Issue link: https://read.dmtmag.com/i/733263
OCTOBER 2016 14 THE JOURNAL Before I got into the manufactured home com- munity business, I was the largest private owner of billboards in Dallas/Ft. Worth. I built the company from scratch straight out of college, at a time in which billboards didn't get a lot of re- spect. Back then, most advertisers put the bulk of their budget into television, radio and news- paper, and billboards were looked upon as a goofy, fragmented industry. But then one day the industry suddenly received the positive at- tention it deserved, and it blossomed into a re- spectable, stable investment that was the darling of Wall Street. It wasn't that anything structural had changed; it was a shift in perception and ap- preciation. And I'm feeling that same shift right now in the manufactured home community busi- ness. Three $2 billion transactions in 180 days The sales of Carefree, Northstar and YES were certainly the first clue to this shift. For an indus- try to go from zero to three roughly $2 billion transactions in such a short amount of time is un- believable. It demonstrates the positive percep- tion of the industry in a very public manner. I remember when these deals went on the market, and many old-timers said "they'll never find a buyer". They were wrong. Those individuals were stuck in the past, and not looking toward the future. New entrants into the industry Of course, the most high profile new entrant has been the Carlyle Group – the largest private equity group in the U.S. But there are scores of other new investors who are excited about the business model. Many see the industry as a more profitable extension of their multi-family back- grounds. Higher level of play If you drive through communities constantly – as I do – you will note that the appearance has never been higher. A decade ago, you could drive into many manufactured home communi- ties and cringe. It didn't seem that most owners either knew how to enforce rules or cared to do so. Now, the overall condition of properties throughout the U.S. is much higher. I think that this is what has ended the "witch hunt" of many cities against community owners – they see that the level of play has risen and no longer feel these owners to be bad citizens. Of course, what's really happened is that more professional owners are gradually buying and cleaning up those properties that had great locations but were in horrible physical condition. More loan products The recent introduction of new loan products by Fannie Mae and Freddie Mac now offers even more attractive loan terms, including the ability to re-size the loan. This cures one of the short- comings of traditional conduit lending, and fur- ther reflects the positive perception to the asset class. More cohesive integration between manufacturing and community owners To us, the CASH program from Clayton/21 st Mortgage was a game-changer for the industry. We've already brought in over a thousand homes under this program. Champion and other man- ufacturers are now introducing similar programs. What's exciting is the new vertical integration between community owners and home builders – one of the most powerful alliances for the rebound in construction numbers and harnessing the de- mand for vacant lots. It's a natural win/win that should have been in place years ago. Higher rents more in-line with market forces We believe the approximate national average for lot rents in the U.S. is around $275 per month. That's a ridiculously low number in a U.S. housing market that offers a median sin- gle-family option at $170,100 and an average three-bedroom apartment rent of $1,290 per month. We believe that lot rents could double and still remain highly affordable. Fortunately, many others share my viewpoint, and we are see- ing nice increases in rents in many markets. As long as rents are trending up, it's a good thing. The replacement of many moms and pops with new, more professional owners is increasing that velocity. Positive media perception Prior to 2014, I had not seen a single positive article on the manufactured home community in- dustry. Now there are dozens. The New York Times, Bloomberg and the Wall Street Journal all seem to be fans, and even local media groups finally seem happy with the product. We were on local television twice this month – and both times positive. The industry's "stigma" seems to have finally broken down and is being replaced with a positive narrative on affordable housing. A new optimism I'm an eternal pessimist, and even I am ex- cited about where this industry is heading. How can you not be? Anyone who has been around for at least a decade knows of the struggles that the industry has faced, and the fact that it has finally won hard-earned recognition. It's excit- ing to have new entrants to the industry who ap- preciate the huge untapped potential in higher rents and occupancy, and who understand why it has the best business model in commercial real estate. Conclusion There's a huge shift going on in this industry. The clues are all around us. We've finally turned the corner in tapping our full potential. Do your part to push the industry forward. Offer a great product at a great price. Be proud of what you do. Get active in your state association. Help to make history. Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 21,000 lots in 25 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top- selling ones in the industry. To learn more about Frank's views on the manufactured home community industry visit www.MobileHomeUniversity.com. Can You Feel The Industry Shifting? BY FRANK ROLFE COMMUNITY CONSULTANT T J