The Prefab Pod

Prefab Review

Hi, my name is Michael Frank, and this is The Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab and modular housing industry. Today, we're speaking with Chris Krager, the founding principle of Ma Modular and the founder of KRDB, a design build firm in Austin. Welcome, Chris.

Ma Modular

Hey, Michael, thanks for having me. 

Prefab Review

Thank you. Thanks for joining. I'm really excited to learn about your company. First, I hope to learn a little bit more about you. How do you get into this business?

Ma Modular

Well, my undergraduate degree was in general business administration and finance, and I worked in banking and real estate in Chicago for five or six years before I went back to school to get my M.Arch professional.

And upon graduating from graduate school, and with the background I had, I was immediately enamored with architecture. But I also realized that most of the folks that I knew growing up, I come from a born and raised in Detroit working class, middle class background. Most of the folks I knew, didn't have access to architecture. And so I started my design-build practice pretty much immediately out of grad school with the intention of making architecture and design more affordable and accessible. So we did design-build in...

Prefab Review

Is this in Austin or Indiana?

Ma Modular

Sorry. Sorry. Yes. In Austin, Texas. Yes. So I came to grad school. I moved from Chicago to Austin to go to grad school, University of Texas at Austin. And I certainly didn't expect to stay in Texas, but I really became fond of Austin in my time here and saw what you know, coming from Chicago to Austin - It was a big town that was in the early stages of becoming a real city. And it seemed like there was going to be a great opportunity here. So I stayed here and started my design-build practice and we were doing, you know, site built, fairly conventional, not conventional, but I mean, you know, architecturally designed projects. We were entrepreneurial from the beginning. We'd go out, we'd buy land, design and build houses, and sell them. And, you know, our intuition about the latent desire for good design in terms of people who had relatively modest means, fortunately paid off. And, you know, we got lucky. And we ended up on the cover of Dwell magazine with our first project. What started as a small practice of two guys working in their living room pretty quickly became a practice where we had several commissioned projects. And then we started getting inquiries from people in other cities and states. And after doing about, oh, I don't know, four or five or six of these projects in various places like, Baton Rouge, in Oahu, in Bergen, New Jersey, where we would design a house for a client and then they would go out and have it bid with a local GC and it would come in 25, 30, 40% over what we could build it for here in Austin. Our frustration with getting these projects executed for people in other markets led us to pursue this path of modular construction. There was this opportunity that was there and I wanted to figure out a way that we could deliver this product on a broader scale. This is about I mean, this is probably 14 years ago when we first went down this path. And so I had exposure to it. I had worked, I put myself through undergraduate school as a framer in the summers. And back in Detroit, I worked for a construction crew who worked almost exclusively on modular and factory built houses. And so I'd seen this firsthand. So back then, there was probably in central Texas alon probably 8 or 10 modular manufacturers within a two to three hour drive of Austin. So I just started reaching out to them to see if any of them would be interested in talking to us about working with us. 

Prefab Review

Awesome. OK. Let's get to the story, I'm interested. So what did you find? You have your own factory now, Right?

Ma Modular

 No. No, we don't. And so we still use third parties because the idea always was to take the advantage of the existing infrastructure. That's, you know, both the manufacturers, the delivery capacity, and the install crews, which, you know, depending on what market you're looking at, you know, manufactured or modular housing could comprise, in some places 20 - 25% of the market. Usually not that high. But there's a familiarity with this type of building in most markets. Granted, it's usually much more traditional. Yeah, its mass market. Exactly. And so for us, the idea was to just kind of jump into that stream and then, you know, find partners, both manufacturing and on the backend side, set crews and GCs that were geographically appropriate to where we had interests. You know, and I've had people ask me, well, why don't you open your own factory? And I mean that in and of itself is a, I could talk about that for an hour. But it's just because I don't want to be limited. We're interested in providing a variety of product types across a  broad marketplace. So we offer development assistance services, design services, and we do c.a.  And actually we're involved in some of our projects, like we have projects in Los Angeles, we have a development partner out there. We have six or seven projects and we are involved on the equity side there, too. So we're a partner on that project, on those projects as well. But we don't do manufacturing.

Ma Modular

I definitely want to dive into you as a kind of an equity partner and developer. It's entrepreneurial in a way that many of the people we talk about, it's just not the area they've chosen to pursue. 

Prefab Review

So we talked a little bit about it but can you sort of break down between Ma Modular KRDB like sort of what the distinction is and what you actually do. Like what are the different service offerings.

Ma Modular

Well I mean at this point. So Ma was as I may or may not have mentioned, essentially KRDB is the parent company of Ma. It was an outgrowth of KRDB and MA began solely as a company providing single family designs, single family products. And still, as far as what we promote on our website, we still limit that to single family. And going into the modular endeavor, we didn't have any other intention other than pursuing single family. And so KRDB does a broad variety of things where MA, for the most part, we prescribe to the single family aspect of our practice and basically, you know, design services alone.So whereas KRDB does many things, does development, does design, construction, acts as a as a joint joint venture with people, et cetera. So I hope that clarifies that. 

Prefab Review

That's helpful. So one of the questions this varies a lot from firm to firm. Let's say I want to build a fairly custom single family residential home. I apologize for not knowing the exact number - you know, you maybe have like a dozen plans or something like close to that on the website. If I want to build something and say, “hey, I want to do something that's a little X inspired by this, but different.” Are the plans on the MA website?

Ma Modular

They are

Prefab Review

If I was looking to do something more custom, sort of more like a kind of standard custom architecture thing?

Ma Modular

They are. And so there's a kind of a story to that and an evolution of the practice in that regard and in the beginning, so when we first set out to do this, one of the things that we were cognizant of, well, there were two kind of sets of parameters that we're very concerned with and trying to hold in equal weight. When we first started this and as I said, I went around and ended up going to three or four factories in central Texas and sitting down and talking to them and understanding their process and et cetera. And then, you know, also like looking at the very long history of prefabricated construction as it relates to architects and then thinking about, OK, well, we want to provide design on the other side for the client. We want to design flexibility. So the first iteration of MA was a good kit, parts approach where we would say, OK, we're gonna design an array of modules that will be conceived in such that they would provide maximum flexibility for different types of contexts or programs. And so for the first five or six years, all the houses we built were a product of taking those base module sets and putting them together based on the site, client program, budget, etc. And then even tweaking some of those modules. You know, early on and actually the first house we were going to do, I was going to do it on spec rather than doing it for a client. I found a modular company in Waco, Texas, which doesn't exist anymore, Patriot Homes. And they had an a young architect who worked on their team there. And he was very enthusiastic about it. And I found a lot and I bought a lot. We were gonna build our prototype home, which is one that we still have - the Luna plan, which is a fifteen hundred square foot, three bedroom, two bath house. And about two months into the process, I got a call from this architect and he said, oh, the company is going out of business. And so he said, “but I'm going to work for another company up in Elkhart, Indiana. And let me call you when I get there and settle in.” And he did. And sure enough, it was a small, privately owned company and they said, you know, we'd like to do this, we'd like to work with you. And I was like, well, you guys are 1,600 miles away. And, you know, we did the math on it and it still kind of made sense. And they built our first house. But unfortunately, that would just be the first. And then actually, that company built that house for us, shipped it. We set it, I would say, within a year. That company also went out of business. And those are just the first two in a series of kind of failures we've seen and lived through on the manufacturing side. And again, this kind of ties back into, you know, saying I could talk about it now for an hour, about why I wouldn't necessarily get into that aspect of the business as a variety of reasons. I think I've seen failures, but.

Prefab Review

So we, I think you don’t know that much about it, but we help, say, over 100 different people a year, probably multiple times that number actually do projects across the country. And, you know, we've had some experience luckily, I don't think we've had any of them. But we certainly considered and talked to, you know, people like Green Fab that have certainly gone through some issues in the industry in terms of factories. And with the current economic tumultuousness going on right now, this level of diligence on this sort of financial solvency of factories is certainly something that's kind of top of mind for us and sort of helping buyers figure all this stuff out.

Ma Modular

Yeah. And, you know, and it goes beyond that, too. It's also the exigencies of the market. I mean, we've had big companies that we've worked with who are medium sized companies who, for example, here in Texas. And this is kind of maybe a Texas specific thing or in certain geographic regions there is one or two manufacturers who were providing single family product for us and then when there was the oil boom and man camps became a thing there was a huge demand for man camps.

Prefab Review

Right. Why build one custom thing when you could crank these things out?

Ma Modular

Exactly. So there's that as well. And or, for example, we built both single family, I mean, I'm kind of skipping ahead. We got Palm Harbor Homes, a company that we work with, did some of our first houses here in Austin, but also we started working in LA. We started doing some I’d call them basically,a townhouse style product. There's an ordinance in Los Angeles, the small lot ordinance. You may be familiar with that. It allows for increased density. You could build up to like four units on what used to be a single family lot. And so we did. We were doing both single family and multi-family products with them.

And then they were supposed to do, we have a 24,000 square foot mixed use multi-family project here in Austin that I developed, and we were designing and building, and they were supposed to be our manufacturer on that. And at the 11th hour, they said, we just can't do it. And it was just about them looking at their demand at the time, which this was about a year and a half ago, two years ago. And we were gonna go on-line and they just again, it had to do with, you know, them looking at the math, the complexity, how many floors they could crank out a day versus the potential problems they can have with our product, which is a little more complex.

Prefab Review

So, yeah, so let's talk about that. So hopefully we're giving customers their information again. We get many, many, many inquiries every day about people trying to build modular across the country. And certainly your name comes up in particular. We get a lot of interest on the West Coast, hopefully we're not giving the wrong information, is that you are not primarily, at least in Northern California doing work. Is that right? And can you talk about the geographies that you are actively working in and also what you need in place in terms of partners to actually make that work?

Ma Modular

Yeah. I mean, a majority of our work has happened in South Texas, specifically central Texas, although we've done work out in West Texas as well. But Texas and Los Angeles. We've done a project in upstate New York. We certainly get inquiries from pretty much everywhere. I mean, there are definitely specific parts of the country where we get more inquiries. And it's, I would say, primarily the perimeter of the country, you know, the West Coast, down here in Texas, Florida, and the East Coast. Our aspiration was always to offer modular housing as broadly as possible. But I think pretty quickly, what we realized is that there were going to be markets where it won't be feasible because the site-built costs in, I would probably say most markets, you just aren't going to be able to compete with them. 

Prefab Review

You're saying that if you're trying to buy a custom house in Ohio and it's, you know, a $100 per square foot all in, it's going to be hard to make the numbers work. 

Ma Modular

Exactly. Exactly. Yeah. Because you know this as well or better than I do, that the cost of the product at the factory door or FOB be in the industry lingo is pretty is pretty consistent, although I have found in recent years that some of the West Coast factories, 

Prefab Review

It's pretty hard to build nice stuff for much under two hundred dollars a square foot. And my impression is you guys in Austin probably do it for a lot less.

Ma Modular

Yeah. Well and those numbers have gone up significantly in the last few years. It used to be that I could get products quoted on the West Coast with factories working out there FOB, $100, $110 a foot. And we saw, we saw I would say 30, 40% price, if not more price increases over the last few years. I think as demand and interest in this delivery method increased. And then even within the same companies, you will see there's a larger, a larger nasch, one of the larger manufacturers that I've just recently kind of connected with where, you know, we're getting pricing from, they have a westcoast factory and then they have an East Coast factory and they both will do the commercial product. But because of the labor costs in the East Coast factory, which are lower and it's non-union, they found that they're producing the product and they told me anecdotally, it was for one particular client on the West Coast, it was cheaper to build in their East Coast factory and ship across the country than it was to build in their West Coast factory.

Prefab Review

That’s probably right, I mean, I think depending on the home, shipping is not as expensive as people think it is. Particularly if you're good about maxing out the space of your module, you know, Right. 40 by 50 or 40. Ok, cool. So let's go back to the sort of initial question, because I'm sure a lot of people are hoping to understand that. So what are the specific areas you're covering? From my perspective you guys have really nice stuff. What do you need in place to build in other areas? 

Ma Modular

So number one is manufacturing partners, and that's been, hands down, the biggest problem, supply, finding consistency, being able to find, establish, and maintain a consistent relationship with a manufacturer. And as I'm saying, there's one of the larger manufacturers that I just met the CEO at a housing conference here in Austin back in November. And I was introduced by someone. And we 've now been talking to their factories here in Texas, on the West Coast and the East Coast. As a matter of fact, their factory outside of Dallas does not have modular certification. And they're going to get mod certification with one of our floor plans because they see the opportunities. And so I'm very optimistic about developing this relationship. But I am also cautious because we've been like I said, we've gone through so many. There's been so much volatility in this market. So that's the main thing is finding these manufacturing partners. And so we've had plenty of interest from Northern California up in the Bay Area, Sonoma, Napa, et cetera. And I do have manufacturers that we can build with and fabricate to supply units there.

We've just been really focused on, we haven't done a lot of, we haven't been aggressive about marketing. That's actually a total overstatement. We don't market at all. I mean, we generate a lot of our own projects. I have development partners, and then we just get a lot of inquiries on a daily basis. And so we've been focusing on trying to develop our legs. And we've moved. We've evolved into some townhouse and multifamily product and then really trying to as we evolve from and I don't think I finished the story, at the start we started with the kit parts approach and then the manufacturers.

We had a company go out of business and then a couple of companies go out of business. And then when we did find some companies that were interested and willing, like, listen, we would really be much better if you could provide us with consistent floor plans.

We weren't building something new every time they came to us. And that way we can ensure that, you know, we're protected from there being issues or problems on the line. We'd want to slow the line down. And so that's how we moved into the kind of set floor plan situation where people can still pick their finishes, fixtures and finishes and whatnot. But we don't do any custom work anymore. So, you know, finding the manufacturers and then the local general contractors is number two, but close behind. Because if you don't have that GC that is familiar with or willing to understand or learn modular, it's just a non-starter. So you have to have that kind of network of general contractors who are interested in doing that work. 

Prefab Review

That makes sense. So let's let's jump to the costs. What's the most expensive market you guys typically do? Is it Austin?

Ma Modular

No, I think its L.A. And really, the costs, It's more the cost of the mods from the factory. 

Prefab Review

Sorry to interrupt, so what I can say, I always say this to people because I think you guys constantly get, and you, meaning modular companies and architects constantly, get asked about this and are less transparent than people generally want. Not for understandable reasons, because it's hard. Because there's a lot of moving parts. Right, in terms of local building costs, manufacturing costs and the architecture costs. So can you maybe break it down in a way just so that people understand?

Ma Modular

Definitely. And so I would say in Austin, we can probably pretty consistently count on around probably $90 a square foot at the factory. Ninety, Ninety five. And then it's probably, you know, maybe $15 and $20 for a delivery and set costs.

Prefab Review

Does that typically include like foundation and stuff like that?

Ma Modular

No, no, no, no. So like you know in Austin I would say what I tell people is, that our range these days we’re probably minimum $200 - $215 a square foot and up to $250 or so. And that is for the smaller units. It's more. You know. 

Prefab Review

The mod kitchens are expensive 

Ma Modular

stuff like kitchens, bathrooms, AC. And so the mod costs are, you know, you usually half or less of the cost of the overall project. So, you know, the remaining you know, like I said in Austin, if we're, you know, between $200 and $250, the mods are usually $100 to $115. And then the balance of that is going to be the site costs.

Prefab Review

And then as the architect, is it like you have, five or ten or fifteen percent or even higher margin. L

Ma Modular

Yeah, we have a licensing fee that we just build in. And so when I talk about the cost of the models of the factory, that actually includes our licensing fee. And then now we also have a very nominal kind of drawing fee up front to produce permits at banks, ads, things like that, help the client pick out, you know, their selections, etc.. 

Prefab Review

And then let's say you do a project in LA, do you. Is it basically every part of that getting multiplied by two or is it more complicated? 

Ma Modular

I don't think it's by two. I think it's more complicated than that because in Los Angeles, as you probably know, I mean, market to market, there's such extreme variation and things like, you know, the impact fees, school fees and stuff. And then site costs and foundation costs and utility costs. I mean, you know, I mean, even here in Austin, we've seen, you know, utility costs like water and wastewater, tap costs have gone up multiple times. I mean, probably three times as expensive to get a new water and wastewater tap now than it was six years ago. So, yeah. So out there, I don't think it's twice as much. I mean, I think in L.A I mean, I think we would probably, you know, again, it's going to be totally like out there what I find is that the sites have hills that are so huge. Yeah, our projects out there, Echo Park in Eagle Rock. And we're you know, we're lucky if we've got something that's only, you know, a 20 percent slope on it. So, you know, those site costs are hugely significant. And the project cost, you know, I think out there on a single family, I think we'd probably at minimum be $250 - $275 a foot. But again, there can be such variation in those.

Prefab Review

 Honestly, if you're able to do that all, you should because I mean we would send you tons of business.We don't have amazing partners at L.A. who do things at that cost.

Ma Modular

I mean, we've priced some. I know that there's several manufacturers out there that are quoting two hundred foot FOB for mods. You know, you're not going to, we have manufacturers who are not there and they specifically don't locate in California for that reason. Right. You know we can ship mods for significantly less than that. 

Prefab Review

So that's awesome if you can do that. Yeah. We should print that because there certainly is a lot of demand for that. OK. Let's talk about the development work you do as a firm. So it sounded like you sort of got in building with some sort of essentially spec homes. Yeah. So what's that like now. Like in terms of yeah, how do you decide which projects to do?How do you decide to get involved? What kind of partners do you look for? Is it just capital partners to just do the equity? We deal like 1-to-1 with people who come to us for recommendations and how to do different investments and I personally have done a few of these, and I am curious to learn what your framework is for that.

Ma Modular

You know, it’s varied. Usually, they haven’t been solely capital, they are generally, in LA, my partner out there is actively involved in managing the projects. They have a construction company. He came to me initially, it started with one single family house. And that one became a four unit small lot, then 5, then 7, then 14, and single family. And over time because we were copacetic in terms of our interests in design and sustainability etc, we were on the same page. That kind of relationship just snowballed. And our partnership is kind of vertically integrated with him handling most of that. Me being primarily kind of development assistance, you know, design and helping whereas like here in Austin, we have like I said, we were just about finished with our MLK mixed use project was our first modular multifamily mixed-use project. And I developed, designed and built it. My business partner was someone I had done a couple of single family projects with. He had some lots in the neighborhood I lived in. He also had developed. He came to me and said, hey, I'll throw the land in and you throw in the, you know, develop, design, build, services and we'll do this project. And, you know, it went well. We like each other. And he had this other property that he had re-zoned. And so we partnered on that for this mixed-use multi-family project. So I get approached frequently by people at a variety of scales from, you know, not so much any more like one-off single family developments. But you know from single family projects to people having land where they want to develop mixed use multi-family projects and are typically we're bringing sweat equity to the table and bringing our knowledge and expertise in development, design and construction access. 

Prefab Review

Let's talk a little bit about just the last question on this. So when you're considering a project, there's sort of two questions. I'm guessing you're just selling off the units basically when they're done or are these build and hold projects typically?

Ma Modular

You know, historically, they were selling them off. But recently I've been shifting a little bit more into acquisitions mode to hold some things for some, you know, kind of passive income. We're developing a creative office project where my firm will be there and another design firm and we're gonna hold it. And so it’s twenty thousand square feet and we're going to

Prefab Review

Those are just like triple net-lease kind of things?

Ma Modular

Exactly. Exactly. So. So we're you know, we used to be pretty much a build and sell, but now it's a combination of that where we're holding some of it. Some projects, we're holding all of it. Some projects where we're you know, it's a mix. 

Prefab Review

What do you look to do? We get this question a lot of the time. They're like, “hey, I want to invest in this concept of like buying land and putting a house on it or putting a commercial space on it.” Can you tell me, does this work? And, you know, a lot of times it depends on your goals. But, you know, we try to be helpful about explaining, you know, if people aren't super experienced, sort of like what to expect in terms of like cap rates or whatever, you know, at least sort of difference between, like what you could sell something for and what you can build it for. For a rule of thumb, do you look for, are there specific sort of metrics or types of things you look for when you're kind of being like, oh, this is really interesting, we should look more into this or know the economics of this just don't justify it?

Ma Modular

Well, you know, I mean, historically, we were and are kind of value driven firm. And so we have looked in areas, we go just beyond typically, we've kind of gone just beyond where a lot of people were looking to develop to try to see a trend in the market. And part of that was driven by one of our main goals, which was to provide, you know, affordable, well-designed buildings.You know, with the trend in urbanization overall, you know, whatever. We spent 17 years I mean, doing this when we first started, it was pretty easy to do that. Finding good deals just doesn't you know, that becomes more and more scarce these days. And so, you know that what goes into the decision has changed, probably has also influenced the kind of build and sell versus the build and hold decision as well. So because we've done so many different types of projects, I can't say there aren't, really there aren't really any specific metrics. I mean, I'm probably a little more prone to get involved in a project because I have something about it kind of subjectively that really interests me. And it might not be the best return, but because it's in a particular location or there's a kind of intersection of kind of potentials there’s not so much that I'm going to, you know, get twenty five percent return on it.

Prefab Review

And then last question on sort of Ma/KRDB. What scale are you all at right now? I don't know if you think about this in like doors or customers or houses or projects per year.

Ma Modular

Yeah, I mean, that's been the, it's a kind of tricky one to answer, because the project types we've gotten involved with over the last five years have changed and become progressively larger. But that also has the kind of cycles on those projects, as you know, going from building, you know, single family houses, which, you know, when I was doing, you know, I could do a spec modular single family house and buy the land fabricate it and sell it, you know, inside of eight or nine months, you know, this this mixed-use multifamily project I'm working on, I don't know, we're in year four or five on it. So that's a little bit hard. You know, it's hard to kind of put a concrete number on it because you know, the firm's gotten a little like we're still small, we're only 10 people. But we are working in L.A. and Austin. I'm also looking at development opportunities in upstate New York. And they're yeah, they're longer term, long, longer trajectory projects that are of a larger scale. So it's kind of hard to put a door, you know, volume number on it.

Prefab Review

So we're going to, we've got a longer than normal, so we're going to do a kind of an abridged fire round. These are typically questions we get all the time from people. And it's great to have an expert like you to help answer them. So do your best to answer in one minute or less. But we  won't be too strict on it. All right. So the first question is. I know you’ve done a couple different like awarded environmental projects. A lot of firms say they build in an environmentally friendly way. And sometimes, in my opinion, that's incredibly true. And sometimes it's like, OK, you’re just building normally and you’re going to say, oh, we can do a PV system or whatever or solar system on it. And then we'll call it, say, zero net energy. Right. How can I tell the difference between, like, firms that say they're building in an environmentally friendly way. What should I be looking for?

Ma Modular

You know, the proof's in the pudding. I mean, I think that really looking at you know, I think the metrics for those things have changed over time. And now that you have things like the living building challenge, which you're probably familiar with, where, you know, it's more it's looking at that before and after and a much longer trajectory. And so how these buildings are performing and kind of cost benefit analysis, I think is. Yeah, I think you have to dig pretty deep to see if it's if it's kind of substantial or if it's just greenwashing. But I think, like looking at the kind of post occupancy and how these things are actually delivering on their promises afterwards is key.

Prefab Review

And then we get this question a lot. What do you look for in terms of local builder partners? Are there specific things that, like if I'm in an area and you don't have a great network there, what should a customer be trying to filter for?

Ma Modular

I mean, I have previous happy customers. I mean, calling, you know, once you find a builder asking for three or four references. Seeing the houses and talking to the clients and asking them what their experience was like with the builder. I mean, that really is the best way, I think, to vet that. It. 

Prefab Review

And then finally, we're seeing a lot of demand, on like sort of accessory dwellings at least in California. Because they sort of legally made it a lot easier to build more homes. Is that something that you're experiencing as well?

Ma Modular

So we are. It is something that we've been interested in focusing our attention on. And it's been kind of like back burner-ed for me for like five or six years. I've been saying, oh, I'm going to get around to it really. As I said previously, we've never been like aggressive marketers. But especially with the passage at the state level, the change in the ADU laws in California. My business partner and I, as a matter of fact, we were just talking about this yesterday. We've been kind of looking at strategies to try to implement those and deliver those and market those on a broader level. And we have seen an uptick in interest in it.

Prefab Review

So basically, right, for those at home who don't live in California. Honestly, Portland and Minnesota. And then a bunch of kind of I think other jurisdictions have laws that allow for essentially pretty automatic for sort of adding two units or three units to a single family lot in California. 

Ma Modular

Right. And, you know, and Austin's allowed ADUs for like 10 years or so now. But then over and above that, the new rewrite of the land development code that is hopefully going to get implemented. In lots that used to be SF3 which only allowed two units, you could have three or four units. So I think this is becoming you know, this is more and more popular. You're going to see these opportunities in middle and large markets for this, you know, smaller units like this. 

Prefab Review

Yeah, definitely seems to be. I think it certainly can be really good for the homeowner and it provides sort of a unit type thats pretty interesting in terms of like all the second and third order, right, repercussions. There's like there are questions of like, is this really how we want these areas to develop versus just like. Like a lot of the areas that are doing this have also been kind of poor about adding like vertical density, which sort of gives you more bang for your buck. So it'll be interesting to see sort of the give and take between these over the years. 

Ma Modular

Oh, well, yeah, I totally agree with you. I think in my estimation, the thing that has, you know, the primary hurdle is economics. I mean, you can't get approved for a loan for the most part, for an ADU with projected future income on it. So, no. I mean, 

Prefab Review

A few small firms are doing like some version of splitting the economics on that stuff on a small scale. But. Yeah. Right. Exactly.It's basically people who have equity in their homes who are doing kind of like refinance type stuff.

Ma Modular

Exactly. So I think it kind of keeps it from being more broadly utilized. 

Prefab Review

Absolutely. Yeah. And people are trying interesting stuff on that. So we'll see what they're, you know solve for. OK. Final question. And we ask this to everyone. What are you most excited about either for your company or for the industry in the near future?

Ma Modular

It really is the missing middle housing that that has been you know, like I said, the practice has evolved in that direction over the last few years. And I really see I think, well, we'll continue to do single family products. I think that for so many markets, the need and the demand for increased density, you know, going to 10, 15, 20 units an acre in cities, I mean, I could stay in Texas and Houston, Austin, Dallas, San Antonio. The housing demand over the next 10 years, I really think that it's a great delivery method for that product type of the missing middle. And so that's a lot of our effort and interests are, you know, being refocused in that direction.

Prefab Review

That definitely sounds like a worthwhile place to be focused. Thanks again, Chris. For more information about Ma Modular and KRDB, visit mamodular.com and krdb.com. And as always, you can visit us at prefabreview.com for general analysis and coverage over all sorts of things in industry. Thanks again, Chris. Thank you, Mike. Appreciate it.

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Prefab Review

Hi, my name is Michael Frank, and this is the Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab housing industry. Today, we're speaking with Steve Glenn, the founder of Plant Prefab and Living Homes and the current CEO of Plant Prefab. Welcome, Steve. 

Plant Prefab

Thank you. Great to be here. 

Prefab Review

So I'm really excited to learn more about your company. But first, I was hoping to learn a little bit more about you. How'd you get into this business?

