Triad Financial Services–ECN Capital ‘Significant Barriers to Entry’ ‘Blackstone Partnership Extended-Expanded’-4 Year Trends w/Fed Funds Impact on MH-Negative YTD Returns-More; plus MHMarkets
“We are a de facto aristocracy now” said Dan Bongino on his nationally syndicated radio show 6.26.2024 at about 1:38 PM ET. According to their latest investor presentation: “ECN Capital Corp. (“ECN”) is a business services provider operating fee-based, asset-light platforms through which it originates, manages and advises on credit assets for its financial institutions (“Partners”). That same document also says: “ECN’s business services require highly specialized expertise, industry knowledge, regulatory compliance and strategic relationships, which provide significant barriers to entry.” If that sounds like a page out of the Berkshire Hathaway “moat” playbook, recall what MHProNews previously said in part: “New Triad President Lance Hull Remarks – is Claytonization of Largest Independent Manufactured Home Lender Triad Financial Services Underway?” From page 7 of their Q1 2024 investor relations presentation document: “National platforms built over decades originate and manage exceptional credit assets on behalf of committed credit investors, including banks, credit unions, life cos, and institutional investors.” Part of ECN is Triad Financial Services, which is manufactured home lending focused, and the other segment of their business are involved in the RV & Marine industries. “Institutional investors,” such as MHProNews previously reported, appears to be a reference to Blackstone and Carlyle, which crafted deal with ECN/Triad. So too has Skyline Champion (SKY). See SKY’s latest at this link here and here. ECN/Triad is a longtime Manufactured Housing Institute (MHI) member firm.
It is a truism that things are not always as they may appear to be to wide swatches of the population. This report is being published on the day of a much-anticipated debate between the de facto nominees of the Democratic and Republican parties for their presidential candidates, i.e.: Joseph “Joe” Biden and deposed President Donald J. Trump. Presuming the debate occurs as planned, several claims that have been widely believed by the supporters of one of those two candidates are potentially going to be challenged live. To those who follow a broad enough cross section of the national news and/or who routinely follow this platform’s periodic national news updates, those revelations may already be familiar. But to those who only follow a narrow segment of mainstream news, some of those claims may seem surprising or even difficult to believe. Propaganda is routinely at work in not only Russia, Communist China, Iran, North Korea, Cuba, Venezuela, or other nations – but a different (and perhaps more subtle) type of propaganda is at work here in the U.S. and other “Western” nations too. Does believing propaganda harm the targeted audience? Of course. That is part of the goal of propaganda, to keep those who have power in power. Does knowing propaganda is occurring mean that the properly informed individual is better off than the uniformed or misinformed? That would routinely be true. Does this matter to manufactured housing? As thy say in the battleground state of Wisconsin, Youbetcha. More on those items in planned future report. But for now, it is worth mentioning that Bongino’s statement is hardly a revelation to regular and detail-minded readers of MHProNews. When a system is rigged, as is widely believed in the U.S., that means it benefits ‘insiders’ and disadvantages outsiders. A Democratic lawmaker recently made a surprising admission in an interview that MHProNews reported on.
It stands to reason that if much of a national economy is rigged, that it is equally possible that specific industries are rigged too. Deep dives like this one into ECN-Triad Financial Services helps peel away realities from myth and fiction.
Speaking of facts, among the facts not found directly from the information published by ECN, which are provided in Part I of this report, is this from Yahoo Finance: “Trailing total returns as of 6/26/2024:
Part I of this report with analysis will feature information from ECN-Triad’s latest investor pitch. Highlighting in Part I is added by MHProNews, and the significance of some of those highlighted items will be explored in Part II.
Part II of this report will provide additional information with more MHProNews analysis and commentary. Part III is our Daily Business News on MHProNews manufactured housing connected equities and broader market report updates.
Part I – According to ECN Capital – Triad Financial Services – Investor Presentation for Q1 2024
From Page 7 of their investor pitch is the following.
Manufactured Housing
Founded in 1959
Strategic partnership with Skyline Champion (SKY-NYSE), 2nd largest producer of manufactured homes
Improved originations revenue margin; no fair value adjustments in quarter
Significant debt and on balance sheet assets reduction; ~$350M of held-for-trading portfolio sales executed in Q1
Managed assets increased +12% Y/Y in Q1 to ~$5.2 billion
Operational process improvement plan on track to be completed in H1 2024
Overfunded for 2024; Banks & credit unions increasing commitments, extended and expanded agreement with existing investor in Q1 & incremental institutional programs in Q2
Michael McCulley joined Triad in Q2 as General Counsel responsible for overseeing legal and compliance departments (page 10).
