Only 18 Days; & Growing Pains = Groaning Pains

Blog # 261 Copyright 2013 1 September 2013

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

Purpose of this blog. ‘To be a national Advocacy voice, statistical Research reporter, & communications Resource for LLLCommunities, of all sizes, throughout North America!

Opportunity to respond. ‘Critiques, reactions, & suggestions for future blog coverage: gfa7156@aol.com or Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.’

I.

Only 18 Days & Counting….

II.

When Growing Pains Become Groaning Pains

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I.

Only 18 Days & Counting….

22nd annual International Networking Roundtable,
in Bloomingdale, IL. @ 18 – 20 2013

Here’s how this year’s only national educational, peer networking, and realty deal – making event, designed specifically for land lease lifestyle community owners/operators, is shaping up ‘two weeks out’:

• If you’re ‘in the market’ to acquire LLLCommunities, you’ll be present at Marcus & Millichap’s Investors’ Symposium on Wednesday afternoon. At least three other national real estate brokerages will be present and including their listings among the more than 50 being showcased between 4 & 6PM.

• Gala Reception Wednesday evening is sponsored by Wells Fargo Multi – Family Capital Group. Frankly, ‘anyone who’s anyone’ throughout the LLLCommunity real estate asset class will be present that evening, from 6 – 8PM. It’s a veritable smorgasbord of national leaders, freelance consultants, and legendary players.

• Thursday morning! There’s no more exciting a day than when the Roundtable event begins. At this time, everyone will receive a copy of Bruce Savage’s new book, The First 20 Years!, the most comprehensive list of industry contacts available anywhere in the industry/asset class, and more!

• What other trade event do you attend, during the course of the year and as a matter of course, gives every single person gathered, an opportunity to stand and introduce themselves to the entire audience? This is one of the most popular and enduring features of the annual Roundtable event.

• Since this year’s theme is ‘Celebrating 20 Years of Camaraderie!’, there’s no more fitting a keynote presenter than Gary McDaniel, founder and chairman of YES! Communities, out of Denver, CO. Gary, among his achievements is former chairman of MHI, and before that, of the National Communities Council division.

• The RV/MH Heritage Foundation’s Hall of Fame, Museum & Library will be featured during the second keynote presentation of the day. Most LLLCommunity owners/operators are unfamiliar with this guardian of our industry and asset class’ legacy in Elkhart, IN. This is our opportunity to learn, and to show our support!

• Following this exciting start to the festivities, there’ll be more than a dozen educational seminars and panels Thursday and Friday; covering everything from product branding, electrical code, types of RVs, ‘ROCs’, RE deals good & bad, social media, ‘5-RPs of Marketing’, small owners emphasis, platform purchasing, benchmark statistics, and more.

• Thursday afternoon there’ll be a two hour forum, led by LLLCommunity owners interested in exploring the idea of starting a Private Equity Fund, for the purpose of providing chattel capital to qualified LLLCommunity owners/operators

• Friday morning, following the ever – popular Real Estate Lenders Panel, there’ll be ‘the first ever’ summary of all the chattel capital programs in effect today, from the ‘Big Five + One’ firms to several home manufacturer partnership programs, to online crowd funding, and more.

• At this writing, there will be no HUD – Code homes on display. When I first asked around, I received a lukewarm reception – which surprised me. One would think these firms would jump at opportunities to exhibit Community Series Homes for LLLCommunity owners/operators to buy. Evidently not. Is it possible they’ve simply become complacent at shipping only 50 – 60,000 homes per year?

• Saving the Best for Last, is how participants oft describe the final hour of every Roundtable event. And this year will be no different, as we caucus in the main conference room to engage in discussion regarding industry issues, current trends, and whatever topics LLLCommunity owner/operator participants desire to parse.

Well, there you have it. No fewer than ten major reasons to make your way to Bloomingdale, IL., between 18 & 20 September, to participate in the only annual trade event designed exclusively for LLLCommunity owners/operators and their favorite lenders. For more information and or to register, visit community-investor.com or phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

Postscript. Here’s what a former chief executive of one of the ‘Big 3 C’ HUD – Code home manufacturers (i.e. Clayton, Champion, Cavco), and past MHI chairman penned last week about this year’s 22nd annual Networking Roundtable: “I have a scheduling conflict, so cannot attend even a portion (of the program). It is great you have continued these confabs over the decades! Maybe this is another reason (land lease lifestyle) communities are now the bulk of the remaining (manufactured housing) industry!! Keep up the Good work. Best.”

