Sun Communities Hits a New 52-Week High!

Sun Communities, Inc., the self-administered and self-managed real estate investment trust with a market cap of $7.45 billion, is a fully integrated real estate company, which, together with its affiliates and predecessors, has been in the business of acquiring, operating, developing, and expanding manufactured housing (MH) and recreational vehicle (RV) communities. As of December 31, 2016, the Real Estate Investment Trust (REIT) owned and operated or had an interest in a portfolio of properties located throughout the United States and Ontario, Canada, including 226 MH communities, 87 RV communities, and 28 properties containing both MH and RV sites.

Two days ago, on November 26, Sun Communities’ stock reached a new 52-week high! The 26^th had the company’s share price at $93.89, still with a $96.71 target (or 3.0% growth). Should the $96.71 price target be reached, the company will be worth another $223.50 million on top of the current $7.45 billion. This is the time that positive momentum is shown and when buyers usually come in, making the 52-week high event a remarkable benchmark for every stock; however, fundamental investors are known to usually stay away and are careful shorting or selling stocks.

This morning (Nov 28) had the stock price starting at $93.51, then dropping as low as $92.34, and climbing back up to about $93.00 and again dropping to $92.68 where it’s currently at and projecting to rise again.

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4 Things to Know About the Current State of Debt Financing

Nearly 10 years ago, the Great Recession occurred. This caused the debt financing landscape for commercial real estate to evolve, leading to banks becoming more cautious in their commercial lending. But, banks are still originating loans and financing options are still available. Here are 4 things you need to know about debt financing:

1.)      Banks lending for U.S. commercial real estate has surpassed pre-recession levels, according to a study conducted by the Federal Reserve Bank of Richmond. This boost can be attributed to low interest rates, foreign investors appetite for U.S. property, and a strong renter demand to led to an apartment building boom.

2.)      CMBS (commercial mortgage-backed security) loans have skyrocketed, amounting to $66.6B last quarter which is a major improvement from the $49.9B issued during the same time period last year. In August alone, lenders issued 335 loans totaling $10.65B, which is a huge spike compared to zero loans issued in January.

3.)      Alternative lenders are stepping in and filling a void left by big banks. The country’s top five nonbank lenders – Blackstone Group, Mesa West Capital, Starwood Capital Group, TPG Capital and Mack Real Estate Credit Strategies – together funded $20B in bridge loans in 2016.

4.)      Traditional banks lenders and alternative lenders are becoming increasingly competitive. There are two primary buckets of capital in the commercial lending game – price leaders and proceeds leaders. Price leaders are the traditional lenders, giving borrowers a lower rate, but only about a 60% loan-to-value ratio. Proceeds leaders, or debt funds and alternative lenders, give higher rates than traditional lenders but compete with a higher LTV ration, which is usually about 60%. The market is divided as traditional lenders and debt funds are trying to find their niche.

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Phoenix’s Transit-Oriented Job Base is Growing

Although still trailing other big U.S. cities, Phoenix’s transit-oriented job base has grown 7.5% from 2015 to 2016. Phoenix ranks sixth out of 50 U.S. regions studied by the University of Minnesota for growth of workers linked to transit systems. Proximity to transit systems is becoming a major priority for large employers such as Amazon, as it solicits bids for its $5 billion second headquarters. In a traditionally sprawling Maricopa County, transit has helped draw jobs and commercial real estate development to downtown Tempe and Phoenix.

                  New York, San Francisco, Chicago and Washington rank at the top for jobs near transit systems, but the Phoenix region is adding to its transit options with hopes to catch up to these major cities. Mesa is extending its light rail down Main Street, Phoenix has approved a south line for Metro down Central Avenue to Baseline Road and South Mountain, and Tempe and Valley Metro are developing a new street car line downtown Tempe. With Phoenix’s economy and job growth steadily thriving, these new transit additions will only improve that growth in the near future.

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New Fannie Mae Program in NH Makes Buying Mobile Homes Easier, Less Expensive

A new Fannie Program, in which New Hampshire is the sole participant, provides for smaller down payments, lower interest rates and 30-year loan options for manufactured homes located in approved resident-owned communities. So far, Fannie Mae has approved eight resident-owned communities for participation with plans to add more. In New Hampshire, 123 of 450 mobile home parks are resident-owned, and the Fannie Mae program will only boost the number of potential buyers.

                  With lower interest rates, low and middle income borrowers will have the opportunity to afford better manufactured homes, or have more disposable income, which levels the playing field with single-family residences. The program was approved only for New Hampshire because majority of the mobile home parks in the state are resident-owned. Some park managers, like Adam Gidley of Salem Manufactured Homes, are asking the question: “Why do resident-owned communities get a benefit that other communities don’t?” According to Ignatius MacLellan, resident-owned communities offer a better chance that Fannie Mae would get its money back if it needs to foreclose on a property. With interest rates going from 8-12% down to 4-5% with the Fannie Mae program, it’s currently a “sellers market” right now in New Hampshire according to Gidley.

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