ELS & AMC to Acquire 74% of HA, & Letter ‘C’ HUD Code Mfrs.
Alphabet Soup Firms Acquire 74% of Landlease Communities
In Hometown America’s Portfolio!
Letter ‘C’ HUD Code Home Manufacturers Encouraged to
Rejuvenate Their Languid Industry!
Thanks for Making June 1st a Special Day for Me!
“I am writing to announce Hometown America has reached an agreement with Equity LifeStyle Properties (‘ELS’) to sell 76 communities…We are scheduled to close on the sale of the first 39 communities on July 1, with the balance of the communities expected to close before the end of November.
As you are aware, we are also scheduled to close on the sale of 16 communities to AMC over this same time period. After the sale of the ELS and AMC portfolios, Hometown will be a much smaller company with 32 remaining communities.” Rich Cline (lightly edited. GFA)
So the company announcement, dated May 31, 2011, reads. But what doesn’t the communiqué tell us?
• ELS, Inc., is acquiring a portfolio of 76 landlease communities containing 31,167 rental homesites on approximately 6,500 acres in 16 states (primarily in Florida and the northeastern region of the U.S., and “certain manufactured homes and loans secured by manufactured homes located at the Hometown Properties…for a stated purchase price of $1.43 billion.”…at an estimated 6.7% cap rate ‘assuming the acquisition was completed on 1 January 2010.’ (That’s the right date. Think about it…) Extracted from an ELS, Inc. press release cited in E – Trade news.
• Previous bullet point news prompted these observations and calculations from a fellow landlease community portfolio owner/operator who’s pretty good with numbers. “The $1.43 billion works out to about $45,000 per rental homesite. Wonder how many of those are vacant? Apparently there are manufactured homes included in the deal as well. Even if as many as 25% of those sites were occupied by homes bought for $20,000. apiece, the per site cost of this deal is still almost $41,000. In addition, the deal appears to be funded by nothing more than debt and the sale of stock, with most of the debt maturing in six years. Good luck ELS!”
• ELS, Inc. property portfolio grows in size, from approximately 307 landlease & RV communities, as cited in the 22nd annual ALLEN REPORT @ 1 January 2011, to approximately 383 properties. ‘Approximately’, as a few properties are almost always ‘in play’, either being acquired or sold during the normal course of business. No change in ranking, however, as ELS, Inc., has long been identified as largest owner/operator of this income – producing property type in the world!
• Hometown America, once the two portfolio transactions are ‘closed’, will drop from 124 landlease communities (despite showing 127 on aforementioned 22nd ALLEN REPORT) to 32. Depending on the actual ‘rental homesite count’ of the 32 retained properties, this could conceivably drop the firm from its’ #7 ranking, down to somewhere in the mid – twenties. Word has it Rich Cline and two senior execs will continue to manage the landlease community portfolio for the Pacific Northwest pension fund owner.
• AMC is the abbreviated name of the new firm to manage 14 ‘other landlease communities’ being acquired from Hometown America. AMC? One wag suggested a rejuvenated American Motors Corporation (i.e. ‘Remember the Gremlin?’). But no, knowledgeable folk claim it’s American Manufactured Communities, established (or to be established) by CAP REIT, an apartment REIT, headquartered in Canada, who’d eventually like to launch an IPO (Initial Public Offering of stock), as a new REIT, here in the states.
• Why reference to an alphabet soup of firm names? Well, beyond ELS, Inc., and AMC, cited in the previous bullet points, the following letter abbreviations appear in the 22nd annual ALLEN REPORT: RHP Properties; YES! Communities; MHPI; UNIPROP; KDM Development; CRF Communities; UMH Properties, the REIT; former CREICO, now Ascencia; SSK Communities; NTH Property Management; HCA Management; A.L.S. Properties; QCA Management; KAFCO, Inc; PLJ, Inc; M.N.A. Investments; MUREX Properties; and, MISA Corporation. And there are many more, beyond the 137 ranked in the report.
Rich Cline, writing in the final paragraph of the company announcement, cited earlier, concludes,
“…I want to thank everyone for their commitment and dedication to Hometown over the past 13 years and ask for your understanding and support as we move to this next phase in the life of Hometown.”
As a long time industry observer, who along with Bill Geary, CPM, from California, was ‘present at the birth of the Hometown America’, when founded by Randy Rowe, it’s been an interesting, and at times exciting scenario to watch unfold and document, as the firm grew in size through acquisition (Remember former REIT Chateau Communities, Inc. acquired in 2003, two years after it had acquired CWS Communities?), and ownership change. This acquisition announcement too suggests an answer to the mystery of CEO Greg O’Berry’s abrupt departure earlier this year. Next phase in the life of Hometown, as well as ELS, Inc., and AMC? ‘Stay tuned’, as it’ll surely make for an intriguing ‘read’ or two, over time.
Speaking of which, ‘News of the ELS, Inc., AMC, & Hometown Transactions’ has already been written into the manuscript of the new ‘historical retrospective’, scheduled for release at the RV/MH Heritage Foundation’s Hall of Fame Induction Banquet, 1 August 2011, in Elkhart, IN. Book title? Landlease Communities, Manufactured Home Communities, Mobile Home Parks, Trailer Courts & Camps, and Affordable Housing. Formal invitations to this annual gala event are ‘in the mail’, but to ensure your opportunity to attend, phone (574) 293-2344. Hint. If you’re a personal friend, and or business colleague, of this blogger, contact landlease community owner/operator Dennis Ohnstad, to learn of additional ‘networking events’ planned later that evening and next morning, ‘for everyone in the LLCommunity business’: (217) 493-0083 or firstname.lastname@example.org
Letter ‘C’ HUD Code home manufacturers are hereby encouraged to rejuvenate the/their/our languid, listless manufactured housing industry! In the dog – eat – dog world of HR (Human Relations) employment headhunting, reference to ‘C level executives’ is trade lingo for job openings and applicants at the CEO, COO, CFO, & CTO level. In the HUD Code manufactured housing industry arena, letter ‘C’ firms are: Clayton Homes, Cavco Industries, and Champion.
