Jay Wardlaw on Investing in MHCs Across the Southeast – Multifamily Real Estate News

Jay Wardlaw
Jay Wardlaw, President, MHP. Image courtesy of MHP

Manufactured Housing Properties is one of the most active owners and operators in the Southeast, with 2,500+ lots across more than 50 communities in the Carolinas, Georgia and Tennessee. The company acquires undervalued and/or underperforming manufactured housing properties and enhances them through professional asset and property management. As of mid-September, MHP’s portfolio occupancy was 91 percent.

To find out more about the company’s investment strategy and plans for 2023, Multi-Housing News reached out to President Jay Wardlaw, who has extensive real estate finance experience, having served in various positions at Regions Bank, Bank of America Merrill Lynch and JP Morgan.

What makes the Southeast region so appealing from an investment standpoint?

Wardlaw: We chose to focus our acquisition efforts in the Southeast due to the region’s high growth, strong employment and need for attainable housing. Our communities are located in areas that are relatively close to employment centers and essential services such as grocery, shopping, medical and schools.

The company owns and rents approximately 50 percent of the homes that are located within our communities. The remainder of the homes are individually owned, with the land for the home leased by the resident.

READ ALSO: On Fostering a Sense of Community in Manufactured Housing

Many manufactured housing communities across the country are well-maintained, attractive places to live. Does that mean that the perception of mobile home parks among investors has changed?

Wardlaw: Yes, we believe the perception of manufactured housing communities or mobile home parks has changed for the better. With the high cost of multifamily housing and desire for more privacy, many people are choosing to live in manufactured housing communities which offer more space and security. Most communities are well-operated and maintained. We view our communities as a key part of the solution to the nation’s affordable housing crisis. As an owner and manager, we are dedicated to developing and operating well-maintained and safe communities.

What can you tell us about how much the cost of capital in the MHC sector has changed over the past few years?

Wardlaw: With the support of the government agencies—FNMA/Freddie Mac—as well as the changing positive perception and performance of manufactured housing communities, the availability and cost of capital has improved. MHP has been able to secure the cost of capital from the government agencies and banks at levels that allow us to purchase and improve upon communities that may have been neglected in the past. We anticipate the cost of capital in the MHC sector to continue to track other traditional real estate asset classes in the future.

How do you finance your MHC acquisitions?

Wardlaw: Our acquisitions are financed through a variety of lenders in the manufactured housing sector. They range from local and community banks to regional and national banks, insurance companies and the government agencies.

How much are you feeling pressured by concerns over rising rates and inflation? How is the current financial climate impacting MHC investing?

Wardlaw: The entire housing industry is experiencing the same effects of rising rates and inflation. Much of the pressure stems from the cost of capital, as it makes it more challenging to acquire properties with sufficient net operating income to cover the costs—debt service—to finance the acquisitions, and allow an attractive return to our investors when compared to other alternative investment vehicles.

To what extent can MHCs curtail the current affordable housing crisis?

Wardlaw: The ability of MHCs to curtail the current affordable housing crisis is dependent on how well federal, state and local programs and regulations are able to improve financing and reduce restrictions that have historically prevented the development of MHCs. The manufactured housing industry has worked hard, and will continue to work hard, to educate the population on the important benefits MHCs provide to the housing market and the overall economy.

President Biden’s Housing Supply Action Plan is set to expand government-backed financing options for manufactured housing investors. How do you think this capital influx will impact the sector?

Wardlaw: The Housing Supply Action Plan would have a positive impact as it will lead to greater access to funding to support growth in our sector. It will support the production and availability of manufactured housing, allowing manufacturers to modernize and expand their production lines, and helping manufacturers respond to supply chain issues. It would also assist with product design and support future loan purchase capabilities. The plan will provide incentives for land use and zoning reform that will result in new communities that can be developed to assist in the demand for housing affordability and the accessibility of these homes.

What are your expectations for the manufactured housing sector going forward? How much do you plan to expand your portfolio in the next 12 months?

Wardlaw: We are very excited about the prospects of the manufactured housing sector over the next several years. The demand for attainable housing, coupled with the desire for affordability, privacy and overall value, are all clear tailwinds. The support of the federal government in the form of more accessible and competitive financing should increase the supply of manufactured housing and provide much-needed support to homebuyers, manufacturers and community owners and operators.

Over the next year, MHP intends to continue the company’s active acquisition strategy throughout the Southeast region and substantially increase the size of our overall portfolio.

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