6 MHIndustry Trends, & Time for New Type MHShow?

COBA7® via community-investor.com Blog # 349 Copyright @ 17 May 2015

Perspective. ‘Land-lease-lifestyle Communities, a.k.a. manufactured home communities and ‘mobile home parks’, comprise the real estate component of manufactured housing.’

This blog posting is the national advocacy voice, official ombudsman (press) , research reporter, & online communication media, for all LLLCommunities in North America!

To input this blog & or affiliate with Community Owners (7 Part) Business Alliance®, a.k.a. COBA7®, use official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

COBA7® Motto = ‘U Support US & WE Serve U!’, & Goal of its’ print & online media = to ‘Not only inform & opine, but transform & improve our MHBusiness model!’

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Introduction to Parts I & II of this week’s blog posting.

In Part I, a half dozen contemporary MHIndustry & LLLCommunity trends are identified, along with positive & negative consequences; and, ending with ‘Five Tips to ID Trends!’

Part II, asks, ‘Time and Trends Ripe for a New Type Regional Manufactured Housing Show?’ Hint. The answer is ‘yes’, but how will it look when ready to debut will be the subject of a future blog posting here and elsewhere.

I.

Identifying, Using & ‘Dissing’ Business Trends

“You don’t need the Psychic Hotline to find out what the future holds for your business, but you do need to pay attention to trends. Unlike fads, trends are long-term tendencies that shape our culture and companies. They reflect what is happening in the world around us and help predict what is to come. “

So reads wise guidance relied on during 26 years publishing the Allen Letter professional journal, and nearly seven years penning the Allen CONFIDENTIAL!, a highly respected, limited circulation business newsletter. I no longer recall who provided the sage advice, but it’s been appreciated time and again. At the end of this posting, I’ll list the ‘Five Tips for Tapping into Trends’ that complement the opening quote

In the meantime, I’ll tell you this, the quote’s been a valuable maxim, reminding me to stay alert to and describe emerging trends. In today’s blog, I’ll identify several, but not all the national trends shaping ‘mobile home parks’ into manufactured home communities during the 1970s thru 1990s; then land-lease-lifestyle communities, circa 2005. Will also describe positive and negative characteristics of each trend; and how recently, an accidental ‘dissing’ (‘disrespecting’) of an established LLLCommunity trend, could foist unintended consequences on the manufactured housing industry.

First the trends.

Land-lease-lifestyle community consolidation has been an ongoing, albeit intermittent, trend since the mid-to late 1970s. Then, ‘syndicators’ roamed the land, searching for failed ‘mobile home parks’ to acquire as tax write-offs and turnaround opportunities for their doctor and lawyer limited partners. That drill ended in 1986 with a tax law change. Consolidation then became a series of ‘waves’, first documented in the Roulac RE Consulting Group of Deloitte Haskins + Sells ‘Largest Mobile Home Park Owners list’ in 1987 – precursor to the annual (26th) ALLEN REPORT (a.k.a. ‘Who’s
Who Among LLLCommunity Portfolio Owners/operators Throughout North America!’).

Since then, we’ve seen the real estate investment trust (‘REIT’) wave build from four LLLCommunity property portfolios in 1994 & 1995, to crest at six a decade later; then decline in number to three, five years later (2009); remaining at that small number today (2015) – though new IPOs (Initial Public Offerings of stock, as REITs, is reportedly in the offing.

Next came a few equity ‘players’, one of whom, Hometown America, operates to this day.

And the most recent consolidation wave is evidenced by aggregators buying and flipping property portfolios often comprised of marginally-performing LLLCommunities, to capital sources outside the manufactured housing industry.

Positive aspects of all these consolidation waves? Certainly have popularized LLLCommunities as a realty investment vehicle; and to a lesser degree, highlighted and promoted the lifestyle, especially all adult communities in Sunbelt regions.

Negative aspects of all these consolidation waves? Gone, pretty much, are the days of strong and vibrant state manufactured housing associations, as Mom & Pop-developed LLLCommunities have been absorbed into (now) 500+/- property portfolios nationwide. Large portfolio owners, or their representatives, have supplanted heretofore wealthy sole proprietors active in local and national advocacy matters, seriously reducing attendance at statewide meetings and local chapters. And some would say, certain large property portfolio ‘players’ have, at times, played havoc with local housing market rental homesite rent rates, raising them too much and too frequently, negatively affecting occupancy rates and the value of homes titled by homeowner/site lessees.

Majority of earliest ‘mobile home parks’ were designed to site small (then) singlewide mobile homes. In time however, as the housing type became more popular, and manufacturers understood the $$$ potential of the ‘big box = big bucks’ mantra, multisection homes became vogue – requiring manufactured home community design and development to accommodate the evolving trend. Positives? Today’s larger manufactured homes are certainly more ‘homelike’ than ever before. And today’s newer LLLCommunities ‘look & feel’ more like communities than their high density ‘mobile home park’ predecessors; both measures popularizing, once again, the lifestyle. Negatives? Less unit density = (likely) less ROI. And, unfortunately, that’s also one of the factors working against the ‘affordable housing’ reputation of manufactured housing in years past. While today’s large manufactured homes cost less per square foot, than site-built competition; the tendency, on the part of some large property portfolio owners/operators to ‘push the envelope’ where rental homesite rent rates are concerned, increasing the difficulty of making a case for housing affordability.

