Lunch Anyone? Fallout Continues. Best of times, Worst of Times

Blog # 221 Copyright 2012 25 November 2012

Perspective. ‘Land lease lifestyle communities, a.k.a. manufactured home communities, & earlier, ‘mobile home parks’, are the real estate component of manufactured housing.’

I.

Lunch Anyone?

1/23 in Louisville, KY: Dine & Network with Movers & Shakers!

II.

Fallout Continues!

Amazing! Little Official Action, but Lots of Support from You!

III.

Best of Times, Worst of Times…

What I Tell Prospective LLCommunity Investors When They Call

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I.

Lunch Anyone?

1/23 in Louisville, KY: Dine & Network with Movers & Shakers!

Who’s up for starting a new tradition at the Louisville MHShow?

‘More than a few of you are’, since several manufactured housing and land lease lifestyle community businessmen and women have asked me – since the ‘free lunch is long gone at the Louisville MHShow’, Why don’t I host an annual ‘by invitation only’ luncheon and networking event, at a nearby hotel, for those who want to get off the showroom floor for awhile, to dine & socially mingle with ‘friends in the MHBusiness’?!

Well, I’m game, if You’re really interested! Tell you what we’ll do…

I’ll soon drive down to Louisville and reserve a venue. In the meantime, you indicate interest in being invited to the networking luncheon, by responding via phone (e.g. MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764) or email: gfa7156@aol.com
Simply state your desire to participate, leaving me your preferred contact information.
I’ll send you an invitation, & read future blog postings here for details, $ amount, etc..

So, what do we have in mind? An appropriately sized hotel meeting room, probably a buffet luncheon, with seating conducive to interpersonal networking; then a special speaker (not me), followed by opportunities for open discussion – or maybe three ‘directed discussions’ on such topics as lease option, financial regulatory compliance, and how to collect 100% of your site rent. And there’ll be no pressure to conclude the event. I suspect we’ll convene between 11 & 11:30AM, break bread together from11:30AM to 12:15PM, titillate you with the surprise presenter from 12:15 – 1PM (I do have someone in mind.) And you’ll be free to return to the MHShow anytime you wish: before or after 1PM, or later – if you participate in one or more of the three directed discussions described above. In any event, I plan to keep the meeting room available for networking, discussion, and more, until at least 3PM. Cost? Too early to say, but as reasonable a fee as I can negotiate with the host facility.

Wanna participate? You’ll need an ‘invite’; and the first step to receiving that, is to phone the above – listed MHIndustry HOTLINE or email me via gfa7156@aol.com

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A Postscript of Virginia Sorts…

Speaking of networking, as well as education and industry/asset class matters! Don’t forget. If you own and or fee manage one or more land lease lifestyle communities in VA, MD, NC, WV, and surrounding areas, plan to be in Richmond, VA., on 6 December 2012! Why? The Virginia Manufactured & Modular Housing Association is hosting a day long opportunity for Education (‘How to Set Affordable & Risky Price Points on New & Resale Homes’ & ‘How to Turnaround Troubled & or Abused Properties!’), Information (‘State of the MHIndustry & LLLCommunity Asset Class!’ & 21st Mortgage’s cutting edge C.A.S.H. Program, funding on – site home loans in partnership with LLLCommunity owners!), and superb interpersonal networking (luncheon) among land lease lifestyle community owners/operators. Tyler Craddock, VAMMHA’s exec, is your point of contact for more information and to register (only $35.00/person!): (804) 750-2500. Hope to see you there!

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II.

Fallout Continues!

Amazing! Little Official Action, but Lots of Support from You!

Haven’t said much yet, about what happened at the NCC meeting on 8 October 2012, during MHI’s annual meeting in San Antonio, TX. Suffice it to say however, an unexpected, unfortunate public incident occurred that begs redress for the injured parties.

As of 21 November, MHI’s Executive Committee attempted, by email, to dodge responsibility for said incident, even though it occurred at their annual meeting venue; suggesting offended MHI members take the matter up with the NCC division officer effecting the highly embarrassing incident.

With that said, know nary a week goes by – and there’s been seven of them so far, when we haven’t heard from one or another land lease lifestyle community ‘owner’, assuring us of their ongoing support. Here’s the most recent email commentary and challenge to come our way:

“A long time ago, I got sick of the ‘do nothing clique’, who are ONLY in the mix for their own selfish reasons. Why invest personal money, and more importantly TIME (to this end). Keep up your tenacious fight, and continue to be our voice! Help to crystallize the issues, and support people who can really help make a difference.” JR (Emphasis added. GFA)

Where does this sorry matter stand today? Correspondence continues to pass back and forth among the elected and salaried leaders of our industry’s primary national Advocacy body, and the injured parties. I’m hoping there’ll be resolution by the end of November, certainly by 8 December, which will mark two full months of waiting for this situation to be made right. Beyond that? Well, guess you’ll need to read this blog posting, from week to week; as well as upcoming issues of the Allen Letter professional journal; and, certainly plan to be at the next NCC meeting in Arlington, VA., on 26 February 2013.

