least 24-foot doublewide units) on mobile home
spaces. The ability of the park to accommodate this
trend will contribute to its ability to attract and
retain tenants, maximize occupancy, and, hence,
support debt service on the bonds. While many
older MHPs may currently have a large number of
older, singlewide units (i.e., 12 feet in width), if the
spaces themselves are large enough to accommodate
larger units, this will partially offset the existence of
a substantial number of singlewide units.
However, if existing MHP spaces are too small
(i.e., less than approximately 34 feet in width) to
accommodate doublewide units, this means that the
singlewide units located on such spaces cannot be
replaced, and this may eventually threaten the park
owner’s ability to market those spaces to new ten-
ants. New, smaller mobile home units (12 to 16 feet
in width) may be more difficult or even impossible
to acquire in today’s market given the trend
towards larger units. If the park contains a substan-
tial number of smaller mobile home spaces that can
only accommodate singlewide units of 16 feet or
less, we will request a market study to demonstrate
that the demand for such small spaces still exists
and will continue to exist in the future. If the mar-
ket study determines that the MHP is functionally
obsolete due to the number of smaller spaces, the
MHP may not be eligible to receive an investment-
grade rating from Standard & Poor’s.
Bond structure
Mobile Home Park transactions rated ‘BBB-’ or
higher may have bond maturities of up to 35 years,
longer than the 30 years typical for other rated
AHP transactions. Since the collateral securing the
bonds in MHP transactions consists almost entirely
of land, the question of useful life of real estate is
not an issue. While MHPs usually include some
improvements, such as clubhouses, swimming
pools, and other common areas, most of the value
of the project is derived directly from the land.
However, the property condition report for the
transaction, should demonstrate that the effective
useful life of the improvements in the park is
greater than the term of the bonds.
Cash flows and reserves
Standard & Poor’s will assume a vacancy rate for
MHP spaces at the higher of 2% of gross rental
income, the park’s historical vacancy rate, or the
actual MHP vacancy rate in the market. We will
typically rely upon the structural engineering report
to provide guidance on what the appropriate
reserve for replacement should be. If, however, all
or a portion of the capital improvements outlined
in the structural engineering report are to be pre-
funded with money deposited in the replacement
reserve fund at closing, Standard & Poor’s will
apply any such deposit as a credit towards the
required on going replacement reserves.
Ownership, property management, and oversight
The nature of the project’s ownership is an impor-
tant element in rating MHPs. Standard & Poor’s
will rank owners based on their experience, commit-
ment, asset management capabilities, and financial
strength. In particular, we will look at whether the
owners have experience in handling the unique
aspects of MHPs. Transactions with owners without
previous experience in owning MHPs will usually
not qualify for ‘BBB-’ or higher ratings. Standard &
Poor’s will also look for property managers with
experience managing MHPs. At the time of the site
visit, we will interview the property manager to
review experience and track record with MHPs, all
aspects of day-to-day operations, and overall operat-
ing strategy. Specifically with regard to MHPs, we
will look at turnover time for vacant spaces and the
procedures in place for handling sales and replace-
ments of mobile homes in the park.
Ongoing financial and management reviews by a
qualified asset manager or oversight agent are also
necessary. In most cases, an outside private over-
sight agent with experience in bond compliance for
rated MHPs is retained to provide ongoing finan-
cial and management reviews.■Unenhanced Affordable Housing Project Debthttp://www.standardandpoors.com 269