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Live from Public Days at the Great Southwest Home Show

May 1st, 2011 1 comment

TULSA, OKLAHOMA.  Deanna Fields, Executive Director of the Manufactured Housing Association of Oklahoma (MHAO) has been reporting from the Public Days at the 2011 Great Southwest Home Show at the QuikTrip Center at Expo Square in Tulsa, OK April 29-May 1, 2011.  She noted on Saturday, April 30:  “Over 800 visitors now, with three hours to go…Not the thousands we were hoping for; it is a lovely day outside!  However, homes are being sold and the public are in awe!”  Later she reported that the “triple-wide has sold three times already and two are cash deals!”  And still later, “The triple wide sold five times Saturday.  Three were cash deals… and that home sells for $120k.”

Lots of happy traffic during the Public Days at the Great Southwest Home Show at the QuikTrip Center at Expo Square in Tulsa OK! Photo from Deanna Fields

 

“It’s been steady traffic:  312 on Friday, 936 on Saturday and 222 as of noon Sunday.”

Fields continues, “All the dealers are happy from the sales and prospects!  It’s raining and cold today so folks are coming in!  I just stopped a couple from Oklahoma City/Wellston.   They saw our classified ad.  Folks from all over the state have come… the majority of the homes sold were from our Oklahoma City dealers!   Everyone is happy!  Just enough traffic to keep everyone busy in the houses! # #

Deanna Fields, Executive Director of the Manufactured Housing Association of Oklahoma (MHAO), 1/800-234-MHAO or Deanna Fields <mhao@mhao.org>

The IBISWorld Controversy and the Manufactured Housing Industry

April 13th, 2011 3 comments

Exclusive MHMSM.com Industry In Focus Report

The March 2011 IBISWorld report that cited manufactured home dealers as a ‘dying industry’ has made news inside and outside of the manufactured housing industry. MHMSM.com has contacted a variety of Industry leaders and personalities from coast to coast to get their comments. On-the-record comments have included national association leaders, as well as professionals in factory-built housing from the manufacturing, retail, communities and lending sectors.

Messages, comments and calls to MHMSM.com from manufactured home industry professionals dribbled in at first, and then gained in volume as publications such as The Atlantic and Business Insider covered the IBISWorld report. As an example of mainstream media coverage, a TV station in Houston reportedly called a regional firm to interview them about the developing IBISWorld story.

Derek Thompson, associate editor at The Atlantic, penned a commentary that included these words:

“At the center of a perfect storm of boomer burnout, a brutal recession,
and a rapidly changing industry, the mobile home retail market
could be the worst industry in America. Here’s why.”

Photo from The Atlantic
Photo from The Atlantic

“If I asked you to name America’s least fortunate industry, your mind might go to record stores, obliterated by on-demand apps; or photofinishers, left in the cold as digital cameras turn Americans into our own photo editors; or fabric makers, where business is booming … in Shenzhen, China.

“But when it comes to unlucky industries, it’s manufactured home (aka mobile home) retailers who really hit the trifecta. First they missed out on the housing boom. Then they felt the gut-punch of the recession. Now they might yet miss out on the recovery. That makes them America’s fastest dying industry, according to a new report from IBISWorld.”

Paul Bradley with Resident Owned Communities USA (ROC USA) was one of the first in the manufactured housing world’s leadership to publicly respond to this IBISWorld report. Bradley wrote a feature article for MHMSM.com that analyzed the IBISWorld report. Quoting from Bradley’s analysis:

“The (IBISWorld) report states ‘demand is dwindling’ and ‘sales are stagnant because the industry is not innovating, and that sales are likely to continue falling in the coming years.’ They go on to say, ‘Manufacturers have made cosmetics changes to manufactured homes, but they have not been significant enough to alter their life cycle stage.’ The report puts MH retailers in the ‘Industry stagnation’ category of declining industries.

“Are you kidding me? These are ‘deeply researched answers’?

“First, the headline clearly comes from their marketing division as a means of grabbing headlines. The research is not about a dying industry but a declining industry segment – one of two long-standing distribution channels in the business.

“With MH shipments in 2010 at 50,000 or 20 percent of 2000 levels, it’s not news that retailer revenues over that period declined. On that data, I’m surprised establishments are not down more than 56 percent. It suggests that the segment has excess capacity and additional closings are likely.

“Most surprising to me is laying the blame at the feet of manufacturers on the issue of design! From a ground-level market vantage point, that’s misplaced.

“The industry’s great declines came about as a result of, first, an industry-created chattel collapse where the seeds were sown in run-up to the 373,000 shipments in 1998. The collapse, and the repossession overhang which followed, began the decline like a skilled boxer’s well-placed left jab.

“The right overhand came next in the form of aggressive sub-prime and predatory lenders in the site-built market. In that run-up, traditional MH buyers – who were harder to finance for MH as a result of the chattel collapse – were lost to site-built housing in an eerily familiar boom market.

“Dazed by the right hand blow to our collective heads, the left to the body that has people reeling now is the regulatory reaction – the SAFE act, etc. – to the clearly consumer-eating lending practices of the last decade.

“The results of this three punch combination are declines of the magnitude widely reported and felt, and like a good whack, the pain lasts a while.

“Innovation in housing design, however, is not the industry’s chief failing.

“For those of us in the community market segment, in fact, innovation in new homes is a small issue – not a non-issue but a mere shadow of the aforementioned home financing issue. In fact, we are seeing demand for replacement and in-fill homes but only where we are able to arrange decent home financing. People want more efficient homes and the cost savings with new EnergyStar homes can be dramatic based on buyers with whom I’ve spoken.”

(Editor’s Note: The complete analysis by Paul Bradley can be found at this link.)

Other commentary in the form of articles proposed for publication, private and public comments followed. Thayer Long at the Manufactured Housing Institute issued this email as part of his response:

“State Execs & MHI Board:

“A very well articulated response to the IBIS report from last week by Paul Bradley which was just posted on www.MHMSM.com.

“I’d also just add that the sentiment at the Tunica Show, the Louisville Show, and the expected strong turnout at the Congress & Expo and the Tulsa Show and York Show later this month certainly don’t indicate this industry is going anywhere.

“Tony/Paul – I hope you don’t mind me sharing. We’ll see you in Las Vegas. Thanks for your support.

“Thanks-

“Thayer”

MHMSM.com spoke with Danny Ghorbani at the Manufactured Housing Association for Regulatory Reform (MHARR) and to Thayer Long at the Manufactured Housing Institute.

