHC asset class.
Additional Offices in:
Continual exposure to manufactured home
communities is what sets the MHC Team apart from the
Atlanta, GA
typical, generalist appraiser. PGP Valuation Inc have
developed a database of market transactions, operating Announcement……
expenses, and rental rates that is growing with each Boise, ID
appraisal. The impact of this wealth of information Over the past decade only a few firms had appraisers
ripples throughout the analysis and is not limited to just who are considered experts in the valuation of
an improved comparable selection. In the experienced manufactured home communities . Many of those Boston, MA
hands of the MHC Team, the database allows the experts are now together at one company , PGP
appraiser to track historical trends to more accurately VALUATION INC.
Chicago, IL
gauge how the manufactured home community industry
is evolving. This equates to a report with a more PGP Valuation Inc is pleased to announce the
insightful market analysis, accurate projection of net addition of Bruce Nell, Matt Bilger, James Scott and
Chuck Schierbeck to their National Manufactured Dallas, TX
operating income, and a capitalization rate that reflects
the state of the local market. Home Community Valuation Group.
Denver, CO
As we look forward to 2009, it is clear that hiring an Bruce Nell was a principal with Crown Appraisal
appraiser with the expertise required to perform a Group and their Director for MHC Valuation.
proper analysis is of paramount importance. In 2007 Together this team has worked on MHC projects in Detroit, MI
and 2008, clients of all different sizes trusted the MHC nearly every market in the US.
Team at PGP Valuation Inc with the valuation of This experience is added to the industry leading Honolulu, HI
approximately 400 facilities for a variety of purposes. Manufactured Home Community Valuation Group at
Whether the value is to be used for PGP. Together the team has appraised thousands of
acquisition/disposition, estate planning, property tax facilities across the United States and Canada Los Angeles, CA
dispute, or litigation, utilizing an appraiser that is an
expert in valuing manufactured home communities and
who understands the industry is essential. Phoenix, AZ

PGP Releases New Report Format: Portland, OR

“Asset Management Report”

PGP has created the Asset Management Report as Sacramento, CA

a simple, cost effective format to help identify
potentially weakening commercial real estate
markets, properties at risk, and loans that need early San Diego, CA
management attention.
San Francisco, CA
The Asset Management Report is a regulatory
compliant appraisal in a customized format that
delivers critical information you need to limit Seattle, WA
management and review costs and maximize return Pictured (left to right): James Scott, Chuck Schierbeck, Bruce
on your loan portfolio. ASK US ABOUT IT! Nell, Lisa Ventresca, Matt Bilger
Vancouver, WA

Spring 2009 Newsletter COPYRIGHT © 2009 PGP V ALUATION INC 8