Plant Prefab

 Well, that could be a long answer. The short version is, growing up as a kid, I wanted to be an architect. I had Legos and blocks and books on Frank Lloyd Wright and the case study architects. Then I thought I was going to be an architect. I got to college. I learned there in a summer program in design that I have neither the talent or temperament to be an architect. Unfortunately, it concluded, but I learned about developers and realized that if you actually cared about the quality of the built environment, developers were more important than architects because they set the agenda. They hire architects or not and let them do great things or not. So I concluded that some day I should do that and hire great architects and let them do great things. But I was also into technology and that's why I spent my career before I started Living Homes many years ago as a way to really empower architects and architecture and make great sustainable design much more accessible. 

Prefab Review

Cool. I feel very much the same way. Also, you know, among the most fun things that we do is, you know, getting to be make-believe architects, where we help our clients move a door or change a wall. But yeah, it seems like there's a lot of infrastructure that you can really help with in kind of enabling others. So anyway, so at its core, what is Plant Prefab?

Plant Prefab

We design and manufacture high quality architectural, single and multi-family homes. Clients can work with any architect, and as long as those architects design to design guidelines which architects can download on our site, we can build for them or you can work with us. And we have standard designs and we've worked with some great World-Class architects like Ray Cappe and Kieran Timberlake and Brooks + ScarpaBrooks  and Yves Behar. You can select one of those designs or we'll work with you on a custom design. So those are the various options you have to work with us. And ultimately we give people a much more time and cost efficient way to build a very sustainable, healthy home. 

Plant Prefab

So do you have architects in house as well? Or is it primarily the third party people on your website? 

Plant Prefab

We do. We do have architects in house as well, although most of the vast majority of the projects we're building were designed by other architects, not by us.

Prefab Review

But like you can stamp stuff that are like your standard plans and all that stuff? 

Plant Prefab

You don't have to stamp in California.

Prefab Review

I know that's true on a state level, some of our projects with like HOAs and design reviews we still end up seeing that a little bit, but totally. So what part of the process do you take on? Is it primarily the modular construction? 

Plant Prefab

Well, as I said, we design and manufacture. So, again, we can be your design firm and we can manufacture or, we can just manufacture.

Prefab Review

So you're creating the modular shell of the home. Are you basically doing most of the inside the home as well?

Plant Prefab

Actually, we have a hybrid building system that we designed and patented and announced last month. So we have a new kind of panel we developed called a plant panel. So some of our projects are just all panels. Some of them are panels and modules. And some of them are all modules. The module projects tend to come very complete. All finished plumbing and electrical, cladding, drywall, paint, mill work, appliances installed, tiles grouted. We're mostly focused on urban projects. And really the prime imperative is to avoid the costs and delays that often hit urban projects. So we try to do as much work off-site as possible. 

Prefab Review

But tell me more about this plant panel thing. So that's sort of like a panelized flat pack system? 

Plant Prefab

It is, but again, it's available as a hybrid. We're in the custom business. That's one of things that really makes us unique. So we look at each project and we figure out what's the best way to build that project. Now, there may be some constraints. For example, you may not be able to bring in modules because of transport issues or training. In which case it has to be all panels. But it may be that because of the design and it's particularly true in multi-family where they're trying to maximize height and units that really are a hybrid approach, where you do modules for kitchens, baths, utility cores and panels for the other parts of the space, that may be the better approach. Or it may just be that it's more time and cost efficient to just do all modules. So we just have flexibility. We get these things on a project by project basis. 

Prefab Review

That's great. So I'm just looking at your site right now. Are any of the standard plans typically panelized?

Plant Prefab

We can do them all penalized. 

Prefab Review

So it's totally agnostic? 

Plant Prefab

Right. 

Prefab Review

Well, that's awesome. Are you using some kind of like, SIP (structural Insulated panel) for that? What's your approach on the panels?

Plant Prefab

No, it's our own design. As I mentioned, we designed and patented it. It's a pretty complete panel. It comes with infrastructure. So electrical, plumbing, finish work. It's not like a SIP. It's much more comprehensive.

Prefab Review

What geographic areas are you primarily serving right now? Is it mostly California?

Plant Prefab

Mostly California, yes. But we have done projects in other other places.

Prefab Review

So when thinking about what makes a plant home, it sounds like flexibility to work with all these different architects is a terrific quality of yours. There's like a specific sort of standards you have. And I understand there's some structural things, but are there sort of specifics in terms of like ethos, r values, et cetera, that you feel like kind of make something a plant home? 

Plant Prefab

Yes, but I don't know that I would describe it the way you do. I mean, we we're a custom business. So architects do plans that reflect their design intent. They do the specs that talk about finishes and fixtures, but we're in charge of means and methods. And we're in charge of the bulk of the materials that comprise a home by volume. One of the things that really is kind of core DNA for us is sustainability. Which, by the way, something I didn't see in your description about us. And we should talk about that later.

Prefab Review

We're always trying to get better. 

Prefab Review

Yeah. So the first home we ever designed was the first home ever certified LEED Platinum in the history of the program. We've got twenty seven homes certified platinum and a bunch gold, which is way, way more than than any other pre-fabricated and almost any design firm. So building at the highest levels of sustainability, it's just part of our mission. One of our values is Earth Day, every day and less is more. So we are very careful about the materials we source. For example, all of our paints and stains are no VOC. Our drywall contains among the highest recycled content that we've been able to find commercially available and it's mold resistant. Our insulation is made of recycled glass fibers. So we're very responsible about the materials we source, regardless of whether that's something that's important to clients or their architects, although fortunately more more people do care about that stuff. 

Prefab Review

It takes among the highest priorities, I'd say that and cost are the two things we get the most when we talk to customers. Tell me about your collaboration with architects. You list like an impressively stellar group on your site and I guess we know a lot of the same people. So it seems like architects are really excited about it. We had Geoffrey Warner from Alchemy Architects. I think last week or the week before. And he was telling me about how you had something in the works with their firm. How do these work?

Plant Prefab

Well, I guess they probably can be described two ways. One is, we can work with any architect. You just download our design guidelines and as long as you get us plans that are kind of based on some of the parameters we need to be able to build, e'll do it. So that's one way. And then for a much smaller number, we're working with architects. We're actually commissioning them to do designs that we release as standards. And we make them available in our gallery. People can peruse those designs. We introduced last month a really cool new 3D interactive configurator. So, so far, just for three of the homes, the top three of the gallery, you can configure homes like cars with finishes and fixtures you select and even a package of smart home technologies that we offer. Amazon's one of our investors and we worked with them on this package of smart home technologies and our home ship with those technologies. And then you can call Amazon and they'll come over and set it all up for you. So that, you can do online. And with those architects, we pay them royalties every time we sell one of their homes and we'll be doing that more and more. We've got some exciting announcements with some new folks coming up soon.

Prefab Review

Yeah, it's definitely very cool. Cool model. Tell me about that. So I feel like there's a range of models on this in terms of how much of the standard homes get built. I know there are some companies that are incredibly like what you see on the site is what you get at your house. And then there are some where they're like, honestly, the internal joke is that no one builds the standard home. And that's just kind of like this sort of point of inspiration. How does that end up working with most of your projects? 

Plant Prefab

Both. We've done 13 C6s or sorry, it's now called the Living Home 6. But a number of them have some minor variations, nothing major. And we've done a bunch of custom homes based on that. We're inspired by standards. And that's fine with us. What we're focused on, the urban market, and the urban market is a custom market. So we're happy to do standards and we're happy if that serves as the inspiration for some customized version. It doesn't matter to us.

Prefab Review

Let's talk about costs. And I know this is sort of a hard question for very understandable reasons because of all the variables. But you know, we do the best we can to try to be educational for people. So if we assume that, you know, pick any mid-size home you want. And let's just say we're building for example in like Los Angeles or an expensive market. Let's assume that also there's a pretty flat, easy site, right? And it's accessible. You get cranes there, etc. Can you sort of, and you guys are pretty good about being transparent about the cost of modules on your site directly. Can you kind of help me break down the different components of costs? Right. Like what might the design or design tweaks cost? What will module costs run and then like what sort of range in terms of site costs or anything I'm missing. I'm probably missing stuff. Just to help understand what the cost breakdown of a typical project might look like?

Plant Prefab

I can't. We're in the custom business, so we don't have a typical project. The most I can tell you is that our module costs have ranged from $153 to $450+ per square foot. The $153 was a larger multi-family project. The $450+ was a very high end steel framed accessory dwelling unit. So yeah, you know that's when you're in the custom business, you get different types of projects with different budgets. I would say as a general rule, your site, transport, installs, so all of the other costs, can be 50 to 100 percent more from that. So if you're trying to figure out, you know, what are total hard costs, you know, take that range I just gave you and add in 50, 100 percent more. And that's the range we see for total hard costs and then soft costs. I'm not going to say anything about permits that also varies widely. Design fees, I mean, if you're doing a standard with us, it's 8% design fee. And if it's fully custom, it's 15% percent. But different architects have different design fees. 

Prefab Review

Got it. Yeah, that makes sense. We help people across the country. But in terms of like I'd say high end of California, we typically see local costs around $200 a square foot for pretty normal sites in like pretty high end areas and obviously a lot less than that. Sorry. and by pretty high end areas I mean, like San Francisco, Bay Area, Los Angeles, etc..

Plant Prefab

You're saying you see $200 a square foot in L.A. and the Bay Area?

Prefab Review

 For the local builder costs.

Plant Prefab

No way.

Prefab Review

 Are you guys seeing much, much higher than that?

Plant Prefab

Much, much higher. Like that's just easy. I'm sorry to challenge you on that, but you are not seeing any credible bids in the L.A. area at two hundred dollars a square foot and in the Bay Area, double that.

Prefab Review

You're saying $400 a square foot for local builders.

Plant Prefab

3, you know, if you're working with a real cut rate. Yeah, absolutely.

Prefab Review

That's great. That's great feedback to understand what you guys are seeing .

Plant Prefab

That's old data. 

Prefab Review

Yeah. And please, continue to push back because we work with a lot of people honestly, but it's always really helpful to understand you probably work with at least as many. So I appreciate that. All right. So just in terms of sort of finishing up stuff on plant prefab, can you tell me a little bit more about maybe one or two of the projects, let's use coolest as sort of a subjective term. What are among the sort of coolest projects you've done? Like things that you think are really interesting that you've done recently?

Plant Prefab

Well, I'm really excited and proud about the fire rebuild projects we're doing. We hit three. We ship another one next week. So the three we shipped were for victims of the Tubbs Fires in Northern California. The the fourth, the one we ship next week is the first for the Woolsey Fire. And we have 20 more in various stages, some really, you know, I'm psyched that we're part of that solution. I'm also really excited about the fact that we're just building for literally many, many architects who have never done prefab before. And that's part of our mission is to show them and frankly their clients, there is a more efficient, more reliable, more predictable way to build. So we've got a number of projects with the Brown Studio in San Diego. One of them is in the Tahoe area - super exciting project. We have already shipped a couple homes for that. How do you know about that?

Prefab Review

So we're connected to those people a little bit as well. And then we're also doing one of, we're doing a project down the street as well. And I'm a big skier. Well, not right now in the shelter in place times. But yeah, I'm pretty familiar with the project.

Plant Prefab

So we got a bunch of work with them. So those are a couple of projects. And we've got an affordable housing project that we're doing with Brooke Scarpa in Santa Monica for the Community Corporation. We won a million dollar grant from L.A. County last year for that project. We're super excited about that one. 

Prefab Review

That's awesome. Great. All right. So it's been awesome learning a little bit more about what you do. And oh, one more, to the extent that you can be transparent about this, what scale are you are at right now? It sounds like you're doing a lot of projects. 

Plant Prefab

What does scale mean?

Prefab Review

 Sorry, like how many customers or how many houses are you building? I don't know sort of how you think about this, but yeah. Like what volume are you guys at?

Plant Prefab

Not a question e're comfortable answering, but we've got a sixty-two thousand square foot facility and we're full. 

Prefab Review

OK. All right, time for the fire round - basically a bunch of questions that we get all the time that it's terrific to be able to ask to experts like you. To the extent that you can answer them in a minute or less, that'd be terrific. But I will not be too hard on you about this stuff. So question number one. Tell me a little bit about doing different kinds of roofs for modular homes. Many of the modular homes we work with honestly only do sort of mostly flat or like half-12 roofs or 1-12 roofs. I noticed that you actually have some sloped roofs. What are the challenges in doing that? And are you able to do those kind of a modular way or are those done site?

Plant Prefab

We do pitched roofs all the time. Sometimes they're done, oftentimes they're done with modules and they tilt up. So they they ship flat and they tilt them up on-site. And we've also shipped as a separate component that gets installed on site. It's always a shipping height issue. 

Prefab Review

Yeah, that makes sense. Can you tell me a little bit about garages. I noticed some of your homes have garages and I assume other ones can be added on a site basis. When you do them as sort of a standard part of the house, are they actually part of the module or how does that work? 

Plant Prefab

We have done it as part of modules, but generally it seems best to do that on site. It's just more cost efficient to do it that way. So it really depends on the project. 

Prefab Review

And then, his is not a great quickfire question, but what's your experience been with ADUs? We're seeing like an explosion of interest broadly in this. I notice you have a number of models in your line. Are there any sort of key takeaways or thoughts you have related to building ADUs?

Plant Prefab

It just seems like there's a significant increase in interest. We've seen a lot more in the last year than we did in the previous year. So I think it's, and certainly in California it's been made much easier by a series of state laws that started under Brown and are continuing with Newsom. 

Prefab Review

Cool. And then final fire round question that we ask a lot of people. f I'm considering a piece of land or purchase and I think I want to build a modular home or I guess any home on it. What are the key things that I should look for that you look for when you're looking at doing a site analysis?

Plant Prefab

Well, it's all about transportation and craning accessibility, craning little bit less. So if it's one story because you can do roll on. But definitely transportation accessibility. Hills aren't necessarily a problem, but really narrow roads with really tight turns are. But that's assuming you're doing modules. And again, one of the reasons why we developed this hybrid system is we are working on projects where access for modules are an issue. And so we're doing panels. So when you're dealing with someone who has that flexibility, then transportation is a different issue. But if it's an all mod solution you're looking at, then that analysis really has to be done up front because of course, you don't want to find problems later when you actually are shipping and realize that you may not be able to get that to the site for whatever reason. 

Prefab Review

Terrific. Well, thanks so much for all this information, it's been great to learn a little bit more about your company. A final question that we ask everyone. What are you most excited about for your company or for the industry, for the near future? 

Plant Prefab

Well, it's not a great question right now, given what's happening with... So, you know, I feel grateful that homebuilding was excluded from the stay at home directive in the state of California. So we've been open and we're continuing to build. And as I said, we're building a home for a fire victim who very much wants to move into their home next week. But I don't take any of that for granted. And I, of course, I have no greater ability than anyone to know what will be the state of the economy and home building in the next year or two because of this. So we're taking it day by day. 

Prefab Review

Yeah, I think we all are, and that's good to hear that you guys are taking a thoughtful, responsible approach to all of this. Well, thanks again, Steve. I really appreciate the time. For more information about Plant Prefab, I assume plantprefab.com is the best place to visit. You can always visit us at prefabreview.com for general information about the industry. Steve, we really appreciate your time.

Plant Prefab

Great. Appreciate it. Thank you.

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Prefab Review 

Hi, my name is Michael Frank, and this is the Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab housing industry. Today, we're speaking with Geoffrey Warner, the principal architect and owner of Alchemy. Welcome, Jeffrey. 

Alchemy

Hey, Michael. 

Prefab Review 

So, very excited to have you here. Thanks for hanging in here with us during your time in quarantine and I'm excited to learn more about your company. First, though, I was hoping to learn a little bit more about you. How did you get into this business?

Alchemy

It depends on whether you're asking how I became an architect or how we got into the prefab sort of gig, if you will.

Prefab Review 

Either one. It'd  be great to hear the history. 

Alchemy

So, in high school, I wanted to be an architect. I didn't exactly know why. So I went to architecture school and found out a lot of stuff about the art of architecture, which was really aligned with a lot of the things I learned as a kid. You know, going to the Walker Art Museum and appreciated as aesthetic process. The one thing you didn't learn about as much in college at the University of Minnesota was how to put things together. And so at the end of school there, started building furniture to learn how to put things together. And long story short, I was working in an office for a little while. Sort of decided that maybe quitting and starting out with something that's sort of more exploratory when I wasn't making any money anyway. You know, not working and learning how to build stuff yourself is probably a great way to do that. So that's what I ended up doing, is basically doing furniture design, working on bungalow renovations, small home renovations. Minneapolis and St. Paul are littered with these little story and a half bungalows. So those were kind of our first projects. And so this design-build is kind of how we got into both sort of learning how to put things together, I would say, and running a small nascent design office, which eventually became sort of a whole, full fledged architecture practice. 

Prefab Review 

And then did that, so did that start as Alchemy or did Alchemy come later?

Alchemy

Yeah. You know, I worked out of my bedroom almost like I'm doing today because of the virus outbreak. So, you know, by working on these small projects, you basically have a couple of guys who go out and build something. And so you're sort of doing it as a means to an end. But the directness of designing and building, you know, sort of short circuits a lot of the things. You don't have to deal with and say have a full architecture office, but it actually ends up in a weird way it teaches you really a lot about the more subtle aspects of designing and connecting that to actually getting things built. I also shared a furniture design office with a bunch of people, and so we had the ability to do metal work and just experiment with a lot of different materials. 

Prefab Review 

So did you start out doing kind of site built homes like people have been doing forever?

Alchemy

Yeah. You know, some of the first projects we did were small houses because that's what we were kind of, you know, exposed to. The Erato house was actually one of our first house design projects. It was really a practical solution to a problem which the owner had, you know, bought a piece of land for $130,000 and had $50,000 left over to, do, you know, a house or a cabin, a retreat. So, you know, that's not a lot of money even in 2001. So we said here's two solutions. The first one is we can give you a pole barn, which is this big-ass space with nothing in it. Or we can build you a little jewel box. And she says, tell me more about the little jewel box idea. I said, well, it's not very big and you don't have money for plumbing or actual electrical hookups. But, you know, we can build this thing and you know, basically celebrate what's best about your site as a retreat. And that's it. So that's what the first house ended up being. We actually ended up building it ourselves. It kept us busy. It also allowed us to kind of meet the budget to suit design and build at the same time. But really only three of us built it off site as a way of also sort of circumventing the lack of contractors that were available sort of two hours away from our office.

Prefab Review 

So, a lot of people, I think, know you best for the weeHouse. Can you describe the weeHouse and what makes it a weeHouse.

Alchemy

Yeah, so we didn't set out,  the name of our company, our architecture office, is Alchemy, and the weeHouse is sort of a subset of our office, which is named after our prefab design program. And it really came out of this project. And so basically what we looked at is the fact that the site was, as I said, two hours away from our office. We thought, oh, wouldn't it be interesting to just build this thing as a box that we could, you know, put on a truck and we'll build it in our parking lot and we'll put it on that truck and we'll bring it out to the site and we'll put it on its foundation. And that'll save us a whole lot of driving back and forth, et cetera. And our workshop, you know, as I said, we were in a workshop at that point. So it's like we'll have all the tools basically right there. Seemed like a great idea. Dwell magazine, it wasn't really a thing yet. My exposure to something called prefab modular housing is not something that I'd ever even heard of before. And the only example we had is like Jean Prouve from the 20s or 30s or whenever that was, right. 40s, whenever. 

Prefab Review 

Got it. So you were really doing the first one because it sounds like you guys were more or less manufacturing it yourself. So it sounds like it was very much a practicality thing. But anyway, obviously, like what year, not to date anyone; you or me or anyone listening, what year was that? 

Alchemy

That was 2001. 

Prefab Review 

OK. That's not that bad. All right. So it wasn't pulled by a horse to get to the site. Got it.

Alchemy

No, that's not that old. I'm old, but not that old. You know, it's interesting to think about how much things have changed since 2000. I mean, the birth of the Internet was, you know, sort of mid to late 90s. And this was happening at a time when the economy was exploding. You had all that .com kind of stuff and it was very expensive to get things built. And so really, this was a means to an end. What we did. So you asked earlier that I didn't answer your question yet about what the weeHouse is and what we did for our client, Stephanie, is we just basically looked at what, you know, the biggest load that we could kind of fit on a truck 

Prefab Review 

Right on a truck, that's how everyone starts with this. 

Alchemy

Yep. Exactly. And so we said, all right, if we stay under 14 feet, actually, that means we don't really have to have very stringent permits. So we did that. We had a steel frame so we could bolt a porch on. And what we ended up with is something like if you are familiar with Donald Judd's concrete sculptures that look like shoe boxes with the sides taken off. So basically a square, you know, a rectangular tube in space is really exactly what the original weeHouse looked like. Interestingly enough, I didn't actually find out about Donald Judd sculptures until one of our first clients who saw the original weeHouse said, and lived in Marfa, Texas, where he lived and worked and did his art and said, we want a house just like that here. And when I found out that he'd done whole fields of concrete weeHouse  things, I said, hey, this is awesome.

Prefab Review 

That's cool. OK, so when we're talking about weeHouse, are we talking about something that's modularly built versus built as a kit. Sounds like you're building at least the first ones modular?

Alchemy

Yeah, we. Anything that you stick, anything you make as a shoe box is you know, referred to as a modular building. Right. You know, now we look at a lot of different ways. Basically, we just use. Well, let me back up. The nice thing about doing it that way is that you can build everything in that box and get it all done and put it on that truck and ship it out and the inside's done completely, the outside, if you design it right, it can almost be done as well too, which is the case of that very small three hundred and fifty square foot house that we did.

Prefab Review 

So are you putting appliances on the truck and stuff, too? Are those getting added in by a local builder afterwards?

Alchemy

In that case, we probably included, you know, like an under counter refrigerator or something like that actually in that case, it didn't have electricity. So it was probably just an icebox actually that she put ice in.

Prefab Review 

Cool. And then in terms of the evolution today, I assume you're using third party factories or second party factories, whatever you want to call, you know, factories not owned by yourself to actually manufacture. And you're focusing mostly on the design. Right?

Alchemy

Yeah. So just to kind of continue the story in one minute or less. Basically, a lot of people saw that project, which, as I said, was just a means to an end. And we thought, hey, this is, you know, maybe something we should tell people about. So it was a Midwest home no, not a Midwest home, a Met home. And they put in their holiday gift guide and said, here, buy this for your sweetie for Christmas, which we thought was a little weird. But a lot of people saw that and said, hey, we want one of those. We want it just like that, but we want it to be three thousand square feet. And the one we did was 300 square feet. So that's when we started researching factories to build these things. And we found out about, of course, the modular home industry, which had existed for decades. And they were set up to do as, you know, not quite the lowest common denominator housing, but just basically, you know, focused on inexpensive, quick housing solutions. And what we did is, you know, reach out to them as partners to try to just basically include better materials and just more design value, I would say, to build these things.

Prefab Review 

Got it then. So today you basically have like a kind of network of a few factories you typically work with?

Alchemy

Yeah. We probably worked with over 20 factories at one point or another over the almost 20 years that we've been working on this process. And, you know, now we really rely mostly on just a handful of factories who we feel kind of meet the quality and capability needs that we're looking for.

Prefab Review 

Got it. To push into that, I guess sort of two questions. One, can you, no pressure if you can't. Can you tell us who these factories are? And secondly, what do you look for in, like, how do you assess, the quality of the factory in terms of being a partner?

Alchemy

So, you know, when we started doing this originally in and about 2003, I guess, is when we thought we might do more of a system, a design system, it was almost impossible to get any factories to work with us because they didn't need to, they were so busy. And they didn't understand why. I mean, people didn't go visit the Internet and look through all this stuff and we didn't have prefab groupies calling us up twice a week, you know, wondering about what we're doing next. You know what I mean?  So it was hard to get those first factories identified and on-board, but eventually, you know, by explaining and by poorly providing the answers for them in the processes to them to say, hey, here's how this design works. This is how you can execute it in your factory. They started to realize that we actually did know how to put things together. We really thought very intently about that process and the build ability on their hand. And I think that really helped at the beginning. So to your question, it was like, how do we know who is right to work with? You know, now it has to do with what they're good at and how we can leverage their best capabilities to deliver the design with their capabilities where that might be. So, for example, we're not doing all of our houses in a modular way. We're working with Plant Prefab in California, for example, who does the living home. And they also have a suite of architects. And so we're about to roll out something called the lighthouse with them. They built a couple projects for us already. That's sort of like the modular standpoint. And then we're also working with, say, Bensonwood on the opposite coast, who is more of a panelized producer.

Prefab Review 

And we've had him on the podcast so far, by the way. 

Alchemy

Yeah, exactly. I'd be surprised if you hadn't. Right. So, you know, you work with each of these outfits in different ways according to what their main capabilities are.

Prefab Review 

Would you use, again not an expert but fairly, fairly familiar with Bensonwood. And like as you said, they're a kit provider or a panelized provider or whatever you call it. So does that mean you would not use them for sort of a typical house because it's structurally different? Or will you do that in a number of different ways?

Alchemy

Well, you know, basically what we would do is look at, you know, we're essentially doing a very large weeHouse with them that really takes advantage of a panelized process instead of a modular process. So by that, I mean, we also do something called barn houses. And if you think about a barn as being, you know, like barn space is a big, huge space. So which doesn't really want to come in boxes. So we have a very modern design that takes advantage of their system and is very sustainable. So, you know, matching up the ethos of the project as being very sustainable, very low energy with a volumetric delivery system, which really lends itself to panels and then combine that with the really high quality sort of couture materials and details on this project with their expertise and ability to get that through is, you know, makes them a great partner for us there.

Prefab Review 

Makes sense. So typically when you're deciding, do you do sort of just standard stick built stuff too still? Or is it mostly kind of panelized or modular.

Alchemy

Yeah. Well, that's a great question. So, yes, we do. We have evolved initially thinking that we were going to you know, people sort of would call us up after this Met Home article, for example. And when we sort of had very static Neanderthal kinds of drawings online showing what the weeHouse system was like. And we thought, hey, we're gonna be able to press a button and these houses are gonna come out. It's like, well, this is great. We're just going to order off a menu just like you do at McDonald's or whatever it is. It's going to be great. Well, you know, we quickly discovered that was impractical for a lot of different reasons. And I think that fast forward to today, we look at every project as a combination of a lot of different kinds of sometimes competing requirements. And what we do as architects is really try to match the delivery system to the tools that we have and the design needs for that particular project. So that means that actually we have  weeHouses that look like they should be built as modules that we sometimes build on site because it just, it matches the team, the local team better. And the capabilities and the costs or the opportunities, you know, mean that we went that route instead of doing it as a modular project.

Prefab Review 

Right. I imagine that crane or site access may also, how does that play a significant part into your choice on this?

Alchemy

I mean, sometimes it has to do with like does it cost more to design it off site and then put it on a truck? Because, you know, like the labor costs in some rural areas are actually quite, quite low. And so you can employ really awesome craftsmen in the middle of nowhere. If you can find those craftsmen, which you mean you can a lot of times. Right. And it doesn't need to be done in three months and done. You know, you've got like a year to build that or whatever it is. And so it's like, great, let's build it with these guys who are awesome. And they're gonna build it on site. And that's what we're gonna do. Other places when we're delivering to San Francisco, for example, it totally makes sense to build it as a modular because you can drop it in a box. You don't have to tie up, you know, the street for more than an afternoon or whatever it is. And you're basically on your way. 