Danny Ghorbani stated in a telephone interview that his comments were not the official position of MHARR, but represented his own views on the IBISWorld report and related.

Ghorbani stressed that the IBISWorld report represented the “failure” of “the post-production sector of the Industry” [meaning, MHI] in “serving that segment of its membership.”

The MHARR official then referenced two previously published documents that do represent MHARR’s official position, which were previously published on MHMSM.com in August and October 2010. These MHARR Viewpoint articles called for ‘the post-production segments’ of the manufactured housing industry to form their own national association; a thinly veiled vote of no-confidence from MHARR towards MHI.

MHMSM.com spoke extensively with Thayer Long at the Manufactured Housing Institute (MHI). The typically soft-spoken Long was quick to respond.

Long was at times tongue-in-cheek, at other points direct in his comments about the IBISWorld report and Ghorbani’s often pointed comments on the matter. It should be stressed that Long’s comments, which follow, should be viewed as his own, and not necessarily reflective of the official view of MHI.

In an exclusive interview with MHMSM.com, Long shared the following thoughts:

Thayer Long:
“If it is a dying industry, then ok, then I guess I quit! And if Danny wants to blame it on us [MHI], okay, what else is new? … I am still struggling to figure out what he (Danny Ghorbani) is doing right now. Name one thing that he has accomplished … in the past three years? What has he accomplished…? I would love for you to think about that and get back to me. What has he accomplished? We [MHI] win and lose some battles. But at least we try. We have accomplished some things. Except, except, except… [MHARR]…nothing….

READ THE FULL INDUSTRY IN FOCUS REPORT

IBIS Report and the Manufactured Housing Retailer’s Future

April 10th, 2011 1 comment

Having spent 40 years in the industry, I have experienced every down cycle the industry has had since they started keeping records in 1961. After a peak nationally of almost 600,000 units in 1973, we suffered a dramatic plunge that was felt the most in the Southeast where I was located at the time. I relocated to Oklahoma in the 1980s and endured a drop in shipments from about 13,000 homes in 1983 to about 350 or so in 1988. Shipments again took a hit in the early 1990s as lending became almost nonexistent. The current down cycle began after a peak of nearly 373,000 shipments nationally in 1998 and has fallen below 50,000, which is lower than when the record keeping began in 1961. 

I certainly do not have the credentials to refute the recent IBIS report that labeled the manufactured housing industry as being on the verge of extinction. I also approach the subject with some trepidation as I majored in Marketing and I am keenly aware that most of the buggy whip manufacturers are no longer in business. In order to accept the results of the report from a market demand stand point, we would have to arrive at the conclusion that the demand for new homes priced below $70-100 a square foot will become no longer significant. We would also have to accept that this disappearance of market demand will occur as down payment requirements are poised to increase to perhaps 20% while terms may be reduced to as low as 15 years. In the face of enormous down payment requirements and shortened terms for repayment, suddenly prospective home buyers are going pass over housing opportunities in the $20 to $40 per square foot category? 

We would also have to accept that demand for homes that can be titled without real estate will disappear. Suddenly no one will want to allow their kids or other family members to place a home on family land without encumbering the real property?

We would finally have to believe that no one living in a manufactured home community would have an interest in upgrading their home, and the communities would have no potential for new residents. 

I read Paul Bradley’s feature article in response to the IBIS report here in MHMSM.com. I share Paul’s optimism that a possible result of increased requirements for site-built housing may shift more buyers to the manufactured housing market.

We have had to endure ongoing discrimination of the allocation of lending resources even when the Duty to Serve language is rewritten to specifically cite manufactured housing. As a retailer, I do not see any shortage of willing buyers for the homes that we build. We do experience a series of problems related to recent acts foisted upon us by the federal government. 

I observed in a LinkedIn comment earlier that our industry trade organization, the Manufactured Housing Institute (MHI) is constricted by the composition of their membership from assuming the role of a being a strong advocate for individual industry divisions. Retailers would have to form an independent organization dedicated to retailers in order to have someone in Washington, DC truly going to bat on all the issues that retailers face. I don’t see the numbers or the money being there for that to happen. In the mean time, we accept MHI with its wrinkles, knowing that the diversity of the membership does not allow for the extreme dedication to our needs that we would like to have. 

The Manufactured Housing Association for Regulation and Reform (MHARR) serves in that capacity for independent manufacturers and manufacturers need that dedicated representation as they have many issues affecting them that are completely unknown to other industry segments. 

Another theory being floated by some industry members is that a conspiracy is in play to undermine the effectiveness that the HUD Code provides and bring about its demise. If that theory is true and if the conspirators have enough influence, market demand will not matter. I am not smart enough to know whether or not a conspiracy exists to destroy our industry. I would say that if it does exist, it is experiencing reasonable success. 

We do face very difficult times as an industry. I have quipped on more than one occasion in the past few years that “absence of stress is death…and I am very much alive.”

As an industry, we have taken a beating for the last twelve years. Some of that has been our own doing and some from lack of fairness by government actions or inactions. If a conspiracy does in fact exist, I am too small a player to have much impact on stopping it. Absent a conspiracy, our company plans to move forward and provide our clients with great values in housing and outstanding customer service. Hopefully our industry can see itself through the balance of any remaining down turn and see an increase in shipments in the years ahead. 

I was privileged to be invited to return to Georgia last summer to speak at the industry’s annual state convention. Given my 40 years in the industry, I was able to reflect back to 20% rates with no less than 10% down and no ability to finance land or improvements. I titled my presentation after Charles Dickens’ A Tale of Two Cities: “It was the best of times, it was the worst of times….”

And indeed it is. # #

by Doug Gorman

Doug Gorman owns Home-Mart in Tulsa OK, and is perhaps the most award wining retailer in the U.S. today.  He has served the Industry on the state and national levels, including as Show Chairman for the Great Southwest Home Show in Tulsa.  You can read his Cup of Cocoa with Doug Gorman at this Link. Contact Doug at doug@homemart.us

The Death of an Industry (or not)

April 8th, 2011 12 comments

 According to IBISWorld, a respected economic, demographic and government research company, Manufactured Home Dealers are one of the top 10 key industries that are dying in the United States. In their special report dated March 2011, over 700 industries were researched. The report stated that there are life cycles that industries go through, which are growth, maturity, and decline, and that even in a recovery declining industries will continue to underperform.