National advocacy for manufactured housing has been around for more than seven and three decades respectively, where MHI & MHARR are concerned. However, national advocacy for (then) manufactured home communities did not become a necessity – or the beginning of an eventual wave, until the early 1990s, when several large property portfolios launched IPOs, eventually becoming REITs in 1994 & 1995. Two years earlier, in 1993, the Industry Steering Committee (‘ISC’) was formed by 19 LLLCommunity owners/operators. And in early 1996, the National Communities Council was launched by MHI, absorbing the ISC, eventually making the NCC a full-fledged division.

In early 2014, the national advocacy wave crested with the formation of the Community Owners (7 Part) Business Affiliates®, or COBA7® – where national advocacy is the last of seven function areas.

Positives? If nothing else, national representation and advocacy on the national political and regulatory level. But now, with the debut of COBA7®, there’s 1) ongoing statistical research, 2) monthly distribution of key resource material, 3) weekly and monthly print and online communication via blog and newsletters, 4) & 5) superb networking and deal-making opportunities, and 6) professional property management training and certification via the Manufactured Housing Manager® program.

Negatives? At least two. ‘Too much power by too few at the top’, as in manufacturer members (i.e. the Big Three ‘C’ firms: Clayton, Champion, Cavco), and too few housing finance and (now) land-lease-lifestyle Community portfolio owners/operators! Then there’s ‘affluence gerrymandering’, the purposeful scheduling of national meetings at high-priced resort venues where only the wealthiest businessmen and women can afford to attend – hence, enjoying limited opposition when it comes to deciding matters of national policy and procedure. To this abuse is the added ‘insult to injury’, whereby proxy voting is banned, by at least one national advocacy entity, at national meetings,

Hard to say here, which trend came first, widespread interest in submetering utilities to increase profitability and conserve energy and natural resources; or, resident relations as a professional property management focus that along with profitability and curb appeal, distinguished the better run properties, from those left to languish. Positives? Again, increased profitability and conservation of energy and resources in the first instance; better reputation, more resident referrals, and longer resident retention, in the latter instance. Negatives? Beats me.

Marketing, selling, and often seller-financing new Community Series Homes, or CSH Model manufactured homes on-site in (now) land-lease-lifestyle communities is one of the newest, ongoing trends, to characterize contemporary operations. Forced on owners/operators, with the departure of ‘easy to access chattel capital’ at the turn of the century, and resulting disappearance of thousands of independent (street) MHRetailers, the New Breed of MHRetailer & Lender is likely here to stay! Positives? More AITR (Alternative Income to Rent) measures than ever before; likely resulting in greater ROI potential. Negatives? Difficulty complying with cumbersome, complicated, state and federal financial regulations. And, to date, this trend has not swept up the smaller (i.e. less than 100 rental homesites per property) LLLCommunities who comprise an estimated 85 percent of the national inventory (i.e. 50,000+/- such properties). This trend has been primarily a property portfolio driven phenomenon.

And now this imbroglio (‘an intricate, confused or perplexing state of affairs.’): Mixed-use land-lease-lifestyle communities, once a rarity, have become all but commonplace, as a bona fide trend, among some-if-not-many portfolio owners/operators of this unique, income-producing property type. Mixed-use here, describes income-producing properties characterized by homeowner/site lessees on rental sites within LLLCommunities, whether they reside in ‘mobile homes’, manufactured homes, modular homes, ‘park model RVs’, ‘RVs for a season’, even stick-built homes constructed on-site to look like HUD-Code homes. And yes, even rental units, as in apartments.

• Positives? A clear demonstration of property owners/operators ‘doing what it takes’ to keep vacant rental homesites occupied and paying rent’! Some of these shelter types, especially those RV-related, have helped reclaim lost ground when it comes to providing ‘affordable housing’ in LLLCommunities, as well as filling functionally obsolete rental sites.

• Negatives? Manufactured housing industry purists sometimes have difficulty accepting ‘anything but manufactured homes’ being sited within this unique, income-producing property type. This might be one of the reasons the NCC’s recent ’50 Largest MHCommunity Portfolio Owners/operators’ list debuted with all RV site counts stripped from the rental site totals of portfolio ‘players’. Consequences of this unilateral action? Beyond the initial toppling of ELS, Inc., by sister REIT, Sun Communities, Inc., as ‘World’s Largest Owner/operator of LLLCommunities!’, that remains to be seen. Hopefully the NCC will realize the error of ‘dissing’ valuable RV rental sites in LLLCommunity portfolios. If not, the council runs the real risk the number of RV sites will continue to increase among some-if-not-many property portfolios, to the point where they’ll become the majority shelter choice. One MHI direct, dues-paying member, ELS, Inc., is already at that tipping point. Which suggests this question: ‘If RV sites no longer ‘count’ in a property portfolio total, will annual ‘per site dues calculations’ be based on resulting smaller number of manufactured housing rental homesites? If so, ‘Why do this to one’s budget planning?’, as it likely means, for example, a 50% reduction in annual dues revenues received from ELS, Inc., alone.

