Not too many years ago, modular home factories only gingerly
stepped into the commercial modular ring. I can remember several companies
including one that I worked for actually telling their reps not to go after
anything that wasn’t single family housing.
My, how times have changed. Today there is hardly a modular
home factory that isn’t looking for large projects like dormitories, motels, apartments
and townhouses. The housing crunch forced most factories to fill their
production lines with lower profit modules that they would have never touched prior
to 2008. A good example is the Homark
Homes story today about their “man camp” projects being 50% of their total
sales for the year. Could they have
survived if they hadn’t got the order?
Maybe, but now they won’t have to find out.
Developers don’t care how their projects get completed, only
that they come in close to budget and within their time frame. One thing the
factories had to learn the hard way was that developers don’t pay for their
modules either as an “assignment of funds” due within 3 days of delivery or with
“curbside” payment. 30, 60 and even 120 day payment is being accepted as normal
for these projects and many factory owners have had to go to their banks
looking for additional operating capital.
As a side note….This is what makes the $60M that Blu Homes
just received from an investor even more puzzling. The investor is betting on
the future of a company with no large production numbers while several
traditional modular factories were hitting the sidewalk searching for money (high
interest rates) to keep them afloat until their big projects were paid. If you
bet on horse racing, that would be called a “sure thing.”
There is also a downside to taking on large projects; losing
the single family builder. For example, you
are a builder that buys 12 modular homes a year from a factory and until now you
have been getting homes on a timetable that works for you and your customer. Now
what happens to your contracted home when your sales rep tells you that your
home will be pushed back 3 weeks so that the factory can complete a very large
production for a developer that is running behind schedule?
The answer is quite simple. You shop your next home around
until you find one that isn’t too busy to produce your home when you need it.
There are factories that actually have spare production lines available for
just such a situation. Some have multiple locations they can build from and
others have idle production lines at their current location. Most modular home factories have production
lines that can expand to handle a medium size project with little consequence
to the builder but if we are talking about the large 100+ module size orders which
could tie up a line running at full production for upwards of a solid month,
then you just have to weigh the benefits.
This is a large project from PBS in Middleburg, PA. Contact Nick Lust for more information.
Modular home factories are quickly coming to a crossroads.
One direction points to continued project sales with a dwindling SFH builder
base while the other direction shows the Federal government opening up $40B a
month to banks for single family homes.
Lucky are the factories that have planned to go in both directions.
