Category Archives: Clayton Homes

Clayton Homes Looking at Wichita Falls for New Facility

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With demand strong for mobile homes, Berkshire Hathaway’s Clayton Homes, the number one builder of mobile homes, is negotiating to open a plant in Wichita, Texas.

The new facility would be located at the site of the former ATCO building on Burkburnett Road.

If all goes as anticipated, the plant will add 200 jobs to the city.

Currently, Clayton Homes has eight plants in Texas that are all running at capacity.

Damage from September’s Hurricane Harvey has increased the need for modular homes in Texas.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Clayton Homes Acquires Fourth Site Builder

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Berkshire Hathaway’s Clayton Homes has acquired Oakwood Homes, Colorado’s largest privately held homebuilder and community developer, and the approximately 18,000 lots it owns and controls. The company is the fourth site builder that Clayton has acquired since 2015, and it currently owns homebuilding companies in Missouri, Tennessee and Georgia.

The deal closed on July 3, 2017.

“Oakwood Homes has an impressive history of homebuilding innovation, and practices a relentless commitment to quality and service for its customer base,” said Keith Holdbrooks, president of Clayton home building group. “Oakwood’s self-sustaining operating model, company culture and core values align well with Clayton’s, which is paramount when we acquire a company. We look forward to working together with Oakwood to improve the homebuyer experience while providing greater cost-saving opportunities for homebuyers.”

Founded in 1991 by CEO Pat Hamill, Oakwood Homes builds modern, distinct communities throughout Colorado and Utah that are recognized for their innovative designs, energy efficient homes and highly customizable building processes. The company sold 1,200 homes in 2016 alone, which represents a 20 percent increase from 2015. Oakwood Homes differentiates itself through its commitment to both customer and team-member experiences.

Clayton entered the site-built industry in 2015 through its Clayton Properties division in order to provide industry-leading homebuilding solutions and improve the experience of modern-day homebuyers. Since 2015, Clayton has increased its homebuilder portfolio by acquiring like-minded, innovative companies in strong growth markets, such as Summit Homes in Kansas City, Mo., Goodall Homes in Gallatin, Tenn., and Chafin Communities in Atlanta, Ga.

“After more than two decades of building beautifully functional new homes in Colorado and Utah as a privately held company, we are excited to join forces with Clayton,” said Pat Hamill. “This partnership is part of our strategic vision to continue our steady growth and to provide a very high standard of customer service for our loyal consumers, all while keeping our existing leadership team.”

In 2016, Clayton built more than 42,000 homes. Site built homes are an increasing focus as they have a higher price point than Clayton’s mobile home business.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Clayton Homes Acquires Doyle Mobile Homes

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Clayton Homes, the nation’s largest builder of manufactured homes, has acquired retailer Doyle Mobile Homes.

Doyle Mobile Homes is a manufactured home dealer that exclusively sells the Clayton Homes brand and is located in Flemingsburg, Kentucky.

Started by the two Doyle brothers, Adrian and Russell, after they returned from military service in World War II, the enterprise originally focused on selling used cars until Russell Doyle noted that while buying used cars in North Carolina he was “quite often run off the smaller roads by these so called ‘House Trailers.’” Adrian Doyle went and purchased several 8-foot wide House Trailers and the company was on its way to becoming a manufactured home seller.

By 1975, Doyle Mobile Homes had become one of Clayton Homes’ top retailers, and they are one of only 7 Hall Of Fame dealers nationwide out of over 1,100 dealers.

CEO of Clayton Homes, Kevin Clayton, said. “We are so fortunate they have decided to join Clayton Homes. Their home center was inducted into the Hall of Fame in 2001 and their home center is achieving a 98 percent Customer Service Index score, which has rarely ever been done.”

In addition to manufactured homes, Doyle also sells underground storm shelters.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Clayton Home Acquires Site-Built Home Builder in Tennessee

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Berkshire Hathaway’s manufactured home builder, Clayton Homes, has done a bolt-on acquisition.

Clayton Homes, the number one builder of manufactured homes, has acquired Goodall Homes, a builder of new single-family homes, townhomes and condominiums since 1983.

The Gallatin, Tennessee-based company is headed by Bob Goodall Jr., a graduate of Lambuth University, and a licensed real estate broker, residential contractor and commercial contractor since 1983.

The move continues to expand the Clayton Homes presence in the site-built home business. The company acquired Atlanta-area builder Chafin Communities in the fall 0f 2015.

According to the company, Goodall Homes has built thousands of new Single Family Homes, Townhomes, Courtyard Cottages, Condominiums, and Villas in the Nashville area. They have developed many residential neighborhoods in many Middle Tennessee locations.

The acquisition of Goodall Homes includes approximately 3,600 lots and 180 homes under construction in a five-county area in Middle Tennessee.

Goodall Homes closed 436 homes in 2015.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance

Warren Buffett Vigorously Defends Clayton Homes in Annual Shareholder Letter

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“The Best defense is a good offense,” is the old saying, that is exactly the approach Warren Buffett continues to take in defending Berkshire Hathaway’s mobile-home manufacturer Clayton Homes from those who say it preys on low-income home buyers.