Prefab Review 

That makes sense. So can you tell me about maybe one or two of sort of the coolest projects you've done so far? Define cool however you define it, most interesting etc.

Alchemy

Oh, boy. So now you've got me on the spot because, you know. It's funny, we get a lot of, we created a very open ended design system. And so we get a lot of clients who bring their own sort of thoughts and dreams into where these projects are going to go. And so we're continually learning from our clients. You know, we have unbuilt projects for the tops of skyscrapers that were real projects that we didn't end up building, which are still nonetheless actually really interesting. We got to work with the head architect at Apple and do a project for himself and his own land. And, you know, he was actually really inspired by the original weeHouse and maybe the Marfa weeHouse, which were very, you know, just very, very simple, almost platonic, iconic projects. And he basically wanted to do it just sort of that same way, but just really kind of being able to bring up some more building quality and a little bit more geeking out on the architectural-ness of it. And that project actually, as you know, was really a great example of what you can do kind of on a higher end, which is still actually quite modest by most custom architectural standpoints. 

Prefab Review 

And just a question. So we deal with people all throughout the country. But we do have a lot of customers who come to us, you know, on one coast or the other. What do you do when you're spec-ing out a project? Because I've had three calls about them today. Like sort of average cost in different areas. But what do you think when you're talking about the cost of sort of a custom project in sort of the Midwest versus maybe one of the coasts? How much of a discount are people seeing? Because sort of the occasional question I get is, hey, I just want to build something cool somewhere. This is a second home. What's it gonna cost? Which is incredibly broad and incredibly hard to answer, but just sort of interesting kind of the range of costs on your projects. It sounds like you have a lot of breadth in terms of geography of where you build. 

Alchemy

Yeah. I mean, that's a good question that you know, I grew up in the Midwest and I'm driven by a kind of a farmer ethos about this sort of practical Hands-On sensibility and really an admiration for the poetics of the industrial and agrarian landscape, right. And so I am really attracted to sheds and barns and the quality of light you kind of get inside and around those kinds of things. That can be transported to just about anywhere in the country. And the way of achieving that in other parts of the country, I think people understand that kind of way of thinking. And so we try to import what the practical solutions are to these things, to areas where it's not necessary, the lowest common denominator building. And so sort of naturally we go where there's the east and west coasts, primarily California and, you know, Oregon, Washington and up in the northeast where, you know, developing modern, small projects of really high quality is something that you can do a really nice job, but it's more of a case of like most architects are already busy doing like one and a half, two million dollar houses and up. And so finding somebody to do a half a million dollar project is actually quite hard to do because it's pretty much the same amount of work to do a half a million dollar job as it is to do a two million dollar job. 

Prefab Review 

So last question before we jump into our fire round and what, if anything, are you most excited about or what are your plans to sort of scale or do different things with your company going forward? Like we hear from a lot of people, hey, this ADU trend is something we're going to focus on a lot. Are there in terms of the way the world looks now or was maybe a few years ago? Are you planning to do anything different with your company?

Alchemy

So I'll answer that in sort of two parts. The first is just about the industry in general. I mean, I'm excited that the fact that this is just there's more awareness of the process and the technology and why you would do it. There's an awareness of sort of the state of the need for sustainability and to use our resources on earth wisely. And there's also a bigger awareness that sort of, you know, less is more. So on our own side, e've spent a lot of time really embracing the idea of small dwellings and the quality of living small. The luxury of less. And so the latest project that we're working on, this latest effort that we're rolling out initially with Plant Prefab is the Lighthouse ADU, which is just a small dwelling of about five hundred square feet for both, you know, eight accessory dwelling units and guest houses. But it's flexible enough to be adaptable to a lot of different sites in terms of how you access it, in terms of how you look out, how it takes in, you know, the wind and the sun and all that kind of stuff. And it can be achieved, you know, pretty quickly. But above all, it's, you know, sustainable. It's well-crafted. It's beautiful, and it's actually aspirational rather than just being, you know, a need to be somewhat inexpensive or something.

Prefab Review 

Got it. All right. So let's jump into what we call our fire round. These are questions that we get constantly on our site. And yeah, it's great to be able to tap experts like yourself to get answers. So if possible, try to limit yourself to one minute or less per question. But we won't come down on you too hard if you don't. So the first question is, what should a high quality architect cost? If I'm looking into paying for an architect for my project. So, you know, oftentimes we see a percent of project costs. We've seen a number of different models though, so eager to understand that.

Alchemy

I think it depends on what that architect is doing. You know, we plug in at somewhere probably around 15 percent of the project budget, which is actually pretty common. You could go up to 20 percent. You could go down to 10 percent. But I think that you can also get a lot of value out of it. Working with someone on a limited basis in which you're putting the most work in for the sort of highest value of that work on a consultant basis.

Prefab Review 

Got it. That makes sense. As part of your standard process and your research, you talked about a feasibility study. What's involved in the feasibility study? 

Alchemy

In the last couple of years, what we've realized is the best way to leverage this suite of pre-designed houses is to use not only our built projects but the conceptual background for the weeHouse program, for example, and the Barn House program and the lighthouse as starting points for people to really quickly, you know, discuss with us what things that they're both practically open to and also kind of ideologically or are aesthetically open to. And so what we do is, we go out on these kind of very intense one to two day site visits where we basically are planning the whole project that carries all the way through from that initial site visit.

Prefab Review 

Is that a requirement that basically you're always going to the site to do a project? 

Alchemy

I really feel like the site is almost more important to the outcome of the project than even the houses. And so we really feel like meeting people, understanding them, having them understand us goes so far through the whole project. You really become kind of married to each other through the course of the project. And so that's the place to design, to build the trust, and to really understand the subtle, maybe unspoken requirements of any project as well. Just understanding the site, I mean, there's so many things you can't appreciate about the site and the opportunities about the surrounding areas that really, you know, have to be done in person, on site. 

Prefab Review 

And then, can we talk about integrating solar? I mean, it's something that more or less is required to do in California right now. And I'd say probably the majority of projects we're working with have some kind of solar or renewable component. How do you think about that as an architect? Are you seeing the same thing? 

Alchemy

We're putting solar on our own house, which was actually a weeHouse that was built for some other people in 2007, and so, you know, we're putting I mean, I feel like that it only makes sense. The there's a couple of different ways of thinking about solar. I mean, once you put on solar, then you're using more electricity. Right. And so you're designing a house to use less energy. We start by saying look, we're going to give you as close to a sort of  practical passive house envelope as possible, which means we want it to use as little heating and cooling as possible as a starting point. And then you add on the electrical kind of components for your house. In California, it's almost all electric now. And so having those solar panels to offset that electrical usage is you know, it pairs very closely with the passive design. 

Prefab Review

A final question and apologies, we ask this to everyone every episode, and I sort of kind of asked you this question already. So apologies in advance. What are you most excited about for your company or the industry in the near future?

Alchemy

I think actually the lighthouse that we're developing is going to really be as close to the idea of the house as an iPod, If you know what I mean. And you know, as I said, I'd rather an iPhone but the ability to bring, you know, practically deliver design in a package which is kind of closer to actually pressing a button and making that rollout in a whole bunch of different ways, either whether it's modular or site built or panelized or kitted out, I think is going to be something that people are going to appreciate when they see some of the examples of some of the things that we're working on now and we've already completed.

Prefab Review

OK. Thanks so much, Geoffrey, for being on this. It's been terrific to learn about Alchemy and weeHouse and everything you're doing. To learn more, you can visit AlchemyArch.com and you can also always visit us at prefabreview.com for broad coverage of the industry. Thanks again. 

Alchemy

Thanks a lot, Michael.

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Prefab Review

Hi, my name is Michael Frank, and this is The Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab housing industry. Today, we're speaking with Jim Russell, principal and owner of Ideabox. Welcome, Jim. 

Ideabox

Thanks. How are you?

Prefab Review

Nice. Nice to talk to you. And thanks for making the time for us in this weird world we live in right now.

Ideabox

Yeah. How are things going in San Francisco? 

Prefab Review

They are, they're going, you know. I see the inside of my apartment a lot. So otherwise it's hard to tell. It's a weird place right now. Anyway, moving to a slightly less grim topic, I'm excited to learn more about your company. So first things first, I was really hoping to learn a little bit more about you. How did you get into this business?

Ideabox

You never know how things go. It's kind of a career thing in the sense that it wasn't defined at the beginning, but it's certainly something that's been fun. Now that my background is in architecture and also energy and resource efficiency, and in the 90s, I was working with a team that produced energy efficient prefab houses in the Pacific Northwest, which is where I was introduced to this industry. And then long story short, to do a variety of other energy efficiency, marketing and programs and then also some marketing campaigns for companies, large, large, large companies but always had this interest in the prefab construction process and its ability to deliver homes cost effectively, but always kind of felt like design could be utilized in this industry sector. And then with my background in energy and efficiency and also materials and healthy home and all the things where we worked over the past decade, it just seemed like an interesting combination of skill sets. So we started it and then that's the real boring version of it. But that's how it is. 

Prefab Review

And so I'm just looking at your LinkedIn, It looks like you started out right around 2005.When you started it, did it look like, we'll get into your product offering in a minute or so, but did you start with something similar to what you're doing now or was it pretty different?

Ideabox

Well, it's interesting how, you know, that was just before the 2008 collapse. And now I think we stayed pretty true to the original goal, which was that we always felt like houses were starting to become I don't even know how to describe it, our idea was that you could live simpler, that you could live not in a causal way. That's the one key thing, is that it's not about living a certain lifestyle, it's just living easier. We always felt like there were a lot of these new materials at that time that could make your lifestyle less attached to the house and on the outside and more comfortable to live in a healthy sense, on the inside. And then we always felt like, you know, designing a lot when I started in architecture, it was in a resort community. And I was always fascinated with why couldn't houses be like the places we always want to go? So I really wanted to bring design into the small house sector, but to the prefab industry, really. And so that's kind of where we came from. And we're still trying to do that today. Our houses are a lot bigger now than where we started. But the concept is still the same. 

Prefab Review

Cool. So let's get into that. So I have some knowledge of this. But, you know, for both me and for everyone at home. Can you explain more about the exact products and the houses you are building on a regular basis?

Ideabox

Well, we build primarily today to two different building codes. One is the manufactured home code, which despite its reputation and the market, they're really pretty cool in the sense of how it works with local municipalities and permitting and that kind of stuff. And the other one is modular, which is when you're building the local building code wherever that house wants to go. So, you know, each has their strengths and their merits. And, you know, our theory relating to codes is whatever the right fit is for the project and the customers, is one that we pursue.

Prefab Review

Yeah. Let's dive into that a bit before, I do want to get more into your specific stuff, but let's dive into that because a lot of the companies, especially the modular companies we talked to, build only to modular code. I think as you said, manufactured gets kind of a bad rap in terms of they're short of a bunch of reputational things around sort of how they appraise, how they appreciate, etc. So it would be great to understand sort of what your take on that is.

Ideabox

Well, I think, you know, I think it's just in my view, the way we approach it, it's just a code. Like any code, you know, whether it's building a shed in your backyard to the local code or whether it's building a twenty thousand square foot house, codes are codes so you can build well to a code. Or you could build something not so great to code. It depends on what your goals are. So, you know, when we approach the manufactured home concept, it was about the flexibility of what that code offers. Now, there's a lot of, you know, restrictions to how that code works better overall. It's a pretty cost effective way to deliver things, not in how the home is designed or built or the materials you use, but just in how the code works. So while there is this huge preconception of and it's still true, I think there's a lot of ignorance in all communities about what a manufactured home could be. Those things still exist and they're still real and they're still building houses that, you know, could be cooler, but we didn't look at it from that perspective at all. We just took a fresh approach and it wasn't easy to to find a building facility or two that would be willing to work with us because we were coming at it from a different place. But in the end, it's a valid solution for a lot of people. 

Prefab Review

So let's dive into this more specifically. Right. I'm definitely not as knowledgeable as you on this. So the key thing on manufactured right, is that they're approved by HUD on a national level. So I assume the permitting is a little simpler, right? Are there major nuances I'm missing, which I'm sure there are? And then also from an actual building standpoint, how does that differentiate between the homes that you build to the modular standard and to the modular code versus the manufactured code, are they actually structurally different at all? And what are some of the key differences?

Ideabox

Well, the first part of your question, it is overseen by HUD. They do have local considerations. For example, if you're in a small load, you've got to meet that. Up in the northwest here, we have a different energy standard. We build above all that anyway. So it's really never going to be an issue for us. But it is an onerous code. It's actually more onerous, really, than modular just because of the layers of oversight the HUD code and the federal government require. And as far as structural differences, the biggest primary one is that HUD code requires the steel frame that the home is transported on, remain on the house. So you're using those two I-beams as part of your structure. When you build modular they're not required to have I-beams. Those if they do, they come on a carrier or some other kind of transportation device and those things go away. So your structural loads and calculations and everything are to the perimeter. And so structurally, that's basically the biggest difference - the floor joists almost all the time. And then also the foundation preparation for the houses is different. One is that there's patterns depending on the house as to how you support the frame and the perimeter walls. And on the other side, the modular side, you're building a conventional foundation most of the time. But other than that, it's really I mean, there's some other electrical nuances and plumbing nuances and small things. But if you stood in one house that was modular and one of ours that was manufactured, you probably wouldn't notice the difference.

Prefab Review

All right. So from a cost perspective, does that mean that using sort  of permanent foundations vs. right, typical manufactured homes by definition, or whether they're permanent or not or sort of often considered not permanent, that means that the cost of the foundation and site work tends to be less? 

Ideabox

Well, it certainly can be. Ours' aren't. I don't know of any of our houses that have ever been moved. It's a bigger deal. But you know, there are code provisions that consider the manufactured installation to be permanent. You know, in the West Coast, in California and Oregon and throughout the west, really we'll have seismic standards you have to meet. And so those are enforced which is great. But I suppose on the very low end or the less costly end, they can remain somewhat mobile like in a manufactured park, for example, or it's not a permanent install, which we  don't do many of those. So I'm not as familiar with those. 

Prefab Review

And then the last question on this particular topic is, yeah, I don't know how involved you are, I think the other question we get on this issue a lot is around appreciation of that. Have you seen any difference in the appreciation in sort of buyer's willingness to pay for one or the other?

Ideabox

That's a, you know, often asked question. And I think in the case of our stuff, I can't speak to the other stuff. But, you know, there's a couple of things and it has to just do with really human nature, a really nice house on a really good site, it's gonna do fine. We've only had a few of our houses re-sold and all of them went quick and fast and above asking. So you know, we've done over 300 now, I forget where we are exactly but we're out there now. And so it's a small percentage of what we've done. But they did do fine. I think if you put a you know, not an expensive house, ours are considered kind of expensive in this sector, and a lousy site, it's not going to do well at all. So it's really I think, locale.

Prefab Review

 So we sort of went off on a tangent, which is kind of a fun tangent and we get those questions a lot. But just getting back into what Ideabox actually builds, so I'm looking at your website, it looks like, you know, you build a lot of small and medium sized houses. What are the things for people listening that sort of make you distinct? Like what are the key values? What are you trying to accomplish? And how does that manifest itself? 

Ideabox

I think, you know, in a fundamental esoteric way, we just want houses that are a blast to be in. We are also interested in creating things that don't require a lot to live in and around, you know, kind of what I said earlier. So it's really mostly design. I think that's you know, we're really big on the use of a lot of glass to bring in lots of natural light. And, you know, with the window technologies today, we can do that without too much energy penalty. We like volume. We like things that are tall and well, you know, there are road restrictions as to how tall you can be with something. We try to maximize those volumes. We love openness, you know, before there was an open concept, we've always been big about sharing space with, you know, like living in, and dining in, and cooking as a public part of a house. And then there's the bedrooms and baths and stuff that's the private part of the house. But all of them want to live the same way we want. Lots of life, lots of lines, lots of air. We'd like all that kind of stuff. And we like access to the outdoors quite a bit because we live in a pretty cool part of the world. Most of the time and the ability to live inside and outside extends the size of a home quite easily. And because we are what we are, it's just as fun to be outside as inside most times.

Prefab Review

Which is in Oregon, correct?

Ideabox

For this network today, we're most of the West Coast. We are working on projects now in Palm Springs and projects up in...

Prefab Review

Yeah, we'll get to that. I mean, you guys are specifically located in Oregon, Correct?

Ideabox

Yeah, we are physically in Oregon.

Prefab Review

Cool. So let's talk about if I buy an Ideabox home for myself, what parts of the process are you helping me with vs. another party? You know, you're handling the design, I assume. You know, potentially the prefabrication, not the site work. Like, can you give me the specifics of sort of what areas you handle.

Ideabox

So are you talking about just kind of the process of what we do? 

Prefab Review

Yeah, exactly. And which of those parts sort of do you bite off versus working with other parties.

Ideabox

Well, you're working with a lot of parties. At the end of the day, you know, every single project is a construction project, whether it's a little house or a big one. So the one thing that we've tried to do is, and most times clients haven't done this kind of thing before. So you're having to take on a lot of hats. And as we've grown, you know, into modular stuff, finding contractors and stuff is really the primary challenge of a project's completion. But the process of things really is; our client comes in from wherever they are. We like to talk to them and meet them and talk about what their goals are. This is design related, but it kind of is you know, budgets are huge and we want to make sure the clients understand what they're wanting to do and what their budget goals are and make sure that we're steering them in the right direction. Typically, we meet with them. We can meet with them in person. A lot of times we don't. But we can see all the sites on the computer today. We can see them in 3D. We can get a sense of scale. The one thing that we have to pay attention to that site-built projects don't, is we have to be able to deliver the products that we build. And so we're looking at it from both a design perspective in terms of views and opportunities and how that site wants to live. And also how do we get a box? It's so big and so tall and so long for that location. So there's that extra little bit of fun in that. And so then conceivably, the design part's always fun and it's always interesting. And we try to have as much flexibility as we can within the limitations we have working in a plant, you know, as a prefab builder. Once the design is complete, we have several builders we work with in different parts of the West Coast. And so that house gets reviewed and costed. And meanwhile, we're working with a client to secure local contracting. Because that's equal, if not more important and actually most times more challenging than building the house part. One magic day, the house gets delivered, this is cutting edge really sharp. The house gets delivered. It gets finished and they're off to the races. 

Prefab Review

So what do you do? Do you own your own factory? Do you work with third party factories or how does that work? 

Ideabox

At the very beginning, and it also comes from my background with the industry and energy stuff, we've always felt like there's existing capability out there already. And running both production facilities is a completely different experience than like running a design shop. So we've always wanted to take advantage of existing capabilities. And now it's not easy to find the right ones. And it's a marriage at the end of the day. You've really got to find people who believe in what you're doing and you go through that kind of process with those people before you can go work with them. So yeah, we work with existing facilities.

Prefab Review

 I want to talk about it because we know a lot of them in your area. Yeah, are there a couple specific ones?

Ideabox

Yeah, but we have proprietary stuff with them. They're not the ones in your area. The other thing that I have to say is that we have a kind of an affordability goal, too. Right. So a lot of the factories that are kind of in the news a lot these days,

Prefab Review

 Or in your area or in Washington are a little more expensive for a price point then my impression of you guys, right?

Ideabox

 Yeah. Because that wasn't ever our goal. I mean, you know, it sounds kind of whatever. But if price was no option, you'd do tons of things. And so part of our, I don't want to say mission, because it sounds serious, but part of our goal was to have houses that people can actually buy. And the things we were seeing when we first started and even more today, their costs are incredibly expensive. So our goal is to stay in the room for most people.

Prefab Review

So it's low. Let's dive into that. So one of the questions we get a lot, which we do our best to answer, which, you know, I find modular companies often have a hard time answering for understandable reasons. It's sort of this price point/cost question. And I understand that that's partly because every site is different. There's levels of customization. But let's talk about one of your projects or sort of an example project in an expensive city. Right. Let's call it Seattle or something. Right. From like a cost standpoint, what might we be looking at and it'd be really helpful if you could sort of help break that down in terms of the different parts of the project. Right. Like sort of design, soft costs, cost of the modules. Right. And then, you know, kind of typical, maybe site costs for a relatively easy lot. 

Ideabox

That's a very, very loaded question. As far as the way we cost things is that what you're seeing online is reflective of typical projects of that particular model. We don't really change the costs from place to place because that's relevant to us in terms of just the house part. With the exception of any local code, things like, you know, the easiest ones, snow loads. But, you know, those kinds of things will have an impact. In California, obviously, there's the wildfire stuff like sprinklers and those things. But we don't change our costs, relating to where the house goes. We've said we're re-evaluating some of our houses or doing our current process. It's been since 2005. We've always kind of had a margin that we've set which allows us to be freer with what we do in design. So what we make isn't relying on the house. It's just what it is. 

Prefab Review

So let's go along, I'm looking at your website right now, so I'm looking at the Ideabox Fuze 3, which for those at home who are not looking at it, it is a very nice looking Fifteen hundred-ish square foot, three bedroom house, right? Like the price online, it says the original starting at $207,000. The custom is starting at $235,000. So first of all, as you said, that is significantly less than some of these other sort of high-end factories where, you know, we see like $190 to$210 per square foot per module. Right. You guys, I guess, doing some quick math in the back of my head you know, a little more like $150 per square foot on that. That makes sense. All right. But yeah. So are your local costs then going to be pretty similar to that? 

Ideabox

That's the kicker. And that's the most difficult part because depending on where you are, the cost can vary wildly. Right. You know, in Portland and Seattle and I'm sure in the Bay Area, obviously in the Bay Area, competition for contractors is really, really high and location like anything, is location. And so those costs are much, much higher than, say, a rural site. And on the other side of Yosemite or somewhere like that in California, or eastern Oregon or wherever. So those just those are just crazy.

Prefab Review

What are you seeing these days? So I can tell you what we see if that's helpful? Right. We typically see like with a few exceptions, right. If you're doing something in Oakland, you know, somewhere in the Bay Area that's expensive, $200 a square foot for the local side of this would not be unusual at all. 

Ideabox

Yeah, that's that's what we're seeing. I mean, the site prep is site prep always. So it's not going to be different from our house or a site built or from a high end prefab company. That's just what they are. They're not going to change it, too.

Prefab Review

OK, so let's talk about this sort of relationship with the local builder. So he's the local builder. How are you guys doing the transporting for all of that stuff or is that the local builder or how does that happen?

Ideabox

Well, we arrange all of the transport and delivery and then to the extent where some sites require certain kinds of equipment to get homes there. So we want to coordinate all that. And then depending on code like manufactured as an example requires in most states, a licensed installer to do the install. So there's a contractor that's preparing the site like they would for anything. And then if it's a manufactured install, we do need to find the source of a local installer. On modular, the general contractor can take it all the way through if they want to. We still like installers because they've done it a million times. And, you know, it's just a higher degree of security, I guess. 

Prefab Review

But then how many customers are you actually serving on a yearly basis?

Ideabox

I would say, you know, with all the weird stuff going on these days, we're about at 30 to 40 houses a typical year. At any given time we probably have 40 to 60 projects in some phase. And that seems to be fairly typical year after year. 

Prefab Review

How do customers find you? 

Ideabox

I think the Internet mostly. You know, we're in a town called Salem, which most people only know it being south of Portland. So, yeah, we're not a drive-by kind of facility. We just have a little spot here in Salem and people come in usually from the Internet. We used to do a lot of home shows back when there were not a lot of them, just a couple really in the northwest. But those have kind of changed. So it's really Internet driven. We were on HGTV a few years ago, and that continues to send people. And, you know, certainly the magazines are kind of fun, too. So I would say Internet mostly. 

Prefab Review

Yeah. So let's talk about the actual design of the actual homes. One of the things that I've heard from some other companies, this may not be true for you, is that the sort of homes that are shown on their site or the plans on their site are basically advertising and no one ever actually builds them. You know, they're more for inspiration. Is that something true for you or are people sort of building, like what's the breakdown of kind of very custom designed homes to something incredibly similar to what we see on your site?

Ideabox

There are some that are more popular than others, but the one thing about our side is that everything you're seeing is very real. All the models have stemmed from something - some projects that we've done. That's why they're up there as a model. In fact, we had this conversation yesterday because there's a lot of things that we haven't shown that we've done for people. And they're not something that we feel is a model for us. A model is something that people have seen and bought over time to the point of others that they serve as inspiration. But now what you're seeing is kind of what we do. We don't do design to market or advertise. We just show what we're working on.

Prefab Review

So I noticed some time in the last year, I think you launched this farmhouse style home, which is cool because it gets a lot of people to our website and then we, you know, help a few hundred people every month sort of think through projects. And, you know, like well under 50 percent of these people actually end up doing the projects, at least right now. And this sort of modern farmhouse style is definitely one of the two or three, you know, sort of more in-vogue style. We get a lot of mid-century modern. A lot of modern glass and a lot of people who want a sort of modern farmhouse. So two questions about this house. One is. What inspired you to do it? So let's actually start at that. What inspired you to do it? 

Ideabox

Well, there's kind of a funny thing about that. It was a design that we did in Colorado for someone who we needed to meet an HOA requirement. Which was the 6:12 roof pitch. You know, just because 

Prefab Review

We're doing something very similar with someone in, you know, in Tahoe who has to do a 4:12 pitch

Ideabox

 Sometimes design drives it. And then with all the as you mentioned, the popularity of the farmhouse and there are some of us that are a little group here that thought it should go online. So we put the drawings online. The funny thing about that is that we've done a lot of that house, but not with that 6:12 roof pitch. They've all done our typical roof pitch, which is the shed, the shed roof. So it's done wonders for us and it's brought a lot of people to us. But the houses that we don't, have all been to more of a modern look. So it's interesting. Now, I think it's kind of funny. And we're not big on trends. We don't like to do things that are trendy. We just like to do it. We do. And that one I felt like we were caving to the trend, not to take anything away from it, it's just that I think there's other more fun ways to apply it so that you're not looking like you're part of the trend. 

Prefab Review

So since you guys are released annually, putting new plans on your site, so we're doing this in March of 2020, Do you have any sort of inspirations or ideas about stuff that will go on for this year?

Ideabox

We're trying a couple of things. One is, you know, I know we're already pretty cost effective, but we're trying to come up with something that we can repeat and control costs a little bit more in California. The first couple of those are in process right now. And if they are built the way we've designed them, that might be something you'll see new. We're always looking for better ways to make building more cost effective or affordable, so particularly in California that'd be awesome.

Prefab Review

OK, so I wanted to, it's been great to learn a bit about Ideabox but I want to transition quickly to our fire round. So basically, these are kind of questions that we'd like you to ideally answer in a minute or less, but we don't enforce that limit too hard. But it'll be great to tap new expertise. OK. So we talked about local builders a little bit and how crucial they are. If I want to build something in an area where you may not have a really deep local relationship, what should I be looking for?

Ideabox

Interesting question. I think a comfort level with a builder. You know, their local reputation matters and their availability to the client matters. But once they're sourced either by the client or by us, because we will we will also help if they're not ready, we really want to get to know them ourselves personally, to make sure, because you are handing off, you know, it's like a relay race, you are handing something off and you want to make sure it finishes the way it's intended. But just like anybody building anything, if the local guy's good, that's what you want. 

Prefab Review

But does it matter if they have a lot of experience sort of doing modular or not, or is that not as crucial?

