Blog # 410 Copyright 2016 COBA7® @ 21 August 2016, community-investor.com
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 sole national advocacy voice, official ombudsman & historian, research reporter & online communication media for North American LLLCommunities.
To input this blog &/or affiliate with Community Owners (7 Part) Business Alliance®, a.k.a. COBA7®, use Official MHIndustry HOTLINE: (877) MFD-HSNG o r633-4764
COBA7® Motto: ‘U Support US & WE Serve U!’ Goal of its’ print/online media = to ‘Not only inform & Opine, but transform & improve MHBusiness Model Performance.’
INTRODUCTION. A simple but complicated mix of two timely topics.
In the first instance (Part I), we remember and honor LLLCommunity owners/operators who defied convention and status quo in 1993, to prepare for the anticipated REIT wave of 1994 & 1995. Today, only a handful of these pioneers remain active in the MHBusiness.
Then there’s Part II. Hopefully you already realize we live and work in turbulent times, where the national economy and our industry’s business model are concerned. But have YOU stopped and considered the lasting effects horizontal (consolidation) and vertical integration have had, and continue to have, on our industry and realty asset class?
If you’re one of those who believe the MHIndustry needs a new, independent national trade association to protect and advance the business interests and concerns of the post production sector of manufactured housing, you’ll want to read this week’s blog posting from beginning to end. Because there is indeed a third such party ‘waiting in the wings’ for the timing and leadership to be right and effective from the word ‘Go’!
23 Years Later, Only Six Remain Active!
On 31 August 1993, 19 (then) MHCommunity owners/operators met in an Indianapolis airport hotel for a strategic planning meeting, to plan effective national advocacy for their unique, income-producing property type, before the anticipated REIT wave of 1994 & 1995. The list of ‘players’ at the time was a veritable ‘Who’s Who’ of community owners/operators nationwide, e.g. Randy Rowe; Gary McDaniel; Tom Horner, Jr.; Martin Newby; Kamal Shouhayib; Gill Geary, CPM®; Marty Levin, Esq.; Eugene Landy; Brian Fannon, CPM®; Ed Zeman; and, George Allen, CPM®
During the months following that day long meeting, an Industry Steering Committee (‘ISC’) was birthed by these men; and 2 ½ years later, MHI formed the National Communities Council (‘NCC’) division, to absorb the ISC. Today, the rest is history.
But what’s happened to the 19 individuals who stepped forward as pioneers in our industry at the time?
Some have moved onto other business and personal pursuits, not to be generally heard from again, e.g. Jeff Kellogg, Jerry Ellenburg and Scott West, Dick Leiter, Bill Williams, and Bill Geary, CPM®.
Ron Richardson, to date, is the only one who’s deceased. Martin Newby and Tom Horner, Jr. have been succeeded in their respective businesses by sons and other relatives. Lynwood Welhausen and Marty Lavin too have retired.
Randy Rowe, during the past two decades has accumulated and sold two LLLCommunity portfolios, and has now moved onto other realty investment interests. Jim Grange continues to work with Gary McDaniel.
That leaves six men still active in their business careers:
• Gary McDaniel, an RV/MH Hall of Fame inductee and past chairman of MHI, during recent years founded and grew YES! Communities, headquartered in Denver, CO.
• Kamal Shouhayib, working from Troy, MI., continues, with the assistance of his wife and sons, Rob and Omar, to own/operate Choice Properties throughout the Midwest.
• Eugene Landy continues to be patriarch of (now) UMH Properties, Inc., a REIT, headquartered in Freehold, NJ. and is assisted by his son Sam.
• Brian Fannon, CPM®, also an RV/MH Hall of Fame inductee, having worked for several large portfolio firms over the years, but is now focused on a effecting a new LLLCommunity development in Michigan.
• Ed Zeman, succeeded his father, Bud Zeman, and owns/operates one of the largest property portfolios in the Midwest.
