Agency/CMBS Debt and Road Type

[Brenden Mitchum]

Hey fellow community owners, I was wondering if anyone has experience securing agency or CMBS debt on a mobile home park with chip n' seal roads?

We are looking to purchase a park and the difference in price between chip n' seal and gravel is about $300k. I've only ever heard that banks want to see asphalt roads for agency & CMBS debt. However, in my research, it seems the topic might not be as black & white as I'd thought.

Anyone with first hand experience in the matter??

Thanks in advance!

[Brett Hulsebus]

Hi Brenden,

Based on my experience with Agency & CMBS loans, it isn't so much roads as much as it is with the loan amount. The condition of the roads could be an issue in regards to the LTV, but they (GSE & CMBS) only secure loans that are $2 MIL+.

Again, based on the lenders I work with, no way you can secure a loan with Fannie, Freddie, or a CMBS at $300K. I have lenders that will originate those, but it will be a 3-5 ARM based on the current Prime rate.

There may be others who disagree with me, but that is my experience.

[Brenden Mitchum]

Hey @Brett Hulsebus, thanks so much for the insight!

We are familiar with the loan amount requirements for both. I think you may have misread my question. But, just to clarify, the entire portfolio would be well over $30M at refi so size shouldn't be an issue. However, we are also very aware that those loans are not just based on loan amount. Class, condition & utilities all play a big part too. So, still trying to figure out if one of the parks being on chip n' seal would be an issue. The rest are asphalt. Assuming all are in good condition, regardless of material. Any thoughts on this specifically?

[Brett Hulsebus]

@Brenden Mitchum

Hi Brenden,

Apologies for misreading your post.  I was on couple hours of sleep that day.  

Writing this with a full night sleep, I now understand better what you're asking, but don't know the answer. I'll reach out to one of my GSE/CMBS lenders for input and let you know when I receive a response (they should get back to me same day if not the next). Thank you.

[Brett Hulsebus]

Hi @Brenden Mitchum - Apologies for the late reply.  Had an emergency situation come up related to a 1031 exchange that I needed to move on.

And you are correct.  It does have to be asphalt for agency debt.  Hope this helps.

[Brenden Mitchum]

Hey @Brett Hulsebus

No worries at all - I really appreciate the follow up! While it certainly doesn't help our returns, it does support our decision to go with asphalt from the start. 

Thank you!