Ideabox

Well, no, I don't think so. And part of it's because you asked a long time ago about delivery and those kinds of things. And, you know, part of my answer is we would like to work with installers and people. So for most of the country, we've got those people out on the West Coast, I should say. So we're gonna coordinate heavily with those people, with the local GC, so that the foundation is the way it's supposed to be so that expectation is when the house arrives, everything is what it needs to be. So the contractor knows what happens after the home arrives. And so everybody's kind of in the loop as to how the process works.

Prefab Review

So next question, if I want to buy and I want to custom design a house and I want to work with someone like Ideabox, what's most helpful for me to sort of bring to the table or bring in preparation for that process? 

Ideabox

I don't think it's any different than any architectural project or any kind of creative thought. Anything you have that inspires you to come to this place is what we want to see and experience ourselves. So everybody approaches it from different ways. Some people come in and we just kind of sketch it all out here or electronically over the web. Some people come in with, you know, like look books or whatever they call those things where they're showing the things that have inspired them in different ways. And then the site itself almost always presents all sorts of opportunities that we can take advantage of. So it's a combination of all that stuff. 

Prefab Review

Got it. You talked about evaluating, getting a box to a site more or less. What are the, I mean, I know some of them like road access, power lines, what are the key things you're looking for to make sure that's feasible?

Ideabox

Well, that's a big one, depending on what house or what model. The length of something can matter. So like a really curvy road can be a challenge. The houses typically ship at 16 foot wide and 16 feet tall and by some length. And some of the larger ones obviously are longer than the smaller ones. So that's one of the first things we do, is see what the site access is and see if there's any issues up front, because if we can't get there, you know, the rest of it's kind of pointless. So we'd like to look at that stuff rather early. 

Prefab Review

OK. And then the final fire round question. This sort of speaks to your roots. If I'm thinking about environmental friendliness and I like the idea of building an environmentally friendly house, what should I be looking for? What are the things I should be evaluating and thinking through?

Ideabox

That's another huge industry all by itself. One of the nice things about prefab is that you're not doing a whole lot to the site. You don't have to do as much on site. You can keep the building environment kind of tight because, you know, every opportunity you have in a project is to minimize waste or minimize disruption. That's key. As far as the house goes today, it's pretty easy compared to when we started. Because there are so many materials that are available now that weren't available then. You know, in turn, like I remember, we were doing bamboo. And bamboo is like this amazing thing. And all our houses were no VOC paints and the interiors another one. But those are hard to get back then, you know? Fourteen years ago, fifteen years ago. So those are all, you know, today we're using energy less, which is key. And with L.E.D. for lighting and the new refrigerators are pretty efficient. And we like zonal heating versus forced air. Because one, you're not blowing dust mites and stuff everywhere from the forced air furnace and then two the energy efficiency is better with zonal. For heating and cooling, we like ductless heat pumps because they're incredibly efficient and they work very, very well. You know, there's opportunities throughout the process from the exteriors today with well, in California you know, with the fire stuff, fiber cement siding is practically probably mandatory there. But they also use fly ash in their manufacturing. So it's a very useful material. You don't paint it as often. We use a lot of things that it's, paints embedded in the material. So even further just it's just every phase, there's opportunities and we try to take it.

Prefab Review

Cool. And then this has been really helpful. I really appreciate the sort of time and sort of helpful information here. So the final question, we ask this to everyone. What are you most excited about for either your company or the industry sort of in the near future?

Ideabox

I think the thing we're focusing on now, and of course, that's a really interesting question, I think being nimble right now is my catch phrase of the last month or two. We're always excited about design. Always, always, always. And the people that we get to talk to continue to keep that excitement going. You know we're fortunate to have really good clients and really exciting sights. The process of design is always, always fun and always exciting. So, but being able to come up with solutions that are interesting and kind of exciting and doable, that's where my thoughts these days of being nimble are, that we can have things that people can have and have them relatively affordably and have them reasonably quickly, just kind of at least for me, one of the driving forces. So that's a long answer to your very quick question. 

Prefab Review

Well, thanks a lot. This has been a pleasure learning more about you guys and hopefully we stay in touch. For more information about Ideabox, I guess the best way for you to learn about it is probably at ideabox.us. And as always, you can always visit us for information about all sorts of companies in the industry at prefabreview.com. Thanks again, Jim. Really appreciate it.

Ideabox

Thank you.

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Prefab Review (PR)

Hi, my name is Michael Frank, and this is the Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab and modular housing industry Today, we're speaking with Steve Linton, President of Deltec.

Deltec Homes

Thanks, Michael. It’s great to be here.

PR

So I am very excited to learn more about your firm. But first I was hoping to learn a little more about you. How did you get into this business?

Deltec Homes

Sure, so I was a student of structural engineering in college at Cornell University. I was always interested in buildings and construction architecture. And after graduating, I went to Boston and worked as a project manager on quite a few large construction projects. A lot of historic preservation projects, which is kind of really where my interest began on the green building and the sustainable building front. And after that, my wife and I moved to North Carolina to be closer to family. And I decided to do something completely different and actually taught school for a while. I taught middle school math and science for several years. And that was actually invaluable to me. I often joke that I learned everything I need to know about leadership from teaching sixth and seventh graders. But then, yeah, after that chapter I came to Deltec and I actually started in 2007 here as a green building consultant and really was able to work in all parts of the business. I was consulting with customers. I was doing engineering work. I was doing design work. New product development really kind of gave me a good sense of the entire business and was also at that time doing energy audits for a sister company that Deltec had. And it was really at that point I started to see how energy inefficient existing houses are. And so I kind of began to frame the essential question for Deltec, as you know, what will the home of our grandchildren and great grandchildren be like and how can we build that home today? And so, you know, sort of with that mindset in 2011, I took over as president here at Deltec and have really just been blessed. I've got an awesome team. There's an amazing group of homeowners from decades-ago that really all believe strongly in what we're doing. So, yeah, that's my quick background. 

PR

That's awesome. So obviously, it seems like you, I went on the website, it said that Deltec, it's been around since 1968, so it sort of pre-dated you, so to speak. How did it start? What's the sort of evolution been like to sort of what you are today?

Deltec Homes

Yeah. So the company started in 1968 and it was actually founded by two brothers. One was the entrepreneur, one was the engineer. And they originally set out to build houses that were a little bit different. And their first pass was actually an A-frame style home. And they quickly realized that was not the house of the future. And they got interested in a different style of architecture, which is what we know our flagship product is today, which is this round or what I call panoramic home. And so they began building these homes for actually the resort industry pretty much exclusively. And so people would go and stay at these homes, at ski slopes, at beach resorts, and they would experience just a different way of living. And that that living is unique to Deltec and that you really establish this real connection with kind of the natural world outside, capturing these amazing views. And so people remembered that and over the years, started asking more and more to build a Deltec home of their own. And so, you know, from the 70s and early 80s, transitioning forward into today, you know, we're building probably ninety five percent of our homes now for individuals, whereas we really started building them for resorts. That makes sense. 

PR

And then let's talk about the exact price you're offering today. So I guess the panoramic, do you call the 360 houses or something like that on your website? 

Deltec Homes

Right. 

PR

You have the distinctly round homes, but then you also have, I guess, a couple other lines of homes, to get some sort of understanding on what exactly your product line is.

Deltec Homes

Sure. Yeah. There are three different parts of our product line. What we call the 360 collection is that panoramic home, that round design that's been our flagship since 1968. And then we also have the Renew collection, which are traditional and modern designs that are really optimized for energy efficiency and sustainability. And we also have what we call the crescent collection, which is essentially a around home that's in an elongated shape. And so it's almost a mid-century modern style of architecture with rounded ends. And so, you know, I think the important thing for folks to realize is whichever product most interests them from a look and feel standpoint, you know, they're all built the Deltec way. And so for us, that means designing and building the house the right way the first time for the benefit of future generations. That's what we call building a legacy home. And you know that Deltec Way is thinking about excellence and thinking about being better stewards of our planet and building homes that protect us from the most severe weather on Earth. And, you know, really also, as I mentioned earlier, help us to experience that connection with the natural world around us. So all of those parts of the Deltec way find their way into the different products that we offer.

PR

Cool. So let's let's jump into, when you say your houses are green, or more green, or more sustainable than other homes, what specifically are you referring to? You're referring to like, r values,  right? Like levels of insulation? 

Deltec Homes

Yeah.

PR

What are the sort of metrics or sort of standards that you use in trying to define like, sort of what hits that threshold? 

Deltec Homes

Sure, that's a great question, Michael. So for us, it's been a lot of different things over the decades that define sustainability. And there's a couple of big themes. I would say one theme is the actual sustainability of the home. And so that's what we're looking at. How are we building? What techniques are we using? Whether that's increase r values, increase air tightness, looking at passive solar design, or ways to essentially, you know, optimize the amount of energy that the home is using and really drive down the energy that the home is using. So that if you do pair it with renewable energy, you've got a really, really smart design. So, you know, an example would be when we build our energy wall product, it uses gaskets. And so, you know, between the plywood and the framing of the actual structure, there are gaskets to help make each and every piece airtight, which is something that's relatively easy for us to do in a factory setting. But not so much in a, you know, on-site environment. And so that's kind of one side of how is the product actually sustainable? And then the second side is, you know, how is the operation sustainable? And so for us, that's, you know, building with a hundred percent renewable energy here in our factory. So back in 2007, we were the first in the world to build homes with one hundred percent renewable energy. We have 273 solar panels here on the facility. We also really strive to lower our waste. We produce about 85% less waste than a stick built home. And so, you know, thinking about how we operate to also compliment the sustainability of the product. And then I think the third piece, which is really something special that I believe Deltec brings to the table, is kind of a combination of all three of these and that third piece being resiliency. So we build a lot of homes in, you know, environments where that are gonna be subject to hurricanes, or other very challenging situations, whether that's earthquakes. And so thinking about the resiliency of the home and building a home that's going to last for generations and generations. Like I said earlier, what we call a legacy home. And so if we can build a home that's around for a super long time, that doesn't have to get rebuilt after these severe weather events, then that also is really contributing to the overall sustainability.

PR

That's cool. So let's talk about exactly what part Deltec does. So are you a 100% design envelope or do you end up being the architect of record on projects? It'd be great to sort of understand what parts of the process you guys offer? 

Deltec Homes

Sure. So we really focus on providing the items where we feel like we're adding a unique value. And so, for example, you know, the structural shell of the home is really where we're building in that exceptional strength and also building in that sustainability. And so that's you know, that's the heart and soul of what we're offering is the you know, the walls, the floor, the roof. That package typically includes windows and siding. And then, you know, the things that we don't really add value on like sheetrock or flooring, things that a builder can get locally. You know, we don't do that because we don't feel like we're really offering anything to the customer. Now, on the design side, we are doing all the design work for the customer in terms of creating that custom home. You know, all of the floor plans and associated drawings that go with that. In most states that ends up being all that a customer needs. There are some states, you know, California is an example where, you know, there may be an architect that would be brought into the equation and that would be an architect in California who we would work with to accomplish that. But we do not do that service in-house. We would use consultants for that.

PR

To what extent are plans customizable? This tends to vary a lot from sort of company to company we talk to and work with.

Deltec Homes

Yeah, exactly, that's a that's a big part of the way our system is set up. And so the vast majority of our customers are custom designing their home from our basic building blocks. And so that's the way that we describe it, is there are in the 360 collection, there are 10 different sizes of round structures. And then there are different wings and connectors and pieces that you can use to connect them together in different ways. And there are actually millions of combinations. And so starting with those building blocks, we will create a custom designed for folks really to kind of meet any interest or need that they have. On the Renew Collection and the Crescent Collection side, those are much more standardized. Then the idea there is you know, some people want to go faster or, you know, are happy kind of starting with a plan that's already fairly set, maybe making a few adjustments along the way. And, you know, sort of short cutting some of the design process. And it really is up to the customer that in terms of how much they want to put into custom designing versus going with something that's more standard. 

PR

That makes sense, In terms things like garages and stuff like that, which I guess often are site built, what do you guys do? Do you include garages or are they site built or do you do those in the same panelized way you do other stuff?

Deltec Homes

Yeah. So we build garages and in a panelized way, just like the rest of the home. And sometimes they're connected. Sometimes they may be standalone, but yeah, that's an offering for, you know, for any of our homes, a garage if that's something that the customer wants.

PR

And then, just in terms of all the stuff, we actually really talk about this, So I order a house from Deltec and I live in California. If I wanted it in California, then just it's flat packed and shipped to California? Is that how it goes?

Deltec Homes

Correct. Yes. We would look at a couple different ways of shipping it there. Most of the time it ends up being, you know, on a 53 foot tractor trailer. But, you know, we ship all over the world. So sometimes it's on a container, even on a rail car, if that's more cost effective. But yeah, it would be flat packed and would be sent to you and then the builder partner would be there to put it together on the ground.

PR

So you actually serve outside the US as well?

Deltec Homes

We do. Yeah. We've shipped homes to over 30 countries in our history. You know, the Caribbean tends to be one of the most. It's one of the strongest areas for us because of the hurricane work that we do. But yeah, we ship all around the globe.

PR

So let's say what's the pricing and cost and I know this can be sort of complicated because particularly for providers like you that are not doing the full home,the local side is probably a lot more expensive. Whereas, I live in the Bay Area versus like, you know, parts of North Carolina. But let's just take a look. Washington, D.C., is a fairly expensive, fairly local city. What are we looking at kind of from a price point, cost perspective? And then can you sort of help break that down? I find it helps to break these things down. Components, like what am I looking at in terms of the shell? What is a frequently cost efficient shell? And how does that vary in terms of size of home? I'm sure as you get bigger, it gets to be a little less expensive, like a dollar per square flat rate range at least.

Deltec Homes

Yeah. Yeah. So that's you know, that's the question that everyone asks. And you're right, it is a little bit tricky to give specific answers. But I think there's several things that I can share that will be helpful. You know, as you said, it can be helpful to break it down into parts. And so the shell package price is something that's instantly ascertainable for us. And that's you know, that's one of the benefits of building off-site, as you know, precisely the cost of that portion of the build. But really, until the complete design is done, it's hard to get exact prices. But, you know, I would say and you know, we actually have the benefit of here in Asheville, North Carolina, where our factories are based, we have a general contracting division as well. So we actually turnkey the homes in this area, which I think gives us a really good understanding of what the builder partners that we work with are also seeing in terms of cost standpoint. So we can, you know, help customers understand what costs make sense and in a range see whether things are coming at the right numbers or not. So, you know, I would say in the Washington, D.C. area, that's going to be, you know, a more urban, more expensive area to build. We do have a builder partner up there. I think most of the homes in that area are going to be probably in the $300 a square foot range. Just on the upper end of what we're seeing sort of, you know, countrywide, we usually tell folks that, you know, the total cost is going to be between $200 and $300 a square foot. And that includes the Deltec shell, as well as all the work that the builder has to do. The only thing that wouldn't be included would be the cost of the land. And so I was just going to say, just to help break it down, usually about one third of that total cost ends up being the Deltec Shell package. So, you know, anywhere from, say, $70 to $100 per square foot is, I think, a range of what most people see. And then if you multiply those numbers by three, you get $200, $210 to the upper end, about $300 per square foot in total. Now, I think a couple things that I would note, I think that are really important when folks are thinking about cost. The first is really thinking about the quality of space versus the quantity of space. And I think the danger of thinking about this in a cost per square foot way is that we forget the other variable in the equation, which is how big is the home? And so, you know, one thing we really work with folks to understand is what is the right sized home for them? And if there are, you know, ways that we can use our designs and the unique things that they can do to help people build fewer square feet, that can be really one of the most meaningful ways to control costs. The second thing that I often share with folks, I think it is really important, which a lot of people don't think about, is the total cost of ownership. Right. So this the upfront cost that you and I are talking about, Michael, that's a number everybody's used to because everything has a price tag. But the cost to operate and maintain a home can vary dramatically over time from different types of homes. And that's where Deltec really shines. Energy bills are going to be less, the maintenance is going to be less because of the way that we're building these homes to be resilient. And especially if you're building in a hurricane prone area, you know, the cost savings to avoid having to rebuild is really substantial. So, you know, if folks think about cost, it's really important to think about the total cost over time, especially since most of us are paying for our homes over time through our mortgage as well.

PR

My sense in terms of what scale you are at right now, I know you're probably one of the bigger companies we've talked to. Like how many, I don't know what metric you think about, but how many shells do you ship per year? How many customers are you dealing with at any one time? 

Deltec Homes

Probably the simplest answer would be a couple of years ago, we crossed our fiftieth anniversary and we had built just over 5,000 homes at that milestone. So on average, it ends up being about 100 homes per year. And I think in our pipeline right now, we have just over 200 customers in various stages of our design process. And, you know, we can build up to about 250 homes per year. And obviously, that number varies from year to year depending on the market. And, you know, as we sit here today, we're in the midst of this coronavirus challenge. And so it's hard to say what it will be this year. But, you know, about 100 but a hundred homes per year has been the average.

PR

And then how do most customers find you?

Deltec Homes

So there's probably two most common ways a lot of folks find us because they're looking to accomplish a couple of things, whether that's capture an amazing view, build in a hurricane zone, or build a sustainable home or maybe all three of those things and they're just searching for us online, that's the most common way anymore. But we also have a really strong network of homeowners that I mentioned before. And a lot of our business comes from referrals from people seeing a Deltec home for the first time, not even knowing it was a thing and then walking inside and just saying, “wow, this is really cool, I want one.” And so, you know, hearing from our five thousand plus homeowners across the globe and across the country is also a really common way that people find us. It's awesome. 

PR

It's been awesome learning a little about Deltec. I want to quickly transition into our fire round. These are kind of slightly more general questions that we get to our site constantly. So I'll ask you a couple questions. You do your best to keep your answers to 1 minute or less, but we don't enforce that too harshly here. So with that being said, so if I want to build with SIPs (structural insulated panels), Deltec or anyone else, like what should I be looking for? What do you look for in terms in terms of experience or competency, in terms of building out of your builder network?

Deltec Homes

Yeah, that's a great question. We get that one fairly regularly. You know, the first thing I would say is engage. Engage us or engage whomever you're thinking of using and let them help because, you know, we can really help you through that process. We've done it a lot and we're certainly there to guide folks through picking the right builder. I think the number one thing that I tell people is to find someone that communicates well and fits with your style of communication. I think that's essential from there. You know, the level of technical expertise that they have, for example, with a panelized home or a prefabricated home, I think is much less important. You know, we can send somebody to assist the builder during the assembly and after that, it's really standard stuff. So I think that the communication piece to me is one thing that I always suggest that people really focus on first and foremost.

PR

How about site feasibility? Particularly for Deltec, but really for anyone. What are the things you look for when people try to understand if it makes sense for a plan. 

Deltec Homes

So, you know, we work with customers in all different stages. Some folks will come to us and we'll actually begin designing the home before they found the property. And that can be a useful technique because they better understand what they want their home to be. And that can help to drive the land, whether that's the size, the orientation, the slope, you know, any of those types of factors. Other folks have already found the property. And we work, you know, starting from that point forward. But it's a really tough question to answer and in a general way, especially since we're building all over the world. You know, the climate and the geography of the region makes a big difference. And so it's kind of not a one size fits all answer there. But what I would say is, you know, our goal in the design process would be to listen to the customer, ask a bunch of questions about what they want their home to be, and then help them translate those wants and needs into the tangible things that they want to look for in their property.

PR

Got it. Are there certain types of sites? We get lots of people in like L.A. or San Francisco or Colorado who have these beautiful, incredibly steep slopes and those can be challenging for some companies to do it. Are there certain types of sites, at least for your product, that makes sense for a lot. 

Deltec Homes

Not necessarily. I mean, to be honest, we somewhat thrive on the more difficult the situations because we're building in, you know, places where one hundred eighty five mile-per-hour hurricanes come through. And so almost anything can be done. I think the real issue for most people is what it's gonna cost to build in a very tricky situation. You know, we've built on islands that have no roads or ports or access and you have to unload them using World War 2 era landing craft. We've kind of seen it all. And so I think, you know, that's in some ways that's what we thrive on. You know, I would encourage folks to do their due diligence on their land. And the advent of GIS and some of those tools has been really helpful for folks to understand, you know, is this in a steep slope regulation area that's going to maybe change how I'm allowed to build? And so I think those are the kind of questions that we would help guide people through when they're in those situations.

PR

And then one thing we see is just the cost of ownership in certain parts of the country is pretty high. We see a lot of residential buyers interested in sort of doing multi-family or kind of like, a single family home with ADU projects. Is that something you do? And how do you help people think through that? 

Deltec Homes

That's certainly become more and more popular. We have done a few projects like that, some recently in California. It's not our focus, but it is something that our product is well-suited for because, you know, our homes go all the way down to three hundred square feet. And so there's lots of different size options for folks. But, you know, to be honest again, because those things tend to be so dependent on local zoning regulations, it's something that we don't have a broad expertise in. We're gonna look at it from a design standpoint and say, OK, what is the design trying to accomplish? And, you know, help that customer explore and make sure they know all the rules and regulations from a zoning standpoint.

PR

So probably our final fire round question. It sounds like you have a history of being passionate about sustainability. And as I said, in some states, we're now actually required to have solar or some other renewable energy source to sort of create zero net energy homes. At least in California right now. I think there are a few other states that have similar types of laws. If I were a homebuyer and I'm not in a state where this is required. What should the calculus be when evaluating? Do I want to add solar or do something else to make this a kind of a zero net energy or negative net energy home?

Deltec Homes

Yeah, that's a great question. You know, I think the calculus has changed from even just a few years ago. I often say that I don't think it's a question of how to build a zero energy home anymore. It's really a question of why not? The costs have become such that it can make really strong financial sense, even without incentives anymore for people to go this direction. And I think, you know, one of the unique advantages of working with us as we do have a green building department. We have somebody that can help you through those decisions. You look at energy modeling. You look at how to accomplish the sustainability goals that you want. And so, you know, I think it's, you know, each person is a little bit different, but I think for most parts of the country, it's coming to the point where the question is, is why not? 

PR

Got it. So this has been really great for getting your perspective on a range of issues and building with Deltec. I have one final question., We ask this to everyone, what are you most excited about for your company? You know sort of the broader prefab industry as a whole sort of going forward for the near future.

Deltec Homes

I would say, you know, I think it really for me and for all of us here at Deltec, it comes back to our big dream, Michael, which is, you know, we want to change the way the world builds one home at a time. And one of the areas where I feel like we're really called to do that is in building in these hurricane prone areas. Back in January, I was down in the Bahamas at a rebuilding summit that the United Nations put on. And something that really struck me there that one of the folks shared was he said, you know, we sit in the shade of a tree that we did not plant and we plant a tree whose shade we will not sit. And that really spoke deeply to me, because that's the mission that we're on, essentially building legacy homes. And so, you know, the week after Hurricane Dorian came through, you know, our engineering team was meeting and we were saying, OK, we're seeing the effects of climate change. We're seeing that these storms are getting stronger and stronger. How do we build for 200 mile an hour storms? How do we build for 250 mile per hour storms? And so I think that's what it's going to take in this changing world. And that's the challenge, I believe, that we're called on to solve for our people and our planet.

PR

Yeah, I agree it's great to see people in the industry taking positions of leadership on all that stuff. Steve, it has been terrific talking to you and learning more about you and the company. For more information about Deltec, check out Deltechomes.com. And as always, you can always visit us at PrefabReview.com for a range of content about the industry. Thanks again, Steve. 

Deltec Homes

Thank you, Michael. Really enjoyed it.

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Prefab Review (PR)

Hi, my name is Michael Frank, and this is the Prefab Pod presented by PrefabReview, where we interview leading people and companies in the prefab and modular housing industry to learn more about them and make it easier for you to make decisions about your prefab or modular project. Today, we're interviewing Paul Nyulassie, the president at DIGZPrefab and NYUdesigns. Welcome, Paul.

DIGZPrefab

Thank you. Thank you for having me, Michael. 

PR

Great. So we're very excited to have you today. I'm very much looking forward to learning more about your firm. But first, I was hoping to learn a bit more about you. How did you get into this business to start?

DIGZPrefab

Well, I've been doing it for twenty five years. I practice architecture. I also work as a construction cost estimator and I work as a project manager with very large general contractors in San Francisco. To answer your question, I decided to build a stick frame house in Mill Valley in 2006. And being in the industry, I soon realized that in the residential industry, I was having a hard time controlling my costs. And through the process, all the money that I had into the project, I had very little equity. And after I built and sold the house, I realized that given the location in San Francisco, Mill Valley, Marin, that there had to be a better way to control costs. And after that experience, I went ahead and did all of my projects modular construction. So I no longer do stick frames. I've built several homes in Mill Valley, all modularized. In Tahoe and also in the Oakland area. And I've just found that when you go into a contract with a factory, you have a fixed contract and that's a good way to control your construction costs. And in the greater metropolitan areas of L.A. and San Francisco.

PR

That makes a lot of sense. So I've been to your website and I've seen you have both ADU designs on your website, but also it looks like you have a bunch of custom homes. Can you sort of explain the variety of the types of homes and projects you take on?

DIGZPrefab

Yeah, absolutely. So, yes, a year and a half ago, I went ahead and launched my ADU designs. And we have built a total of five of them so far in the Bay Area. And we're having a lot of fun with it. I launched my factory two years ago after working with many, many factories throughout California. And I realized that this was something that I felt on a design-build basis. It would make more sense for me to branch out, take my construction background as a project manager and marry my architecture and construction and cost estimating as one package. And that's what we're offering right now. I have a team that is also a general contractor that does our custom homes. We're currently doing a 4,000 square foot, 8 module project that's going to be going into San Rafael. It's all custom. Many of my projects in the Bay Area and also down in L.A., the planning and design review process is the same process as any other custom stick frame project. That process can take anywhere from 6 months up to two and a half years. That's just the nature of the beast in California. In these areas, we have to go through the neighborhood HOA or design review process. But the homes that I'm doing are all 100% custom and I have never been able to do the cookie cutter designs on hillsides. And also, I focus on my clients wishes of what they want. One of my projects in Marin has twenty one foot ceilings with floor to ceiling glass overlooking the Bay and San Francisco. I don't have any limits with modular construction and designs and I do have a lot of fun with it.

PR

That's great. So that's pretty cool. So I actually haven't seen, sort of, this complete full stack offering, that much. We've helped people with a few hundred projects this year. So you're saying that you actually will be the architect, you'll be the prefabricated manufacturer, and then it sounds like you'll also also do the foundation in general contracting work, is that what you're saying?

DIGZPrefab

We are doing that. So the recent project that we just delivered in Santa Cruz, we're trying to limit the risk of homeowners where sometimes you have between the architectural office and the general contractor, you have a disconnect. We're trying to minimize that disconnect. So my production manager at DIGZPrefab located in Newman, it's about 90 miles out of Oakland. We also are coming out on site as the general contractor to do what we call the stitch and we are stitching the modules together. We're doing the crossover connections, the MEP, which is mechanical, electrical, plumbing and fire sprinkler connections, as well as the seismic and foundation connections. So we delivered eight modules in Santa Cruz. It's a two thousand square foot house with a five hundred square foot ADU up over a garage. And we built that project, which was twenty five hundred square feet. We built that in five months and we set it on its foundation in two days.

PR

And then it took like eight weeks of finishing after that or something?

