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NOTES RECEIVABLE FROM MOBILE HOME PARKS

3 Months Ended

Mar. 31, 2024

NOTES RECEIVABLE FROM MOBILE HOME PARKS

4. NOTES RECEIVABLE FROM MOBILE HOME PARKS

The notes receivable from mobile home parks (“MHP Notes”) relate to mobile homes sold to mobile home parks and financed through notes receivable. The MHP Notes have varying maturity dates and require monthly principal and interest payments. The interest rate on the MHP Notes can be fixed or variable, and the interest rates range from 6.9% to 12.5%, excluding the Default Loans defined below. The average interest rate per loan, excluding the Default Loans below, was approximately 8.0% as of March 31, 2024 and December 31, 2023, with maturities that range from 1 to 10 years. The collateral underlying the MHP Notes are individual mobile homes which can be repossessed and resold. The MHP Notes are generally personally guaranteed by borrowers with substantial financial resources.

As of March 31, 2024, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 24.0%, 17.2% and 13.4% of the principal balance outstanding, all of which was secured by the mobile homes. As of December 31, 2023, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 24.5%, 17.9% and 14.0% of the principal balance outstanding, all of which was secured by the mobile homes.

MHP Notes are stated at amounts due from customers, net of allowance for loan losses. The Company determines the allowance by considering several factors, including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history. The Company establishes an allowance composed of specific and general reserve amounts. As of March 31, 2024 and December 31, 2023, the MHP Notes balance is presented net of unamortized finance fees of $1,257 and $1,565, respectively. The finance fees are amortized over the life of the MHP Notes.

As of March 31, 2024 and December 31, 2023 there were past due balances of $262 and $98, respectively, on the MHP Notes excluding the Default Loans, as defined below. For the three months ended March 31, 2024 and 2023, there were no charge offs recorded for MHP Notes. Allowance for loan loss for the MHP Notes was $616 and $735 as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, there was a minimal impaired balance of MHP Notes. Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell.

Approximately $54 million of MHP Notes and Other notes receivable is with borrowers either owned or operated by one individual. Approximately $36 million of these notes currently is in default (the “Default Loans”) and is the subject of ongoing litigation in which the Company is the plaintiff. These notes are collateralized by mobile homes and land and are personally guaranteed by multiple borrowers. The Company evaluated the recoverability of these notes as of March 31, 2024 and determined a provision for expected loan losses is not deemed necessary based on the analysis of the underlying collateral. The Company accelerated the Default Loans at the end of January, 2024. Upon acceleration, the loans accrue interest at a rate of 17.5% and are due on demand. At March 31, 2024 the Default Loans are presented on the accompanying balance sheets under the heading Current assets, with $26 million in Current portion of notes receivable from mobile home parks (“MHP”) and $10 million in Current portion of other notes receivable. During the three months ended March 31, 2024, the Company foreclosed on property and homes of $2.3 million that is included on the accompanying balance sheets in Property, plant and equipment, net.

Notes receivable from mobile home parks, net of allowance for loan losses and deferred financing fees, consisted of the following at March 31, 2024 and December 31, 2023:


	As of March 31,		As of December 31,
	2024		2023
Outstanding principal balance	$	184,435	$	184,280
Loan discount and deferred financing fees		(1,257)		(1,565)
Allowance for loan losses		(616)		(735)
Total	$	182,562	$	181,980

The following table presents a detail of the activity in the allowance for loan losses for the three months ended March 31, 2024 and 2023:


	Three months ended March 31,		Three months ended March 31,
	2024		2023
Allowance for loan losses, beginning of period	$	735	$	—
Provision for loan losses		(119)		205
Charge offs (recoveries)		—		—
Allowance for loan losses, end of period	$	616	$	205

The following table presents impaired and general reserve for allowance for loan losses at March 31, 2024 and December 31, 2023:


	As of March 31,		As of December 31,
	2024		2023
Total MHP loans	$	184,435	$	184,280
Allowance for loan losses		616		735
Impaired loans individually evaluated for impairment		29,884		31,215
Specific reserve against impaired loans		5		5
Other loans collectively evaluated for allowance		154,552		153,065
General allowance for loan losses		611		730

We evaluate the credit quality of our MHP portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is generally based upon borrower payment activity relative to the contractual terms of the loan. The following table disaggregates the outstanding principal balance of MHP receivable by credit quality indicator based on delinquency status and fiscal year of origination and is presented as of March 31, 2024:


	Year of Origination
	2024		2023		2022		2021		2020		Prior		Total		% of Portfolio
< 30 days past due	$	6,247	$	44,028	$	46,610	$	25,829	$	31,134	$	3,855	$	157,703	%	85.5
30-90 days past due		—		11,950		4,340		8,328		1,948		—		26,566		14.4
> 90 days past due		—		120		46		—		—		—		166		0.1
Total	$	6,247	$	56,098	$	50,996	$	34,157	$	33,082	$	3,855	$	184,435	%	100