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Best of Times, Worst of Times…

What I Tell Prospective LLCommunity Investors When They Call

By now, most of you reading this 221st consecutive weekly blog posting, know I make my living as an independent, freelance consultant to the factory – built housing industry, land lease lifestyle community owners/operators, and affordable housing purists and enthusiasts nationwide. As such, we field a wide variety of task inquiries every week, including: deposition and jury trial testimony in expert witness cases; telephonic & on – site inspection Mystery Shopping assignments throughout the U.S.; covert property management criminal investigations; property takeover & turnaround planning services; public, private & corporate speaking engagements; as well as, professional property management (Manufactured Housing Manager® or MHM®) training & certification class scheduling – and more.

The one near routine inquiry these days, for ‘private industry & realty asset class briefings’, comes from financiers, equity funds, Wall Street analysts, hedge fund directors, lending institutions, academics, and now, realty – secured mortgage servicing firms, all asking the same or similar questions:

Is now the right time to invest in manufactured housing & or land lease lifestyle communities? If so, why? And if not, why not?

To begin with, those are not generally the two ‘trade terms’ inquiring clients use in their question or questions. But their choice of lingo is usually a clear indication as to how little or much they already know about our interrelated business types and models. What’s contained in the following paragraphs, albeit in abbreviated fashion, is what I shared with a paying client this past week; and frankly, the ‘drill’ doesn’t change much from client to client, or month to month, unless new information or helpful statistics become available for my use. Ready?

I won’t tell you ‘up front’, whether this is the Best of Times, or the Worst of Times, to invest in manufactured housing and its’ real estate component, the land lease lifestyle community (a.k.a manufactured home community). But you’ll be able to make up your own mind, by the time we’ve worked through the following paragraphs, and you’ve studied the 23rd annual ALLEN REPORT, as well as other contemporary trade articles. The 24th annual ALLEN REPORT will be published 1 January 2013 as a lagniappe to the Allen Letter professional journal.

To begin with, ‘manufactured housing’ and ‘land lease lifestyle communities’ (a.k.a. LLLCommunities) are two different, but closely related business types and models. HUD – Code manufactured housing, on the one hand, has to do with the design, fabrication, shipment, and installation of factory – built housing constructed in accords with a federal preemptive performance – based building code. Manufactured housing production, marketing health, and industry performance are measured by ‘annual shipment volume’ of new HUD – Code homes. At present, and for the past several years, annual shipments have been at an historic and dismal nadir of only 50,000+/- new homes per year, down from a renascence high of 372,843 new HUD – Code new homes shipped during 1998. No significant change, or improvement, is seen on the horizon – unless there’s an increase in crew housing demand from natural oil – fracking regions of the U.S.; or FEMA needs thousands of specially – designed homes, following natural and weather disasters. Of course, a wholesale return of the now decade – long – gone accessible chattel (personal property) financing of HUD – Code homes would also be a major game changer!

LLLCommunities are neither growing or declining in number. It’s estimated there are 50,000+/- of them nationwide, with 85 percent of that number characterized by properties containing 100 or fewer rental homesites apiece. Because of their scarcity (i.e. 50,000+/-), stable occupancy (homes too large & expensive to relocate), stable & competitive site rent (compared to conventional apartments in the same local housing market), affordable home ownership & equity opportunity, being ‘recession proof’, and unique opportunities to ‘add value’ in difficult economic times, these income – producing properties enjoy the near perennial reputation of being a Sellers’ Market. It’s, in large part, why the majority of the 15 percent of LLLCommunities, larger than 100 rental homesites apiece, are today in 500+/- known property portfolios domiciled throughout North America only. For more details read the 23rd & 24th annual ALLEN REPORTs.

With all that said, what are the unique, encouraging, even troubling trends characteristic of many, if not most or all LLLCommunities across the U.S. today?

Traditionally, when one acquired a LLLCommunity, it was commonplace to rely on local independent ‘street’ MHRetailers (formerly referred to as ‘street dealers’) to sell new and resale manufactured homes, then encourage buyers to site their new home in (then) mobile home parks cum manufactured home communities. Well, due to a plethora of undisciplined lending practices, throughout all segments of the manufactured housing industry before, during, and after the ‘turn of the century’ (i.e. 1996 – 2005), most independent sources of chattel (personal property) finance have disappeared from our industry and are remain gone. Same with the MHRetailers; their number is estimated to have plummeted from 11,500, at the turn of the century, to but 4,000 independent ‘street’ MHRetailers & ‘company stores’ today. And no near term relief or change is foreseen there as well.