II.

When Growing Pains Become Groaning Pains

The Historic Love – Hate Relationship Between Independent (street) MHRetailers and Land Lease Lifestyle Community (a.k.a. manufactured home community) Owners/operators is Renewing in Certain Local Housing Markets Across the U.S.

Amidst little fanfare, and even less recognition after the fact, a heterogeneous group of two dozen MHRetailers and LLLCommunity owners/operators gathered, at the invitation of Rainmaker Associates Bill, Judy & Chad Carr, in downtown Chicago, to explore past, present, and probable future interrelationships between these two distinct segments of the HUD – Code manufactured housing industry.

One result of this two day meeting was the drafting and circulation of a formal White Paper titled: ‘Street Retailer & Community Sales Centers’. Specific contributors to said White Paper included the Carrs, Dick Moore of TN, Ken Rishel of IL, Jim Reitzner, MHM® of WI, Greg Harmon, MHM® of OR, and yours truly.

And as opening paragraphs in the White Paper clearly indicate: In the past, “MHRetailers & LLLCommunities…have needed and worked with each other, to varying degrees of success.” However, (they) “…seem to be more at odds today, than ever before.”

The White Paper, in general terms, described the evolution, from ‘infill of vacant rental homesites in LLLCommunities by MHRetailers – during the 1970s & 1980s, to the late 1990s reality – when said retailers, for the most part, became general contractors. As such, they sold and sited ‘more homelike multisection manufactured homes’, a.k.a. ‘big box = big bucks’ units, as land/home packages, head – to – head against site or stick builders working developed ground conveyed fee simple. In effect, MHRetailers abandoned their traditional infill roll with LLLCommunities. And at first, this didn’t matter much, as the average physical occupancy, among LLLCommunities, hovered in the 95% range between 1995 the turn of the century.

When the annual new HUD – Code home shipment rate hit 372,843 units in 1998, another phenomenon began: the conversion of independent (street) MHRetailers into ‘company stores’ via expensive buyout. These previously independent businesses now were managed by salaried staff. This change squelched heretofore entrepreneurial business decision making, that shut off stock housing inventory glutting, when local housing markets were saturated. And anyone (reading this) who was around at the time, knows ‘the rest of the (sad) story’; that when new home markets became overstocked, qualified homebuyer caution was ignored, and in the end, we – as an industry – turned many (some say North of 250,000 deals) customers ‘upside down’ financially.

Well, during the next (almost) decade, roughly 2005 – 2015, the number of MHRetailers plummeted, according to MHI, from more than 1100 nationwide, to 400+/-. So where ‘many were lost’ to the land/home package misadventure; and many ‘independents’ became ‘company stores’; now even more closed their doors, as they were no longer able to secure chattel capital from the quickly shrinking independent chattel finance firms – who eventually became known as the ‘Big Four + One’, and recently, with the addition of Green Hill Financial to the mix, the ‘Big Five + One’.*1 And at the time, LLLCommunity owners/operators too played a role in this enronesque financial debacle, as many offered ‘rent free living’, for a period of time, to attract move – ins to fill, overall, tens of thousands of recently vacated rental homesites, whether they be new, ‘resale’ or ‘repo’ homes.

In a nod to the future, Bill Carr, freelance consultant to the MHRetail segment of the HUD – Code manufactured housing industry predicts the industry’s future will not see a return to 1100 salescenters, but rather a national market dominated by maybe 100 mega independent (street) MHRetailers who’re fully compliant with all state and federal financial regulations, and have relearned how to sell new HUD – Code and modular homes into land lease lifestyle communities, even compete successfully – in some local housing markets – with traditional site builders. But that is only part of the story….

All this (the previous paragraphs) brings us to the present day in MHRetailer/LLLCommunity owner/operators relations. Here’s what we’re hearing from across the U.S.

