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A billion-dollar empire made of mobile homes

A mobile home park owned by a private-equity firm in Smyrna, Tenn. (Stacy Kranitz for The Washington Post)

SMYRNA, Tenn. — It’s not fancy. But in the exurbs of Nashville stands part of a billion-dollar real estate empire.

The Florence Commons community consists of about 300 mobile homes of varying vintages, mostly single-wide, many valued at less than $30,000 apiece, set 20 feet apart from one another. The occupants of some will tell you: The floors buckle. The ceilings crack. The doors don’t shut right. Their homes are sinking.

“Okay — it’s a trailer park, not a fancy gated community,” said Jessica Boudreaux, 33, who lives there with her two daughters. “If people could, they’d live somewhere else.”

Yet Florence Commons, along with more than 200 other mobile-home parks around the United States, has produced hefty returns for Stockbridge Capital, a $13 billion private-equity firm, and its major investors.

Their company for mobile-home parks has produced tens of millions for investors in recent years and saw a return on investment of more than 30 percent between late 2016 and the end of 2017, according to documents.

Those ample returns arise in part from their willingness to boost the rents of residents of mobile homes. As one investor’s report on the company put it: The “senior management team has a demonstrated track record of increasing home rental rates.”

It has received $1.3 billion in financing through government-sponsored lender Fannie Mae, which says mobile homes are “inherently affordable.” The money helped them buy existing mobile-home parks.

As large financial firms buy more and more U.S. homes, both conventional and mobile, the question of whether such investments benefit tenants or merely exploit them is a matter of dispute.

Evictions and code complaints: What happened when a private-equity firm became one city’s biggest homeowner

“They prey on people who can’t afford land, people who can’t move,” said David Barrett, 62, an excavation equipment operator who lives in Florence Commons. “They’re taking advantage of — I wouldn’t say poor people — but working people. Where do you think their profits come from?”

Yes Communities, the investors company that owns Florence Commons, says it is helping to meet the nation’s need for affordable housing.

Much of the investors’ revenue comes from residents who, while they often own their homes, must pay rent for the home lot. At Florence Commons, rent has risen by 4 percent or more a year, residents said. Most have little choice but to pay up because of a practical reason: They can’t move. The dwellings are called “mobile,” but they are costly to transport and sometimes owners are contractually forbidden to move them.

The residents at Florence Commons must pay in other ways, too. Rent checks that are six days late incur a 10 percent fee and a threat of quick eviction. If residents fail to cut the grass, the park managers threaten them with fees of $100 or more, residents said. An aggressive towing service has forced some residents to pay $200 or more to recover their cars.

The median income for families that live in mobile homes is about $30,000 a year. Adult residents of mobile homes also have lower levels of formal education, according to surveys. About two-thirds of them lack education beyond high school.

“The owners just seem to want to get every dime from us,” Boudreaux said.

Officials with Stockbridge Capital, a firm led by Terry Fancher and Sol Raso, released a statement: “Stockbridge is proud of its association with YES Communities, which has met the affordable housing needs of its residents nationwide for the past 11 years.”

Vanessa Jasinski, vice president of marketing for Yes Communities, said the rents at Florence Commons have risen at 4 percent a year on average over the past six years — slightly higher than the average lot rate in the area last year, according to figures from Datacomp, an industry analyst.

Jasinski also said the rules — and fees — for lawn and parking violations are intended to create pleasant surroundings. No park residents were required to pay for grass-cutting last year, she said. In the past five years, 46 home renters at Florence Commons have purchased homes in the community, she noted.

As for the damage caused by mobile homes settling, she said “it is not uncommon for manufactured homes to settle and experience issues like these. This is true also of site-built homes.”

'Chained to their booths'

Over the past three years, some of the biggest private-equity firms — the Carlyle Group, Apollo Global Management and TPG Capital — have taken stakes in mobile-home parks, according to a forthcoming report by the nonprofit groups Private Equity Stakeholder Project, MHAction and Americans for Financial Reform. The mobile-home parks owned by private-equity firms have more than 100,000 home sites, according to the report.