Of those identified as the top ten, Manufactured Home Dealers ranked 3rd in revenue fall off, declining 73.7% from 2000 to 2010, only behind apparel manufacturing at 77.1% and Record stores at 76.3%. Projections from 2010 to 2016 propel Manufactured Home Dealers to number 1 on the list, projecting a further decline of 62%, with Record Stores and Photofinishing a distant 2nd and 3rd at 39.7% and 39.1%.

Evaluating these Industries based on number of establishments, Manufactured Home Dealers had 3,968 in 2010. From 2000 to 2010, Manufactured Home establishments declined 56.7%, ranking 4th on the list. The forecast from 2010 to 2016 places Manufactured Home Dealers at the top of the list again with a projected decline of an additional 58.7%, with Video postproduction services trailing at 37.8% and photofinishing at 33.3%. If this prediction holds true, less than 1,700 Manufactured home establishments will remain by 2016!

The report singles out the Manufactured Home Dealer’s demise based on lack of product change, stating manufacturers have only made cosmetic changes and these changes have not been significant enough to lengthen the life cycle. This industry stagnation doesn’t delegate all players to extinction though. Those that focus on niche markets and dominate the markets of where the competition has diminished could gather some profits.

More importantly, how will manufacturer’s respond with product evolution that buyers, lenders, and appraisers will support? The Manufactured Home Dealer network has historically been a successful channel of distribution for manufacturers. Without it, sales numbers will continue to dwindle and more manufacturing facilities will close. There are thousands of capable career professionals working at these Dealerships. Product innovation and development could resuscitate the patient and stabilize an industry that, by the opinion of those that report to business decision makers, is a dying breed. Does this new widget rise from the ashes as a manufactured home? What is that innovation, that paradigm in factory-built housing that will wake up the giant searching for evolution? We have an idea, now will the industry embrace it? What ideas do you have to advance the industry’s cause?

By Otis Orsburn
hybridCore Homes

Otis is 40+ year veteran of the factory-built housing industry and is Vice President of hybridCore Homes, an innovative startup company offering site built homes with factory built cores. He can be reached at 707-523-3673 x 109, email: otis@hybridcorehomes.com. The company website is www.hybridcorehomes.com

George Allen Forecasts Manufactured Housing Industry Change and Future

April 6th, 2011 No comments

Part IV: Manufactured Housing Industry Change and Looking Forward

Editor’s Note: This is the fourth of a four-part series of the exclusive interview George F. Allen gave MHMSM.com Industry in Focus Reporter Matthew J. Silver.

MHMSM: What have been the major changes in the industry you have witnessed in your 25+ years in the business? 

GFA: We’ve covered some of it. But it goes back to some of the trends, mainly the consolidation trend. But you have to understand, before 1990 there was not even a dearth of knowledge about operating statistics, or occupancy percentages, or any kind of numbers – it just did not exist. And the prominent players at the time did not want it to exist. They may not say that, but it’s true.

When I hung out my shingle as a consultant, I thought of what kind of statistics would be helpful to the industry. But my detractors were the very people I was trying to help. The attitude back in the 90s was, “Why document this information, and publicize it; it’s only going to attract investors.” People are only going to want to compete for this limited number of properties. It wasn’t until Sam Zell took MHCs public, and the Wall Street analysts asked, “What’s your occupancy, what’s your operating expense ratios?” Basically, what the companies claimed to do did not make the Wall Street guys happy because they had no norms to compare them to.

Then the major guys came to me because they wanted to go public, and started supporting me as an independent third-party researcher and writer. That changed the whole landscape. Other investors started showing up, and that made it a whole different ball game.

Some of that same attitude exists today, and it works in two ways:

1. I guarantee you in the next few months, I will get calls from people who want to know the numbers in the Allen Report, but they are the same people who refused to give me numbers when I was putting it together.

2. The other is, there are still areas that are totally unexplored. How much do you pay a community manager? Is it based on the size of the community? What’s the nature of the manager’s duties? Nobody wants to share. We’ve tried several times through MHI to survey these 500 portfolio people at national meetings, and no one wants to participate. They don’t want to reveal what they are paying, and they don’t want their managers to hear what other people are paying their managers. We are notoriously low pay for what we require. But they don’t participate in the HR surveys that they claim to want.

MHMSM: What are you going to do after you semi-retire this year?

GFA: I have a number of personal and family projects I want to be engaged in and enjoy. Not that I don’t enjoy what I’m doing now. The problem is I’m so passionate about the industry that it’s hard for me to pigeonhole my time to enjoy these other areas. I don’t plan to disappear entirely.

MHMSM: Do you have other speakers lined up for the International Roundtable later this year? Are you locked in on a location for this year’s Roundtable?

GFA: I’m working on that right now. I’m working on my speaker list and the location. Sept. 14-16 is what I’m targeting now. I always try to come up with some sort of a theme. I think it’s going to be, “The Past, Present, and Future of Landlease Communities.” I normally have one or two keynote speakers. But this time, if the three different entities I’m in negotiations with right now to sell my report, step up to the plate and buy sections of what I’m doing, they will come together at the Roundtable. They are looking at my Report from three different perspectives. I’m not going to identify them, but one is a national not-for-profit that’s looking at using certain things I do to continue to serve the portfolio owners from coast to coast. That’s the big picture. The second group is a for-profit that wants to serve the 85 percent of the small ‘mom and pop’s’ across the country. The third part of the puzzle could very well be a first time ever academic presence that wants to better serve the research and statistic gathering and publication requirements of both the manufactured housing industry and the land lease community asset class. I’m in discussion with all three of these entities.

It’s not just the report they’re looking at – it’s my newsletter, my database, various other reports I do. I think they could pick up what I’m doing and move ahead in their specialty areas. Nothing would please me more. And I think the three organizations could do a better job than just one person. That’s my cautiously optimistic view of what I would like to be able to market at the Roundtable this fall as being a turning point in the history of the asset class.

Thirty years ago, none of this existed. Today it exists in a sole proprietor fashion, but going forward, in 2012, it could be more encompassing, more efficient, and better serve all the community owners across the country. So, the plan is to bring these three to the Roundtable. Two of them have been there before. And even if we weren’t negotiating now, they would be there anyhow, but representing only much smaller parts of what they have been doing up to now. What I’m hoping is that the Roundtable might represent the coming together of all three of these entities, giving them the opportunity from the bully platform to say, “This is what we’re picking up from where George is leaving off.” The only thing I might have a problem with, is all three want me to continue to be involved. That could be a greater time commitment than I have now.

