Sizing a $4M participation in a 14-park bridge loan where half the NOI growth is rent push

Your 8.3 percent is the honest debt yield and it's low for a bridge on a 74 percent occupied portfolio with four broken water systems.

Run it the other way. At $19M and SOFR plus 375, if SOFR sits around where it's been you're looking at debt service in the high $1M range on an interest only basis, which against $1.57M of lot-only NOI means the home rentals are paying your interest. That's not a coverage story I'd want to defend in month 20.

The other thing your numbers do. Their year three NOI is $3.6M, up 76 percent. Occupancy 74 to 92 is 212 lots filled in three years across 14 parks, so five lots a park per year plus the rent push plus the home conversions all landing. Any one of those slipping and the refinance takes a haircut. At $19M you'd be at a 33 percent basis on their exit value, which is fine, but you only get to that exit if somebody else funds the water work.

I'd want $19M to be $16.5M with the difference in a lender-controlled capex holdback, and I'd want the debt yield test measured on lot revenue only. If the sponsor won't take that, the plan is thinner than they're saying.

Something nobody has priced here is what the dirt is worth if the plan stalls. 1,180 entitled lots is close to unreplaceable in most jurisdictions, since almost nowhere approves new parks. If four of those parks sit in markets where the land under them has a higher and better use, your downside isn't the NOI, it's a slow sale to somebody who wants the parcel.

I'd ask for the assessed land value per park and the current zoning classification, and specifically whether any are legal nonconforming. A nonconforming park that loses 60 percent of its homes to a storm can sometimes lose the right to rebuild at density, and that rule differs by jurisdiction. That is the scenario that turns your $19M into a land loan.

Question from the cheap seats. Who is the sponsor here, in the sense of what's behind them? If this is a fund on its third vintage with committed capital, a capex overrun gets funded. If it's a syndication that raised the equity deal by deal, the $900k budget going to $1.8M means a capital call to investors who just wired, and those calls often don't fill.

I'd ask to see the equity documents even though you're on the debt side. Specifically whether there's unfunded commitment behind the equity, and whether the GP can bring in preferred equity ahead of the common without a vote. @ledger's holdback idea only helps if somebody can actually fund the second half.

Pull the rent rolls yourself and count lots four ways: occupied by tenant-owned home, occupied by park-owned home rented, occupied by park-owned home on a sale contract, and vacant with utilities live. Sponsors routinely report the third bucket as tenant-owned because a contract is signed, and if those contracts are unrecorded installment sales the occupancy number you were given is soft.

Second thing. Check whether any of the 873 includes RV or park model sites on monthly agreements. Those are not lots in the sense your appraiser will use, and I've seen 40 of them buried in a 14-park roll-up rent roll with no note.

Third, ask for the last 24 months of bank statements per park, not the sponsor's T12. In-place NOI of $2.05M assembled from 14 sellers' books usually shrinks when you tie it to deposits. I've had it come in nine percent light on a much smaller portfolio, and nine percent off $2.05M puts @ledger's lot-only debt yield under eight.

On the paper. Three years with an extension at the lender's option is the clause I'd fight, since "lender's option" means at month 30 the borrower has no exit and you have all the negotiating power, which sounds good until you realize the equity walks and you own 14 parks with broken water lines.

I'd want a borrower extension right conditioned on a debt yield test and a rate cap in place, and I'd want the cap purchased through the full extended term rather than the initial term. Caps expiring 18 months before maturity is how these blow up.

Also read the recourse carve-outs on the guaranty carefully. Environmental and water system compliance carve-outs on a portfolio with permitted community water systems are worth more than the springing recourse language most sheets carry. And confirm with your own counsel how the guaranty enforces in each of the four states, because that's not uniform.