At that point in time – when independent, third party – originated chattel mortgage financing disappeared from the manufactured housing business scene, owners/operators of LLLCommunities, from coast – to – coast, exercised one of the aforementioned unique characteristics of this property type, i.e. ‘ability to create additional streams of income’ by selling and self – financing new and resale home transactions on – site! This worked fine for awhile – until getting (some say, unintentionally) swept up in financial reforms, following our nation’s recent economic hiatus, specifically, the S.A.F.E. Act (Safe And Fair Enforcement of Mortgage Licensing), provisions of Dodd – Frank legislation, Red Flag, American Patriot Act, AML, and more. Now $$$ matters have become much more complicated; enough so, many LLLCommunity owners, like me, when needing to fill vacant rental homesites, opt to buy resale homes (Some buy new homes), then lease them as ‘rental units’ on – site, rather than ago through the complicated and inherently dangerous hoops of becoming and remaining compliant with onerous state and federal $$$ regulations. Speaking of ‘new homes’, know that one area where HUD – Code home manufacturers work closely with LLLCommunity owners/operators, is in the area of designing, building and shipping Community Series Homes, a.k.a. CSH Models. These are generally modest size singlesection homes or smaller multisection homes, often featuring front porches, but almost always characterized by durability – enhancing features, to prolong the home’s utility and life as it passes among multiple homeowners/site lessees and unit renters.

Another dynamic that’s been playing out, during the past decade, is the shake out of properties, sometimes even entire LLLCommunity portfolios, where owner/operators, in an attempt – I suppose – to emulate the real estate investment trusts (‘REIT’s) in this asset class, ‘raised site rents too much too fast’, to maximize profitability during the Go Go economic times, roughly between 1998 and 2008. The inevitable consequence was, as ‘rents went up’ (in effect stealing value from homes sited in affected properties), we turned our customers ‘upside down’ in their transactions. They then, ‘voted en masse, with their feet’, becoming ‘no money down’ buyers of new, cheaply constructed tract homes (which included underlying realty in the transaction) financed via undisciplined lending practices akin to what cost the manufactured housing industry their sources of capital just a few years earlier! Then that site – built home finance bubble burst.

Now today, many of these LLLCommunities, large and small, whose rental homesite rents rose to ‘double or more’ what local housing markets indicated, or could bear, have become tied up in forbearance agreements, and most recently – back on the market, as foreclosure deals. So properties are indeed available for purchase; it’s just that, in many cases, one must craft a viable turnaround Management Action Plan or MAP, that effectively deals with curb appeal issues, deferred maintenance, filling vacant rental homesites (marketing), collecting delinquent site rent, and adjusting rental rates – all at the same time, or in tight sequence. And there’s this strategic question; ‘Where will the funds come from, to purchase new and resale homes to then be either resold and self – financed (e.g. via lease option or one or another type of ‘captive finance’*1), or leased as on – site apartment units?’

The intent here, has not been to ‘scare you off’ the asset class as an investment vehicle, but to deliver a healthy dose of contemporary reality, before you begin a serious search for the ‘right property’ in the ‘right location’, at the ‘right time’, and for the ‘right price’, that meets your investment needs and goals. *2 There are additional resources to access, as you continue your research and decision – making. They include:

• Manufactured Housing Institute’s (‘MHI’) National Communities Council (‘NCC’) division; the national Advocate for land lease lifestyle communities nationwide: (703) 558-0678

• Center for Manufactured Housing Studies or CMHS, the new, academic Research arm, for manufactured housing, land lease lifestyle communities, and affordable housing nationwide. Calls temporarily being taken and forwarded, via the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

• Manufactured Housing Communities Association of North America or MHCA, maybe the new ‘comprehensive Resource servicing’ arm for land lease lifestyle communities throughout North America. Phone the MHIndustry HOTLINE: (988) MFD-HSNG or 633-4764.

End Notes.

1. For lease option information, contact Spencer Roane, MHM® via spencer@roane.com And for ‘captive finance’ alternatives information, and training relative to being compliant with finance regulations, contact Ken Rishel via (217) 971-3968.

2. For further information on the land lease lifestyle community, as investment vehicle, read: How to Find, Buy, Manage & Sell a Manufactured Home Community ($75.00) & Landlease Communities, Manufactured Home Communities, Mobile Home Parks, Trailer Courts & Camps, and Affordable Housing ($19.95). Both books available from PMN Publishing. Order via MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or visit community-investor.com

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George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry,
The Land Lease Lifestyle Community Asset Class &
Affordable Housing Purists & Enthusiasts Nationwide
Box # 47024, Indianapolis, IN. 46247 (317) 336-7156

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