Manufactured Housing Highlights
Adjusted operating income before tax in Q1 of $9.0 million
Improved originations revenue margin (5.2% vs 3.9% in Q4)
No fair value adjustment in Q1; portfolio conservatively marked
Managed portfolios grew ~12% Y/Y to ~$5.2 billion
~$350M in held-for-trading finance asset portfolio sales in Q1
Operational efficiency plan on track to be completed in H1 2024
Triad over funded for 2024
Blackstone partnership extended and expanded in Q1
Rental funding program launching in Q2
Bank and credit union capacity returning
Additional Information from ECN-Triad, from Q1 2024 or their 2023 year in review, but not necessarily in their original order.
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Part II – Additional Information with More MHProNews Analysis and Commentary
In no particular order of importance are the following insights and additional information and their sources.
1) Lance Hull may know/recall these quotes, and if not, his former firm’s ultimate boss certainly has not indicated any loss of cognitive decline and would recall these statements and related facts.
MHLivingNews and MHProNews have explored how this maxim of Vladimir Lenin can be applied in manufactured housing. It is important to follow the money trail to see who is bankrolling the various statements and research into manufactured housing. Financial support by individuals who are often like-minded and allied, such as Warren Buffett, Bill Gates, or George/Alex Soros to certain entities should be considered. That doesn’t mean that their insights aren’t valid. As years of careful research has revealed, the question of paltering and posturing must also be considered. Or as James “Jim” Schmitz and his antitrust colleagues at the Minneapolis Fed observed, the various threads of evidence can be difficult to unravel.
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2) Per page 15 of their Q1 2024 pitch deck is the following, with the call out boxes and related insights added by MHProNews. Per ECN/Triad’s pitch deck, the “Fed Funds +525 bps” from March 2022 to July 2023 was an implied impact on shipments. But per Mark Yost, CEO of Skyline Champion (a sizable stakeholder in ECN/Triad) in a recent earnings call ‘high rates support demand’ for more manufactured homes, a view often seen as a historic truism in MHVille. See Yost’s remarks linked here.
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4) Remarkable. Per Triad Financial Services website on 6.27.2024.
Lance Hull
President
Lance, an accomplished professional, recently joined the Triad Financial Services team in July 2023. With over 25 years of remarkable leadership experience at 21st Mortgage and Clayton Homes, Lance brings a wealth of expertise in various areas including marketing and loan origination services, loan servicing, insurance, inventory finance, and compliance. Throughout his career, Lance has consistently demonstrated his ability to develop and execute effective operational strategies, leading to exceptional results. His exceptional leadership skills, coupled with his talent for team building and motivation, have contributed to his successful track record.”
As was noted in the opening paragraph of this report with analysis, ECN/Triad’s pitch deck includes the phrase: “ECN’s business services require highly specialized expertise, industry knowledge, regulatory compliance and strategic relationships, which provide significant barriers to entry.” Per an abstract to a book entitled Berkshire Beyond Buffett authored by Warren Buffett-Berkshire Hathaway groupie and cheerleader, Lawrence A. Cunningham, J.D.: “Management experts refer to these as “barriers to entry,” making it difficult for competitors to take market share away. Warren Buffett draws on medieval imagery, portraying a business as a “castle” and such barriers and advantages as “moats.”
In the almost a year since Hull joined ECN’s Triad Financial Services, Yahoo Finance reports that as of 6.26.2024 the firm has a YTD return of –39.44%. Remarkable?
Also per Yahoo Finance (see 3rd graphic in Part II #1 above) as of 6.26.2024, YTD Return in 2024 is: –46.12%. Remarkable. Per Triad on Hull above: “Lance has consistently demonstrated his ability to develop and execute effective operational strategies, leading to exceptional results.” Okay, “Exceptional.”
5) But in fairness to Hull and ECN/Triad, look at the results of the firm they climbed in bed with.
7) There is perhaps understandable talk of “Clayton Alumni.” Lance Hull after “exceptional” years with Berkshire-owned 21st Mortgage Corporation and Clayton Homes, obviously would have been exposed to what Kevin Clayton described as: “he (Warren Buffett) paints such an image in each of our manager’s minds about this moat, this competitive moat, and our job is very simple, and we share this…Deepen and widen your moat to keep out the competition.”
Perhaps no one before MHProNews has reported on Jonathan Kanter, the top antitrust cop at the Department of Justice (DoJ) at this time. Kanter specifically singled out “moats” as an are of focus in antitrust (i.e.: anti-monopolistic practices) law enforcement.
8) As MHProNews has also noted, per Buffett and his late partner Charlie Munger: “You can’t make a good deal with a bad person.” Buffett also said that “bad guys win. They know more games.” Lest anyone fail to read between the lines sufficiently, Barron’s recently said about Buffett that he was at risk of losing his ‘good guy image.’
