Long Tooth Warren Buffett, Dick Klarchek and Mobile Home Parks

by Michael Barnabas

The expression 'long tooth' means someone who is older. Warren Buffett is 81, that qualifies. But does that keep him from being effective or listened to by investors or business men? Hardly. Age has not made Buffett any less effective, if anything, perhaps all that seasoning has made him more effective. No one needs to come to the defense of one of America's – and the world's - richest men. But what about Richard J. “Dick” Klarchek? What about many old mobile home parks from coast to coast? Long tooth as well, and those reviews are decidedly mixed.

It seems all-to-easy to pile onto someone like Dick Klarchek, who has been vilified in Chicago area newspapers when his manufactured housing community empire collapsed into bankruptcy. But some of those same newspapers sung his praises when he gave millions to Loyola University for their new Klarchek Information Commons. The society columns raved when he held his lavish million dollar plus wedding.

This column is not about defending Klarchek, he is very capable of doing so himself. What this column will do is point to an idea of Klarchek's; one that too many conversations over drinks at manufactured housing industry events missed completely.

Klarchek had a vision for updating older mobile home park, and it didn't ask for a dime of federal taxpayer money to do it.

Klarchek had some prime time parcels of real estate that were manufactured home communities (MHCs) in the Midwest. One common feature of his MHCs was that their routinely fine locations. These were often large, older properties. As such, they had hundreds of older mobile and manufactured homes in them.

The problem Klarchek faced is one that thousands of community owners still face today. It is perhaps one of the more serious issues that the Industry suffers from today. Namely, how do you modernize a long-tooth 'mobile home park?'

Klarchek's solution was bold. We won't look at the failures of the plan, because each of those failures could be successfully addressed. We won't look at his resident relations program (was there one?). What we will look at was what he tried to do to make for a rebirth of the communities that his now bankrupted firm once owned. Because elements of his plan had merit. The baby should not be tossed out with the bath water.

Based on the high site fees and high mortgage balances on the properties, Klarchek did the opposite of what many MHC owners do. He didn't fill sites with cheap used product that was re-furbished. He didn't go to an entry level factory and buy cheap product to place on vacant sites.

What Klarchek did was acquire perhaps the best new home product in his market area, Hi-Tech Housing's homes. He had floor-plans designed to fit his vacant sites. He then marketed those homes toe-to-toe against site builders and conventional real estate. He appealed to the clients who could afford those higher payments, and were arguably dollars ahead by buying in one of his MHCs than the far more expensive conventional construction in the same markets.

I heard that hundreds of mobile homes and older HUD Code homes were removed and those sites replaced with hundreds of new, gorgeous residential style manufactured homes with 9' flat ceilings, transom windows, purchased wood cabinetry and all finished drywall. Each of those hundreds of sales were at high prices, not give away prices.

While we can feel badly for residents, lenders, vendors, workers and those negatively impacted in the fall-out of any bankruptcy, let's not overlook the positive lessons to be learned, for those with eyes to see.

Thomas Edison was a failure 10,000 times. But each failure brought him closer to designing that incandescent light bulb that eventually brightened the lives of billions of people around the world. Dick Klarchek's business collapsed, for reasons known or speculated about. But let's not overlook a diamond in that debris.

Older mobile home parks – a.k.a. manufactured home communities – even in pricey markets – can and should be updated. They don't all have to be done the way Dick Klarchek tried to do it. But he demonstrated what was possible, without requiring federal subsidies. Community owners can take the good parts of this lesson, and put it to profitable use. ##

Michael Barnabas (MB) is a pen name for a multi-decades veteran of the manufactured housing industry. MB is not selling consulting services or any other products or services for that matter; he's a ranking executive working for a well known company in the Industry, and compensates the publisher for the privilege to pen columns like this one. As with all columns we publish, his opinions are his own, and may or may not reflect the views of MHProNews.com (MHMSM.com).