It was less than a year ago that the company first came under attack, when with the force of a volcano, a Seattle Times and the Center for Public Integrity investigative report titled “The Mobile Home Trap” accused Clayton Homes of relying on “predatory sales practices, exorbitant fees, and interest rates…trapping many buyers in loans they can’t afford and in homes that are almost impossible to sell or refinance…”

Buffett’s immediately addressed the accusations head on at the 2015 Berkshire Hathaway annual meeting, when he said, “I make no apologies whatsoever about Clayton’s lending terms.”

Now, in his 2015 annual letter to shareholders, Buffett has a devoted one and a half pages to defending Clayton Homes from its detractors.

In a vigorous defense, Buffett wrote:

“Our retail outlets, employing simple language and large type, consistently inform home buyers of alternative sources for financing – most of it coming from local banks – and always secure acknowledgments from customers that this information has been received and read.”

In an unusual move, Buffett went so far as to include the actual form on page 119 of the 2015 annual report.

In the Same Boat as the Home Buyer

In defending Berkshire’s practices as a home seller and mortgage lender, Buffett points to Berkshire’s holding on to the mortgages it originates rather than selling them off in the broader market. Buffett notes that this adds risk to Berkshire, and that by holding on to the mortgages it is in the same boat as the home buyer. If a home buyer defaults on their mortgage it leaves Berkshire not only with a bad loan, but it also has to eat the costs associated with repossessing a used mobile home.

“At Clayton, our risk retention was, and is, 100%. When we originate a mortgage we keep it (leaving aside the few that qualify for a government guarantee). When we make mistakes in granting credit, we therefore pay a price – a hefty price that dwarfs any profit we realized upon the original sale of the home. Last year we had to foreclose on 8,444 manufactured-housing mortgages at a cost to us of $157 million. The average loan we made in 2015 was only $59,942, small potatoes for traditional mortgage lenders, but a daunting commitment for our many lower-income borrowers. Our buyer acquires a decent home – take a look at the home we will have on display at our annual meeting – requiring monthly principal-and-interest payments that average $522.

Some borrowers, of course, will lose their jobs, and there will be divorces and deaths. Others will get overextended on credit cards and mishandle their finances. We will lose money then, and our borrower will lose his down payment (though his mortgage payments during his time of occupancy may have been well under rental rates for comparable quarters). Nevertheless, despite the low FICO scores and income of our borrowers, their payment behavior during the Great Recession was far better than that prevailing in many mortgage pools populated by people earning multiples of our typical borrower’s income.”

Congress Weighs In

The Seattle Times report did not fall on deaf ears in the halls of Congress. In January, Representatives Maxine Waters, Michael Capuano, Emanuel Cleaver and Keith Ellison wrote a letter to the Justice Department and the Consumer Financial Protection Bureau calling for a probe of the company’s lending practices.

So far, there has been no action by the Justice Department or the Consumer Financial Protection Bureau, and in his annual letter Buffett forcefully touts what he feels is Berkshire’s outstanding record in regards to adhering to the regulations that govern mortgage lending.

“Let me talk about one subject of which I am particularly proud, that having to do with regulation. The Great Recession caused mortgage originators, servicers and packagers to come under intense scrutiny and to be assessed many billions of dollars in fines and penalties.

The scrutiny has certainly extended to Clayton, whose mortgage practices have been continuously reviewed and examined in respect to such items as originations, servicing, collections, advertising, compliance, and internal controls. At the federal level, we answer to the Federal Trade Commission, the Department of Housing and Urban Development and the Consumer Financial Protection Bureau. Dozens of states regulate us as well. During the past two years, indeed, various federal and state authorities (from 25 states) examined and reviewed Clayton and its mortgages on 65 occasions. The result? Our total fines during this period were $38,200 and our refunds to customers $704,678. Furthermore, though we had to foreclose on 2.64% of our manufactured-home mortgages last year, 95.4% of our borrowers were current on their payments at yearend, as they moved toward owning a debt-free home.”

While all has been quiet recently in regards to Clayton Homes, the fact that Buffett has devoted so much space in his annual letter to defending the company may mean that more tremors are coming, and issues related to Clayton Homes could erupt again in the future.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Clayton Homes in $50 million Deal to Acquire Chafin Communities

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Berkshire Hathaway’s Clayton Homes is acquiring Chafin Communities, a Georgia home builder that builds extensively in northeast Atlanta.

The roughly $50 million acquisition will give Clayton Homes 1,100 building lots.

Chafin Communities’ principals, brothers Eric and Daryl Chafin, are staying on board to head up the new division. The two began working in construction as teenagers and founded their first construction company in 1966. The company’s 25 employees will all become Clayton employees.

Chafin Communities has constructed over 4,500 homes to date, and in 2014 Chafin Builders LLC/Chafin Communities ranked #13 in the Atlanta’s TOP 20 Home Builders List, based on Homes closed in 2013.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.