DIGZPrefab

 That's correct. That's correct. So wood flooring and buttoning up of some siding. This was an exciting project for me because this is one of the first projects where we were able to take the lead. And I was able to do things my way rather than relying on other factories where I had to curtail my designs to meet their needs. And I was able to do what we were able to do, all the siding on the exterior of this house as well as all the overhangs and the roofing sheet rock. And it was a pretty turnkey project for the clients.

PR

That's great. That sounds awesome. I actually think one of the most sort of value added things that the factories or architects can bring-in is a really sort of synched-in local builder because we've seen in areas where things are not distinctive and that's a little more challenging.

DIGZPrefab

It is challenging. And I've been through those sagas and it's not fun. And when you're delivering twenty-five to twenty-seven thousand pound modules coming up the hill side, you know, there's a lot of moving parts and you have to work with a company that is going to need to be cohesive and we need to work together with that. Cool.

PR

So what areas are you serving? The sort of counter of doing a lot of stuff yourself is just you're probably not serving Boston, right?

DIGZPrefab

I'm advertising on the East Coast, in New York and Boston areas. However, I am a boutique and we work one on one with my clients. And all of my projects are designed in revit with a 3D modeling bin. And so, you know, I'll take my laptop with my clients. We will design the projects around a kitchen table together. And we're a team, and I really focus on design-build rather than design-bid. But to answer your question, I am servicing pretty much the West Coast. Many of my projects are in the Bay Area. Many of my projects are in Marin. We just finished through the design review process for twelve single family homes in North Hollywood. And I am picking up some more work down in L.A. L.A. right now is just passing an ordinance which is extremely exciting, is that they are now going through the process of allowing tiny homes on wheels as legal and rentable ADUs. San Luis Obispo, Fresno, Santa Clara is just passing the law and San Diego. And so that's exciting news. If we can try to bypass some of the some of the process and hurdles that we have to go through with the planning and building department for and deliver an ADU that's 400 square feet. It's going to reduce the cost. And we're able to just basically leave it on the wheels and tow it right back into someone's backyard. 

PR

That's pretty cool. Yeah, I actually like it. I do want to talk more about ADUs because we've been really pretty excited by the other new laws in terms of 60-day permitting and four foot set backs and stuff like that. But I didn't know about the the wheels thing, I guess, right, I guess at very least probably saves you a bunch on foundation costs and stuff like that.

DIGZPrefab

It really does. And we're advertising an ADU. I can deliver up to a 400 square foot ADU. It will look and smell just like any other constructed residence 2x6 studs, 16 inches on center. We use 2x12 floor joists, 16 inches on center. It's a very sturdy house. We have to comply with all the building codes local and through the state. But the beauty of that is correct. We can deliver it with a VIN number. A basically comes out with a DMV tag and with L.A. and San Diego being on the front end of this. I think it's going to be a very exciting thing that we can start offering to clients where we don't have to go through all the foundation and things that are gonna hold us up with the city and planning departments. 

PR

That makes total sense. Yeah, that's that's very cool. I'll definitely learn more about them. I'm guessing that that's going to end up being a like no short term rentals kind of law, so mostly based on creating long term housing, but it will be interesting to learn more about all the nuances. 

DIGZPrefab

I think it's the Wild, Wild West right now with ADUs. And I think we're all learning and the codes are constantly changing. But as you may know, California has now passed the law that any single family house is allowed ADU up to 1000 square feet, up to 1,200 square feet for a detached unit. But then also you're allowed a J-ADU, a junior ADU you within the footprint of a single family house, which is five hundred square feet. The code is also allowing now multi-family projects, multifamily apartment buildings up to ADUs detached for rentable units. So I think it's a very exciting times for affordable housing.

PR

So let's break down costs. I think that's one of the things that no one likes quoting because every project's different. But let's start, let's talk about one of your projects, you can call it the Mill Valley Project and Oakland Project for basically thinking about like, you know, in an expensive area of California. It sounds like it's mostly where you operate. Let's just say a standard ADU, Let's start with the standard single family home, say two or three thousand square feet. I don’t know If you talk about total price or price per square foot. But I mean, obviously, you have a part of each of those components. Can you help me break down like, you know, what the module cost tends to be for a project with you? What the architectural design cost tends to be. And then what's sort of the other costs? I have certain numbers in my head for the market. I want to begin to understand if I said, hey, go work with NYUDesigns, a general range of what these things might be. Yeah.

DIGZPrefab

No, absolutely. And I really try to pride myself on providing loan to value cost estimates. So I provide those 100% free. I want to make sure that it's not only feasible for the client, but also my company. And so to answer your question. We always have soft costs. And I have the question many, many times where clients are looking to a general contractor to either stick frame or modularized. And the one component that I see that clients are not thinking about are the soft costs. The permits, a permit for a single-family house in Mill Valley can cost anywhere from 30 to 50 thousand dollars. A water meter in Marin can cost up to seven thousand dollars, but a water meter up in the Oakland Hills can cost up to fifty nine thousand dollars. So those are things that we all have to take into consideration, as well as the civil grading drawings. But in a nutshell, with all those soft costs, PG&E, East Bay Mud or our Marin Municipal Water or down in L.A. as well as the permit costs, building permit fees, architectural, structural engineering, mechanic, electrical, plumbing, fire sprinkler drawings. You're looking roughly at about one hundred dollars a square foot for those soft costs. For the site costs, many of my projects we're looking at, and this is based on a three thousand square foot house. We can't use that for a 400 square foot ADU. That's a little different. Yeah. For a foundation you're looking at anywhere from one hundred to one hundred and fifty dollars a square foot with the strict measures with drainage and the civil grading drawings that we have to do. We can't just you know, we can't dump water right into the streets any longer. We have to mitigate that and the water has to be treated with bio-swales that we see all over parking lots throughout California. Residential homes have to do that also. But you're looking at about one hundred - one hundred fifty dollars for all of your site costs, including your utility trenching, your PG&E, all the infrastructure that all the things that you're not going to see after the house is complete.  For the modules itself we're going to be ranging anywhere from $177 a square foot to $200 a square foot. And that's for a three thousand square foot house that will have everything. All your sheetrock, flooring, cabinets, all the inspections will be done. It's a very turnkey package, you know, and also when these modules come together, even for myself that I live in. My project. I'm very passionate about my designs. But even when the modules come together and I'm walking through these houses, I forget where the modules begin and where they ended. And so you're looking at a very custom high end house. Most of my clients in Mill Valley, Santa Cruz, parts of Oakland and Tahoe. They gain, very, very good equity going in this process. So, for example, two of my projects in Marin, I have disclosed land to my clients. I'll use an example of a project which was approximately a little over two thousand square feet. They paid $375,000 for the land, all in with the construction and all the soft cots. As I was speaking with the land and the construction, they were into that project $1.6 million, but it appraised for $2.2 million. And so we use lenders, we use Umpqua Bank in California.

PR

They're fantastic.

DIGZPrefab

And they will fund up to 75% loan to value. All of my projects in Mill Valley, use Umpqua. And I've had two other projects. Same scenario, all in land and construction. One project on a hillside with views of Sausalito and the city all in. They were into the project, $1.7 million, but it appraised for $2.7 million. So I won't do stick frame construction any longer. With this process, I feel that it's foolproof and my clients are getting very good equity. And the project in Santa Cruz is a very good example of land construction. They're roughly into that project, one million and they will be putting it on the market between $1.6 to $1.7. So there's a good opportunity for someone to make some money or just have equity. 

PR

Yeah. Unfortunately or fortunately, this tends to be right. It's basically the costs don't vary that much between like. A high-end area of Mill Valley and maybe a less expensive area outside Santa Cruz.So it seems like a lot of this tends to be around location. Because if you know, if new construction, like as you said in Marin, can, you know, you can sell for $1,000 or $700 per square foot. It sounds like your projects are probably in the well, like $400 - $500 a square foot. A typical example like this. So there's some delta..

DIGZPrefab

Absolutely, Yes. And, you know. And then but then you also have to compare this site built construction that can range anywhere from five hundred to a thousand dollars a square foot. When I built in Mill Valley, I couldn't control the change orders. And I'm in the industry. And this process, the factories and in my factory, we offer a fixed contract not only for the fact not only for the modules, but for the site stitch. We want to make sure that we are protecting the clients as much as possible. And we try to make sure that we're dotting our I's and crossing our T's, because if this was an easy process to build in California, everybody would be doing it. And it's not an easy process. There's a lot of moving parts to this.

PR

Cool. So let's talk about your ADU projects, so I guess everyone says this sort of thing. I talked to people in the industry that kind of like I don't know if I'd call them advertising, but like the advertised plans on site are some sort of, there to spark the imagination. It sounds like that's similar with you guys in sort of how you thought about the market, where the kinds of places you're building these, what are the use cases to understand more about your practice? 

DIGZPrefab

Of the last five to six ADUs that I’ve just built. It's interesting because I think this ADU will be changing our family values, the fabric of our cities, and I think it's a fantastic thing. And I had a project in Danville where the family, the parents, their son had recently married and they had their kids. You know, obviously were having difficulty finding a house to purchase. And so they they built they built a 1,000 square foot three bedroom ADU in their back yard for their for their kids. And I'm seeing that a lot throughout the projects that I'm working with. I've also had clients in Mill Valley that are, you know, they have a very large mortgage payment and they're thinking, look, you know, this is expensive for us. Why don't we rent out our main house and live in the backyard? You and I have two projects like that. And so it's not only for just affordable housing for renters, but it's also changing how we look at things and how it's for our kids. And so I again, I think it's a very exciting process right now. We delivered a t275 square foot ADU in Oakland in the flats of Oakland near Berkeley. We built that over the summer. We built that in 12 weeks. And the family built that for their in-laws and parents to come and visit so that they can be visiting with their grandchildren. So that's what I'm seeing that's happening right now. It's starting to have extended families living, living with us, but also having the privacy that we all desire.

PR

Yeah. We're seeing the same thing. OK, so. So it's been great to learn a bit about your firm and your practice. But I want to transition to our fire round. These are a bunch of short questions really to help make me and the audience sort of smarter on general issues we think about with building a Prefab or modular homes or at least evaluating the idea of it. So I'll ask you a couple of questions. And do your best to keep your answer to 1 minute or less, but you don't have to actually. So the first question, which sounds like you're very qualified to answer given all the work you do in hilly areas, if I am thinking about building on a hill or thinking about site selection versus like a flat lot. What are the key things to understand in terms of cost difference? In terms of feasibility what are the things you look at when you're evaluating? Is this site appropriate enough?

DIGZPrefab

Well, number one, is it buildable? And that's something that we have to do our due diligence. I let all of my clients know if you find a parcel of land and we go to the planning department and it's zoned for a single family and it meets the setbacks, we need to do a little bit of a feasibility study on on the interim to make sure that it is something that not only can the clients afford, but if it's something that, you know, it's something that we can build on. Not all not all land in California is buildable. There's a reason why it's vacant. And so we have to find out what that is, whether there's an easement running through it. And so it's always better to build on a flat lot. We see a lot of hillside lots around California that appear to be affordable, but what do you have to do to those lots to make them buildable? And if you have to dump in another five hundred thousand dollars into a seventy five thousand dollar hillside lot, you have to see if that's actually worth it. The flat lots are easier to work with if you can find it and fill. But the cost variations I've had, I just recently did a hillside upslope. The foundation on that was three hundred thousand dollars and we're still building to the same building code just like any other custom stick frame house. So when my clients find a lot, we will do a loan to value estimate and make sure that it's something that will fit their budget. And that's that's that's that's what I try to do.

PR

Do you find that you need Geotech to make that assessment or is that more for all the department related issues and foundational issues, verses like understanding feasibility?

DIGZPrefab

Absolutely. When I have my clients looking at a three hundred thousand dollar a lot or a five hundred thousand dollar law and the seller has not provided a soils report or a geotech report or a survey, I let my clients know right at the beginning, look, if the seller isn't going to do this and this is something that you really want, I would suggest tying up the land in escrow. Putting your earnest deposit down, tie it up for three weeks so we can do our feasibility study. But paying three thousand dollars for a survey and paying three thousand dollars for a soils report or reconnaissance report that's a drop in the bucket as far as what you could be doing if this land that you're paying three or five hundred thousand dollars for and you close escrow to find that it's something that you cannot afford. So I always let my clients know, write the check for the soils report and write it write the check for the survey to make sure that this is something that you want to move forward with.

PR

Cool. OK. We have two more questions. Nope. Next question is. It sounds like you've done some work with HOAs. That's been one of the most interesting learning processes for us here over the last six months or so. Right. We're doing one project on an HOA where I think the design standards are written in the 90s and they require windows that aren't being manufactured anymore. And my impression is that's not a, that's not a rare occurrence. It's stuff like this happens in sort of areas all the time. Do you have a set of best practices for dealing with these kinds of issues?

DIGZPrefab

Well, I've dealt with HOA in Mill Valley and it was an HOA back in the 60s. And so to answer your question, yes, we have to bring the HOA to modern times, obviously, but that HOA is in place. And so we have to design within their guidelines like C-Ranch, we have to design within those guidelines and make sure that the house is going to fit compatibly within the surrounding location. So I can design anything I can design, I do modern designs, but I've also done craftsmen. And I've also had to do a Victorian design in downtown Point Richmond, which was five, three-story live-work lofts where the city said this is a historical zone so we can design anything within the area to make sure that it fits.

PR

That makes sense. And then finally, let's go through. We talked about this a little before. I'm thinking about, let's say, building with you guys or someone else like you guys where, you know, it's really a custom home built for the lot and built for my specifications. Let's run through what am I looking at for timing of each component? Let's say I'm a motivated person who doesn't want to spend 18 months on this design. Yeah. Let's break it. Can we break it down some sort of feasibility to design, to permitting to as we sort of said, construction and finishing.

DIGZPrefab

Absolutely. And this you know, this depends on the jurisdiction and what city we are working with. The quickest project I had was in Point Richmond, which took me six months from the pre-construction phase to design review phase to developing the construction documents to having a permit in hand. Actually, Santa Cruz took me three months. Santa Cruz was a pleasure to work with. And so we had a permit in hand within three months and we were ready to build the project. Now, if I'm dealing in L.A. North Hollywood, Mill Valley, San Francisco, you know, those projects can take anywhere from two and a half to three years for just your planning approval. And so that doesn't have anything to do with modular construction or stick frame. That's just the planning process. One thing I want to add, which always excites me is that once we have the planning approval, wherever that is, through design review, we bypass the building department. We take the construction documents to the state of California. And I run all of my construction documents through the state. I can get a building permit after the local jurisdiction approval in roughly two weeks. And we can start construction on the house immediately in the factory. Now, while we're in construction with the house and the factory, I'll take the construction documents back to the building department for the foundation review only. And there's a reduction in fees on that. So it helps that along the way. And we'll have to wait for the foundation. It could be two to three months for the building department to review the foundation. But we will be working with the house, building it while we're getting the foundation approved. 

PR

Cool. That's good to know. Well, thank you. This has been a really great learning both about you and getting your expertise and all these other kind of aspects of building and design. Final question. We ask this to everyone. Every time we do one of these, what are you most excited about going forward for either your company or sort for the industry for the near future?

DIGZPrefab

Well, I'm very excited about the ADU laws. And I'm very excited about the tiny homes. I think this is a great, great avenue for all of us to put an ADU in our backyard. It provides rental income. It provides a place if we would like to rent out our main house, live in that and travel. I think it's given these times, I think this is something that is going to start changing our family values. And I think it's a really good thing that excites me.

PR

I totally agree. Thanks again, Paul, for being on the show. For more information about DIGZ2Go and new designs check out DIGZ2Go.Com. And as always, if you're interested in learning more about Prefab and a variety of companies in general, you can visit us at PrefabReview.com. Thanks again.

Learn how to buy land, select the best house plan, get financing, calculate investment ROI, and more. Save hundreds of hours of research.

We respect your privacy.

Thank you! The guide will be emailed to you soon.

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NOTE - This podcast was originally recorded in June, 2019 and because we’re sloppy, it got lost in the file cabinet somewhere :-). Here it is belatedly.

- Prefab Review

Hi, my name is Michael Frank and this is the Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab and modular housing industry. Today I'm very excited to have Brian Gaudio, the founder of Module. So welcome to the podcast Brian.

- Module

Thank you. Thanks for having me.

- Prefab Review

So you're the first, we've done a handful of these, but you're the first real startup that we've had on this. So I wanted to start by asking you, “why did you start Module and what did that entail?”

- Module

 So my co-founders and I started Module in early 2016 and why we started it was, you know, my motivation really was, I was trained as an architect, worked in the field, and felt that the product that a lot of home builders and developers were putting out there in the market wasn't really in the best interest of today's home buyer. And so I saw this gap in the market where a lot of the developments that were going up were really top of the market; it was really targeted towards a luxury audience and there is this huge missing piece for people who needed housing but couldn't afford sort of the architect designed luxury product, and wanted something that was a little bit smaller than the typical home builder does and they weren't being served. So we started to serve that need and then ultimately you know our goal is to make really well-designed homes accessible to the average home buyer in the US. So what are their needs and how can we serve them? So that's really why we're doing what we're doing and how we got started was I was living abroad actually moved back to the city of Pittsburgh where I'm from, moved in you know back to my childhood home started working out of my parents basement working out of libraries and coffee shops and then we slowly started to build our team from there. We participated in a local startup accelerator and just started to get our funding under us in 2016. So it was you know, maybe not the glamorous startup life that people typically think about.

- Prefab Review

But that's cool. So it sounds like this is interesting because I thought that I'd read an article or two about you and thought that the key value proposition for you guys was really around sort of this house that sizes up with you. But it sounds like your first inspiration was around affordability and accessibility.

- Module

Yeah, you know the inspiration for this affordability came from working on a documentary film. So a friend and I - Abe Drexler, he's an  Architect at Keiren Timberlake, he and I were just finishing up school and we had got this fellowship to go research the housing crisis and the most innovative solutions that were being developed around the housing crisis in cities in South America. We traveled to Rio, Sao Paulo, Bogota, Lima, Santiago, and  interviewed architects, designers, and governments. People were coming up with different sorts of urban acupuncture projects and different concepts. But one of the really interesting concepts that was being executed in these cities in South America was this idea of incremental housing and there is this architecture firm there called, Elemental that was doing this incremental housing work and what that basically was is in Santiago, they only had so much government subsidy to go build public housing. So with that little amount of subsidy they could either build a house that was a normal sized house with really, really poor quality materials like the bottom of the barrel materials or what they decided to do was build half of the square footage of a typical house - so half of a good house but build it with really good materials. So they did that sort of thing, if you imagine just building half of a house, so a kitchen, bathroom, and maybe a space to sleep in. Then the residents would come in, live in the space, and then add on as their family grew and their needs changed. So this incremental housing, kind of pay as you go, I thought was a really cool concept and I said how could we apply that in a different, completely different, context in the US, so sort of the inspiration for starting Module. And what we've learned, we've spoken to more customers and just delivered our first house to a customer. While part of our value proposition is growing in your own space, there's actually a really huge need for people who are just looking for a smaller amount of space that's well designed and that's super energy efficient. So that expanded ability component is part of our value proposition but it's actually not what gets people in the door; who, you know, sign up on our website. They just really want something that they don't see for themselves in the current market.

- Prefab Review

 All right so let's talk about what you guys are actually building. Can you kind of explain this product so to speak or the kind of different options buyers have and what they cost?

- Module

So we're live in Pittsburgh. Right now we've gotten some requests from 20 something states and several countries about building a house there, which we will get to in this sort of mid-term future but for now we're working in the city of Pittsburgh and we're delivering an infill Single Family, attached or detached product. And we will work with both modular manufacturers and panelized manufacturers of 3D boxes or 2D wall panels. So we work with two types of manufacturers and we're delivering this infill housing solution. Our homes range from one bedroom, one bathroom, around 650 square feet up to three bedrooms, two baths and that's about fourteen-hundred square feet. And we even have this stacked duplex model where you can live above and then rent out a one bedroom one bathroom home below. And I believe that one's around seventeen hundred square feet. So we have a couple of different base models but really our designs are targeted for the Pittsburgh infill vacant lot. I was gonna say why we design, so most of our designs are 16 feet. They could be 16 or 18 feet wide but we've really sized them to the vacant lots that exist in Pittsburgh. And in Pittsburgh, our city is a rust belt town. We have about twenty seven thousand vacant lots in the urban core. These aren't out like in farmland you know an hour away from the city. This is like, five minutes to downtown, vacant lot. And so we have so many vacant lots because the steel industry left our city in the 80s and homes were torn down. So really, the customers that we're serving, we're helping them find a vacant piece of property, find the right starting unit, select that, select your lot, select your house, and then we will go coordinate the construction.

- Prefab Review

So you see you're actually helping people find land as well?

- Module 

That's correct. 

- Prefab Review

Interesting. And then what's the price point for these? So are homes like a two bedroom one and a half bathroom home?

- Module 

The pricing on our website is specific to Pittsburgh. But right now that starting price for a standard model is about $195,000 - $200,000 for a two bedroom unit. Now that doesn't include your site work, foundation and utilities and the cost of land. So we leave those out because that varies site by site whether you want a slab on grade, you want a crawl space, or you want a basement.

- Prefab Review

What is the typical range of site work in San Francisco for example? It's really expensive. Like I say it's typically like at the high end right, it can be 200 dollars per square foot. I assume it's not that in Pittsburgh so I'm just just curious.

- Module

Yeah we assume you know our kind of standard plug in there is around fifty thousand dollars for site work, utilities, and foundation it can go up too if you have a really bad site. You know, you can go up to a hundred thousand so that's kind of a range for site work right now. In Pittsburgh, we have this combined sewer system, so we have one giant sewer pipe that sits under the the roads and that's now illegal in most cities and so you know typically, you have separate stormwater and sewage but we have a combined pipe that was built in the seventeen hundreds eighteen hundreds in Pittsburgh. And so now every developer that does a new construction project has to dig from their property to separate trenches even though we have one combined sewer system to dig two separate trenches to get to that in the event that hopefully in the future the city adds another sewer pipe to separate storm and sewer water.

- Prefab Review

So let's sort of talk through that process of building. What parts does Module take care of? And what parts do you basically the people you work with, or just other parties, do later? Are you working with third party manufacturers? Are you GC? Or do buyers have to find their own GC? Or do you have a network of local contractors? What parts does Module sort of take care of and what parts do other people take care of?

- Module

So from the customer side, we're essentially holding their hand through the entire process as a turnkey solution so they'll log onto our website, they'll fill out a form: they give us some information about their current needs, future needs, and financial health, and we take that data and say “ here's the house, here's the lot that makes sense for you” and help them make those selections, and then we coordinate the entire construction. And so people can actually fill out you know, we have this web application on our website, If you don't own land you can sign up and we actually have available lots that we believe are good fits for our product. So customers can view that, but in terms of what do we do in-house versus out of house, as a startup company we had to be thoughtful about that because we're not a contractor, we're not someone who had started you know maybe flipping homes and moved into new construction. We started this as a startup company with the goal of building thousands of homes throughout the country. And you know compared to the typical software startup, you know home building is much more capital intensive than you know the distribution channel for an app right. Our distribution channel is actually going through zoning and permitting. It's not you know upload to IOS. And so when we think about how do we apply a startup mindset to our company structure it is instead of building our own manufacturing facility right out of the gate we're working with third party manufacturers. I know some of the other startups said you know we're gonna raise 10 million bucks and we're going to get a factory. You put some robots in that factory, they're gonna build some houses. I don't think we will go there until we have probably 200 homes a year. At that stage, it makes us sense for us to have our own factory. But until then we're working with third party panel manufacturers and modular manufacturers. So our first home we built was with a company called Bensonwood they're a panel manufacturer out of New Hampshire. They do really high quality panels. They were manufacturing but in terms of what we do in-house is going to be a little bit on the podcast. So our first home was built by them and so it's really really high quality in terms of the insulation value, the quality of the windows, and just the assembly. So we work with third party manufacturers. We work with third party GCs. So we have a network of preferred contractors in the city of Pittsburgh that understand how off-site works. And they care about you know, passive house design principles. So that's kind of how we vetted our contractors in the Pittsburgh market. So we will coordinate the manufacturer, we coordinate the contractor, and then in-house, we'll do a lot of the design work and take the customers from zoning approval that need a zoning variance, do that to get them to building permits, and then we'll sort of stay on as a project manager throughout the construction of it in Pittsburgh at least.

- Prefab Review

So why do you both panelized and modular? We've talked to a lot of prefab and modular companies and I'd say most people choose to do one or the other. What's the benefit of that?

- Module

 So really what it's come down to is with certain sites in the city of Pittsburgh you know there are some, if you've if you've ever visited Pittsburgh, there's these Mount Washington which is this sort of giant hill, and then there's three rivers that sit within the valley. And so certain sites have really difficult site access. And for instance on our first home it was basically built by someone who bought the vacant lot that sits behind their house. And the only way to access that lot was through an alley and it was a 50 foot 55 foot long building and we could not get a box that was 55 feet long through that alley and through the power lines. And so from panelized, you know, our sort of units that we're picking up from the crane were a lot smaller and that was one reason to go panelized on that project. But I would say why we work with both modular and panelized projects, certain projects are a good fit for modular certain are good fit for panelized. If a customer cares about pushing passive house standards then Bensonwood is the right manufacturer. If a customer is more price sensitive and they have a site that's fairly accessible, then modular makes sense. So we feel like at least on the single family residential detached we can get a better per square foot cost on modular, we can get to higher building performance standards on the panelized side. So it really depends on the project need.

- Prefab Review

Is pricing the same? I know Bensonwood is definitely not the cheapest, maybe the least expensive manufacturer out there.

- Module

No, pricing is different. And that depends again on the manufacturer that we use. So for customers who are more cost sensitive we try to modular-ize that particular project and/or help them select a site that makes sense for modular if they want to push to go to passive house, then panels could work for them.

- Prefab Review

I'm pretty interested in this sort of start up process. What modular provider providers do you use? Just because we talked to a lot of them. And sort of second, how did you decide who is the right fit for you?

- Module

Wow. So we've traveled a lot and visited a lot of manufacturing facilities in the Northeast. So we're working on our next project. It's a four unit mixed income housing project on vacant land that was owned by the public entities here in Pittsburgh. And for that project we're going to work with the manufacturer called Structural Modules Inc. SMI and they do some high performance modular stuff. All of our homes are designed for the Department of Energy zero energy ready Home program. And so it's this certification that the DOE puts out. So when we go look and talk to a manufacturer you know, as we're walking the line, we're looking 1 - for quality craftsmanship 2- for if they're willing to sort of bend on their typical wall assemblies. Right, some manufacturers are like, “these are the boxes that we build. You've got to build a two by four wall with X, Y, or Z and that's it.” But at our company stage, right now, we need to be working with manufacturers who are OK going outside of the box of their typical assemblies and their typical processes. So really, that's what we're looking for when we're looking for a manufacturing partner. It's not necessarily that they produce modular and manufacture it. It's someone who understands quality and cares about energy performance. So we've walked probably a dozen manufacturers throughout and there's a ton in Pennsylvania interestingly enough because a lot of the Pennsylvania mod manufacturers are servicing customers in upstate New York and it's just to set up a factory. So we thought a lot of them were members of who have been participating in the National Association of Homebuilders,  building systems council and a lot of the modular manufacturers are members of that particular kind of industry group.

