A number of factors in the North American housing market are
all continuing to coalesce, forming the sustained impetus for a decided shift
among more and more consumers away from traditional stick-built houses, and
towards more affordable manufactured homes. According to HUD-sponsored data
collected by the U.S. Census Bureau in its periodical MHS (manufactured homes
survey), the average sale price for a manufactured home is currently around
$68,300, and sales have jumped around 23 percent from 2011 to 2014 (up 13.8
percent between 2013 and 2014 alone), clearly illustrating the underlying
market dynamics. Consolidation within this market further illustrates the
aforementioned dynamics, with deals like the $1.32 billion Green Courte
Partners’ portfolio acquisition this time last year by Sun Communities Inc.
(NYSE:SUI), consisting of 59 manufactured home communities across 19,000 sites
in eleven states, being a major data point. According to a recent report
published by Freedonia Group, U.S. demand for prefabricated housing is
currently on track to grow by 15 percent per year through 2017, with
manufactured housing taking up the lion’s share of the market.
Whether it is the ongoing surfeit of baby boomers retiring,
the tightening of new locations for construction and rising construction costs,
or the supply constraints exacerbated by elements like regional hydrocarbon
development in the Bakken, Marcellus and Eagle Ford/Permian, the end result is
the same: sustained demand for affordable manufactured housing. A trend which
was recently highlighted by leading commercial real estate investment sales,
financing, research and advisory services firm, Marcus & Millichap (NYSE:
MMI), which sees continued housing demand from key energy producing regions
throughout the foreseeable future. This trend is particularly evident in Texas
where, despite rig counts still being off by roughly 60 percent from October,
amid oil futures that have retreated to the sub $60 per barrel level, the
latest Rig Data reports indicate the biggest gains last week since February of
2014, with a 21 rig uptick marking interest by producers for a return to
development. And Texas isn’t just about the energy sector either, so the
significant market diversity of the state’s economy is continuing to fuel a
housing shortage, with home sales in North Texas recently hitting a new record
for both the number of purchases and per unit price, at around 4 percent higher
than last year.
In fact, prices across most of Texas’ major cities continue
rising, with the Dallas-Fort Worth median price in particular growing almost 10
percent, more than double that of nationwide home prices, which are up by more
than 5 percent this year, as buyers come back to the market in droves according
to chief economist at the National Association of Realtors, Lawrence Yun. New
housing starts in North Texas are 40 percent lower than in 2006 and yet home
sales across the country have rebounded to just 25 percent below 2006 levels,
indicating just how fast prices are rising, even as single-family home starts
last year were just half of what they are in a typical year. Despite easy
mortgage rates, many homeowners are also under too much debt on their
properties to sell, making the market even tighter, and younger Americans are
still finding themselves unable to get on the property ladder, due primarily to
factors such as outstanding student loan debt. In many respects, and especially
in states like Texas, this is a perfect storm for the housing market, and one
which puts a bright spotlight on the manufactured homes segment.
Major sector players like Skyline Corp. (NYSE: SKY), which
sold nearly 3,000 manufactured and modular homes last year, as well as Nobility
Homes, Inc. (OTC: NOBH), which has an array of retail sales centers throughout
Florida in addition to being a manufacturer, have been clocking in some
impressive results, with SKY reporting a 28 percent uptick in sales for the
first nine months of fiscal 2015, and NOBH seeing a 23 percent uptick for its
most recent quarter. In the especially strong growth market of Texas, Wisdom
Homes of America (OTC: WOFA), which is focused on manufactured home retail
centers, manufactured home subdivisions, and mortgage origination within the space,
is also seeing the upside. WOFA recently reported over $1.2 million in revenue
for its second quarter, with 2015 guidance that is on track to hit upwards of
$4 million, in what is the company’s first full year of owning/operating
manufactured home retail centers in Texas. Also, currently less than ten
percent of WOFA’s targeted client base is even in the energy recovery sector.
As professional services and healthcare make up the vast majority of their
targeted client base, the company should do quite well, irrespective of which
way the hydrocarbon sector goes.
With a strong footprint already established in Texas, where
the company has retail centers in Rhome, Tyler and Jacksboro, and recently
signed a three year lease for a new retail center in Kerrville, Wisdom Homes of
America is well on its way to achieving its strategic goal of opening 30 retail
centers over the next five years. Each center is expected to sell around three
homes a month, generating some $2.3 million a year per center, or $69 million
in all. The company’s subdivision and manufactured home communities approach in
particular is worth noting, as it offers buyers an extremely affordable turnkey
option that also generates more revenue for WOFA itself, given the increased
margins from both the lot and unit sales (revenues of around $65,000 on average
per house and $20,000 profit per lot). The company intends to turn out around
six projects a year moving forward as well, with approximately 30 to 40
residential lots per project, which will save individual homebuyers as much as
60 percent over comparable options. The mortgage origination space for
non-prime manufactured home loans, currently dominated by Berkshire Hathaway
(NYSE: BRK.A; BRK.B) component Clayton Homes’ 21st Mortgage Corp., collectively
representing over 870 manufactured home retail centers across the U.S. and some
$1.5 billion a year in home mortgages, is another key target for Wisdom Homes
of America as the company continues its expansion.
