Archive for May 16th, 2010

Mid-Year ALLEN REPORT Names New # 1 Owner/operator

Sunday, May 16th, 2010

Mid – Year ALLEN REPORT Announces New # 1 Owner/operator! *1

ELS, Inc. president, Joe McAdams proclaims: “…we have shifted our business from being a trailer park company to being an RV company – a lifestyle company.”

(Before sharing this interesting story, here’re three IMPORTANT DEVELOPMENTS! Subsequent to last week’s ‘Recent MHCC Meeting’ (& contrasted views of manufactured housing’s national advocacy bodies) blog; a significant triple position paper was aired by MHI; startling revelations made, on the subject, by a recent MH executive; and an intriguing MHIndustry recovery plan suggested by a veteran land developer! These ‘blog responses’ will likely form the substance of next blog posting, so ‘stay tuned’ here! GFA)

Now for this week’s story! For veteran landlease (nee manufactured home) community portfolio owners/operators, and Sam Zell fans alike, the April 2010 issue of WOODALLSCM.com trade newspaper contained an article titled: ‘ELS President Joe McAdams Plans to Ratchet Up the Brand Recognition of the Park – Owning Powerhouse’ (pp. 5 & 21). The front page story is replete with surprises (e.g. Reread subtitle to this blog posting!); rare insight into the firm’s difficulty with their manufactured home communities; a brief description of ELS’ recent foray into renting homes on – site; and, what it’s like to be a public company.

First the switch “…from being a trailer park company to being an RV company…” Parenthetically; one wonders, whether fascination with the word ‘park’, in this context and throughout the cited article, is either a sign of disdain for the asset class, or portends a Luddite – like view of the unique income – producing property type? In any event, here’s what ELS, Inc. president Joe McAdams tells WOODALLSCM.com about the switch:

“In 2003, ELS had 128 manufactured home properties and 14 RV campgrounds and resorts. By the end of last year (2009), ELS had increased its RV resort inventory to (sic) 88 Encore and 80 Thousand Trail properties, with 64,000 sites, while still owning 136 manufactured home communities.”

Well, the 21st annual ALLEN REPORT (January 2010) listed Sam Zell’s ELS, Inc. as the largest landlease community (‘LLCommunity’) portfolio owner/operator in the world, with 309 properties (including RV parks), comprised of 111,000 reported (mixed) rental homesites, located in 27 states and one Canadian province. ‘Doing the math’, the majority of ELS, Inc. present property portfolio, according to McAdams, is now comprised of 168 Encore & Thousand Trail RV resort properties and only 136 LLCommunities, for a grand total of 304 properties. When the RV properties are backed out of this total, the remaining LLCommunity property count drops ELS, Inc., to maybe number four among its’ asset class peers, moving recently rejuvenated American Residential Communities (nee Affordable Residential Communities) or ARC, to being ‘number one in the world’! When the 64,000 RV sites, cited in the previous paragraph, are deducted from the firm’s total of 111,000 sites reported in the 21st annual ALLEN REPORT, the remaining 47,000 sites confirms said drop in placement among peer portfolio owner/operators. And how’s this for a coincidence? ELS, Inc. and ARC have corporate offices in the same building in downtown Chicago, IL.

Then there’s the trouble with ‘manufactured home communities’. “Where ELS had been getting in trouble, is that the average age of people in manufactured home communities is something like 72 years old. They were throwing the keys at us because they get too sick to be in Florida and they have to go back to Elkhart to be with their grandkids because somebody’s got to take care of them.” Those of us ‘in the MHBusiness have heard that story before, but the comment also begs this question: ‘Is that the sole reason homeowners/rental homesite lessees (i.e. residents) are throwing keys at some LLCommunity owners/operators these days? No. For an answer to that question, scroll back through the blog archives at this website to one titled: ‘Numbers, Attitudes, Books & Errors, all ‘UP’ at MHCongress! Then read Part III; specifically, ‘The BIGGEST ERRORS of all….’, for an eye and an earful.

Who’d a thunk; ELS, Inc., ‘renting’ manufactured homes on – site in LLCommunities! “The housing side of our business has really been hurt by the inability of people to finance (manufactured) homes, and the inability of people migrating to our markets to sell their (primary) houses. We have addressed that by renting our inventory. That gives us occupancy and helps the growth on that side.” SO, “We are trying to keep the demographic to that guy that we know will rent and convert to an owner. And we will let him take some of the credit from his rent.” AND “The key to homes is bringing the prices down. They are really nice, but if you get to $50 a square foot, you become a viable opportunity.” Since site rent rate isn’t mentioned, it begs yet another question: ‘Is this firm’s homesite rent rate in sync with other forms of multifamily rental housing (e.g. 2BR2B conventional apartments) in the same local housing market?*2

And finally, “Because this is a public company, it needs steady, predictable revenue. Investors want to know how much dividend they are going to get. We average 2% to 3% dividend each year. But we are showing them sizable growth. Since 2004, this stock has doubled, with all the rest of the market going down. The average yield is 15% to 20% a year. But they want to make sure that it’s steady and predictable. It’s got to be there every year.” And in case you didn’t know it, the Allen Letter professional journal is the sole MHIndustry & LLCommmunity asset class print and online trade publication reporting the stock performance of all manufactured housing – related firms, including REITs, every month of the year! To subscribe, do so via website hosting this blog or see End Note # 1 following. And, for that matter, have YOU bought your copy of Manufactured Housing Finance Primer? It’s only $29.95/copy (postpaid) and contains timely and helpful input from no fewer than 24 manufactured housing and landlease community consultants and specialists. To order, use any contacts listed in end note # 1.

End Notes

1. 21st annual ALLEN REPORT, a.k.a. ‘Who’s Who Among Portfolio Owners/operators of Landlease Communities Throughout North America!’ available for $250.00 from PMN Publishing, at this website, or by phoning the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. ALLEN REPORT is also available for FREE, when subscribing to the Allen Letter professional journal @ $134.95/year (12 monthly issues) by phoning same number or (317) 346-7156.

2. ‘Setting Right Site Rent & Housing Price Points…before buying a LLCommunity, while managing it, & when selling’ is the title of a seminal reprint enclosed with the May issue of the aforementioned Allen Letter professional journal. If you’d like a FREE copy of this helpful, practical, timely document, simply phone the number listed last in End Note # 1.

*****

George Allen, Realtor®, CPM Emeritus®, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class

Box # 47024, Indianapolis, IN. 46247
(317) 346-7156