Horizon Land Co., a Maryland-based owner and operator of manufactured-housing communities, is financing a recent acquisition of new properties through the commercial mortgage backed securities market.
Horizon will be securitizing a new $488 million loan issued by JPMorgan Chase that funded Horizon’s acquisition of 93 manufactured-housing communities made up of more than 11,000 pad sites. The acquisition adds to Horizon’s existing portfolio of 75 communities made up of approximately 13,000 rentable sites, making Horizon one of the largest owners of manufactured home properties in the nation, according to Moody’s Investors Service and DBRS Morningstar.
The new properties are located in 13 states, with the largest concentrations in Champaign, Ill.; Dallas/Fort Worth, Tex.; St. Louis, Mo.; Austin, Tex.; and Omaha, Neb.
The JPMCC 2021-MHC transaction is backed by a $488 million, interest-only first-lien mortgage loan that accounts for the brunt of the $528.2 million financing for the purchase. (Horizon also took out a $40 million mezzanine loan not included in the single-asset, single-borrower transaction.
According to Moody’s, Horizon is benefiting from high nationwide demand in manufactured housing, as these communities “tend to be a more affordable housing option, while the supply remains constrained.” Moody’s noted that there have only been an average of 322 manufactured housing pad sites delivered annually, compared to approximate average of 7,700 new sites that were added to the market each year between 2000 and 2008.
Horizon has experienced high rental and collection rates in its portfolio, even though many landlords were coping with forbearance requests and eviction moratoriums because of the COVID-19 crisis. Since March 2020, Moody’s report stated, the portfolio averaged 97.6% recent collection through January of this year. “Rent collections never dropped below 96.5% during this time,” Moody’s report stated. Moody’s estimates annual net cash flow at $30.1 million, supporting a debt service coverage ratio of 2.03% despite the high leverage of the deal with a loan-to-value ratio of 145.4%.
The two-year loan, priced at one-month Libor plus 2.69%, has three one-year renewable options.
The trust will market 11 classes of floating-rate tranches, with Moody’s and DBRS Morningstar each issuing preliminary triple-A ratings to the senior $184.2 million Class A notes tranche.