9) Those quotes should not be misunderstood or misconstrued by anyone as if MHProNews was implying that someone associated with Clayton, 21st or MHI is automatically a ‘bad guy.’ Each person, each firm, should be evaluated on their own merits, or the lack thereof. That noted, it should be apparent (see more linked articles further below) that MHI is demonstrably not doing it’s claimed job properly. The Manufactured Housing Association for Regulatory Reform (MHARR) recently observed that “in 15 of the past 17 years” the HUD Code industry has produced fewer than 100,000 new homes per year nationally. MHProNews’ analysis of those and other MHARR observations are unpacked in a report linked here.
10) MHARR has apparently retooled their messaging to focus on the underperformance of what they have called “mainstream manufactured housing” by focusing on the primary “bottlenecks” of the industry. While the DOE energy rule and related litigation for manufactured housing is still lurking, beyond that there are zoning barriers and the lack of more competitive financing which are “suppressing” manufactured housing from producing hundreds of thousands of more homes annually, MHARR has argued. For decades, one of the easy arguments that MHProNews has periodically made with respect to their Congressionally mandated Duty to Serve (DTS) manufactured housing is that Triad Financial Services has proven how it is done sustainably and successfully. Triad reports that their manufactured home loan portfolio has been performing well for years. Chattel lending is the core of their manufactured home lending, as the graphics above reflect. So, while ‘this and that’ at ECN Capital may not have performed as well as they may have hoped, chattel manufactured home loans consistently have performed well, which reduces the types of arguments that Fannie Mae and Freddie Mac could reasonably offer their regulator, the Federal Housing Finance Agency (FHFA). It should be apparent that 21st and Vanderbilt, both Berkshire owned, can make a similar statement. Other smaller and regional lenders in the chattel loan space also appear to have loan performance well in hand. David Dworkin’s comments are significant in that regard. Yet, despite such evidence, somehow the FHFA and their charges – Fannie Mae and Freddie Mac – have successfully avoided doing any sort of meaningful chattel lending in manufactured housing.
12) The other issue that MHARR has pushed, and that MHI talks about but apparently fails to give any meaningful support to, is the zoning/placement issue. Additionally, MHI has per an array of sources from inside and outside of their own ranks (past and present) has failed on the promotional/marketing/education front. Triad and other non-Berkshire Hathaway owned lenders play an important role in manufactured housing. There appears to be growing evidence that insiders at MHI are more focused upon industry consolidation than they are about organic growth. Triad’s various moves should be evaluated in part through that lens. Given that “Clayton alum” Lance Hull is their new president, a similar sort of skepticism should be applied to Hull led Triad as ought to be applied to Cavco Industries, which for years was led by Joseph “Joe” Stegmayer, a former Clayton Homes division president. As longer term and detail-minded readers of MHProNews know, Stegmayer was hit with an SEC probe and then legal action, which still has lingering afterthoughts, per their current president and CEO, William “Bill” Boor.
Part III – Our Daily Business News on MHProNews stock market recap which features our business-daily at-a-glance update of over 2 dozen manufactured housing industry stocks.
This segment of the Daily Business News on MHProNews is the recap of yesterday evening’s market report at the closing bell, so that investors can see-at-glance the type of topics may have influenced other investors. Our format includes our signature left (CNN Business) and right (Newsmax) ‘market moving’ headlines for a more balanced report.
The macro market moves graphics below provide context and comparisons for those invested in or tracking manufactured housing connected equities. Meaning, you can see ‘at a glance’ how manufactured housing connected firms do compared to other segments of the broader equities market.
In minutes a day, readers can get a good sense of significant or major events while keeping up with the trends that may be impacting manufactured housing connected investing.
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In instances such as Apollo, Berkshire Hathaway, Blackstone or others, manufactured housing may only be part of their corporate interests. Note: depending on your browser or device, many images in this report and others on MHProNews can be clicked to expand. Click the image and follow the prompts. For example, in some browsers/devices you click the image and select ‘open in a new window.’ After clicking that selection you click the image in the open window to expand the image to a larger size. To return to this page, use your back key, escape or follow the prompts.
Notice: MHProNews invites the firms or organizations named in these reports to respond to any concerns about possibly inaccurate information via email that identifies the concern and offers evidence that sheds a different light on the topic discussed. That said, until 5.9.2024, neither MHI nor most MHI publicly traded ‘insider brands’ have done so. They’ve been repeatedly invited to do so, including but not limited to an outreach on Dec 7, 2o23 and Feb 25, 2024. In the case of that response linked above, no apparent reply was given to follow up inquires by MHProNews.