• From the LLLCommunity owner/operator: ‘MHRetailers have simply forgotten how to sell new HUD – Code homes into our properties! They don’t know us; they don’t know how to ‘sell’ us. My response? What have you, as owner/operator done, of late, to reacquaint local MHRetailers with your property? When was the last time you invited them on – site, say to judge a Home of the Month Contest, or simply to have lunch and ‘talk shop’ with them. Is your literature in full view at the salescenter? And as of 18 September, there’ll be a FREE new training aid available for you to give to them: ‘The 5 – RPs of Selling New HUD – Code Homes INTO LLLCommunities!’ *2 And that’s not all! For the first time in awhile, we’re hearing of disputes regarding protected or inviolable sales territories, granted MHRetailers by HUD – Code home manufacturers – even when said MHRetailer has never, say in a decade, sold a single home into the affected LLLCommunity or communities. Some might call this ‘restraint of trade.’

• From the independent (street) MHRetailer: ‘LLLCommunity owners/operators selling homes on – site ‘Kill & Steal Our Business’! How so? Well, believe it or not – if you haven’t heard this before, it’s not uncommon for property portfolio owners/operators to buy ‘quantities at a time’ of new, often Community Series Homes or CSH Models (Which is to say, smaller multisection or singlesection homes replete with durability – enhancing features. ‘Think about why…’*3), directly from the factory, then sell them at or near cost (minimum profit margin), to make ‘attractive deals’ to get homebuyers/site lessees to move in quickly and ‘Get the ol rent meter a – running again!’ No wonder local MHRetailers are reluctant to send otherwise ‘qualified prospects’ to nearby LLLCommunities to ‘pick out a vacant rental homesite’. They have every reason to believe the on – site sales team will hijack their customer, or the customer will get wind of the ‘better deal’ and switch MHRetailers. And that’s not all! For the first time in awhile, we’re hearing of LLLCommunities ‘closed’ to local MHRetailers; in effect, requiring would be homebuyers/site lessees, to buy their new (sometimes resale) home on – site, before leasing the rental homesite. Some might call this ‘restraint of trade’.

Point in all this? Are the business practices just described a preliminary sign of the manufactured housing industry’s long – awaited recovery? Or perhaps they’re some of the very practices that continue to dog the industry and its’ landlease real estate component; in effect, helping keep us – along with the difficulty in qualifying for chattel capital, at 50,000 – 60,000 new HUD – Code homes shipped each year, when we should be climbing back to the generally acclaimed sustainable shipment level of 250,000 new HUD Code homes per year. What do YOU think about this matter?

***

End Notes:

1. Big Four + One = 21st Mortgage Corporation, CU Factory – built Housing, Triad Financial Services, U.S. Bank – Manufactured Housing Finance, and (Clayton’s in – house) Vanderbilt Mortgage and Finance – and here some would now add (Cavco’s in – house) Countryplace Mortgage, as well as Legacy Home’s in – house lending arm.

2. ‘5-RPs of Marketing’ plastic 3”X 5” wallet cards! There’re two cards, based on the 5 – Ps of Marketing: Right Product, Right Place, Right Price, Right Promotion, Right People! One is designed for HUD – Code manufacturer and independent (street) MHRetailer use, and one for the on – site LLLCommunity salescenter – selling new and resale homes and leasing vacant rental homesites. To request one or both cards, phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. And while you’re at it, ask yourself: ‘Who Else in the MHIndustry Makes Material Like This Available to Me?’ Don’t call for the card until after 18 September – when they’ll be distributed for the first time, to attendees at the 22nd annual Networking Roundtable in Bloomingdale, IL.

3. ‘Durability – enhancing features’ = plywood vs. particleboard, solid wood cabinets, panel floors vs. carpeting, and more. Most new homes purchased by LLLCommunity owners/operators today, will be used as rental units or contract sale homes. In either event, the expectation – rightly or wrongly – is the home will ‘turn’ from time to time – and the longer time span the better. But there’s more money to be saved ‘up front’, by toughening up the home when manufactured, than to incur the same (e.g. recarpeting) expenses over and over and over again. For a FREE list of Community Series Home features, and the Business Development Managers that sell them, request said list when phoning the above – referenced Official MHIndustry HOTLINE.

George Allen, CPM & MHM
GFA Management, Inc.,
Box # 47024, Indpls, IN. 46247
(317) 346-7156

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