• George Allen, CPM®, MHM®, another RV/MH Hall of Fame inductee, is the smallest owner/operator of the bunch. However, over the decades, founded the Community Owners (7 Part) Business Alliance®, or COBA7®, researched & published 27 annual ALLEN REPORTs, plus the Allen Letter, & dozen books.
Yes, the manufactured housing industry, back in 1993, was fortunate to have 19 leaders step forward to chart their collective business destiny! While there are but six pioneers who remain active in the MHBusiness today, it’s interesting to note that four of them continue to lead the companies they founded, or were head of, 23 years ago.
Want to learn more about this key time in LLLCommunity history? Read Bruce Savage’s The First 20 Years! Published in 2014, it makes for a fascinating ‘read’ about our industry and realty asset class, prior to, during and since the renascence of 1998. To order a copy, for $24.95 postpaid, simply phone (317) 346-7156.
‘The Times They Are A-Changing!’
As Bob Dylan’s song, and album by the same name, opined back in January 1964
Well, 50 years later that message has been, and continues to be proving, true for the HUD-Code manufactured housing industry and its’ real estate component, today’s land-lease-lifestyle community asset class!
• Early 1970s saw an unprecedented high volume of ‘mobile home parks’, cum manufactured home communities in 1976 developed from coast to coast, to site record-level annual volumes of new ‘mobile home’ shipments.
• 1975 – 1976 saw implementation of the nation’s first and only federal (‘HUD’), performance-based building code foisted on the manufactured housing industry. Ten years later, MHCommunity consolidation began in earnest via syndications.
• 1995 – 2005 marked MHIndustry’s brief and unsuccessful competition, with local homebuilders, using larger, tricked-out Developer Model manufactured homes. Factories bought up independent (street) MHRetailers, to better control distribution, turning them into ‘company stores’. Simultaneously, MHCommunity consolidation continued via several IPOs (Initial Public Offerings of stock) forming real estate investment trusts or REITs)
• In short order, the number of independent (street) MHRetailers plummeted from more than 14,000 to fewer than 4,000. Beginning in year 2009, when new HUD-Code home shipments reached its’ nadir, (now) land-lease-lifestyle community owners/operators picked up the slack and routinely bought, sold and seller-financed new HUD-Code homes on-site nationwide. Today, more than 40 percent of new HUD-Code homes are shipped directly into LLLCommunities.
• Bottom lines? In terms of consolidation: In 1977, 25 housing manufacturing firms garnered 70 percent of national market share; today, in 2015, the Big 3-C firms (Clayton, Cavco, Champion) garner approximately 71 percent of national market share. In the (then) MHCommunity component of the MHIndustry, only 25 portfolio firms were known and documented in 1987; today that total has risen to 500+/- sole proprietors, partnerships, corporations, and three REITs.
And ‘change’ (i.e. 16 year paradigm shifts in consolidation and distribution) continues, particularly for one mega-firm, Clayton Homes, a manufacturer of HUD-Code homes. And their growth is surely stimulated in large part, by dint of ownership by Warren Buffett’s Berkshire Hathaway. Here we learn anew about horizontal and vertical integration.
In this instance, we’ve already observed horizontal integration, as BEING a synonym for consolidation, i.e. acquiring similar (i.e. home manufacturing) firms, e.g. Clayton Homes has acquired Schult Homes, Crest Homes, Karsten Homes, Golden West Homes, Norris Homes, Giles Homes, Marlette Homes, SE Homes, Buccaneer Homes, Cavalier Homes, and more during recent months….
This is another story altogether. By way of definition, it’s the degree to which a firm owns its’ upstream suppliers and downstream buyers. When we first looked at Clayton Homes, in this context, during December 2015, we noted:
• Clayton Homes, with its’ estimated 41 percent national market share, is owned by Berkshire Hathaway
• 21st Mortgage Corporation., one of the remaining Big 3+1 independent, third party chattel capital lenders, is also owned by Berkshire Hathaway. As is the ‘+1’ firm, Vanderbilt Mortgage, in-house home finance arm for Champion Homes.