By way of quick review; Clayton Homes, Inc., in terms of number of new homes shipped, boasts a heady 48 percent national market share. Cavco Industries, Inc, recent acquirer, through bankruptcy proceedings, of Fleetwood and Palm Harbor firms, enjoys a growing market share. And Champion Home Builders, Inc., recently emerged from bankruptcy, reportedly stronger than beforehand, commanded a 6.5 percent national market share at the end of 2010.
With that said; what are they to do? I don’t have a particular plan, but all three of these ‘C’ firms are headed and led by smarter men than me:
• Kevin Clayton at Clayton Homes, Inc., in TN, a Berkshire – Hathaway Company
• Joe Stegmayer at Cavco Industries, Inc., in AZ
• Jack Lawless, CEO, at Champion Home Builders, Inc., in MI.
But I do know this; as an industry, we can only bump along at a 60 year nadir (‘the lowest point’) of housing production for only so long (i.e. 50,000+/- new homes shipped nationally during each of these years: 2008, 2009, & 2010), before we are no longer viable! So, what are some of the tough love possibilities?
• Letter C firms finish buying up the smaller HUD Code home manufacturers, as they fear is going to happen anyway, and consolidate HUD Code manufactured housing into a half dozen (+/-) firms, per automobile industry history early in the 20th Century. Then move ahead as one focused, consolidated, powerful presence!
• Letter C firms sit down and ‘make truly friendly’ with the smaller, and in some cases financially secure, HUD Code home manufacturers in the South, Midwest, and West, to end differences relative to manufactured housing dealings with federal regulators. Then move ahead as one focused, consolidated industry voice!
• Discuss, speculate and decide whether the HUD Code manufactured housing industry is stronger and better served in our nation’s capitol, by dint of a singular manufacturing/distribution focus, supplemented by a strong working relationship with a sister advocacy body representing all other segments, realty and otherwise; OR, ascribe to either of the previous bullet points (Neither of which is in effect today!), & continue unchanged, appearing to be ‘one big happy family’ – but not!
There’s nothing new in those three bullet points! Each is a relatively frequent, ongoing topic of sometime heated conversation, even debate, wherever and whenever manufactured housing and landlease community aficionados, purists (Some would say Luddites) and self – described progressives alike, gather. All this industry observer suggests is, with as much consolidation taking place among manufacturing firms, during these past three years of ‘only 50,000 home shipments’, perhaps we’re at or near a ‘tipping point’ that could (maybe) reshape our industry and asset class for years to come.
All I ask, and hopefully you blog floggers (readers) agree, of these aforementioned leaders, and others who wield influence; ‘Don’t attempt such a paradigm change alone! Solicit input and buy – in from grassroots manufactured housing business peers ‘with skin in their games’; consider all the options (e.g. Return to truly affordable housing; ensure the Manufactured Housing Improvement Act of 2000 is finally fully implemented; emphasize Community Series Homes design; make far better use of Business Development Managers to access landlease community owners/operator who need new homes; and the list goes on…), and communicate broadly and continually, in print and online, as the process proceeds!
Otherwise be guilty, as observed by a blog flogger commenting on last week’s posting, with its’ nod to the ‘Great & Greater Conspiracy’ topics, of a few weeks earlier:
“Perhaps, aside from NAHB and HUD, the most hurtful conspiracy of all is the ‘not conspiracy’, where (manufactured housing) executives, including our national and state associations, say ‘Not my job!’, when it comes to saving our industry! Keep hammering George.” And I plan to do so….GFA
For what? The many impromptu birthday greetings, by telephone, attractive cards, and email messages, on Tuesday 1 June. Can truly say, those were the most remembrances I’ve ever received on any birthday. Geesh. Maybe I should turn 66 more often. Not!
Anyway, that evening, Susan and Adam, our adult children, showed up at home with all but one grandchild in tow (Travis is away at USMC boot camp in San Diego, CA.), and of course our two great grandchildren, Hunter and Peyton. And not to forget Flossie, Carolyn’s 98 ½ year old Mother who lives with us. A very nice end to a near perfect day! Know what Carolyn gave me? An amazonkindle. So, I’m learning something new this weekend.
George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247
Just received an advance copy of June’s issue of the Allen Letter professional journal. Can this possibly be the ‘best one ever’? Maybe. Not only a preview of this year’s Roundtable event (Including registration brochure), but SOLSTICE Communities’ Good Neighbor Pledge (A worthy template for every LLCommunity owner/operator!), Michael Power’s Mantra: ‘The Manager’s job is mostly outside the office, not inside!’ – and rationale following. Then there’s a color photo of a 13X40 British ‘manufactured home- called a caravan over there. Also photos of a Redman ‘Community Series Home’ or CSH, with recessed front and back steps! Lagniappes? Four: an Ascentia brochure (Remember CREICO?), CSH brochures from Fleetwood and Champion; and this month’s Signature Series Resource Document: the 2nd annual Official Manufactured Housing & Landlease Community Lexicon & Glossary of Trade Terminology. All this and more (i.e. 11 additional monthly issues of the newsletter) for only $134.95/year. How can you possibly manage your business, and properties, without it? Phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or (317) 346-7156 – or via this website, to Subscribe!