And these aren’t all the trends, past and present, affecting manufactured housing and land-lease-lifestyle communities nationwide, but they give you a feel for ‘what’s happening’ and why it’s wise and helpful to be a trend identifier and user.

Here’re Five Tips for Tapping into Trends, cited earlier in this blog posting:

1. Pay attention. Listen to what people are talking about when networking. What choices are being made in stores and elsewhere? Watch for these predictors of consumer demand.

2. Read. Trend watchers read dozens of industry magazines, newspapers and newsletters – on and off the web. Changes in any industry will have a ripple effect in yours.
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3. Network differently. Talk to clients and competition. Learn about changes anticipated and experienced by others.

4. Keep track. Not observations. Watch for common threads of information, for a clearer picture of what’s happening.

5. Slow down. Reserve time to think about what’s been learned, and what it likely means to your business.

So, ready to become a trend watcher? Let me know when you spot new trends worthy of research and sharing among friends, peers, and business associates. (317) 346-7156. GFA

II.

Time for a New Type Regional MHShow?

Depends on whether YOU agree with the description of the newest, ongoing trend cited in Part I of this week’s blog posting; again:

“Marketing, selling, and often seller-financing new Community Series Homes, or CHS model manufactured homes on-site in (now) land-lease-lifestyle communities….’

First a little back ground. For many decades, vacant rental homesites in ‘mobile home parks’ cum ‘manufactured home communities’ cum LLLCommunities, were oft filled by independent (street) MHRetailers and ‘company stores’ throughout the U.S. With the all but disappearance of ‘easily accessible chattel capital’ from independent chattel finance firms, at the turn of this Century, it became necessary for community owners/operators to ‘step up to the plate’, so to speak, and buy, market, sell, and often seller-finance, or rent, new manufactured homes (since 2009, called Community Series Homes, or CHS models) themselves, on-site. Well, this has worked reasonably well among some, if not many, property portfolio firms and some sole proprietor-owned LLLCommunities. Well enough, that today, more than 30 percent of all annual HUD-Code home shipments go directly from factories into LLLCommunities; that’s up from 25 percent in 2009. But that’s not the whole picture.

Today, 500+/- LLLCommunity portfolio owners/operators, controlling an average of about 20 such properties apiece, account for the ownership of the 15 percent of 50,000+/- properties that have more than 100 rental homesites apiece. What about the 85 percent of the 50,000+/- national inventory, numbering fewer than 100 rental homesites apiece in their properties? There’s ‘the rub’! How do we, as an industry and realty asset class, reach out and bring these mostly (presumably) passive investors to the point of buying new HUD-Code homes to fill vacant rental homesites in their properties, from coast to coast?

Well, one step will occur this Fall, when the top executives from the Big Three C HUD-Code home manufacturers keynote the 24th annual International Networking Roundtable (9-11 September 2015) in San Diego, CA. Their message: ‘How to Buy New Community Series Homes for Siting in LLLCommunities Nationwide!’ Not only will that message resonate with the estimated 250 LLLCommunity owners/operators expected to be present at the event, but ‘that message’ will be circulated as widely as possible during months to follow.

So, what’s all this have to do with the title of Part II of this week’s blog posting? ‘Time for a New Type Regional MHShow?’

It’s likely everyone reading this blog posting has been to one or more or many regional manufactured housing shows in KY, MS, PA, FL & elsewhere – with ‘shows’ being the operative word, indicating ‘homes on display’. Well, ask yourself this, if a LLLCommunity owner/operator: ‘Have you been satisfied with the number and variety of Community Series Homes*1, or CSH Models, on display at these events?’ Methinks most of you would say ‘No’. As a rule, HUD-Code home manufacturers love to show off their latest designs of ‘Big Box + Big Bucks’ multisection, and humongous singlesection homes at these shows. Rare is the CSH singlesection or small-sized multisection home suitable for siting within a LLLCommunity. And that’s one of the two motivations suggesting the need for a new type regional MHShow. The other reason? The vast majority of LLLCommunity owner/operators who aren’t yet buying new HUD-Code homes, for a variety of reasons. In many cases, they simply don’t know how to go about the buying and selling processes, including seller-finance.

So, watch this website next week, or the week after, for a description of what might be in store as a prototype regional MHShow is planned for the Spring of 2016. A hint: it’ll likely be a healthy combination of several two hour plant tours and at least a half dozen pithy HOW TO seminars, during a two weekday time frame. But that’s all for now…

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End Note.

1. Community Series Homes, or CSH Models. Generally described as being a singlesection or small-sized multisection HUD-Code home with at least one exterior WOW factor (e.g. front loaded porch) and interior WOW factor, plus an array of durability-enhancing features to help lessen the ‘make ready time’ between home owners and or renters. For a free list of these Community Series Homes and where to buy them, simply phone COBA7®’s Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

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