• Berkadia Mortgage is an emerging player, where LLLCommunity mortgages, and manufactured housing finance are concerned. The firm is owned by Berkshire Hathaway.
• Berkshire Hathaway Home Services. “…real estate brokerage network built for a new era in residential real estate, grounded in the financial strength, efficiency and tradition of its’ HomeServicesof America parent company, will change the face of residential real estate.” Quoted from 2013 issue of RISMedia’s REAL ESTATE magazine.. The firm is owned by Berkshire Hathaway. Note. We’ve yet to see BHH ‘changing the face of residential real estate’, but it certainly could include the establishment of a secondary market for the sale of resale manufactured homes, potentially boosting opportunities for Clayton Homes to fabricate and ship many more new HUD-Code homes.
• Various suppliers of products and services upstream, e.g. GEICO & Progressive Insurance companies, as well as various building supply companies.
Now, here’s the proverbial ‘rub’. With quiet but increasing frequency we read of conspiracies and monopolies gradually taking over (if not already ‘taken over’) the political agenda of the manufactured housing industry. For example, here’s a quote from the August 2016 issue of THE JOURNAL.
• Relative to Duty to Serve (‘DTS’) rulemaking at the Federal Housing Finance Agency (‘FHFA’): “…the obvious self-interest of industry dominant lenders in maintaining what has been called a ‘monopoly’ on manufactured housing consumer lending….: p.12
Assuming truth and legitimacy of these claims of ‘conspiracies and monopolies gradually taking over the political agenda of the manufactured housing industry’, what’re the solutions? In the same op/ed piece in THE JOURNAL, the writer makes this case for a new independent national trade association to represent the post production sector of manufactured housing:
• “…to monitor issues in the nation’s capitol, mobilize for effective action, and fight for their interests and issues, rather than the few industry-dominant lenders and the corporate conglomerates that stand behind them.” And until that happens, the writer opines, our shipments of new HUD-Code homes will continue to languish well below 100,000 units per year.
So, where’s this new independent national trade association going to come from? Surely not the Manufactured Housing Institute (‘MHI’) with its’ 80+ percent national member market share of new HUD-Code manufactured housing distribution; nor, the Manufactured Housing Association for Regulatory Reform (‘MHARR’) and its’ regional housing manufacturing firms. The Community Owners (7 Part) Business Alliance®, or COBA7® is ideally suited for ‘the job’ for these reasons:
• Ongoing statistical research. COBA7® has become, during 2016, statistician for the MHIndustry & LLLCommunity asset class, in that GSEs and other government agencies now routinely seek the alliance’s accurate new home shipment data, and other such bodies of information.
• Updating & distribution of more than a dozen Signature Series Resource Documents (‘SSRDs’), monthly, e.g. ALLEN REPORT; National Registry of ALL Lenders; Directory of ALL HUD-Code Home Manufacturers; & nine more
• Weekly (blog) and two monthly print business newsletters for LLLCommunity owners, and senior executives in all segments of the MHIndustry
• Superb interpersonal networking opportunities throughout the year.
• Superb realty deal-making opportunities throughout the year.
• Professional property management training & certification via the popular Manufactured Housing Manager® or MHM® program…1,000+ to date!
• National advocacy when need be. Today that includes official (press) ombudsman and historian for the MHIndustry & LLLCommunity asset class.
But as ideally suited as COBA7® is for this heady and timely responsibility, it’s going to take a younger, charismatic, successful entrepreneur type individual, willing to live and work in Washington, DC., to pull this off! All this has been an ongoing topic of conversation among COBA7® affiliates since January 2014. We even figured out how to effectively fund the effort without soliciting funds from those with a more inclusive vision for the manufactured housing industry. Want to talk about this? Contact me anytime….
George Allen, CPM®, MHM®
Box # 47024, Indpls, IN. 46247