- Prefab Review

So how do your customers find you and how many I know you guys recently built your first house right, how many houses are you planning to build this year?

- Module

So we just finished our first home in Pittsburgh on a vacant lot. It was 880 square feet one bed, one bath. We plan to build at least or start construction on at least another four this year. And we have several other projects in kind of we'll call it the pre-construction pipeline where they're going through zoning, land acquisition, but at least four units in that.

- Prefab Review

How are customers finding you?

- Module

They find us various ways. You know we've had as a startup company, we've been able to leverage our story. And so we've been written up on Forbes tech, crunch builder magazine, a lot of publications have written about this concept right. Of module, right-sized, expandable housing. And so I think people read about us through that and will come to our website. But then I would say that a lot of folks end up googling prefab homes and find their way to our Web site and then the other thing that we've been doing is we've been hosting some events in Pittsburgh. So we’ve hosted an event every year called defining the future of housing. And we get some folks to speak about the future of construction, the future real estate development, energy efficiency, and every year we have about 100 to 150 people attend that event. And that's been a good way to showcase it. You know, we just had it after we finished our first home. So it's a good way to get people through the house that we just built and then also to just talk about where the industry is headed. So we were fairly active in hosting larger events like our future housing event and then some of the smaller things we just do regionally here. That's big as well.

- Prefab Review

Cool. And then finally a list of the Module questions you guys consider just being a developer. Like I assume these homes probably, if you're building them at an affordable cost, they probably pencil in (meaning like the costs of land plus the cost of construction) is probably lower than the ARV - after repair value. Have you considered doing that as a way of kind of just scaling faster versus having consumers?

- Module

You're on the money there. The next four units that we're building we will act as developer on. So we see the ability to scale. You know while some people think of ability scale, let's set up a manufacturing facility and let's try to start pumping out homes. We see it as “how do we get customers faster?” And that is by going out and being a developer. Because the customer may come through your door and they may be like “Oh, I love the moonlight.” Right. Your three bedroom home and I don't have land yet. So that customer was a lead now turns into just an opportunity missed out on everything or I don't have enough money to pay for my own rent right now while also exactly right. So if we don't actually get financing. So we're going through the construction lending process and we work with the you know the Urban Redevelopment Authority of Pittsburgh to acquire property. And so we're hoping to start construction on that project in the fall. So we had to go talk to traditional construction lenders and as a startup company they’re like, “So what's your track record look like?” Well we've built this one House it's really beautiful. You should look at it. So we are stuck here in that thing. 

- Prefab Review

You're investing the equity out of your corporate balance sheet? 

- Module

We have several sources that we're using for that equity. Yeah, but it's different than the typical startup investor mentality where you know the folks who are raising financing for a real estate project are quite different than raising financing for a startup venture. Right. The risk profile.

- Prefab Review

So that means you're potentially using-up the balance sheet. It's not like you're sorry. This is my startup. I mean you're not like people who invest in your startup. That's not necessarily the same pool of capital as it is in these projects.

- Module

Correct. 

- Prefab Review

Got it. That makes sense. Yeah. Just because the return profile is pretty different as you're saying.

- Module

Yeah. And you'd be surprised that when you speak to startup investors right and they're willing to believe and take a chance on some company in Pittsburgh who built one home they're like yeah we'll put in money to go build a thousand. You know you guys can do a thousand homes. That's totally feasible. You go to those same types of investors and you say hey we're just going to build four houses right over there. Here's the sale price. It's actually a better deal than most of the new construction that's going up there. I don't know. That seems risky. It's pretty flat. Right. Like the mentality is different risk profiles.

- Prefab Review

Right. You're probably not going to 100x your housing thing. I guess maybe you'll do that with your company. Yeah. That's cool. That makes total sense. In terms of just moving away from Module, we sort of do a quick fire round on this. It's awesome to hear about Module but it's also good to sort of tap into experts like you about the industry. So just we'll give you a quick couple of questions trying to answer each in a minute or less if you can. So I guess the first question is for a prefab startup like yours. What's your business model look like? Basically where are you making a margin? A lot of companies I've talked to make like 10 percent margin on manufacturing and a little bit on labor. Obviously you guys aren’t doing manufacturing. So how does that look?

- Module

So our business model, you know we sort of have two types of models right. One is the custom built on your lot. And so essentially have a design build contract with them and see your margin on the design-build side. We typically have a Phase 1 design contract and then we turn that into a build contract. So that's the one business model for the individual home buyer who has property already. For the spec development It's essentially you know go raise the equity. Go get the construction financing and then you're making your margin on the end sale price to the customer. So there's sort of two business models I see in the future. This is sort of in the long term future, is once we develop our own tools, our digital platform that we're building out right now, in our network of manufacturers we could license those tools to other builders and developers who are working in other similar markets in these Tier ,2 Tier 3 cities. But that's not a business model we're exploring right now. For now it's like the one off homes. So design contract, and then build contract, and then for the homebuyer who wants to go buy a finished home that's one of our spec homes. It's just a margin on the sale price right.

- Prefab Review

How long does the prefab process take with let's say a motivated buyer in Pittsburgh?

- Module

When you say the prefab process can you…

- Prefab Review

How long does the process from, I bought a piece of land to I'm in my home take?

- Module

So the only reference point I have is our first customer. So we signed a Phase 1 contract with them and believe it was we started working with him in January of 2018 and had sort of our way to get zoning approvals, zoning variances permits, building permits and then started construction by demolishing - there was a garage on the property to demolish the garage in late October of 2018 and then we finished with construction in April of 2019. So it's about a six month construction process. The actual walls went up in two days. That was the fastest part of it. But I think it was around six months for construction and then we sort of had our first engagement with them as a Phase 1 contract, I believe it was in January of 2018 and then we officially started construction in October. As a first customer we hope that that process gets faster for our future customers.

- Prefab Review

Yeah makes sense. So for buyers tips on getting financing. Yeah. I assume you're going to help buyers with that. Or maybe. But do you have a suggestion on how they can do that.

- Module

So we actually spoke to a series of banks and met several lenders at these industry events right, so that NAHB building systems council there's a bunch of lenders that hang out because they specialize in modular residential construction loans and so we've just met a series of lenders. There is a one particular loan officer from Citizens Bank who does work nationally. There's a group called One trust Home Loans. It's out of the West Coast that does specific to modular (lending) so there's several lenders who want to specialize in modular construction. So we have them pre-qualify customers and we also have some local banks as well that we work with.

- Prefab Review

Have you found a good way to get, we work with say we have about two hundred, we have a concierge service, we have about maybe 100 to 200 clients a month. Have you figured out a way that works well in Pittsburgh for buyers to be able to finance land and the construction together? That's one of the issues we find all the time. Like do you do a land loan and then double close? Yeah. How do you do that?

- Module

Yeah that's tough. So you know our first client purchased the land already and so they were only doing the final deal to purchase the land with cash it's a little easier. Exactly. There is a bank there that we spoke to locally that'll do a one-time close. So for pre-sale for instance. So let's say we have a property going up in Lawrenceville, Pittsburgh one of the hotter neighborhoods, and marketed on Zillow as a pre-construction sort of listing. And there is a way with this particular bank to do a single close. There's a contract for the land and a contract for the build. And those are two separate contracts but it's closed as one at the closing. So I'm happy to share that particular lender's information with you if you want.

- Prefab Review

Yeah. Just curious and this is going to be in the fire round. Do you guys have permitting on that beforehand? Because generally what we see is once there's permitting there's no problem.

- Module

 That's a good question. They were talking about another project they did where they didn't. That builder who had that land contract and the build contract did not have building permits at that point. And that can get dicey a little bit. Right. The whole timing of that. So I don't know that I have the right answer there but I remember that particular project there it was a spec home project it was being pre-sold and the builder didn't have the permits yet but it was sort of contingent on them getting that. So I don't know, it's like what domino do you knock first?

- Prefab Review

Yeah.I'm hoping more lenders do it and we're able to find them because it would help buyers get into more of these homes. And it seems like they should be able to because most of these construction lenders are giving money as draws anyway so. Right. You sort of have to hit check points either way along the course. Right. It's not like they're getting lump sum installments but we'll see. All right. Last fire round question. What do you see as the major trade-offs between kind of custom versus non custom when it comes to house bilbuilding? 

- Module

Time and cost. Custom - it's going to cost more. It's going to take longer.

- Prefab Review

It costs more of the manufacturing fee as well or mostly just on the design contract?

- Module

Mostly on the design contract. I would say, I mean our first project was panelized so that we had the opportunity to do more custom stuff inside the home. And you know the question is, as a home as a prospective home buyer what things do you value? Are you someone who wanted to be an architect when you were younger and this is your opportunity to do that then maybe you know and you have the budget to do it. And then custom might make sense but if you're in sort of a practical time pinch then trying to hold back is really important to me and working with the right builder who understands where you are as a buyer and what your needs are I think is really important. That's what I would say. I think you can have a non custom but beautifully designed space just because you've customized something doesn't mean it's a better design. It means it's been customized.

- Prefab Review

All right. That makes sense. Well Brian, it's been amazing having you on this podcast. We ask everyone the same final question and that's what you are most excited about for your company or the industry for the near future?

- Module

Let's see. I'm most excited about one, working on this mixed income housing project for the city of Pittsburgh. We have a nonprofit partner. So we're being co-developers. This non-profit delivers one of our homes to an affordable buyer. That's really exciting because that hits at the core of our mission. So that's one thing I'm really excited about. And then the other is this conversation we had about our offsite, not literally offsite construction, but our strategic offsite with our management team and thinking about how to de-commoditize housing and real estate. You know we look at coffee and beer or these two things that people know used to be in Pittsburgh. You got an Iron City Light, you got a Yuengling and now there's all of these other options for people. And people understand quality so I'm excited to do the same thing but on the housing side on the residential housing side to sort de-commodify that and show the true value of a really well-designed, thermally comfortable space for customers so that's what I'm excited about.

- Prefab Review

That's awesome. Well Brian Thanks again. I don't think we can have enough sort of smart, innovative people working in this space so it's great that you are. For people listening. If you want to learn more about Module, modulehousing.com we're obviously at prefabreview.com. Thanks again Brian. Best of luck.

- Module

Thank you. Enjoyed it.

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Prefab Review (PR)

Hi, my name is Michael Frank, and this is the Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab and modular housing industry to learn about them and make it easier for you to make the best decisions about your next project. Today, we're interviewing Steve Vallejos. I hope I got the name right. The president at PrefabADU. Welcome, Steve. 

PrefabADU

Hi.

PR

Well, anyway, thanks so much for joining and very excited to learn about your company and also to deep dive generally into ADUs in California. We get a lot of interest in them here. But first, I just wanted to learn a bit about you and how you got into this business. 

PrefabADU

Well, we're kind of the old players at this base. We got introduced to the idea of accessory dwelling units back in 2005, when one of the modular factories I was working with tried to launch a product but wasn't really having any success. So they asked us to see if there's any way to get any traction with this. And so that was kind of our introduction to even understanding that there was legislation passed in 2003 allowing it everywhere in the state. So, yeah, that's that's when we got our start. 

PR

Got it. Can you just tell me a little bit more about your company. What are you building at your core like? What are the varieties? What makes your product sort of different or better than others?

PrefabADU

So, I wear two hats, you know, I'm a general contractor and my company, Valley Home Development is where we really, really got our start in this. And then I'm running PrefabADU, which is essentially our panel, our panel production factory for ADU builds. But, you know, we've tried every mechanism and technique out there from conventional building through every type of prefab option. And we originally did a lot of little modular and manufactured homes when we got started in the space working in rural and suburban areas. But as we started to get a lot more requests in urban areas, we found that it was getting harder and harder to either roll-set or crane-set units in because there's no side access and lots of power lines overhead as well in urban areas. So it just led to a scenario where our choices were either go back to conventional building or take on some other type of prefab method. So we looked at SIPs and in Panelized products and in the end we went with panelized products, mainly because here in California at the time and I don't know if that's been resolved yet, but since we're in a seismic zone, the certification and of course, pretty much everything in California, is a seismic zone. So it led us down the path of, you know, working with outside panelized companies and then ultimately just deciding that it's just better if we just do this ourselves, since the panel companies are more catering towards larger single family homes. And also that was an issue with a lot of the mod and manufacturing companies as well. They just had big factories and they're not really designed to run smaller units down their production because their production line costs are much higher and there's kind of a sweet spot for them and it's usually a lot larger than some of the ideas we build.

PR

So just to understand when you say you're doing panelized - That means you're basically flat packing and then bring them to site that way and then kind of assembling the panels onsite. Is that right?

PrefabADU

Yeah. And we're going a little further than what the conventional panelized factories were doing. They would only build walls and occasionally throw in windows, things like that. We're taking them through sheathing and actually doing roofing. So our intent was to find ways to do this, but try and kind of come somewhere closer to what you get with a mod where you're cutting down a lot more of the skilled labor requirements in the field, which are very costly in California and finding ways to do more of that in a production way that makes it so.

PR

So in addition to doing sort of the prefabrication side, your company is then doing the kind of local services side as well in terms of like sitework and all that stuff.

PrefabADU

Yeah. Yeah. I mean that was the way to get it started was we were testing out the theory of this. Is this something that would work if we took over the panel production from the outside organizations and then last year we kind of came to the reality that, OK, well as we move into this year and next year, the demand is increasing greater than our contractor ability. So now we're now we're in the phase of forming relationships with a builder network. 

PR

That makes sense. It's probably a good problem to have. So let's jump back in, then we'll jump into it. So let's go through on the prefab side. Basically, what are you building right now. Twelve hundred square feet is sort of the magic number and to some extent I think it's a thousand square feet depending on what laws you're sort of listening to. What are some of the configurations? How many models are you making? Mostly custom stuff and bigger to understand a bit more about your products.

PrefabADU

Yeah. So in order for most factories to succeed, you know, the key is sticking to the idea of standardizing. And that's really where economics plays in favor for the consumer. So along those lines, we started the organization with a long history of doing this. And so we launched with 10 models. And they range from 150 square feet, which is all the way down to the bare minimum of what the state will allow as what they call an efficiency unit. So it's a little studio on up to our biggest standardized plan is a thousand square feet and it can be bumped up to twelve hundred if people want it to be. But we have kind of, you know, in that 10 plan range, there's kind of everything all on that path. And so what we've got is we've got an array of plans that fit an array of budgets and properties in terms of what zoning will allow. And all of these are tried and tested products that we've done, you know, essentially for over the last 15 years that make sense.

PR

And then coming back in service. So in addition, it just sort of sounds like you guys are still doing the local building part on a lot of the areas. But you said, you're looking to expand. When you talk about services. Are you doing the permitting? Are you doing foundations? What part of this do you sort of buy?

PrefabADU

Well, when I'm wearing the prefabADU hat we're the let's call it design, permitting and the in the kit building. From that point on, it hands over to the contractor who is doing the foundation, the setup of the kit and then all the finished work necessary to take it to finish.

PR

OK. It sounds like you could be the contractor in that situation as well, but it could also be a whatever second party or third party. Yeah.

PrefabADU

We actually have a handful of contractors who are working under us right now getting training so that they can spin off and actually do direct, direct installations with the consumers. And we also have a team down in L.A., in San Diego who are working on getting to the finish line with us on our on what I guess we'll call it like a dealer network program so that we can launch into those areas. 

PR

That's cool. And then what? So then it brings into question, what areas are you actually serving right now?

PrefabADU

We've been serving what's called the nine barrier counties for the San Francisco Bay Area. So it's like I don't know if anybody knows the area, but it's from, you know, from San Jose on up to Santa Rosa or beyond.

PR

Okay. So basically wine country. 

PrefabADU

Yeah. Exactly. Exactly.

PR

And then on the East side, how far east? 

PrefabADU

We traditionally work again. That brings us over into cities like Walnut Creek or Livermore and on up into where we actually reside now, which is, you know, Napa, Fairfield area. The truth is, that's where our general business is. We've worked up into Sacramento and up into the, you know, the the the mountain ranges of the Sierra. We've gone down into Santa Cruz and Monterey and and Morgan Hill. And so we're we're we're we're stretching out further and further. Demand has been great and all those areas and beyond. But we're, you know, as a contractor, we've got somewhat of limitations in terms of how far we go with, you know, with just being able to spread our manpower around. 

PR

That makes sense. And then in terms of what is the average price point that you are dealing at on these different sizes and maybe you can add this as a question. So we get inquiries constantly about what's this actually going to cost. So maybe you can break that down. I know there's a bunch of different parts of this, which is why people have a hard time answering sometimes. In terms of like the panel costs and sort of. San Francisco probably has a slightly different cost profile than like even Napa or maybe it doesn't. But maybe you can kind of break down what we'd be looking at, kind of some local cost on these kinds of areas.

PrefabADU

Yeah. So I'm glad you brought that up because it is hard to just kind of generically price everything, especially if you've got a wide array of products. But generally speaking, the average product is right now it's running at about $400/square foot. A lot of small stuff because we're heavily, heavily doing work in urban areas. So on an average 400 square foot build, I think, ah, let me pull out my pricing thing so I don’t misquote myself here. So we're looking at something that's about a $145,000 build for the whole thing, all-in foundation up taking it to the finish line. But when we actually look at the panel kit, the panel kit is about $34,000 of that. So we represent as the kit manufacturer, we represent about twenty to twenty five percent of the overall build cost on average. And then it is tied to the foundation and then the full deliverable with all the finishes and everything.

PR

So you're saying that that would be like $250, a square foot sort of all in, right. For a hundred over a hundred thousand.

PrefabADU

No, it's at 145. We're aware of that.

PR

I'm sorry. I get it.

PrefabADU

In the Bay Area we're averaging about $365. Right now just kind of across the board. But as we get into the larger units the costs go down. There's a weird metric that plays in on the ADU a little bit differently than what people would expect. As we go down in size the cost per square foot goes up is essentially what you're doing. You still have a bathroom. We see that everywhere.

PR

Right. You have a right. Kitchens and stuff are expensive.

PrefabADU

Yeah, but you know, what's funny is I get the question about cost per square foot a lot. But that's not where we really talk about economics when we're working with our homeowners. What we're really focused on is what does this really cost you? It's like it's like when you go look at a car and you say, oh, I want that new Ford truck. And you're like, wow, that's a $70,000 truck. But then the dealer tells you, yeah. But that translates to about, you know, five, six hundred dollars a month. And then that's really where the economics play in helping them understand how it fits for them and what's important for our customers. And this is really a crucial thing is that we weigh what the average costs would be. Once it's mortgaged into your property versus what the market rate rent would be. So, for instance, that same product in San Jose, let's say, which is one of our, you know, busy areas down there, that product would rent for about 18, almost 19 hundred dollars a month. But mortgaged rolled into your first mortgage. It's only about six hundred ninety dollars a month in terms of added to your mortgage. So there's about a sixty three percent return monthly on your investment. And so that's where we spend a lot of our time educating the consumer about, you know, how this works for them, as opposed to just constantly talking about cost per square foot, which really doesn't measure anything other than just giving you something that frightens you without understanding the value of what you're doing.

PR

That makes a ton of sense. So I do want to ask another cost question, but I agree with you completely that there certainly is a lot of depth from adding value, dropping cash in a home opens a lot of opportunities with ADUs. So let's just jump back to cost one second. If we think what the bigger ADU just because. Right. We sort of started with a smaller example. Let's let's take your thousand square foot ADU. And let's say something. You guys do something like Oakland or Berkeley or San Francisco, like an expensive area. Right. What are we looking at for the cost of like a thousand square foot, assuming we have a place we could put it?

PrefabADU

So you're probably going to come in at maybe$300, $320 , $340, you know, for the total build cost for something like that. And then that unit, that unit, again, I'm looking at a cost chart right now that shows me that that unit would rent for about almost $3,200 a month. So mortgage that particular product would be about 70% of your mortgage. So again, you're making a forty five percent over your you know, your monthly cost on this.

PR

If you're if you're renting it out at a market rate, you know.

PrefabADU

Can I share something with you too? Because this is an interesting thing. There's a lot of confusion about the idea industry and everybody thinks about it as economics returns and profitability. The truth is, as somebody who's been doing this for 15 years and our business still remains, 80 percent of our customers are people who are doing this for family so that we would be doing it for aging parent or kids who were, you know, what we call the boomerang situation where they'd launched, but then come back because it's hard to find housing. So with that, we're not really dealing with people who are trying to find ways to make income as much as we're trying to find ways to offset and get below market rate rents. So what that does is it puts us in a situation where we're constantly monitoring what's called AMI, which is, you know, how does this represent area meeting median income in terms of housing? And that puts our products anywhere between 15 percent on the AMI to fifty five percent on the AMI. And this is the group that is the most at risk of being homeless or actually is homeless right now in the state. This is what the ADU was designed to help solve. And so we don't focus so much on selling the super sexy products to the affluent. We focus on addressing how we can provide affordability to people who need it the most.

PR

So we see this a lot, at least in the Bay Area, which is something where you guys operate is we're seeing an increasing number of I guess this is sort of the affluent, people who own their homes like their neighborhoods and have had their kids graduated. And now. Right. Like, you know, they have made a decent size lot in Mill Valley or somewhere in the peninsula. And actually they want to live in the thousand square foot ADU there, they’re like “I'm sixty five. It's just me and my wife. My wife and I are, you know, the area, my husband and I. And we actually want to rent out the main house.” So we've actually seen that increasing. I'm not sure if that's something you get. It sounds like it's not something you see a ton.

PrefabADU

Oh, no, it's we see we see a lot of that. I mean, it's in you know, the first choice in those scenarios is always family members because as you talk about seniors who want to age in place, they're always constantly concerned about their, you know, the potential of risk and danger for them. So even having, you know, a non family member renter in the main house, well, it sounds very attractive for income opportunities. It's also risky for them. So whenever they can, you know, the decision is often made that, you know, all move into the of you and, you know, son daughters are or somebody takes over the main house. We've also seen siblings do it where we've seen people who are aging and they've decided that, you know, I've got a sister or brother who is also aging as well. And, you know, and that person may move into the main house and go into the ADU or something like that. So. So it still, like I said, remains only 20 percent of the deals that we do are people who are looking at it strictly for an income somewhere where it's not tied to family in the short term.

PR

One or two more questions before our fire around. And that is like what's kind of scale you guys? Like how many houses, I guess, ADUs or homes have you built so far? What are your plans going forward?

PrefabADU

 I think last year we topped out on our own with our total production. To date it was like over two hundred. We've got I think we've got like 15 or so running right now with about 30 going through design review. And that's the numbers kind of fluctuate. We're anywhere between 15 and 25. In actual build and then anywhere between 20 to upwards of 60 going through the entitlement process. So it's kind of an ebb and flow thing. Demand may increase, though. Without a doubt.

PR

So getting into that process. So I have two questions. I guess the first one is what is the timing sort of from beginning a project to end of the project. The typical area and I understand this may vary depending a little bit on that kind of permit process at the county or city or whatever.

PrefabADU

It's got a lot more uniform kind of across the whole Bay Area. We had a huge flux. Is on the designing and permitting process. So in the early days, we used to quote that as it can be anywhere between 2 months to six months, you know, getting entitlement. But on average now, especially with new state laws that we've been pushing, you know, there's a 60 day requirement to issue permits now. So what we've been seeing is, well, a lot of players want to see players. I mean, cities and counties do their best to make that a reality. There's just still situations where ebb and flow pushes it beyond that. So it's still on average, it can be between two to the worst case scenario, four months on from the time they say they want to go forward and do a plan and submit it to getting a permit. Generally speaking, the build process from breaking ground to handing over the keys is about a 90 day window.

PR

And then that's awesome. So you're basically in and out in six months for the most part. And then in terms of the new laws. So there are a bunch of them. We're still trying to get our head around them. All of these were passed, I guess late last fall. But I think most of that went into effect in January. Yeah. Right. Like, what are the key things that people should understand? Are you guys actively building towards that? I know some of the details in terms of what you need like four feet next to the property line, which is pretty different than state laws. No HoA review stuff like that. But be great to understand what the lay person a project could understand well.

PrefabADU

So I could do a whole interview strictly on legislation because we're actively involved in everything legislation. So there were six bills passed and there was actually 13 that we were working on from the beginning of the year. And I was shocked that actually six of them went through. But, you know, the best way to describe it was that, you know, for the most part, the people, the people who see this industry think it started in 2017. And that was based on stuff that we started back in 2015 in terms of trying to address major barriers. And we walked it all the way through the legislative process in 2016. And it went into effect January 1st, 2017. So if you measure activity and growth in this market and everything, it happened back then and I talked to a lot of people who tell me, oh, I've been in this since the beginning and I think, wow, I've never I've never run into you. So you really you've been back at this since 2003. And the answer is no, no, no. 2017. And so we do have a lot of people who came in at that time. But this year, last year was a big year to tackle just a lot of the little oddities in terms of barriers. There were timing constraints that we wanted to try and remove. There's this constant issue with impact fees coming in from, you know, from not from the city themselves, but, you know, third party entities like, you know, Sanitation District, Water District, Parks and Rec.

PR

You're referring to a law that waives them for 750 square feet or less? Yeah.

PrefabADU

The goal was to wave them across the board. But the compromise was under 750 really should get waived and above seven. It should be according to rights in proportion to it regularly. And so those were some of the barriers. There's constantly a little confusion about parking. So there was a smart clean up on that. There's the issue of if you're you know, if you're converting a garage, what does a garage conversion mean? Did it mean tear down the garage or did you just mean converting it, meaning that the garage still has to stand? So there's just a lot of effort to clean up legislation so that we can get a little bit more consistency city to city rather than have each city have their own interpretation. One of the big things that I think was a big deal this year was the fact that every city had to turn in their local ordinance changes to HCD. HCD has the right to review all that and make sure it's in compliance with the state code and if not, give the city an opportunity to make corrections. If the city chooses to stand their ground and say, no, we're not going to make the corrections, then HCD now has the right to turn it over to the state, another division with the state to basically go after a decision whether this is a prosecutable offense. So what's really happened is it's an effort to get everybody on board with the idea that we need to solve this housing problem and we need everybody basically acting the same way. So there's a lot of things that are behind the scenes that are a little less apparent to the consumer when we talk about legislation, but they're more geared towards leveling the playing field. You know, across all jurisdictions and that's some of the bigger things that I like, that, you know, that a lot of people just don't understand. Even people in this industry, quite honestly. And with that, we know, we've already started tackling some issues where we're running into cities who haven't, you know, had their interpretation of the state regulations. That doesn't really comply with our views. So we run it by HCD. And HCD kind of intervened and said, you know, they're either they're either OK with that or no. We think that those positions don't align well with state regulations. So there's a time when you get six bills passed, there's a ton a little buried in each of those bills. But they're all they're all worth reading. And they've all the way, I tell people, is that each of those bills has the opportunity to be equal to what happened in 2017. So basically, you can say we've had literally six times the barrier reform than what we had in 2017. And I think that's just wonderful for an opportunity to make a real viable solution to helping solve the housing crisis. 

PR

Yeah. I mean we're seeing a lot of I guess I would say the setback one in particular feels like it said it at least on the urban lots is enabling a lot of leverage with water.

PrefabADU

One lot coverage was one where there's no firm. Exactly. Yeah. And so that you know, that we have about 13 projects that we submitted over the last five or six years that were denied that we've had those customers come back to us and say, can I do it now? And so they're back in the loop for projects being submitted now and have already been run by the cities to verify that the new regulations will allow it now. And so, you know, that's to me, that's proof that, you know, all of this work is worth the effort.