The company has done a good job already establishing its
brand presence in Texas, and recently announced that the structural and
financial modeling for its soon-to-open retail center in Sherman, where the
company will also be selling land-home packages in the Sherman residential
subdivision, should be ready any day now. The company also recently expanded
the footprint of its Tyler retail center, increasing the footprint of the
outdoor showroom by around 40 percent in order to be able to display some 55
percent more models. A move which was due in large part to consistent traffic
flow from potential homebuyers.
A great deal of the success of WOFA’s model is attributable
to the company’s veteran management team, led by chairman and CEO, Jim Pakulis,
a serial entrepreneur with over three decades of frontline experience in
high-growth sectors ranging from real estate and finance, to healthcare and
internet technology. Pakulis was instrumental in defining WOFA’s strategic and
operational vision, having previously been president of Pacific West Funding
Corp., a Utah-based real estate financing firm, where he handled everything
from structured non-residential and development project finance sourcing, to
day-to-day accounting, operational, legal, and compliance duties. Pakulis
helped WOFA (formerly SearchCore) transition from operating the most successful
medical cannabis finder site in the sector, to manufactured home retail center
operations in 2012, selling the site after having seen annual revenues rise
from nothing, to $16 million in just two years time. Pakulis also brings a
great deal of experience structuring complex framework and expansion strategies
in the difficult healthcare sector, having served as an advisor to outsourced
healthcare clinic management company Synergistic Resources and having been
crucial to numerous acquisitions, as well as the business model transition from
fee-for-service to managed health care, at outsourced clinic management and
operation services company CliniCorp.
The president of Wisdom Homes of America, Brent Nelms, who
came onboard in early 2014, brought a massive infusion of manufactured and
modular housing industry experience with him. With over 30 years in the
manufactured housing game, including having been VP of the Genesis Homes
division of the sector’s second largest manufacturer, Champion Homes, Nelms is
able to exploit his substantial set of experiential knowledge for WOFA, having
brought 33 manufactured home retail centers to fruition, representing over $100
million in annual revenues. Former president of Texas and Oklahoma manufactured
homes retailer Miracle Housing, as well as VP and GM at Nelmstar, the biggest
independent manufactured homes retailer in Texas from 2006 to 2007, where he
personally oversaw nine retail locations, Nelms is the kind of sector guru that
will ensure Wisdom Homes of America stays on course. With intimate knowledge
garnered over his career of markets that span the entire country, Nelms, a
former licensed realtor in Texas who was named Realtor of the Year by REMAX in
2011, is in a prime position to assist WOFA in successfully executing its
strategic expansion.
Director and CFO of WOFA, Munit Johal, is similarly capable
when it comes to helping the company achieve victory. With nearly three decades
of experience spanning accounting, banking, finance and management on both the
public and private sides of the business, Johal came to the company fresh from
a diversified real estate holding company where he was also CFO, Secured
Diversified Investment. Having cut his teeth at the Federal Home Loan Bank of
San Francisco’s Federal Home Loan Board as a senior analytical manager, Johal
is eminently qualified to play a key role in WOFA’s mortgage origination
business, harnessing a tremendous amount of experience in not only having
managed a large staff, but having monitored bank activities and enforcement
actions for a variety of bank holding companies and lending institutions in the
sub $500 million range.
Investors can look forward to further details on the
company’s ever-expanding retail and subdivision presence in the near future,
and should keep an ear to the ground for more news about this rapidly emerging
manufactured homes player.
To get a closer look at the company, visit
www.wisdomhomesofamerica.com
About QualityStocks
QualityStocks is committed to connecting subscribers with companies that have huge potential to succeed in the short and long-term future. We offer several ways for investors to find, evaluate, and learn more about investing in these companies.
QualityStocks is committed to connecting subscribers with companies that have huge potential to succeed in the short and long-term future. We offer several ways for investors to find, evaluate, and learn more about investing in these companies.
The Quality Stocks Daily Blog http://blog.qualitystocks.net
The Quality Stocks Daily Videos http://videocharts.qualitystocks.net
The Quality Stocks “Ones to Watch” http://gotstocks.qualitystocks.net
Please see disclaimer on the QualityStocks website: http://disclaimer.qualitystocks.net
No comments:
Post a Comment