MHMSM: Do you think the industry as a whole is on an upswing, or will it just maintain this somewhat tepid – bumping bottom – atmosphere, with new home shipments hovering around the 50,000 home mark annually?

GFA: The school book answer is, “Of course I’m looking for a bright future for manufactured housing.” But the truth of the matter is, there won’t be a bright future for that half of the industry until third-party chattel financing returns. If the retailer could take the buyer by the hand and lead them to a Green Tree, say, and tell the customer that they can have a 650 score and we will underwrite the loan for your new home. Until that happens, and it’s not even on the horizon yet, we will be at 50,000 homes a year.

But I call it the ‘double dual’ industry. You have the factory and distribution side of the house that’s on the ropes. Then you have the real estate investment and development side of the house, the communities, smiling all the way to the bank. Yes, we have to take risks to make it work, but it’s a seller’s market. This is the only type of real estate investment you can be involved in that, if you are willing to take an extra risk, you can add value by reselling your homes on site and carrying your own mortgages.

MHMSM: If you had to do it over again, what might you do differently?

GFA: That’s a broad question. I could have been a much wealthier person concentrating on buying and selling more properties, than concentrating my energies on creating and developing all the resources I am now selling. Even if I get my dream price for this, I will have made far less than if I had bought and sold manufactured home communities as an investment. I have been very happy on the consulting side. It’s been more personally fulfilling.

MHMSM: Anything you want to add?

GFA: What is not widely known is that through most of that 30-year period of time I have been involved in the industry, there have been individuals involved with portfolios of manufactured home communities who have contributed significant financial support to what I’ve accomplished, who have by choice remained unidentified to this day. I feel they deserve a lot of credit that they’ve not received, and probably will never receive, at their preference. I’m happy with what I’ve accomplished; I just regret that they’re unsung heroes, to whom individuals and companies who own a land lease community in this country and in Canada owe this debt of gratitude, but will never be able to express it. It bothers me, because they made it possible for me to do what I am doing, with money and otherwise. I keep the communities as a separate business, but it could never have supported me in doing what the individuals did quietly, behind the scenes. That may change later in the summer. Stay tuned.

MHMSM: Thank you for your time.

Reporters note: GFA could have retired 20 years ago, but found the consulting work more satisfying than even a zillion dollars. # #

Click here to read Part I

Click here to read Part II

Click here to read Part III

Tunica 2011 Summary

April 4th, 2011 No comments

I have to admit that originally I wasn’t planning on attending Tunica this year, but I got an advance scouting report from Rob Greenlee at Ascot Draperies and he said it was looking like a show worth seeing. He was right – after touring the homes and talking to a lot of the attendees, it really felt like Tunica could be a turning point for our industry.

Tunica has always been a special show for me – 9 years ago I met the Patriot Homes team there for the first time. It was great being able to see and catch up with so many previous Patriot patrons and team members again this year -their staying power in the industry shows the strength that they always had… I even saw someone wearing a Patriot jacket – fond memories! There are a lot of people who have a lot more years experience in our industry than I do, and with the downturn in the housing market I’ve always been afraid we aren’t going to have enough new faces and younger viewpoints to keep us moving forward. My fears were unfounded – I met some exceptional individuals that gave me great hope for the future.

As luck would have it I was seated on the plane next to Cory Chappell of Basic Components, Inc. I’ve met him before, but we had a great opportunity to talk about the future of our industry and our companies. What a bright future Basic Components has! It was really refreshing to hear about a company that understood new marketing tactics, social media, and had an idea of what we needed to do to make our homes attractive to today’s buyers. You heard it here – Basic Components is a company to watch and learn from.

Tunica Crowd

The first day of the show was chilly, but it gave us the chance to walk the homes without the crowds that you usually have to deal with. With there being as many homes displayed as last year, this gave me the chance to get my photography done and talk to the sales teams without taking them away from as many buyers. It also enticed buyers to spend more time in the exhibitor booths which worked out well for everyone. If you didn’t visit the Syntec Industries booth to see the latest BeauFlor patterns you really missed out. Did you know that our industry was the first to use this product in the US? Syntec’s president Bill Watters attended the show which showed their commitment to our industry.

I’m excited about the New Champion! Champion Homes of Tennessee had some beautiful homes and showed off some new floor plans that were well thought out and designed. Roberto Kritzer, VP of Design for Champion Homes was at the show and it was great to hear how he came up with the innovations shown in these homes. Sales Manager Mike Barnett of Champion Homes of Tennessee was very optimistic about their traffic and sales at the show, and I have to say whenever I tried to take photos of their homes they were full of potential buyers. That’s a sign of great homes and a great show. The next five photos are of Champion Homes:

Champion Homes

Champion Homes

Champion Homes

Champion Homes

Champion Homes

When I walked the Fleetwood Homes models, I loved meeting Gary Rice Jr., the account sales manager for Fleetwood Homes in Tennessee. Gary is what we need more of – a person who loves our industry and loves working for Fleetwood. His Dad is also in the business and has been for many years, and this insight makes Gary a great representative for Fleetwood.

Sunshine Homes really stepped up this year and their homes were beautiful. I loved their floor plans, and they showed homes that any new homeowner would be proud to live in. River Birch seemed to be a retailer favorite – when I was in their homes people kept coming in singing their praises. Deimo Payne – the general manager was such a great spokesperson for the homes – I could see why their customers and potential customers were so loyal. The next two photos are of Sunshine Homes:

Sunshine Homes

Sunshine Homes

Deer Valley always brings elegant, well built homes to the show, and this year was no exception. Chet Murphree, VP and sales manager was a delight and did a wonderful job explaining to me what makes their homes so unique. The next photo is of a Deer Valley home:

Deer Valley Homes

And that bring us to the Clayton family of home builders. Once again they stole the show. I appreciate the fact that Clayton understands how important this show is, and doesn’t hold back. I also appreciate the fact that when I was walking the show, Kevin Clayton was as well – that to me shows Clayton is supporting the efforts of the Clayton companies that showed here, as Champion did by bringing the people they did as well. The national companies that represented so well here make me believe that Tunica will continue to be an important show in the years to come. The next three photos are of Clayton homes:

Clayton Homes

Clayton Homes

Clayton Homes

I guess we would be considered competitors, but I loved the homes that Derral Dobbs designed for Southern Energy. And what I loved about Derral is how he understood that if our industry thrives, we all will. In the next photo, the gentleman is Derral Dobbs: Designer for Energy Homes:

