Meeting GSMOL Homeowner’s Association

Date August 12, 2003

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AGENDA ITEM	DISCUSSION	ACTION or FOLLOW-UP
Call to Order	Meeting was called to order at 7:15.
Listing of Marine Land Mobile Home Park for Sale	Pat Love, President - Home Owners Association Marine Land Mobile Home Park is currently on the market listed at $8,000,000.00 through J&H Management company. ROP, a non-profit organization is offering to represent the residents of Marine Land Mobile Home Park in the purchase of the park. Pat Love introduced guest speaker Maurice Priest to present an option for the Home Owners of Marine Land Mobile Home Park to purchase the park.	Motion moved and carried to allow Maurice Priest & ROP to proceed with the packaging of an offer to J&H Management company.
Presentation by Maurice Priest	Maurice Priest, ROP Mr. Priest stated that he is an Attorney that has over 25 years of experience with Mobile Home Owners and a proven track record of working for residents. Mr. Priest gave an overview of his proposal to represent the Home Owners of Marine Land Mobile Home Park in a purchase of the park, including the his initial assessment of the property and options available to the residents. Mr. Priest became involved with the Home Owners of Marine Land Mobile Home Park when Marie Horowitz called him regarding the listing for sale inquiring of options. Mr. Priest then spoke with Sam Edgerton and the City of Hermosa Beach Councilmen. He is aware of all the hearings regarding the potential sale to the Hermosa Beach School District. He has spoken with other park owners and managers and in his opinion Marine Land Mobile Home Park is not worth the listing price, although it is in a good location where housing is expensive. Some homeowners have financial ability to buy the park. Usually a significant portion of tenants cannot make a sizable down payment. Mr. Priest is offering the option of his agency to buy the park in the interest of the home owners with no down payment required from the residents. As a designated non-profit company with current 501C3 status, his agency has the opportunity to receive tax exempt bond financing,. He has stated that his goal is to preserve affordable housing. In addition, if the agency determines that residents meet low income guidelines, the State law authorizes a reduction of property taxes, which in turn reduces rents. Mr. Priest has spoken to J&H Management and to Don Grummer who works in the J&H office as a licensed real estate broker and is authorized to make the sale of Marine Land Mobile Home Park and advertise for the sale of the park. Mr. Priest requested operating and expense information from J&H Management which they shared based on a confidentiality agreement. Based on this data, Mr. Priest conducted an evaluation. EVALUATION: Debt service: Interest rates have been very low. Low interests loans keep rents low. Operation and maintenance/mgmt expenses: Operating and Maintenance Overhead The cost is not only debt service, its also the responsibility to maintain the park. What residents are currently paying is not going toward repair. Monthly rents will include a budgeted reserve for repairs or other emergencies. Acquisition Cost Overhead Acquisition costs include insurance, resurfacing, roof repair ,common area, utilities, property taxes, operations, management and maintenance costs. It is Mr. Priest’s observation that there is “lots of infrastructure work to be done”; specifically regarding utility pedestals too close to the street. Mr. Priest’s offer includes: Fixed rate term No built in profit margin Payment of debt service operations expenses Professional Property Management required by lenders No down payment No personal loan or financing Advisory board made up of Home Owner’s Association Officers that will attend ROP’s annual meeting and receive expenses and financial management data Only one annual increase of 3% built in for maintenance and management expenses Increase of home value by stability of rents Title transfer to the Home Owner’s Association after 30 years and upon obtaining tax exempt status Each resident will be a co-owner A non-profit company representing the Home Owners that is endorsed by GSMOL and familiar with laws that can help residents afford to buy Marine Land Mobile Home Park. In his experience rents go up when a property is sold and the property will be sold to someone. People are looking for profits and will raise rents because of no rent control which only requires 90 day written notice by law. OFFER Based on 62 spaces, currently the average rent is $685.09. At a purchase of $5,500,000.00, the average space rent would be: $998 per mo. At a purchase of $6,000,000.00, the average space rent would be: $1,072 per mo. This figure could be reduced in property taxes or by qualifying for low-interest loans or state grants. It is Mr. Priest’s professional opinion that if ROP is not the buyer, the rents after purchase by a private investor will be raised significantly higher than these rents to recoup their debt. Mr. Priest has determined that there have been inquiries from private investors. He has also determined through consensus that a more reasonable asking price is in the $5.5 to $6,000,000.00 range. His recommendation is to allow ROP to package an offer to present to J&H Management structured in a way that would net more money due to tax breaks if purchased from a non-profit agency due to the 40-45% tax bracket this sizable sale would place them in. He has stated that ROP will move diligently in the interest of the home owners of Marine Land Mobile Home Park.