PR

That's awesome. So this sort of second to last section and we've got a little longer in this than normal because the content’s been awesome is what we call fire around. So a bunch of quick questions and then do your best to answer them in one minute or less. All right. So question number one, and this is a little meaty. What are the ways that people finance ADUs? 

PrefabADU

A majority of the people out there right now, it's really we still call it an affluent product because it really comes down to cash on hand or equity or something.So one. Yeah, I mean we're still seeing that a majority of the customer base out there right now would be considerate. We consider that affluent because they have the resources available. We are seeing more and more players come to the table now in the banking industry with creative funding sources. And I think that will continue to expand. It just needed an opportunity to see the market grow for them to realize that they needed to cut. Stick their stake in the ground and say, we want a piece of this. So, yeah. We're seeing much, much more new funding scenarios come to play. And I think this year will be a whole new array of products from what we're seeing behind the scenes that I can't necessarily talk about right now, because we do a lot of one on one conversations with big and small banks on prepping and launching products. But we will definitely see a lot more funding solutions.

PR

Yeah, unfortunately, I'm involved with a few things as well here. Most of the stuff I've seen, which has been some form of like equity share and unfortunately farther away from like a construction loan, I haven't really seen it get to scale, unfortunately. , that would be awesome if that stuff did. 

PrefabADU

I'm going to say that's going to piss those guys off because we do a lot of talking with them and working things out. But there's a couple of companies that I really like and we're doing business with right now. But I'll tell you that they run a high risk of being predatory. And so we've kind of steered clear from a lot of potential relationships with organizations doing that, because we just don't want to be participating in something that could evolve into that. But to answer your question, there are a lot of scenarios that we're working on now that our equity share scenarios, this could have been.

PR

OK, so site assessment. So what are the things you look at to try to understand feasibility? Right. And if I'm an extremely slow plod and say Mill Valley and Marin or, you know, Berkeley or Oakland can work with you. Well, how do you evaluate that?

PrefabADU

We've over the years, we've drifted further and further away from that and really have been, you know, going down the path of we really have to focus on who we are and who we serve. And when we get into those scenarios, those are scenarios that fit best, mostly with working with an architect and doing a creative one off solution. So unless it can be graded to a flat location for the ADU to reside, or sloped well enough that we can do it as foundation simply. We tend to steer clear of those. They're just they end up running into the more higher dollar and higher end solutions. And there's just a there's another there's another resource pool who caters to that much better than we do in terms of higher volume, high production product.

PR

One of the things that we get a lot of interest in, I think is mandatory on single family homes is sort of solar in zero net energy solutions. Do you do many of these zero net energy? By these I mean, it is we I we played on this on both sides. 

PrefabADU

I do big modular homes. And right now I'm doing a four thousand plus square foot home on top of a mountain in New Almaden that is completely off the grid. So, yeah, I mean, to us, it's never been a scary topic. Now it's just a code requirement under Title 24. So it's just another component of the process for efficiency, energy efficiency that, you know, people are going to have to adapt to. But it's not anything new or scary to us. 

PR

Is that true for ADUs? Only for single family homes?

PrefabADU

It's too for ADUs. But there's a question of interpretation and a to use are are really technically by by how it's been interpreted by the energy code considered to be single new single family homes under the guidelines, if they are detached units, new construction attached, new attach units, new construction still fall under that that perception of being an addition. So under those guidelines, the junior ADU to you or say 50/50, carve out where you're carving out space from the house and then adding on, those are still considered additions and they're not triggering the same requirement coming out of the title 24 calculations.

PR

So it sounds like you're doing solar with everything that's here.

PrefabADU

It's I mean, we can't we can't we can do it with whatever with whatever people want. But in terms of mandatory, it's the detached units. And we do both attach and detach. So it's we do them both. 

PR

So I didn' realize,. you are doing additions as well. Got it. That's awesome. And then from a code perspective, do you end up ever doing these sort of smaller homes as primary residences?

PrefabADU

That's an interesting question. We we because we do what we do and we've been doing it for so long. We get a lot of people who approach us with the idea that the spatial layouts and the efficiency that we have is somewhat unmatched by anything else they see. So as they think about building a house in a smaller scale, And so we actually do build smaller homes for people that fit under the guidelines of everything we do with an ADU but it actually is the primary residence

PR

But it actually is the primary residence and is the permit process for that very different?

PrefabADU

It is. I mean it when we're not doing an ADU application, you fall under the guidelines of just a conventional new single family home application. So it opens up the door for a lot more discretionary review and things associated with that. But then again, the size and the cities and the counties knowledge of to use now make it a lot easier than what it would have been, you know, five or even 10 years ago doing that same exact thing. So it's everything kind of across the board has gotten a little bit more efficient in terms of streamlining through municipalities.

PR

Awesome. Thank you so much for answering these questions. Final question. I ask this everyone at the entities. What are you most excited about for your company or for the industry in the near future?

PrefabADU

I touched lightly on it. We're not focused on, you know, at this point, catering to the affluent and their and their desires for super opulent sexy products, we are focusing on how do we help solve the housing problem. And so the more production we're doing and the more interaction we're having with cities are allowing us to have a greater reach into that area. So it feels good to be doing something that is desperately needed. And the idea of maybe someday evolving into being the answer to the housing crisis is something that we're striving for. So that's what keeps me plugging away with everything that we're doing legislative wise and casita coalition and on and on and on and on. But every day we get to see how that impacts people and that and that feels really, really good. And so that's that's what we enjoy the most. 

PR

Great, that's definitely laudable and definitely something we're very supportive of. Thanks again, Steve. For more information about PrefabADU, PrefabADU.com, I guess is the best place to go.And to read about all sorts of companies in the space. You know, you can always visit us at PrefabReview.com

PrefabADU

Thank you for the opportunity to answer questions.

PR

Thanks again.

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- Prefab Review

Hi my name is Michael Frank and this is the prefab pod presented by prefab review where we interview leading people and companies in the prefab housing industry to learn more about them and make it easier to make the best decision about your prefab project. Today we're speaking with Brian Kuzdas of S2A modular. Welcome Brian.

- S2A Modular

Well thank you Michael. Thanks for having me.

- Prefab Review

Thanks for being here. It'd be great to just hear a little about your background and what led you to start a new modular home company.

- S2A Modular

While I don't know how detailed I should get on this but well I'm fifty five years of age today so happy right. Well not today, today I'm taking you know  I'm fifty five soon to be 56 and a few months but I've had a storied career that's led me up to this moment so maybe I should give you the first two minutes of a little of my background. I got involved in real estate in nineteen eighty five I got involved in commercial real estate as a broker so I did brokerage for about 12 years on the commercial side of the fence and by the way, I was born and raised in Chicago although as you and I are talking, I sit here in Palo Alto ,California now. So I'm a Chicago guy born and raised there nineteen eighty five I get my real estate license and I did commercial real estate for about 12 years and then in nineteen ninety seven I started buying apartment buildings to convert to condos so I don't know if your audience knows anything about condo conversions but after the success of our first one in nineteen ninety seven I started buying more and more apartments and so by two thousand seven, ten years later, I had purchased a total of about 4000 apartments and converted them all to condos. At peak we had our name on the right field wall of the Chicago White Sox we had our name at Wrigley Field home of the Cubs, we had billboards all over Chicago, two hundred employees and just kicking it out and just really taking over that part of the industry. And then two thousand seven hit -  it was the crash for all of us in Chicago was pretty brutal and we went quickly from two hundred employees down to twelve in the course of about 30 months. So by two thousand seven, eight, nine in that era we were scrambling, you couldn't buy a building fix it up and say it and sell it retail the wholesale market had come into play and so it just it was a crazy time. So we shifted into auctions believe it or not. We started to help banks liquidate their properties that they had taken over through the auction process so fell in love with auctions I bought the domain realestateauctions.com which we still own today and we started doing auctions not only in Chicago but we started expanding outside of the Chicago area. Florida was the first state and then California. And by 2010 we decided that it was time to really seriously look at doing expansion across the United States. So by 2012 we had moved the corporate office from Chicago to Palo Alto California. So in August of 2012 that's gonna be my seven year anniversary next month. Basically been here in California for about seven years now. So we continued doing the auctions we built up to about 15 states and then by 2017 I started, though we were cash flowing and making some some sizable money in the auction game it really wasn't the same kind of money that we made when we were doing acquisitions. So we shifted and started building acquisitions again in 2017 putting the auction process somewhat on hold. We bought a couple properties in L.A. County fixed them up bought a property in Tucson Arizona RV park that we're working on bought a home in Palo Alto knock that down and now we're building a traditional stick built home. And then about a year ago I got a call from a lady, her name was Daniela she was one of our directors in our company and she said Hey I found a home in La Jolla California. For your listeners that don't know La Jolla is right above San Diego. And she said we can knock this down and put up a traditional stick built home and make about 20 percent return on it or we can knock it down and build a modular home and make a 30 percent return. And I said well my first gut reaction was kind of negative. I thought wait a minute you know we're building it in La Jolla it's an upscale area it's on the ocean and it's just kind of high end and you know modular is cheap it's boxy it's not customizable and she goes , "No no no no no no no you're you're thinking a manufactured,"  it's modular - modular it goes into a foundation it's permanent. It's stronger construction than regular traditional stick built. So I was clueless literally a year and let's call it 15-18 months ago I didn't really understand the differences. I'd never been in in the business to build modular or manufactured homes. So that was the beginning. I ended up, I flew down to San Diego I bought the lot and then after I she had me go to a place in Southern California to meet with the guy that was proposing building a modular home and I sat in his office for about two hours and I was spellbound. I was just amazed that all the advantages of modular construction and I got it. I mean 15-20 minutes into the conversation I pretty much got it. And then at the very end what changed my My Direction My life is he said to me how many homes are you building this year. And I said Well you know we've done five projects over the last five quarters. I think we're going to do maybe one a month now and we're scaling it just like I scaled the condo conversion business and I said I think we're going to do about five hundred homes within the next five years and he goes you know what you're going to have to meet a friend of mine John Roland - John Roland who is now my partner. John Roland is just entitled permitted seventy two homes to build in Southern California. And he can not find a factory. He wants to build a modular. And he wants to integrate it with. With the Tesla power wall battery and a bunch of renewable energy smart home components that make up net-zero real estate. We can talk a little bit about what those terms are in a second. But he said he can't find a factory anywhere in California that would build with the components that he needs. So he's looking to build a factory. So I said OK I'll meet with him from my side of the fence I've always had construction challenges whenever you scale when you build a lot your first guy you start working with works out great. But then the second contractor sometimes they don't do as well sometimes they go dark on you sometimes their prices go up it's just too if you're going to scale and build a lot of homes. You're so smart to really control that side of the fence So I met with John and it was a match made in heaven. I'm fifty five. He's forty eight. He's been in construction for his whole life. I've been doing the same thing. We're both all in and he said Hey. I need to get a factory up and I want to do this modular and I'm looking for a partner. And I said Well I'd love to to do this I get what what this whole thing is about and and then that's how it all started. We shook hands. Agreed. And now we're building a factory. So it was it was amazing  how branches of life go but that's how it all started. Sorry um I got a little winded there but yeah that's that's how it all started.

- Prefab Review

That's really interesting. I want to come back to what you said about not being able to  and find a factory. I mean off the top of my head know a few in that area of the world. So I'm interested in what you were looking for that wasn't available. But before we get to that let's let's jump into what is an S2A modular.

- S2A Modular

It's squared and so S2A sort of stands for a sustainability advance to a higher power to a higher level it's really we're integrating not only the modular concept the building and all the advantages to that but all the renewable energy smart home technology that's in the marketplace today and building homes that are sustainable. Net zero real estate got so so. 

- Prefab Review

So where are you on this train now?

- S2A Modular

Wow. So where are we at. Can you define that a little better?

- Prefab Review

So is the factory close to being built?. When do you plan to ship houses? Is it just what's the product line that you're actually more specifically offering to potential clients et cetera?

- S2A Modular

Sure. So when John and I shook hands back in June of 2018 it's been a full year now. It's been a just a whirlwind of of of progression. It started out. We locked up some land that we had to title and permit. That process took us a good solid year. The factory the land is in Hemet California for all of you that don't know where that is that Hemet, H E M E T. It's just west of Palm Springs which is a real good anchor a lot of people know where Palm Springs is. So it's about I'd say 50 minutes west of Palm Springs so that land is now permitted to build a factory we've broken ground we basically should have the factory actually producing modules by November 15th in that range. November 1st to December 1st. So that's where the factories at and in terms of that from the time that we start it June. Till today we've taken on about three hundred and fifty five units to build homes slash units whether they're apartments commercial mix use hospitality we're doing it all we're doing commercial and residential simultaneously. So right now we've got there's two things. There's contracts which are signed contracts with money and you're in the bank you know real contracts and then there's pipeline of people that we're negotiating with. "Hey Brian I've got twenty two homes I want to build in in Berkeley California" or whatever that's called Pipeline. So we've got three hundred and fifty five homes under contract and about three thousand units in the pipeline that we're in negotiations with. So it's it's going nuts right now. Cities from developers to all mom and pops people that are looking to buy their first modular home all the way to companies that are building for their employees to entities that want to build subdivisions. It's all all over the place.

- Prefab Review

Got it cool. So one question I have from what you're saying before is so just off the top of my head right,Like plant prefab has a factory pretty close to where you guys are talking about. I think Dvele has a factory pretty close to where you're talking about. Wh? Why build another factory. Yeah. What were you looking for from either price or control or whatever standpoint that said you know I want to own this part of the process.

- S2A Modular

Well some of the factories that you've just mentioned I don't really know a lot about. I don't know those CEOs and I know you hear of them I know Amazon invested in plant prefab and stuff like that. You read these articles but you don't really really know unless you're face to face with the CEO and even then you don't have the you don't know if they're telling you the truth so you don't really really know. I just focus in on our own our own stuff. You know from my perspective being age 55 and doing 4,000 condo conversions it's great when you can control the  vertical integrated piece of construction and you got to go out buy the land you've got to title you've got to do all this stuff you eventually have to build it. And when you build it after that you have to sell it. So we've got all the pieces of the puzzle inside our company - what we lacked was the construction side. So from my perspective I like the idea of the control, you said that word control. What what can you control when you own your own factory and you're building a product out of it you can control the quality, you can control the time that it takes, you control the pricing. So all of these things are really important if you want to scale if you want to do two, three, four homes a year and you're you're one of those developers and I sort of like a mom and pop style developer that's fine to use a plant prefab or some of these other factories. But if you're looking to take on the world and build sustainable houses where you know you want to change the housing crisis in California make a dent it's good to get going you know get your own stuff going. So John is the same way. John John Roland he and I been partners on this deal. He had a company just like I did that wanted to do you know I told you seventy two homes. That's not that's not his only development. He's got a number of them. So for him the need to do it inside and in a modular setting where he can move faster build it less expensive and control the quality was really important for him as well. So again hopefully that answers your question. We just wanted more control and evidence.

- Prefab Review

So now talking about offering a little bit. So just in terms of, I'm not sure if you know anything about our site but basically prefab review we get tens of thousands of buyers to our site  every month who are basically interested in building modular prefab homes typically single family residential stuff. But there's some variance on that. And one of the things we try to provide for that which is part of why we're talking is just kind of education about the price lines where you where you sit in the market. So just with that lens if I want to build a home on a lot what is what is that process like with you. I see there are some really sort of images of kind of renderings of homes on your site. Do you have sort of pre-designed plans or will it mostly be custom, or both. And then also when you were talking about control, Are you really taking control of the entire process or is it your sort of the manufacturer and then there's a local contractor who will also be hired to kind of finish in the home do the Foundation et cetera.

- S2A Modular

Sure. Well it really depends on where it's being built. Can I ask you, and my apologies for maybe asking this without prior asking the question before we got online here but where are you located? 

- Prefab Review

Well so I personally am located in San Francisco. But we have employees kind of across the country.

 Nice so San Francisco Bay.So we're neighbors. So Palo Alto is for all of you listening. Palo Alto is literally about 45 minutes to 60 Minutes just south of San Francisco. So you and I are pretty much neighbors. Exactly. So back to your question. If someone called and wanted to build a home in California then we take care of everything A through Z. If someone wants to build a home outside of California then we would integrate part of this process with maybe a local contractor. We would build and ship and so on. But so let let me take the listeners through route through the steps. There's basically seven and they're pretty easy. The first is someone calls them so they are looking to build a home on this lot. You really want to get a feasibility study done. A feasibility study especially before you close on the lot. Because while it's in a deal pending stage where you've locked the land up with a contract and you haven't closed on it yet that's when you get the feasibility study done. It takes about two weeks and it allows the builder to go in and assess the land, the setbacks, height restrictions, permitting process so that the fees that are included with all of this stuff it costs about thirty five hundred dollars for a feasibility study for residential. And then after that's done, after this two weeks you get a big thick report and it says yeah we can build a twenty eight hundred square foot home on this land. So. So you know you have the confidence before you close that this actually can be done. So. So that's step one. If you go forward that thirty five hundred dollars goes into the construction budget and gets taken off so you can always feel comfortable that you're just not getting charged that kind of money. Now if you don't go forward then of course you paid thirty five hundred bucks for a feasibility study. That's how it goes. Next is design. So now we we now know we can build a modular home. Right. So the second is we design it. We've got an internal department that does modular design. Some of the people out there in the industry don't. I mean the guys that are building a modular home for the first time they have never. They don't know that really from an architectural standpoint it's smarter to just start the design process with a modular architect opposed to a traditional one. You can go to a traditional guy but eventually after the plans are done they have to go into modular architects hands to get finished off to kind of put it in boxes so to speak. So that's step two is you want to have a design done. Now people out there if they had gone to a lot of modular sites and they see all these pretty designs and they want to plop one of those designs down there on their piece of land that certainly can be done but if you're thinking can a modular home be customized the answer is absolutely. Absolutely. I bought a small little box of a piece of land in La Jolla thirty six hundred square feet ridiculously small for anybody that understands that number and you know the report came back that we could build a twenty eight hundred square foot home on that 3600 square foot lot so you know. So that's feasibility. Then it goes into design it could be completely custom. Third is we then go into a construction contract. Once we know what the design is gonna be for those engineering that's where you have to go through a permitting process and get all the civil engineering drawings together the electrical those structural all that all those. Those drawings then get put together and we go into it and you'll take care of that. Absolutely. Yep. Now most companies have bits and pieces of it. I don't know any company that does that a through z but after we get the permits that's when we break ground or simultaneous we call it onsite work while we're doing the modules onsite Work is foundations and your utility hookups and all of that while you're doing the modules in the factory. And then last is the site completion. The last the modules get shipped they get put into a foundation locked in and then the last 10 percent is typically your building materials around the modules and you're done. So that process a through z. We do all of it if it's in California. We get calls every third hour from people all over the country and then we hook up with either factories that you know friends of ours partnerships that we've got across the country and work with local contractors as well.

- Prefab Review

But so if you're doing it in California that means you have general contractors on staff and then they're hiring subs like how to just I'm interested in how the dynamics of that work.

- S2A Modular

Yes. There's really two companies under a parent company is kind of how we perceive it. Is you have the factory which builds 90 percent of the home they build the modules and then you've got the construction side. What's the construction side do. Well they they do the foundation work as I mentioned they do the utilities and then they get the land prepped. So then when the modules get shipped and would that now the modules are on site that construction company is making sure that it gets craned in place the right way and then bolted and then all the last of the 10 percent of the building materials and that's the construction piece so as to a modular has both we have a construction company and we have the factory which is kind of a rare rare combination in this industry.

- S2A Modular

 I find that ninety five percent and I may be wrong on this statistic. So don't hold me to this but I find that ninety five percent of the modular companies you go to the Web site and you research them out they don't own a factory so they don't have that 90 percent of control and then the guys that have a factory I don't know how many of those actually have the construction piece in play.

- Prefab Review

So I mean we've I think we had 200 reviews on our site of different module and prefab companies. We've talked to pretty much all of them. I would say there's a lot of modular architects as you said there's a lot of modular factories. There's almost nobody who like you guys, very frequently people will cover and do construction on areas that are very close to their factory, If you guys are in fact coming off California I don't know of any companies that do all that and cover an area that that wide. So that's awesome.

- S2A Modular

Yes. And and we don't. So today where it sits today is we go A through Z unless there is scenarios where people want bits and pieces. So what I mean by that is we may get a call from Maria today and they'll say hey Brian we and we want you to build five thousand hotel units for us but we have the construction piece. We just want you to put out the modules that's it or developers or maybe developers online listening right now let's say you know we've got a crew to do the foundations and stuff but we'd love to be able to get these modules quick and cheaper and be able to scale and build more because we've got that piece in place which so we work and integrate with those guys. So there's guys sometimes in the development process. We don't have to do a through z because we actually partner with people that are already doing parts of this already but you know we can do both.

- Prefab Review

That's awesome. So let's talk about pricing. Yeah it looked like on your site you said the pricing. Yeah. Why don't you just tell me. Just because it struck me as incredibly low compared to at least when I see for like sort of other high end Bay area prefab imagine our companies. So yeah. Can you just let me know sort of what typical pricing might be for let's say let's let's call that you can tell me for wherever but let's start with saying you know 2000 3000 square foot residence in Palo Alto or the Bay Area or you know an expensive area in the country.

- S2A Modular

Sure. Now I get this question every third hour as well every day in my life

- Prefab Review

 And it's a lot of flat lot if that makes this easier.

- S2A Modular

Sure. Sure and what I was going to say to the audience is this is such a case by case you know you just threw out there flat flat on you know so. So there's all different lots that you build on there's all different zoning regulations and there's so many permitting fees from Palo Alto to San Francisco to Tucson Arizona that there's just there's a lot of differences from one lot to the next. But let's, With all of that's all but with all the caveats and understanding this isn't a guarantee or anything. Yeah let's just go with what's an average. OK. So there's really two companies there. There's the construction side that I just talked about and there's the the factory side. So when we build let's call it on average a 2,200 square foot home we are going to charge about two hundred and fifty to two hundred and sixty dollars a square foot all inclusive. Other than the land. In other words that takes care of the foundation it takes care of now. Now this would include high end materials. So it's your cherry wood kitchen cabinets that have the little glass doors high end not your Ikea cabinets. You know that this is the high end materials that you would put in Palo Alto.

- Prefab Review

You basically have to as of next year.

- S2A Modular

Yes. Right. Exactly so and so. So what that means is that we are spending some some really quality money to make that happen. And that stock in our homes and it goes for about 250 to 260 dollars a square total. Now it doesn't have to be that number. No. There are sometimes contractors will say Hey Bri we just want to do the modules. We don't want you to do any other stuff just get them to the site. And and then then I would say that that number would probably be more like one hundred and forty five to a hundred and sixty five dollars a square foot because we're not doing all the other stuff. So it's kind of about one sixty five for the module and maybe ninety dollars a square for the construction up to one hundred dollars a square for the construction. So put them together. We do a through z and do all the permitting and stuff for you the design the architectural work all of that's lumped together the exact costs here, like 250 - 260

- S2A Modular

Have we ever done it for one eighty to two hundred. Of course. Yeah. I mean we're taking all of that those pretty bells and whistles out and all we can do that strip it down make it me I'm pretty. Instead of high end average and you're going to you can bring that down. So it really depends on the customer as we end in the town that they're building and we went into Fremont and all of a sudden we found the Fremont. Fremont California at East Bay for those. Yeah. I don't know. Yeah. You know all of a sudden we were you know this gets hit with this number and this number a little different than the town right next to it called Union City. So you it's really a case by case guys but it's about 250 to 260 total.

- Prefab Review

Got it. That's I mean quite honestly that's like almost shockingly low to me. So typically I would say in most high income because again we deal with whenever you have a couple hundred projects a month we typically see like high end building in the Bay Area at 450 plus. And we typically see the cost of a lot of modules that like two hundred but then we see much higher site costs to me. So if you guys are in fact able to do with that price that's awesome particularly because a lot of these areas we're talking about you know about like eight hundred to eight hundred plus idea. You know after building your after repair value of these homes.

- S2A Modular

And I'll just kind of add a little bit to it as you know the philosophy of s to a isn't to make a million dollars on every build it's just to build a lot to really you know our mission is is at the end of this is You know to have things that do something that books are written about you know let's let's resolve the California housing crisis. There was some some oddball thing that came on the radio about a week ago that just stopped me in my tracks and I wish I remembered the university that they were doing this but they were voting. They were voting on. Could the students that were homeless that were living in cars stay in the parking lot of this university. I don't know if was Cal Berkeley. It was a very big school here in Northern Cal.. I thought it was Northern California schools on the radio here and I just I stopped it might just sort of shockingly there are so many people living in cars you know cars these 22 year old kids and it's the housing crisis the crisis is so crazy and you know from our perspective as to what we're really looking to do here is to get people into homes that they can afford you know low down payments that they can at least get into home ownership. The houses don't have to be mansions they could be eight hundred to eleven hundred square feet but sustainable net zero real estate low down payments and something that they can afford that they can own they can live in and do thousands if not tens of thousands of these homes. We're not looking to make a killing on every home. Just do it where you can do it where it's affordable. Affordable and good quality stuff. So yeah we're. And we can do it for the price we just talked about 250 260.

- Prefab Review

That's awesome. OK. Last couple questions about us two. One is how many homes are you expecting to build. Let's just let's just call it 2020 at like a year like let's say in your first year.

- S2A Modular

My guess if I was to have a meeting with you Christmas at 2020 I'd put a bet that we will have built a thousand homes in 2020 if not fifteen hundred to two thousand. So my guess is it would range between a thousand to two thousand with the orders that we've got now. I expect that by Christmas we'll have two thousand homes the bill which is about the capacity of our first factory to be able to do two thousand homes a year. We are right now in negotiations for a second factory as we speak today for Northern California. So I don't know when that's going to get up and might my guess is that we're going to be building out of that second factory in the middle of 2020 maybe June July August of next year. So I don't know but I would I would I would say that range.

- Prefab Review

One last question - It sounded like you sort of got into this from being a developer and now you should have more of a right now you're sort of a different part of the ecosystem. Are you still developing stuff for yourself or are you completely focused on you know whatever the manufacturing and construction and design piece.

- S2A Modular

You know it's a great question and very insightful. My answer is both John and I have not only recognized what's in front of us is this multi billion dollar company on its own you know just from the orders from the general public. But John and I have also stepped up and started to your listening audience might have heard but there's something called Opportunity Zones where you can buy in on land and the government gives you great tax incentives. We put together very large funds to build property on those opportunity zones. So as a sort of a side note John and I are able to build thousands of homes as well through our own development companies that all run through S2A simultaneously in addition to the general public. So we're doing both Michael.

- Prefab Review

Well what typically those are I don't know what the politically correct is let's say emerging or traditionally disenfranchised areas. What geography 

- S2A Modular

Opportunity Zones are all over the place in California there's eight hundred and sixty five opportunity zones and a lot of people think you know they are in areas that are less sought after so that it gives the incentive to build in these areas and develop them but you would be amazed at really where they are there. They're also in Fremont and San Jose and parts of Redwood City and they're all over the place. So. So we're building a northern California southern California all over.