Derral Dobbs of Energy Homes

The Montana and Hampton homes were crowd favorites – Derral used color and great architectural details to make these homes memorable. The floor plan of the Montana was captivating – it was one of the reasons I decided to attend Tunica. The exterior and floor plan looked so unique from the outside I was curious to see what the floor plan would be in the inside. I loved the spoke effect they achieved with the beamed ceiling and how well the home was laid out. The colors were warm and inviting, but different from the other homes I had toured. The Montana – built by Energy Homes:

The Montana - Built by Energy Homes

The Montana - Built by Energy Homes

The Montana - Built by Energy Homes

The Montana - Built by Energy Homes

The Hampton boasted a refreshing use of color that just made you smile the moment you walked in the front door. It was the perfect beach house inside and out, and the porch was the right width so you could actually fit furniture on it. The next six photos are of The Hampton – built by Energy Homes:

The Hampton: Built by Energy Homes

The Hampton: Built by Energy Homes

The Hampton: Built by Energy Homes

The Hampton: Built by Energy Homes

The Hampton: Built by Energy Homes

The Hampton: Built by Energy Homes

The homes at Tunica this year were thoughtful – in every home you could see attention to detail that might have been missing in years past, and there wasn’t one home that I wouldn’t be proud to show and sell. With the Great Southwest Show just around the corner in Tulsa April 28th to May 1 and the PMHA’s HOMExpo in Pennsylvania right after that, I’m looking forward to this new momentum we have continuing and growing in the months to come.

by Lifestylist® Suzanne Felber – The Home Idea Factory

Suzanne is a member of MH SPIRIT, MHMSM.com’s team of SPeakers Instructors Resources Inspiration Training that can help you clarify YOUR design needs. Visit mhspeakertrainer.org for more information.

Photos by Lisa Stewart – Lisa Stewart Photography ##

Exclusive Interview with George Allen on Key MHC and Industry Issues

March 29th, 2011 No comments

Part III: The Future of Manufactured Home Communities (MHCs)

Editor’s Note: This is the third of a four-part series of the exclusive interview George F. Allen gave MHMSM.com Industry in Focus Reporter Matthew J. Silver.

MHMSM: What do you envision as the future of MHCs? Expanding as the boomers retire? Growing as a result of predictions made by Dr. Funk at the Roundtable last year? Or not really changing that much?

George F. Allen (GFA): I don’t expect to see the asset class change all that much. What I have seen in my experience, and what continues to this day, is consolidation. In the 1970s and 80s, the communities were individually owned. That’s why there were only 25 on that original list in 1987 and there are potentially 500 today.

In the 1980s, the first wave of consolidators was comprised mainly of syndicators. Real estate investors would get a group of doctors, say, to put up money to buy a community as limited partners under their control. Some of those portfolios exist to this day.

The second wave in the 1990s was the REIT (real estate investment trust) wave. On page 22 of the Allen Report, you can see how Equity Property Lifestyles Incorporated (ELS), which is Sam Zell’s, went from owning 28,407 homesites in 1994 to 111,000 last year.

Sun communities started out as a REIT in 1994 with 13,500 homesites, and now has 47,579, less than half the size as Sam Zell’s. In terms of overall sites, the number has basically doubled since 1994, from 88,000 to 165,000.

The third wave that started eight or nine years ago was the equity wave. Some of the portfolio guys have gone out and found deep pockets, mainly pension funds, to form new portfolios. Two of the most well-known ones have been Hometown America and Green Courte Partners.

Another ingredient in the mix was that back in the 1980s, you could have an adult section of your community, and you could have a family section. The family section was a little tougher to run. Around 1990, the government stepped in and said that was discrimination; that you could not segregate like that in one community. You can have an all-adult community or an all-family community. That was a trend, you could be all mixed, but you could not segregate.

Another trend was the beginning of professional property management. Today many properties are overseen by Certified Property Manager members of the Institute of Real Estate Management. It’s like what a CPA is to accounting, and I’m proud to be one of them. There are about 200 CPMs who claim affinity to the asset class. The most aggressive property management system is the Manufactured Housing Manager (MHM) program that I started about eight years ago to provide a one-day training certification experience for owners and operators of properties to enhance professionalism. Today there are a thousand MHMs across the United States. A third one is the ACM, Accredited Community Manager, which is controlled by the MHEI, the Manufactured Housing Educational Institute, which is an arm of MHI (Manufactured Housing Institute).

Another trend has been the growth of Recreational Vehicle (RV) sites, which have become a major part of the mix. If you look at page 22, you will see the footnote that says over half of the ELS homesites are actually RV sites, nearly 68,000 out of 112,800 in 2008.

Another trend is a whole new business model of manufactured housing sales on site, self financed. Twenty years ago, there were 20 retailers in Indianapolis who sold manufactured homes. They would routinely send their customers to the community on the side of town where they wanted to live. If they sent these buyers to community owners like me, I would spiff them with a check for $500. But that’s all changed. Now there’s only two or three retailers in Indianapolis. That’s because the chattel finance went away. Those guys can sell homes; there’s just no way to finance them. Now, the only finance guys in town are those of us who own communities with excess cash flow and are becoming the bankers. Manufactured homes, new and used, on site, are self-financed. It can be a very lucrative business. I can also send people to the bank for financing, but that’s the exception.

MHMSM: Is it necessary for HUD Code home manufacturers to survive in order for land lease communities to continue to be viable as affordable manufactured housing locations?

GFA: That’s a loaded question. The school book answer to that question is ‘of course!’ You want to think gratuitously of the segment of the industry that brought us to where we are today.

But the honest answer is, as much as I want to see them continue – in the first place, I don’t think it’s completely necessary for them to continue. And number two, I’m not too sure the decisions made today by some manufacturers are going to keep them continuing. No longer are there just mobile homes pre-1976 HUD, and manufactured homes post-1976 HUD.

My interest is in land lease communities; that’s what I write about, not manufactured home communities. There are at least four other types of homes: There’s modular homes, there’s recreational vehicles, park models, and in a few instances, stick-built homes that look like a manufactured home.

1. I could take you to areas in the country where there are two-story, huge modular homes, sitting on leased sites, mostly in high value areas like outside Washington, D.C., where it would cost so much more to own that piece of ground.
2. Then there are Park Models, no larger than 400 square feet, because above that they would have to meet HUD codes. Basically it’s a one bedroom efficiency apartment on wheels. They are also called mini-flats. There are entire properties in some Sun Belt areas that contain nothing but Park Model homes. Some people live there year round, for some it’s a second home.
3. Then there are RVs. I have some people on my property who have very large RVs. They go to Rio Grande, Texas, for the winter, and come back to Illinois for spring, summer and fall.
4. The last category is stick-built homes, and that happens only in Florida after hurricanes. It’s sometimes cheaper to build a home than to have one manufactured because they have to beef them up so much with 2 x 6 wall studs, and so on.

