The phone rings a lot for ARA Newmark’s National Manufactured Housing Group. On the other end
are buyers seeking deals, of course. Out of
all the commercial real asset classes, manufactured housing probably has the most
appealing ratio of high demand versus
limited supply. And increasingly, the
phone rings and there is a special servicer
on the line seeking to vet a particular loan
on behalf of an investor.
A few years ago, the former might have
been routine for the group, which recently
earned National Multifamily Housing
Council’s Broker of the Year award for the
fifth year in a row. The latter, not so much.
CMBS has become more competitive
for manufactured housing, in part due to
regulatory and market issues that made
dealmaking in the broader market more
challenging. An even more dramatic
change can be found on the equity side,
where the investor class is expanding to
include deeper sources of money.
“There’s been a lot happening over the
past year or so,” says Andrew Shih, executive managing director and co-founder of
ARA Newmark’s NMH Group.
While five years ago manufactured
housing may have held a highly fragmented category in which only small investors familiar with the asset class sought it
out for returns, today it’s among the rare
categories of assets that sophisticated
investors across the debt and equity spectrum are clamoring to buy.
What’s more, a similar metamorphosis
is underway in other alternative categories, such as agriculture, medical office
buildings and life sciences and small multifamily loans. Just think where self-storage was seven years ago and extrapolate
for these assets.
The reason, of course, is the nonstop
chase for yield. Overwhelming competi-
tion for the main food groups has driven
up pricing to levels too high for some
investors’ tastes. And with the cycle near-
ing its end, investors are looking for cat-
egories that still have some juice.
So they turn to manufactured housing.
Or life science real estate. Or small multi-family product (which is different enough
from traditional apartment buildings to
warrant inclusion in the alternative category). Here, the yields are higher, but it
must be noted that these categories are
not for the faint of heart. In some
instances, data are not easily available.
Manufactured housing is an example of
that; perhaps as much as half of the deals
are private off market transactions. And
the number of full-time dedicated teams
to this category is at best a handful.
That isn’t enough to stop investors seeking product across all the aforementioned
categories, all of which offer yield but differ in almost every other way.
Consider the new breed of investors in
manufactured housing. For years the buyers were primarily individuals who did little
else but invest in manufactured housing on
BY ERIKA MORPHY
Non-traditional property sectors are coming
into their own as investors turn to these former
outliers in their search for yield