Briarcrest described as 'cash cow' banks are standing in line to loan residents the money to buy as a cooperative
LACONIA — More than 50 residents of Briarcrest Estates who gathered at the Gilford Youth Center last night heard from representatives of the New Hampshire Community Loan Fund that it would be financially feasible for the tenants to purchase the manufactured housing park, which would become owned and operated by a cooperative.
"It's realistic and it's doable," said Kevin Kelly, a former commercial banker and member of the Lakemont Cooperative, formed by a group of residents to bid for the park.
In July, Mark and Ruth Mooney, the owners of the park, tentatively accepted an offer from Maple Holding and Redevelopment, LLC of Orlando, Florida, an affiliate of Hometown America, Inc., among the largest owners of manufactured parks in the country, to purchase the 183-acre park with 241 home sites for $10 million. However, state law entitles the tenants to make a counter offer by presenting a purchase and sales agreement within 60 days of the first offer.
Lakemont Cooperative matched the $10 million offer. The statute grants the cooperative "a reasonable time beyond the 60-day period, if necessary, to obtain financing for the purchase" and, in the meantime, requires the owners to bargain in good faith with the cooperative.
Kelly, along with Angela Romeo of the Community Loan Fund, presented financial projections that indicated that the cooperative could acquire the park and service the resulting debt while confining rent increases within historical limits.
Kelly explained that the projections assumed that the cooperative would borrow $5-million from a bank at 6.10 percent. To limit the principal and interest payments payments, the loan would amortize over 30 years and mature in 20 years; that is, for 20 years principal and interest payments would track a 30-year fixed rate loan, but after 20 years the remaining principal and and interest would be rolled into a balloon payment, which Kelly explained would be refinanced. The cooperative would also borrow $5-million from the Community Loan Fund at 6.25-percent, which would amortize in 40 years and mature in 20 years.
Annual revenue from current rents at Briarcrest Estates, allowing for some vacant units, amounted to $1,087,374 in the most recent reporting period and annual operating expenses, including $30,000 set aside as a capital reserve for major expenses, to $369,306. The total debt, including all taxes, fees and $70,000 to establish a capital reserve, would be $10,582,736 with an payment of $715,808 in the first year. In other words, Kelly said that after operating the park and servicing its debt, the cooperative would be left with a surplus of $2,260 the first year, which would increase annually.
Romeo described the park as "a cash cow," adding "that is why four banks are competing for the loan." She anticipated that the cooperative would not only be offered a very competitive rate but also that the banks would be willing to fund as much as 80 percent of the acquisition. She said that because a bank can offer a lower rate than the Community Loan Fund, the greater its share of the financing, the lower the cooperative's debt service.
Kelly cautioned that the projections were based on the information available at this time, noting that the Mooneys have yet to provide all that is required for the prospective lenders to complete their due diligence.
Robert Shepard, an attorney who represents 25 of the 107 cooperatives that own manufactured housing parks in the state, said that neither the Community Loan Fund nor the banks would consider financing the purchase if it were not financially feasible. He also dispelled suggestions that individual residents could be held liable for debt incurred by the cooperative, explaining that it would be a corporate debt for which no one would be personally responsible.
Conceding that "$10 million is a lot of money," Romeo said that cooperatives in New Hampshire have purchased manufactured housing parks for as much as $15 million. She also pointed out that cooperative owners are eligible for grants and low-cost financing to fund necessary improvements.
Shepard said that so far the Mooneys have failed to bargain in good faith with the Lakemont Cooperative. The statute provides that a park owner who fails to bargain in good faith with its tenants or a cooperative may be liable to a penalty of $10,000 or 10 percent of the sale price, which in this case would amount to $1 million.
The Mooneys have petitioned the Belknap County Superior Court to approve the sale of the park to Maple Holding and Redevelopment, LLC. Attorney John Giere, representing the Mooneys, contends that the state statute is intended to safeguard the interests of tenants of manufactured housing parks. The owners twice polled the tenants, finding initially that 164 tenants opposed a sale to the cooperative and later that the number had risen to 176. On the strength of the poll results, the Mooneys believe that the interests of the tenants, which the statute intends to protect, would best be served by selling to Maple Holding and Redevelopment, LLC. Consequently, they asked the court to find that they have met their obligations under the statute and that their refusal to accept the cooperative's offer would not violate the law and subject them to penalties.
Shephard said that he is in the process of preparing a response on behalf of the cooperative.