The point being, if you’ve got six different types of housing in these communities, there’s no point in calling them manufactured home communities. Call them what they are: they’re land lease communities. That’s what’s happening as we’re going forward; it’s a very subtle difference.

MHMSM: A fair amount of news material we cover focuses on modular housing, especially the so-called energy efficient ‘green’ homes. Do you think this will be a large part of the land lease community market in the future?

GFA: No, not in the near future. They cost so much more that it flies in the face of the affordability issue of manufactured housing and land lease communities. I think maybe it could happen in the areas around Washington, D.C. or Chicago, and people want to go with the latest fashion, like LEED or green. I don’t see it being a major issue.

Next week: the Conclusion – Part IV: Manufactured Housing Industry Change and Looking Forward
Click here to read Part I
Click here to read Part II

FACT CHECK on Elizabeth Warren’s Television Statements

March 27th, 2011 No comments

While a number of community owners and retailers were gathered in Chicago on Tuesday, March 22nd discussing among other things, Liz Warren, Peggy Twohig, and the impact that the CFPB will have on the manufactured housing industry, Liz Warren was appearing on CNBC claiming that she is not as powerful as various groups and individuals are claiming. In disputing those allegations, she made a number of incorrect statements. Here is some information to correct those statements she made.

FALSE CLAIM: “This Agency is subject to other powerful restraints that no other agency is subject to. The first one on money is that this agency, unlike the other banking regulators, does not set its own budget. Its budget is set by the Fed.” – Elizabeth Warren, CNBC, March 22, 2011

TRUTH: The Director of the Consumer Financial Protection Bureau determines the budget of the Bureau. Section 1017 of the Dodd-Frank Act states, “Each year, beginning on the designated transfer date, and each quarter thereafter, the Board of Governors shall transfer to the Bureau from the combined earnings of the Federal Reserve System, the amount determined by the Director (emphasis added) to be reasonably necessary to carry out the authorities of the Bureau under Federal consumer law.”

The CFPB was designed by the Obama Administration and Democrats in Congress in a way that avoids Congressional oversight by providing for a mandatory transfer of funding from the Federal Reserve instead of subjecting it to the Congressional authorization and appropriations process. The amount required (10 percent of the Fed’s operating budget this year, 11 percent in 2012, and 12 percent in 2013, where it will stay fixed in perpetuity) essentially hands the CFPB $500 million. In addition, if $500 million is deemed insufficient, the Dodd-Frank Act authorizes the CFPB to seek appropriations of up to $200 million for a grand total of $700 million or more per year.

By comparison:

  • The CFTC had a budget of $169 million in 2010.
  • The SEC had a budget of approximately $900 million.
  • The FTC had a budget of less than $300 million in 2010.

FALSE CLAIM: “And second and the most surprising, from anywhere in government, is that the agency can be overturned by a group of other agencies.” – Elizabeth Warren, CNBC, March 22, 2011

TRUTH: All other Federal Agencies fall under the Congressional Review Act, which allows Congress to review rulemakings and from which the CFPB is exempt. The Financial Stability Oversight Council has the ability to review rulemaking by the CFPB, but must meet virtually impossible prerequisites in order to overturn any CFPB rulemaking. Among the standards the FSOC must meet to overturn a rule are:

  • Two-thirds of FSOC members must approve; and
  • The FSOC must find the rule endangers the stability of the entire financial system.
  • In addition, the FSOC has only 90 days to review and must consider any relevant information submitted by the relevant agency; and
  • A review petition must be filed within 10 days of publication in the Federal Register of the draft rule.

Voting Members of FSOC:

The Secretary of the Treasury
the Chairman of the Board of Governors of the Federal Reserve System
the Comptroller of the Currency
the Director of the Consumer Financial Protection Bureau
the Chairman of the Securities and Exchange Commission
the Chairperson of the Federal Deposit Insurance Corporation
the Chairperson of the Commodity Futures Trading Commission
the Director of the Federal Housing Finance Agency
the Chairman of the National Credit Union Administration Board, and
an independent member with insurance expertise that is appointed by the President and confirmed by the Senate for a six-year term

You can download some letters that every business in our industry should be putting on their letterhead, signing and mailing.

Ken Rishel
Rishel Consulting Group
kennethrishel@captivefinance.net

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Exclusive Interview with George Allen on Key MHC and Industry Issues

March 22nd, 2011 No comments

Part II:  The Allen Report on Manufactured Home Community Portfolio Operators: Then, Now and Tomorrow

Editor’s Note:  This is the second of a four-part series of the exclusive interview George F. Allen gave MHMSM.com Industry in Focus Reporter Matthew J. Silver.

MHMSM:  What is the difference between this year’s Allen Report and last year’s?

GFA:  A lot. It may have a lot to do with the fact I’m retiring and this may be the last one ever published. I may sell it, that remains to be seen, but I put everything in this one except the kitchen sink.  So this is the standard for years going forward. I’ve already marked mine up with things I should have put in here, but I didn’t think of at the time. But size wise, content wise, this year’s is much larger, and that’s because I wanted to set a high standard for going forward. This is the 22nd year.  The first year was a single page showing the 25 largest known mobile home park* owners based on Roulac Real Estate Consulting Group of Deloitte Haskins and Sells.  It shows spaces owned and parks owned. After I started doing my consulting work, I was coming up with my own list, and they stopped publishing theirs.  I have made it part of my business since.  Nine of the firms on that list are still in business today, and they are in my Allen Report.

MHMSM:  Besides Green Courte Partners, have there been any other changes in the data or statistics since the Allen Report was published?

GFA:  Green Courte bought several other properties right after the deadline, which would move them up the chart for next year, assuming someone takes this over.  A couple of years ago, they bought out a REIT (real estate investment trust) named Landlease and they asked to use that name because they like the way Landlease plays better than Green Courte Partners.  I can’t tell you any more than that without getting on thin ice.  Subsequent to this last Allen Report, they bought six communities with 1,857 homesites, which would have moved them from number nine to number seven in terms of the largest landlease community owner.  The company they bought them from did not respond to my request for information, and I suspect it’s because they did not want to be listed lower than in the past, so they preferred to not be listed at all.  There is one error in the Report because the company, J & H Asset PM, provided me with incorrect figures that put them at number 70 on the list of the largest community owners, when they should have been number 14.