“The firms made these investments seeking to double or triple their money in the space of a few years,” said Jim Baker, director of the Private Equity Stakeholder Project, an organization that has been critical of the private-equity industry. “That doesn’t lead to affordable housing.”

He said residents of these ­mobile-home communities are reporting substantial rent increases, aggressive fees for small infractions and escalating evictions.

Critics of large investors’ role in mobile-home parks point to the remarks of Frank Rolfe, an investor who has owned thousands of mobile-home lots. Referring to the steady stream of revenue, he said that a mobile-home park “is like a Waffle House where the customers are chained to their booths.”

In fact, the money that investors can see from mobile-home parks is remarkably steady — and growing fast. Between 2004 and 2018, operating income from such parks rose 87 percent, according to Green Street Advisors, a global real estate research firm. The income never declined, even during the recession, the research firm said.

In the case of Yes Communities, government help supports the investors’ returns.

In August 2016, Fannie Mae, the government sponsored lender, said it was helping finance Yes Communities. It has helped, through two banks, to provide about $1.3 billion for Yes Communities. Those loans enable Yes Communities to buy up mobile-home parks.

The Yes Communities loan “will preserve affordable housing in communities across the nation,” Fannie Mae said in a news release at the time.

“Providing investors with attractive returns helps YES to invest into new communities and markets and meet the affordable housing needs of both existing and new residents,” Jasinski said.

The terms of the loan to Yes Communities, however, do not limit the rent hikes that face residents. A Fannie Mae spokesman said rent limits are not in their purview.

“We believe the federal government should be preserving affordable housing, but as far as we can tell, that’s not the case with these loans” said Elisabeth Voigt, co-director of MHAction, an organization of mobile-home residents. “If it were, there would be requirements to keep the rents affordable. These loans should be helping residents buy and run their own communities, not private-equity groups that earn huge profits.”

'It's really gone downhill'

Stockbridge Capital, which is based in San Francisco and specializes in real estate investments, invested in the mobile-home park operator in 2008. In August 2016, it sold 71 percent of Yes Communities to a fund whose investors include the government of Singapore and a pension fund for public school employees in Pennsylvania. Stockbridge continues to manage the mobile-home park operator.

It is difficult to know how much private-equity firms are making, but the Pennsylvania pension fund does issue some figures. Between September 2016 and December 2017, the value of Stockbridge’s $179 million investment rose more than 30 percent, according to the firm’s public disclosures.

But while Yes Communities is producing ample returns for investors, some residents say the parks have suffered.

“It’s really gone downhill,” said Kris Wilkin, 47, a state corrections officer who bought a 2003 double-wide home in Florence Commons seven years ago.

One year, residents said, the community swimming pool didn’t open for the summer. Residents also pointed to couches and other trash laying in the park.

Boudreaux, a medical assistant for a neurologist, agreed. She and her two daughters moved there in 2011.

Florence Commons, she said, was appealing to her because it welcomes people with imperfect credit. At the sales office, where salespeople encourage customers to buy homes in the park, they tell visitors that they can buy a home even if their credit records include a bankruptcy or home foreclosure. Credit scores need be no higher than 550.

“Yes! It Feels Good to be a Homeowner!” the company brochures say. “Contact our homeownership specialist today!”

Boudreaux had come from a mobile-home park in South Dakota that was family owned. There, she said, “if there was an issue, they’d fix it.” She expected it would be the same at Florence Commons.

“They said they’d work with us,” Boudreaux said.

She bought a double-wide home for $34,000.

But there are aspects of the park she likes. For one thing, it’s conveniently located and there are enough kids in the neighborhood that she’s rarely had to drive them to a play date.

But the company, she says, doesn’t respond to basic requests for maintenance: requests for better drainage, streetlights or potholes. The park managers seem unimpressed, she said, by her complaint that uneven settling of her lot has created a crack in her ceiling where the two sides of her double-wide home are separating.

Meanwhile, the rents are rising.

The loan payments for home, she said, have dropped. But over the past six years, her lot rent has risen from $338 to $437, or almost 30 percent.

“They’re almost like slumlords,” she said. “If you point something out, they’re just like . . . whatever. They just want the rent.”