Question and Answer	Mark Lee, space 33 asked how many residents are needed for approval. Mr. Priest responded that the 1^st phase requires a majority vote. The 2^nd phase requires 2/3 support to qualify for low-income grants or loans. Mark Lee, space 33 asked if the average rent is based on lot size. Mr. Priest responded that ROP looks at historical variations on rents. And will consider any legal, reasonable approaches supported by a majority of the residents. Corinne, space 25 asked if you can use a property to expand open property. the sale will include whatever the current plan is. If there are less units, rents will go up due to less people sharing the cost. Mike, space 59 asked if a new trailer can be purchased by a resident to replace an old one. Mr. Priest responded that you can replace an old trailer. ROP will also be offering Fannie Mae financing at mortgage rates. Refinancing will be available to residents. Lou, space 10 asked if the residents bought the property, would they be able to get the same financing as ROP and is ROP's cost part of the financing. Mr. Priest answered yes, but that the lenders who will loan ROP millions, would probably not lend to 62 individual home owners without a 10-20% down payment. Lou, space 10 also inquired of other experience ROP has had with J&H Mr. Priest responded that neither he nor ROP has had prior professional experience with J&H Management prior to their inquiries regarding Marine Land. Jeff asked if there had been any offers. Mr. Priest responded that J&H mentioned there had been several inquiries and a couple of offers as of weeks ago. Jeff asked how long it would take to complete ROP’s deal. Mr. Priest responded one year maximum and seven months at the minimum. Jeff asked if the residents will receive interest. Mr. Priest responded that residents would receive a small renters credit or home owners exemption. Marilyn asked how ROP will be paid on an on going basis. Mr. Priest responded that ROP would serve as park managers for 30 years. Barbara, space 27 asked if the 3% increase is cast in stone. Mr. Priest responded that lenders want 3% factored in and state loan guidelines require a 3% operating expense increase to approve loans. A resident asked what types of grants and loans ROP has been able to acquire. Mr. Priest responded State of California 3% low-interest loans as well as city contributions. Marie Horowitz, space 15 asked if the loan-to-value is 100%. Mr. Priest responded that it will be more than that when bond expenses and closing costs are added. He stated that the State is not unfamiliar or with 100% loans and it is not uncommon to approve. Marie Horowitz, space 15 also asked at what point the interest rate is locked in. Mr. Priest responded that it depends on the lender and how quickly the residents can move. City loans may not change interest rates, but usually contribute in smaller amounts. Jeff asked if the budget crisis will affect the ability to receive funds from State? Mr. Priest responded that the State borrowed $8,000,000.00 of funds set aside for mobile home owners in order to balance the budget. Mr. Priest stated that ROP received $4.500,000.00 of $6,000,000.00 left in the fund and recently received a statement asking for applications to submit for September for $1,000,000.00 in funds. Walker Davis shared an experience of a sale of a mobile home park he lived in previously. The residents were offered the opportunity to purchase the park, but did not. The park changed hands and the residents’ rents were raised higher than they would have been had they made the purchase. Jaclyn Plain stated that the residents are under the illusion that they own property, but do not. Residents inquired if there currently are Officers of the Home Owners Association and asked if elections could be held.	Motion to elect Home Owner’s Association Officers put forward.
Adjournment		Meeting adjourned. 8:49pm Next meeting scheduled for August 20^th, at 7:00pm. Location: Community Center 710 Pier Avenue Hermosa Beach, Ca