MHMSM:  Why do you suppose you received only 137 responses out of 500 MHC portfolio operators you contact annually?

GFA:  I am sure there are many reasons why.  Some of them run like this.  First off, it is not a glamour investment.  If you go to a cocktail party and say you own part of the Hilton Hotel chain, it’s very different from saying you own part of five trailer parks.  It’s a very lucrative business, and some people don’t want you to know where they make their money.  Secondly, in my opinion, this asset class is a very secretive group.  Why tell the world this is a lucrative investment when that would only bring in more players you would have to contend with.  In addition, on my deadline for responding, I’m lucky if I have 50 responses to my questionnaire. I get on the phone and start calling and that’s how I got information for the other 87 questionnaires.  Why don’t they send them in?  Some of them say their secretary lost it.  But some of them know that this is the only time all year we will talk, and they want to know what’s going on in the rest of the country.  Some of them don’t want to come around to the front, because they know I will come around the back, and they will get a little information out of me.

MHMSM:  What are the new features in this year’s Report?

GFA:  On page nine, I have listed eight reasons to own communities.  That’s not been in there before. It’s like an insider’s list.

·    On page ten, I show Randy Rowe’s five point plan to save the manufacturing home industry.
·    On page 17, I list my acknowledgments, thanking people for their donations in putting out this report.  I had never asked people for support before, but this year I did.  On the list of the 137 responders, if there’s a dollar sign after their names, it shows they contributed to the report.
·    On page 23, I’ve listed the Five Action Areas agreed upon by the National State of the Asset Class (NSAC) in 2008 that continues to guide owners of mobile home park owners nationwide.  These are the five areas we want to concentrate on to make our business better.
·    All of the appendices from page 25 on are new features I’ve never published before.

In all the years past, I’ve put a price tag of $250. If someone called and asked about buying one, I would say it’s $250, or, you can have one for free if you subscribe to my newsletter that costs $134.95 a year.  Knowing this year’s was going to include more information, I put a hefty price tag on it of $450.  Have I sold any for $450?  No.  Do I expect to sell any for $450?  No.  I am testing the market.  If people call and want to buy it, I tell them I will sell it to them for $250 and I will throw in my yearly newsletter for free.  In other words, I have upped the ante from $134.95 last year to $250 this year.  In part, I am doing it for the people who will come after me, and so far it’s working like a charm. It’s been out only a month or two, and I’m getting one or two calls a day.

MHMSM:  Your Report is important to certain aspects of the industry, notably when it comes to issues such as financing and valuation.  Where might MHC owners turn if your Report is no longer available after your retirement?

GFA:  It is not my intent to see it not continue. I’m entertaining offers from two not-for-profits and one business right now, who want to buy it.  I would probably stay on as a consultant; I don’t want to walk away completely.  I will probably ease away because I want the Report to continue.  Currently there is no one else out there turning out credible researched information for the asset class.

MHMSM:  Why do you suppose no one else has done it? Did you realize there was a need and you filled it?

GFA:  Before I started, in 1978 I was managing apartments for a firm nearby, and after two years they called me into the office and told me they were taking away my apartments, and they had four trailer parks that were in the red, and they wanted me to turn them around and put them in the black.  I walked out of that office stunned and angry; I did not want to deal with what I saw as trailer trash.  I had returned recently from Vietnam, had two small children, and knew I needed to adjust my attitude or get a new job.  I eventually realized there were no mobile home park gurus out there, no books on the subject, and if I could transfer my knowledge of apartment management to mobile home parks, there were opportunities for me as an investor and as a consultant.  And that’s basically what happened.  Two years later, the properties sold; I managed them under the new owners for a while, then my wife and I decided to start our own business.  We managed all kinds of properties, focused on mobile home parks, and two years later bought our own park.  We sold it, made a very significant profit, at which point I could have retired – but I chose to start writing and consulting, and in 1988 wrote my first book on the business, and never looked back.  It’s been a very comfortable business.  Now it’s time to set that up in other people’s hands and take a different route.

*All terms used by GFA have been retained in this blog post.

Next week:  Part III:  The Future of Manufactured Housing Communities (MHCs)

Click here to read Part I: Are Manufactured Housing Communities (MHCs) a Good Investment? http://www.mhmsm.com/blogs/industryvoices/george-allen-sounds-off-in-exclusive-interview-on-key-mhc-and-industry-issues/

George Allen Sounds Off in Exclusive Interview on Key MHC and Industry Issues

March 15th, 2011 2 comments

Part I:  Are Manufactured Housing Communities (MHCs) a Good Investment?

Editor’s Note:  This is the first in a four-part series of the exclusive interview George F. Allen gave MHMSM.com Industry in Focus Reporter Matthew J. Silver.

MHMSM:  You’ve stated that an estimated 15 percent of all manufactured housing communities are in the hands of portfolio operators. What is your guesstimate of the total number of manufactured housing sites in the U.S.? Given this number, how many sites would be in the hands of portfolio operators and how many with independent ‘mom and pop’ owners?

George F. Allen (GFA):  The generally accepted number of manufactured home communities is 50,000. For several reasons we may never know the exact amount, mainly because that type of property is regulated in only about a dozen states. It goes back to the early days when bathrooms were not required to be in ‘trailers;’ therefore, if you were going to have a trailer park*, you would have to have a gang shower and a gang bathroom. The board of health would inspect to make sure these facilities existed for the general health of the public.

That is a law that’s been around for many years in these 12 states that’s never sunsetted [been taken off the books]. In other words, once they started these inspections, they didn’t want this source of revenue to dry up. But once manufactured homes started having bathrooms inside, the major need to inspect mobile homes* no longer existed.

The problem is, from state to state, the threshold, or what constitutes a mobile home park*, varies. It could be as few as three or four sites in Indiana, which is not really an investment size property, and a different threshold in Ohio or Illinois. So if you have a different baseline in every state, you are never going to know. And since 38 states don’t have a list of the communities, we’re never going to really know.

When I was writing my second textbook about the development, marketing and operation of manufactured home communities in 1992, I went to the state board of health to get their list of the 1100 manufactured home communities in Indiana. 

