The implosion of the residential housing market five years ago unleashed untold damage on a wide swath of individuals and institutions homeowners, homebuilders and the global financial system to name three.
The collapse also created opportunities for those fortunate enough to be in a position to take advantage of severely distressed real estate prices. One of the more intriguing firms to emerge from the rubble is Yes! Communities, a Denver-based firm created in 2007 to own and manage assets in the manufactured housing industry.
Since launching, the company has been on an acquisition binge, acquiring 117 mobile home communities with more than 30,000 homesites in 16 states.
Yes, along with its majority equity partner Stockbridge Real Estate Funds, recently bought 10 communities and about 2,500 homesites in Greensboro and the Triangle from another Denver-based firm, American Residential Communities. The properties were part of a portfolio of 42 ARC communities that Yes and Stockbridge acquired.
Yes and Stockbridge paid nearly $75 million for five communities in Guilford County and five in Wake County, according to property records.
Frankly its really been a fantastic business for us, said Andrew Luter, Yes chief investment officer. We just continue to acquire and grow.
The Wake County communities include Foxhall Village, Green Spring Valley and Stony Brook North in Raleigh, Pleasant Grove in Fuquay-Varina and Deerhurst in Wendell.
Luter said Yes grew out of the belief that the subprime lending crisis would ultimately create a need for more affordable housing as people lost their homes to foreclosure or emerged with such bad credit that owning a home was no longer an option.
Traditionally, he said, a community owner would offer a prospective tenant the ability to locate in the park after buying a home from a manufacturer and financing the purchase through a lender who specialized in personal property loans.
Those days are gone, Luter said, largely because access to such financing has been greatly reduced. The model has transformed over the last ten years pretty dramatically.
Options to buy
Yes offers tenants three options: They can go the traditional route and buy and finance a purchase through third-party vendors; they can buy a new or used home from Yes, which also has a financing arm; or they can simply rent a unit in a community.
Luter said the ARC purchase includes a small portfolio of loans that ARC still owned. ARC had previously sold many of its mortgages to 21st Mortgage Co.
Yes acquired the bulk of its overall portfolio in early 2008 when it bought CMH Parks, a subsidiary of Clayton Homes that operated 65 communities and 18,000 homesites in 11 states. Yes has also bought a number of communities in the Charleston, S.C., area.
Yes has been buying up communities at a time when the number of new manufactured homes being shipped has been plummeting. The industry shipped 51,606 units last year, down 49 percent from 2007 and half the number that were shipped a decade ago, according to the Manufactured Housing Institute.
Trouble in the manufactured housing market is typically a precursor to problems in the much larger single-family market, and the industry experienced a steady decline during the 2000s before things fell off a cliff in 2009.
Infusion of capital
North Carolina doesnt have the type of large manufactured housing communities found in places like Florida, California and Arizona. ARC had been among the largest players in the state, but it has now exited the market with its sale to Yes.
We have a lot of smaller, mom-and-pop type things, said Brad Lovin, executive director of the North Carolina Manufactured and Modular Homebuilders Association. Lovin said the Yes acquisition could be a good thing for residents in those communities.
They certainly bring new capital to those communities and maybe they can help stabilize them or bring them up to todays standards with the infrastructure and things like that, he said.
Luter said Yes typically makes upgrades to the communities it acquires, particularly the common areas. The company has hired on all of ARCs employees, he said.
Yes is quickly becoming a major force in an industry that hasnt always had the best reputation. In North Carolina, for example, the Texas mortgage lender W.R. Starkey Mortgage agreed to pay $4.5 million in 2010 for its role in a scheme to get consumers into loans for manufactured homes that they couldnt afford.
Luter acknowledges the industrys past, and says Yes is trying to distinguish itself by bringing a new level of customer service to the industry.
Our classic tenants are pretty underserved and, by and large, I think theyre talked down to a lot and theyre not treated great by landlords, he said.
Lovin said the bad actors are a small minority who have become an even smaller one in recent years.
I guess thats one good thing of a shrinking economy, he said. The bad players seem to go out first.