It appears that Karsten Homes has signed a letter of intent to be acquired by Clayton Homes, several industry sources confirmed over the weekend.  This is news that comes from “left field”, surprising nearly everyone in the industry.  Karsten Homes is a well known and respected manufacturer with factories in Oregon, California, Texas and New Mexico, building a medium-high end manufactured home known for its innovation and style.  Harry and Joan Karsten founded Karsten Homes in 1995 with a single factory in Sacramento after selling their Golden West Homes to Oakwood Homes a few years earlier.  No details on when the sale will close and what changes will transpire as a result of this acquisition, but this is yet another example of Clayton’s bold moves aimed at gaining market share through expansion and acquisition.  With the addition of the Karsten manufacturing facility in Oregon, Clayton will have five brand names being produced in Oregon --- Golden West/Oakwood/Clayton (Albany), Marlette (Hermiston) and Karsten (Stayton).  Will a consolidation occur as a result of this transition? 
 
The Oregonian newspaper ran a front page story in its June 24, 2005 edition entitled “Boom leveling mobile home parks”.  Here are the first two paragraphs (you can read the entire article at this link):
Boom leveling mobile home parks

Boom leveling mobile home parks

Friday, June 24, 2005
LISA GRACE LEDNICER and DANA TIMS

The superheated housing market isn't a bonanza for everyone: Residents of at least four Portland area manufactured-housing parks have been forced to move in the past few months as park owners, seduced by skyrocketing land prices, sell to developers.
Manufactured home parks in Beaverton, Tualatin, Wilsonville and West Linn serving primarily low-income older residents have shut down within the past six months or are in the process of closing. They're being redeveloped for retail use or housing, with rents expected to far exceed what is collected from park residents.

The article was not particularly negative if you read the whole thing, and it centered on the true issue, which is that this is a land-use problem, not directly a manufactured home problem.  We have written about this phenomenon before and received responses ranging from slight concern by some to outright anger from others, most notably a major manufactured home lender who expressed his displeasure for manufactured home community owners.  Regardless of how you feel about this issue, at some point our industry is going to have to deal with the plight of the residents who are being displaced, the losses suffered by residents and lenders on homes that are devalued when being displaced, and the public relations challenge resulting from these closures.  In addition to the Portland, OR closures we are told eight manufactured home communities have closed in Las Vegas recently and over twenty have closed in Arizona.  Several have reportedly closed in Florida and a few are slated for closure in Washington State.
 
Notwithstanding those concerns, there is the other side of this coin.  Land suitable for residential and commercial development is becoming harder to find all the time and developers are more aggressive than ever when looking for creative ways of acquiring land.  As an example, Commonwealth was just hired by a major residential developer to manage their recently acquired SW Washington manufactured home park that they intend to redevelop into site-built housing 6-8 years from now.  This is just one example of how far in advance they are planning and how important it is for them to own developable land to meet future demand.  
 
Frankly, most of our clients, while deeply concerned about this issue, know that their “parks” are still valuable, one way or the other.  But those clients also entered this market not only as a means of investing for a respectable return but also because of their desire to provide affordable housing.  We offer the best in affordable housing and we offer a great lifestyle, but much of this is being threatened by this trend.  Even the most dedicated owner is hard pressed to ignore an unsolicited offer for his or her property that may be twice or three times what it is worth as a manufactured home community.
 
 
For those of us who have made our living in this industry for our entire adult lives, and intend on continuing to invest in the industry until retirement (perhaps beyond), this is a difficult situation to face.  Everyone has an opinion on this topic, but what is truly needed is an industry driven task force that will calmly and methodically study this issue.  Let’s determine whether this is a short term situation of distorted economics in isolated markets fueled by record low interest rates and loose mortgage lending, or a long term trend that threatens the future of manufactured home land-lease communities.
 
These are industry-wide issues that need our careful thought and attention.
 
 

Greg Harmon - President
Commonwealth Real Estate Services
E-mail: greg@cwres.com
Telephone 503.244.2300 Ext. 101