What I came up with was – and I compared it to other states – because of the extremely low number of sites that constituted a manufactured home community, 85 percent of the properties in most states were properties of 100 sites or smaller, with a few exceptions. And that’s important because those are referred to as ‘mom and pop’ operations, because they lack the economies of scale to be a really strong source of passive investment income. It’s not until you get to 150 or 200 sites or larger that the economies of scale will support a remote property management operation. The average size property in portfolios today is around 222 sites, because it takes that many to support a centrally located management operation. The exceptions I referred to earlier are Florida, Arizona and California, where the percentage is more like 78 percent, because there are a larger number of retirement properties in the Sunbelt states. So, of the remaining 15 percent in the other states, six and a half are over 200 sites. This remaining 15 percent is in the hands of 500 individuals, partnerships, and corporations.

According to the Allen Report, the average portfolio is estimated to be 24 properties for each player. Granted, you could have five little communities or one big 500 site community to get on my list. But at the other end of the spectrum is Sam Zell, who owns three or four hundred communities. He’s the biggest player in the world. When Buffett bought Clayton, he acquired 60 communities, but he owned them for only a couple of years and then sold them. They are now owned by a company called YES!  Any properties over 200 sites we call institutional or investment grade properties, because the return on the investment is so great, that’s what the big money goes after. The 100 to 200 site owners I call the young wealth builders. They want to play in this arena, and they are bigger than the ‘mom and pop’ operators, but they can’t compete in the same field as the Sam Zells of the world, so they content themselves with two properties, ideally in the same town, so they can have one management team look after them.

MHMSM:  You have a good idea of how many people it takes to manage and maintain a manufactured housing community (MHC). While it would certainly vary, based on the size of the community, based on your experience, from the community manager or owner, to maintenance, sales and support people who might work on an as-needed basis, what do you think a typical MHC employment would look like? Given this number, how many do you think are employed by MHCs nationwide when there are an estimated 50,000 MHCs in the U.S.?

GFA:  The answer to that is counter intuitive. If we were talking about apartment communities here, the more people living in the apartments, the larger the staff has to be. Statistics show there is a 60 percent turnover rate in apartments, which means you have to paint the rooms when someone moves out, clean the carpet, maintain the appliances and mechanical parts, have a leasing staff and maintenance. Plus you have to mow the grass. At an MHC, there’s only five to ten percent turnover every year. But people own their homes, they are responsible for taking care of everything in their house, inside and out, and they cut their own grass. That means a lot less staff. Proportionally, the larger a community gets, the fewer staff people necessary. I would say a 200 site community would require a full time manager, a part-time assistant, and one and a half guys working outside, mostly maintaining sites not occupied and policing the trash. It would take only half that many people to operate a 100 site community. I would estimate there are fewer than a thousand full time employees of manufactured housing communities.

MHMSM: How many people do you estimate live in MH Communities?

GFA:  Ask Thayer Long.

MHMSM:  How many vacancies do you estimate there are in MHCs?

GFA:  Just under ten percent vacancy.

MHMSM:  How difficult do you think it would be to mobilize these residents and employees of MHCs into following an agenda the “protects and promotes” regulations and laws that govern the purchasing, financing and overall well being of their communities?

GFA:  That’s a loaded question. It depends so much on whether or not they already have landlord-tenant legislation. In California and Florida, that bridge has already been crossed. But if you’re talking about the Midwest, the answer becomes more germane, because it depends on two things: How bad the abuses are by the landlords, and how intelligent, socially conscious and activist-oriented the tenants are in those properties. Those are two very subjective factors. Without an answer to those, I can’t give you an answer to your question.

MHMSM:  Some operators focus only on used and repossessed homes for their sales. Why is it important for community operators to sell new homes?

GFA:  Someone’s making an assumption. Some operators prefer to buy used and repossessed homes and I ‘m one of them. The reason is, there’s a greater margin for profit. If I can buy a slightly used home for five or ten thousand dollars, put in a couple of thousand dollars in new carpet, new appliances, and turn around and retail it for 18 or 20 thousand dollars, that’s a good return. Then I give the buyer terms they can afford so I make money on the interest and money on the ground rent as well. The main advantage to me of a new home is it upgrades the community. The biggest problem I have with buying new homes is, unless you buy a half dozen or a dozen at a time and get a significant discount on the price, you’re going to take a hit on the depreciation. It’s like an automobile. If it’s not attached to the ground, it loses its value instantly. We don’t like to talk about that in the industry, but that’s what happens. Over time, it will hold its value, and the community will look nice and be worth more. But the general trend is a new home will depreciate, because the homes are still considered ‘mobile.’

MHMSM:  What makes an MHC a good investment?

GFA:  Look at page nine of my Allen Report.

Number one is scarcity. There is no money available to develop new ones, there’s no money for third party financing for homes, and local planning commissions are beset by NIMBY – ‘not in my back yard.’
Stable occupancy. Thirty years ago you could back your pickup truck to your 12 x 40 factory-built home and move it out. Today it costs thousands to move your home from one side of town to the other.
Stability, competitive homesite rent.
Low operating expense.

Let me take you through an example. If you and I each had $75,000 to invest, we could either buy a 100 unit apartment building with that $150,000 or buy a three hundred homesite factory-built community. First of all, each one would return about the same amount of income. Secondly, 60 percent of the tenants in the apartment building won’t be there a year from now. In a landlease community, only ten percent of the residents will move in a typical year (five percent of the home). The consequences of people moving out of apartment communities is the manager has to repaint the unit, clean the carpets, service appliances, and advertise widely, to find and attract prospective tenants. Staff winds up working seven days a week. However, in a land lease community, when your occupancy rate reaches 90 percent or higher, it’s hardly necessary to advertise at all.

You may have to pick up some loose trash around a homesite, but the responsibility is a lot less. Now how does that translate into dollars? According to national averages, in an apartment community, 55 percent of all the rent that comes in has to go back out for operating expenses. Seven days a week, mowing the grass, extra maintenance guys painting the walls, cleaning the floors, advertising expense. If we leverage that apartment building and pay interest on the loan, 40 percent of that 45 percent left over goes for interest on the loan. That means we will split five cents of every dollar we take in. For the factory-built community, for every dollar we take in, 40 cents goes for operating expenses. That’s 15 cents more we make, and we don’t have to work seven days a week. But if we’re talking about the Sam Zells of the world who have 400 or 600 home site communities, that expense figure drops to about 20 cents. So if the 150 site community doubles to 300 sites, our expenses don’t really increase. So, on the bigger communities, if we have the same leverage of 40 percent, we would split 60 percent.

*Terms used by GFA.

Next week:  Part II:  The Allen Report on Manufactured Housing Community Portfolio Operators: Then, Now and Tomorrow #