- Prefab Review

Just so now. Want to quickly move to a section we sort of say that's a fire round. So these are more general questions not per say about S2A. You know if you can try to answer that in one minute or less. All right. So what should buyers keep in mind when they're evaluating a site?

- S2A Modular

I would say that depending on what their dreams and wishes are for their family the biggest thing is to get a feasibility study done so that a lot of people have moved forward with buying land first and then ask us to do a feasibility study and when we come back and say we can't build a modular home on it for whatever reasons they're screwed. They already own the land. So the biggest thing for me is always get the feasibility done first.

- Prefab Review

Is that typically because it's like slope or because you can't get a crane in now.

- S2A Modular

Well for many reasons but I'll give you the first one that happened about a week ago. Some lady wanted to build an ADU accessory dwelling unit behind her home. She had bought a piece of land and it was zoned residential but the city of Fremont. I shouldn't have said that but the city changed the zoning over time and she. She's on a main street and she expected to be able to build an ADU. We came in there and it turned out that the zoning has changed. They don't they won't allow it. Now she was upset because she couldn't build an ADU. But what saved her is at least by having the feasibility study done and knowing this she didn't go out and get an architect and start building you know get spending money on an architectural designs and permits and all that and then find out at the end that she couldn't do it. So get the insurance policy first get the feasibility study done first.

- Prefab Review

Got it. One of the things that we see as sort of interesting and challenging is what's the best way to finance a modular home? And I sort of see that two ways. What's the best way to finance and to have you seen ways of being able to finance both the land and the construction.

- S2A Modular

Yes absolutely. And of course it all depends on the credit worthiness of the buyer you know. Right. So it all starts there but yeah there's there's you know I will say this it when when you think of the modular industry versus the traditional it's  faster we move faster we can get a home done in three months opposed to 12-15 months. Right. So when you get a traditional lender that's not really used to modular they they do a construction loan for a year because that's how long it takes. You know you got it and you get these little draws these 12 draws over twelve months first for your foundation then a little bit for your framing all the way down till you've used the 12 months in the million box but a modular you have to go in and boom you need a half a million right now because we're going to build it in six weeks and we're going to set it and get it done in another six. We're done in three months opposed the 12 to 15 months. There's not a lot of lenders that have quite caught up to that. So they're out there there's a you know certainly a handful that we use and we can get the job done but for anybody that's frustrated that's having a hard time just contact S2A modular and we'll see what we can do to set you up with some lenders that we we have in our pockets that we use consistently that can get the job done.

- Prefab Review

Okay. Two questions. One  if you don't mind mentioning who those are. I mean again we see a gazillion

- S2A Modular

Well if you have a gazillion we should talk offline.

- Prefab Review

But it is very regionals right. So we see like local credit unions do a really good job in Pennsylvania to serve but like 

- S2A Modular

For example in Northern California for example U.S. bank is a good one Prime Lending is a good one to use. 

- Prefab Review

Got it. And then are you are you seeing people. So this is the most challenging. One of the most challenging questions we get all the time which is how do you. So most lenders we see will not give you a loan on the land and the home before it's permanent. So what we frequently see is we see people either buying land in cash or we see that doing land loans and then doing the double close with a second construction loan at the top. Have you seen people who figured out ways to avoid that problem for you.

- S2A Modular

No we haven't that's really the typical when you say to buy something before it's permanent. It's pretty tough. You know you don't finance before it's permanent. Yeah exactly. That's kind of tough to do. And again it's all based on the credit your credit worthiness of the buyer if they're strong candidates and they've got money and others other places you know certainly the bank feels protected. So but know that that's always going to be a challenge.

- Prefab Review

And then the last two questions are I guess when come up one of the things it sounds like you're specializing in California. You have to be pretty aware is the high fire risk in many of these areas. What do you do specifically to mitigate that as much as possible.

- S2A Modular

Well we're using materials that are fireproof. So we're building homes that are now basically fireproof homes.

- Prefab Review

That's awesome. This is really helpful. Final question we ask this to everyone. What are you most excited about for your company or for the industry for the future.

- S2A Modular

Well you know what would I immediately comes to my my front of my thoughts are the housing crisis. I've said it two or three times now and I've got a 26 year old son that there's no way that I could ever possibly get him to to see how he could have ownership in California. It's tough. The prices are just too wacky. There's a book that I read recently that said that the population of California is growing. One hundred and eighty thousand units a year are needed to handle the population growth. And over the last 10 years there hasn't been more than one hundred thousand units built in any given year over the last 10 years. And we need one hundred eighty thousand every year. So it's getting worse and worse every year. I think what John and I are probably most excited about is helping that cause getting people to be able to own and not rent own have their own space and met and make sure that not only is it a quality home but it's a sustainable home where they don't have any electric bill attached to it. So yeah. That that's it in a nutshell. I could go on and on with that answer but I'd say that that's probably it.

- Prefab Review

All right Brian thank you so much. It's been great to learn more about what you're doing and I really look forward to seeing it all develop. For those listening if you want to learn more about S2A modular S2Amodular.com is probably the best place to find out. And again I'm Michael from prefabreview.com as well. Thanks again.

- S2A Modular

Thank you Michael. Appreciate it.

- Prefab Review

Hello my name is Michael Frank and this is the prefab review pod presented by prefab review where we interview leading people and companies in the prefab housing industry to learn more about them and make it easier for you, buyers to make decisions about your prefab or modular project. Today we're very lucky to be interviewing Ted Benson the founder at Bensonwood and Unity Homes and potentially some other organizations involved with prefab and panelized building who is based out of New Hampshire. So welcome Ted. Thanks for being with us.

- Bensonwood

It's good to be here and I look forward to this conversation. It's always fun to talk about what we do.

- Prefab Review

So I wanted to start out by asking how do you get into this business.

- Bensonwood

I began in 1973 and as a young idealistic naive young man had a vision to really try to improve the building industry. And so my initial interest was to try to find a better way to build. And my initial go to solution was to revive the old form of timber frame construction and bring it into the twentieth century with better tools and better technology and better building systems. So that's how we started kind of really focused on one aspect of the construction. But the interesting thing that evolved from that is from the very beginning from the early 70s we were prefabricating because the efficient and effective way to create a 20th century version of the old world timber frame was to make parts offsite and to fabricate them in controlled facilities with better tools and better technology. And so through the years you know we've added more of the building systems but we've always had the technology and the rhythm and the logistics of pre fabrication kind of as our underlying skill set.

- Prefab Review

So you said in the 1970s had you been a an engineer or a contractor or anything like that before?

- Bensonwood

I had been a carpenter working my way through high school and college. So initially it was a way to make a living a way to pay tuition and room and board and I became very interested in building I liked it you know I like a lot of things about it especially the immediate gratification or feedback of the work you accomplish. So I became kind of enamored of building in general but really disenchanted with the traditional methods of buildings because the outcome was so often compromised often because of site conditions but often because of lack of training or lack of right attitude or right approach and you know I knew from my own experience growing up how what a huge difference a good quality home can make in a person's life. And it was disconcerting as a young carpenter a builder to see poor quality construction come into the marketplace and affect people who deserve better. So so some of it was you know being inspired by building and some of it came from thinking you know as a young idealistic carpenter that there must be a better way.

- Prefab Review

So you started out you said you're mostly building the frames off site. How how did how did the business evolve since then.

- Bensonwood

Well again initially we were focused on one aspect but it became pretty clear that as a company we needed to come up with a total solution that we had to find ways to control also the building envelope -  the enclosure the walls floors and the roof. And while we might have been mostly interested in reviving this old way of building our clients were very interested in having a home. And so that took us in eventually to a panelization of all sorts. And and so as a company we evolved our pre fabrication to include you know an entire building envelope with all the exterior finishes we added millwork and woodworking so that we were able to provide doors and stairs and trim and all those important aspects of the home as well. And so just over the decades you know we added value to our pre-fabricated product for our benefit and for the benefit of our clients who really needed and deserve better homes not just better structures.

- Prefab Review

 Okay. That makes total sense. So fast forward to today. Can you tell me sort of again I know you have Bensonwood which you should explain it not me but I think it's sort of a high end custom product and you have Unity homes which is sort of more of a you know value product that is not necessarily custom designs but it'd be great to care about those products as well as anything else. 

- Bensonwood

Yeah sure. Well you know in the history of Benson we've we've always focused on a more custom product. And part of it part of the reason for that is is for us to learn is as craftspeople and as builders and to be able to experience a whole wide range of products and building types and architectural types and make sure that we were developing construction methods that were viable for everything and not just kind of narrow exemption the market. And so working in that way and trying to elevate our craft and elevate our skills and to demonstrate that this is truly a better way to build we've been able to bring our product as Bensonwood across the entire country we've been in every state to the union. We've built in Japan and England. So clearly you know we've found a way to attract more of an important niche in the market but also everywhere which brings us solutions to the types of buildings that they build out West as well as down south and in the cold climates and the warmer climates and many different architectural types. And so that's given us a broad experience but it's also allowed us to execute a wide range of of solutions and systems and you know once we had all those solutions and systems manufacturing process then the next goal for us as a dedicated group of craftsman builders was to find a way to make this very high quality product more affordable in the marketplace. And so in 2012 that led to launching a new company not just a division of business with a company called Unity homes. And the idea of unity is is to standardize the components of the building so that we could customize the configuration of the building because we had learned through Bensonwood that every client is different every site is different every budget is different every lead is different. And so we needed a standardized solution to lower the cost of entry keep the quality high but still allow a very wide range of client personalization and customization which we've come to think is critical to better building not just the building quality itself but the ability of the building system to meet the particular needs of clients.

- Prefab Review

And what sort of scale are you guys at right no? I mean I know you obviously do kind of multifamily and commercial property as well. But at least on kind of the residential single family home size like how many. Yeah how many homes a year does Bensonwood and Unity homes do a year?

- Bensonwood

Well you've run up to multi-family piece and that's important because it's all part of what we're doing we're actually raising and installing a big multifamily project in the Boston area right now. And a month or so ago we completed one another multifamily project in upstate New York. And each of those kinds of projects kind of displace 10-12 or 15 single family homes. And so we count things a little bit differently but I think the important thing to know is that our production capacity with our one hundred thousand square foot factory is about 250 to 300 homes a year. And how those get kind of organized between the Bensonwood-side and the unity side and then the out of offices outside architect multifamily and other kinds of projects is always shifting. So right now for instance unity is very busy. We've got a number of projects in production of Bensonwood it's a little less busy because we just went through a big kind of sine wave of activity and we've got another one coming up in the fall. So you know it's good for a company like ours to have the kind of diversity that we have and be able to serve all of these different kinds of markets out there not just across the northeast which is primarily where unity is focused but throughout the country 

- Prefab Review

 Let's talk a little bit more specifically about the two companies Bensonwood and he just because you know when buyers come to us they say OK here's my price point here's the location I want to build and here's the style I want to build in whatever here's the size. What are we looking for. And we try to point them in the right direction. Sure. So for four like to achieve unity are you. Are you guys doing the interiors as well or is what you guys are building mostly kind of the shell the house?

- Bensonwood

Especially, well in Bensonwood the interior part that we're doing is the offsite fabrication of the millwork elements. So we make a lot of interior door stairs trim packages and even things like waste cut systems and kind of all of that you know interior millwork that defines the finish but also the style of the building and it helps us to create the craft consistency from all of our building. So for example we do have a building being constructed right now in Colorado just outside of Denver and maybe six weeks or eight weeks ago we installed the shell of the building and now we have the millwork package ready to go. We're ready to be shipped to the site whenever the local contractor who is taking care of the mechanical trades and kind of the rough in and when he's ready then we'll you know we'll deliver that millwork package for the interior finishes. So on the Unity side its similar although we don't always as a company ourselves make all of the interior finishes we provide the interior finishes stair trim cabinets even fixtures through kind of a suite of suppliers and always focused on quality and affordability. And so some of the things we make in unity buildings like we make trenches for windows and doors but we don't make all the cabinets and interior or as we often do for Bensonwood projects but we're still providing that kind of complete interior package after the shell goes.

- Prefab Review

And then stuff like appliances like hvac it's plumbing that will be done by our local contractor.

- Bensonwood

Yeah. And while the appliances are usually purchased locally and that's important not just for the service side but the mechanical systems : plumbing, electrical, HVAC tend to be installed more locally. However I do have a little caveat on that and that is that we also do make that things like bath pods as modular elements. And so that's been a focus of our new Keene factory to bring that capability back to our production. We did it for two years in our smaller facility and and then just kind of outgrew it. And now that we're in the larger facility the intention for both Bensonwood and Unity entities is to provide complete modular elements. That is you know 3D volumetric elements for the intensive mechanical areas allows. You'll still need a local plumber electrician for tie ins and so on. But we are capable of doing more.

- Prefab Review

Right. And once there's a foundation. Are you actually putting the house together. Or is that with a local contractor standing.

- Bensonwood

Usually both. That's the right way to do it. Almost always there's a representative or two from our company here. But the best the best way for us to execute is in partnership with a local contractor especially if it's a little farther away from our factory. So they're also kind of tuned into the product that we've delivered and have been a part of that installation so they know the details and the requirements of how to ensure that the high performance qualities that we've embedded in it are maintained as they continue their process.

- Prefab Review

That makes sense. What's so from a from an architectural standpoint on the Bensonwood stuff. What's the split in terms of you designing the homes versus an outside architect designing it.

- Bensonwood

Well that's that's a good conversation. We we have a team of interior architects. We do good work and we definitely have a lot of pride in the quality of our architectural design. But that said we we like working with outside architects and bringing them into our system because it really helps us to know to stretch and learn from other professional designers. So we do a lot of work with outside architects. And in fact there's a new initiative that we're relaunching this year in partnership with two significant architects. You'll know the answer to that question in early September because we're launching this new initiative of kind of new Bensonwood products that will be a collaborative effort between our team of architects and two outside architects bringing three products kind of platform products into the marketplace. And it's just been really fun and exciting to work in collaboration with other architects and to show them the standards that we have that really help us to fabricate products efficiently and then together with kind of their design ideas and how we can integrate the two and have lots of standardization. But you know all the customization and kind of the quality that we need to represent you know kind of 3 tentacles of design through one system that makes a lot of sense.

- Prefab Review

Yeah. We've had we're seeing I mean I wouldn't say that strategy's currently popular but we've seen a few people do that over the last couple years. It's always cool to have more you know quality designs that are being built competently.

- Bensonwood

Yeah yeah yeah. The key and the key to it we think is that there's consistency in the systems and the components in the elements even in the parts and pieces so that they all fit offsite fabrication can happen well. But there's different differentiation in the architectural outcomes. And and you know that whole thing is kind of fun because you know there are things that we're now going to be doing that we we alone never would have thought of.

- Prefab Review

We've seen this a little bit before and it seems like a bright light you probably save a little bit on design services. If you're a buyer because right it's not 15 or 20 percent necessarily for it.

- Bensonwood

Yeah. Yeah. Well in fact you save a lot. And that's where you know that part of the reason this is happening.

- Prefab Review

And then the second thing is that I think that helps from an inspiration standpoint too.

- Bensonwood

Yeah yeah yeah. That design a custom design is expensive. We know that because we do a lot of it it takes a lot of time. A lot of effort to make a unique thing in the marketplace. And but on the other side if we could standardize the right things we could still achieve a custom design for much much less design effort. And so that whole effort of kind of standards plus customization and how we reach that is a critical aspect of how to make both affordable buildings more affordable high end buildings more affordable. And that's what I'm trying to try to do both.

- Prefab Review

So any affordability and this is I think probably the most helpful thing to do is trying to give people an understanding around price basically how are your how are your homes priced both on the unity side and on the Bensonwood side. And what would be most helpful is kind of understand. Let's call it a typical project on a flattish lot in Lexington, Massachusetts or something like you know relatively high end area. Yeah. Just basically understanding and if possible. I understand there's ranges and all the stuff kind of how much projects usually come in overall and then sort of what the differences like components are in terms of Bensonwood versus local contractor.

- Bensonwood

OK I'll take your crack at this yeah. I'll get I'll give it a try. But let me preface it by saying that listeners can go to the unity home site unity homes dot com and we do post some kind of prices for each of the platforms. So you can kind of see what we have projected for kind of the entry level models and and then how costs might escalate depending on finished packages. So there is some information there on the Bensonwood side there's less because our work is so custom. Right. So to answer your question if we were building in Lexington Massachusetts the first thing I would tell you because I know quite a bit about that area is that local building costs in Lexington are pretty high. And it would be hard to build any kind of single family home in the Lexington area for under two hundred dollars or a square foot actually. Having said that I can't imagine building one for two hundred dollars a square foot  in Lexington. In other words building costs are a lot higher there. And so that's kind of good news for the unity side because we are very affordable in the Lexington Market because building costs there are so high and and so you know we would be two hundred dollars a square foot just because a lot of the local labor inputs are also expensive in Lexington.

- Prefab Review

This is this is for all in a unity house.

- Bensonwood

Yeah. And on the Bensonwoodside doing the same thing because of the higher level of customization and the higher level finishes its probably more in the neighborhood of 300 which might be fairly normal for Lexington but all the way up to five hundred or even six hundred dollars a square foot depending on customization complexity and levels of finishes.

- Prefab Review

Yeah. I mean three hundred actually it would be surprisingly inexpensive to me for an area like that for a custom house. We would obviously like soft costs like design and such. Yes. Yeah.

And then part of that part of the reason I guess we built a lot in that area. So I'm sure you're confident about that. But I think we should know from the listeners point of view we should put this in context. And let's take it all out of Lexington and and move it to Walpole, New Hampshire where I am currently know which is much more rural. Yeah. And and here you know costs are much lower than a place like Lexington which is a more urban area. And so you could build a standard home in the Walpole area for you know really one hundred and fifty is fairly normal one hundred maybe a hundred and seventy five for a relatively decent local builder type of home and and so here with unity we compete with that. We don't beat it but we try to build a better product that makes sense.

- Prefab Review

What are the costs that basically you're paying Bensonwood or Unity versus contractor is it like 50/ 50, 60/40? Just trying to get an understanding because that's also helpful in terms of our perspective. We understand that illegitimately like, I live in San Francisco. In San Francisco you may pay a little contractor 200 dollars a square foot it'll only be the local site cost right. So to try to understand like you know basically What are we paying the pre-fabricated on top of that?

- Bensonwood

 What is a pre fabrication package or what is a premium from pre fabrication?

- Prefab Review

No. So the question is. So right. So Lexington you said it is going to be three hundred dollars but that's gonna be a split between the amount paid to Bensonwood and the amount that actually goes to the general contractor and his subcontractor.

- Bensonwood

OK yeah. So our typically the shelf package part of the enclosure with windows and doors and the weather type building envelope and all that is included in that interior partitions forces wall system roof systems et cetera is generally 40 to maybe 50 percent. And then if we've added the millwork package you know we can get that up to 60 percent OK. That makes sense. And so you know 40 to 60 percent depending on the extent or package when we do bath pods you know like it's up to 70 75 percent.

- Prefab Review

It sounds like it ends up running like a hundred fifty dollars a square foot or something in that range is that right?

- Bensonwood

Yeah yeah yeah. That's actually a pretty good number a little more expensive on the on the Bensonwood size then on the Unity side because of more war because of that customization than because of the quality of the envelope that makes sense. 

- Prefab Review

How long do these homes you typically take to build particularly in the unity side I can imagine it could be fairly fast? 

- Bensonwood

Yeah pretty fast we we just did put together a unity home last week in Vermont it was two and a half days for the complete shell including the garage. So that was on site assembly of the building shell and on top of an existing foundation.

- Prefab Review

And how about the process from the time you guys want a fast process with a client from when they meet you like when they're in their home?

- Bensonwood

So for unity which is really fast because of the standardization we've actually had several instances several meaning two of where where we've gone from first client meeting to turn key in the same quarter. So that's incredibly fast and don't expect it but it's happened you know if we're just choosing a product that we know how to make and we can manufacturer deliver it. So more typically you know is in the four to six month kind of period for unity. And then Bensonwood is much longer because of the customization of the design which can take four to six or eight months on its own. And then you know then from there we go into production and that is you know six months or eight months or so.

- Prefab Review

Well it's been great learning a little bit about Bensonwood and Unity. Well we just want to transition quickly to our fire round basically i'll fire a few questions at you sort of on a variety of topics tapping into your expertise if possible to give giving your answers in one minute or less. That would be great. And we'll discuss a few things. So first of all tell me a little bit about cross laminated timber. I hear about it all all the time not all the time pretty regularly. I also hear about dowel laminated timber. Do you use it? What's special about it etc.?

- Bensonwood

OK. We do use cross laminated timber and we do use dowel laminated timber especially on the Bensonwood side so cross laminated timber is a way to think about it It's like a really big fat sheet of plywood and and so the cross is actual planks of wood that are oriented in one direction for one layer and then the opposite direction for the next layer and glued under pressure with with incredibly good glue to make a composite panel that may be anywhere from three and a half inches to six inches thick and eight feet up to 40 feet. And the idea of it is more wood kind of developed in a way that it could displace concrete and steel as a building. So cross laminated timber buildings can go much higher because there is not a shrinkage issue that you have in other forms of wood. And they're very very strong and very stable. So that's cross laminated timber dowel laminated timber. If you can think about it as planks side by side by side with dowels driven through horizontally across them to essentially be the glue that connects those planks into a single panel that then can be lifted and installed on site usually as for systems or roof systems in place of you know a more independent light structure.

- Prefab Review

It makes it really helpful. How could buyers think about doing diligence on land? We get this question all the time because a lot of manufacturers don't want to actually even work with buyers before they at least have land in their contract.

- Bensonwood

Well it's you know it's really important to understand the side of the building site and the opportunities and the constraints that may be embedded in that building site. So we do like to work with clients who are in the kind of searching phase. And simply because of Google Earth we can actually help even if we don't always go. And so we can learn enough about the location the adjacencies you know the building restrictions and so on. Even if we haven't visited if we can visit because of proximity is just obviously even better but as designer architects engineers it's really helpful to have some input because always the building design whether it's unity thats standardized or Bensonwood thats custom, nothing happens until you understand the site because design begins on a building site that has orientation as a road. You know there are some logical architectural party that comes out of understanding the building site. So if we can have some influence on helping our clients to understand its opportunities and constraints that's helpful to us.

- Prefab Review

How do you see most people, and this can be a long question so, paying for/financing homes these days? For example is it - Are you seeing two in one products are you seeing a lot of people buying land and find finding financing the construction etc..

- Bensonwood

Nearly everything. And you know it's these days it's it's often it's often an obstacle because not so many lending agencies are or have experience with offsite fabrication. And so we're often in conversation with the lending agencies to help our clients understand and help the lending agency understand how offsite fabrication works. But I would say that most of our businesses with clients aren't necessarily going out and needing to collateralize the land in order to finance their construction loan. I think that many of our clients on the Unity side are having to make sure that comparables have been established, lending institutions are on board, and know that they as individuals qualify for the kind of loan that they're asking for. But we're almost always in the conversation with the livlending agency.

- Prefab Review

Is there a secret to finding good local contractors who can build the kind of foundation and take care of the sort of finishing aspects of the home like yeah. How should a buyer due diligence on this?

- Bensonwood

Tier of good builders everywhere that's you know that's the first thing to say. And then of course the caller corollary to that is it is the obvious one that know not all builders are good. And so we also like to play a role in that in helping our clients to find the right partner builder in the process and to make sure that we have found a person or company that is highly motivated it's the same way we are to serve our clients interests deeply. Unfortunately the corollary a problem the dark side is is that it's just an industry issue that there are a lot of builders who aren't up to date about building science and the new things that are happening with building engineering and and for the  builders out there who aren’t learning and aren't keeping up that is just it's just a problem. And so we generally avoid those and find the ones who are good learners who are partners. The good thing for us is we've been around for forty five years we've built in many parts of the country. So in most cases we know someone who we've already worked with as is is the case in our Denver project right now or we know somebody in that area who could make a referral to somebody else so our resources and our connections are pretty helpful.

- Prefab Review

Yeah it's funny we say our Web site gets hit. We get approached pretty frequently these days maybe once a month twice a month by companies coming from Europe who say we have a successful prefab or sometimes even Asia product in Europe or Asia. We want to enter the market can you help us get customers but also can you help us get connected to local builders because it seems like that's one of the pain points for these newer entrants.

- Bensonwood

Now let me just throw out another secret that's no longer going to be a secret but we've learned that renovation contractors are usually a better fit for prefab partnership than new buildings simply because the renovation contractors are more accustomed to the kind of rhythm that's involved. It's a very fast process and they're usually problem solvers so if there's something a little different that's unusual that doesn't throw them for a curve or curve ball to them where sometimes the kinds of builders who are only doing new construction have a lot of habits and procedures in their process. And then our offsite prefab kind of throws them for a loop that is kind of out of sequence with their normal behavior so renovation contractors are usually better fits for us.

- Prefab Review

I don't think we figured that out if we don't know someone in an area. We usually just try to find somebody experienced in panel stuff even if it's not a manufacturer and that sort of thing. All right. Final fire round question. So I know you guys have done some work on passive houses recently. We actually get a lot ofdemand for parts and houses and zero net energy stuff particularly California. Tell me a little bit about how you achieve that.

- Bensonwood

Sure we're if you go to our Bensonwood Web site and in the area where you find our building systems under tectonics you'll see kind of a selection of wall types that we offer and then and then you'll see an opportunity that we call flex spelled with a p h for you know for its connection to Passive House about how we accentuate each of those building systems to bring them to the passive house level and and so most of our building systems all of our building systems have cellulose as an insulation. And one of the wall types has wood fiber as a exterior continuous insulation layer and and the other one has zip of system on the outside and then we use a TGI or a nice stud to to minimize the thermal bridging and and thicken the wall cavities. So we have several ways of achieving it and that's important in the flex idea for passive house is really critical because each of the climate zones from climate 7 down to climate zone 2 generally has completely different requirements to get to the passive house level. So there's not like one passive house solution. There's kind of a passive house system solution but we've really opted to stay away from foams to reduce kind of the plastic element and the stick with kind of natural materials cellulose, wood, etc..

- Prefab Review

You're sort of saying instead of doing like more of a standard SIP this is kind of your answer to that in a more natural light. 

- Bensonwood

Yeah yeah. We'd like a wall you could eat. 

- Prefab Review

Thanks so much. This has been really great talking. The final question which I ask everyone is what are you most excited about for your company or for the industry for the near future.

- Bensonwood

Well what I'm most excited about is what the industry needs and that we're trying to be leaders for and that is to normalize high performance buildings so that all of our buildings are using much less energy and no fossil fuels. We have to do this as a country we have to do it as citizens of this planet for the climate crisis. We should have eliminated fossil fuels and buildings a long time ago. But we're stuck with it here. And it's unfortunate because building high performance good quality buildings that are even healthier for people is actually not a heavy lift. We know how to do it. It's not advanced technology or anything it's just good quality building and and so to be leaders in how as an industry we move away from fossil fuels to heat and cool buildings is important for us. But you know just plain important for the industry.

- Prefab Review

Thank you so much Ted. I really appreciate your leadership and for taking the time to speak with me today. If you want to learn more about some of the stuff we talked about you can visit Bensonsonwood.com or unityhomes.com and the transcript of this will likely be up on prefabreview.com with about five thousand other prefab articles. Nice talking to you and hopefully we get to speak again soon.

- Bensonwood

Good to talk to you as well. Thank you for the opportunity. Thanks.