Builder and Modular Manufacturer Team Up

Originally published by: Builder OnlineOctober 20, 2011

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Champion Home Builders, one of the industry’s leading modular home manufacturers, has entered into what it’s calling a “teaming agreement” with USModular, a Carlsbad, Calif.–based modular builder. Through its Commercial Structures division, Champion will pursue multifamily construction opportunities with USModular from developers in western states, where modular prefabrication and construction are still relatively new concepts.

The two companies, which have been negotiating since last January, “are playing off of each other’s strengths” through this agreement, says Kevin Flaherty, Champion’s vice president of marketing. He explains that Champion has been going after multifamily business for a while, and recent contracts include a $50 million permanent housing project at Fort Lewis in Washington and a student housing project at Cornell University in Ithaca, New York.

What USModular adds to the equation, he tells Builder, is on-site project management, quality control, and perhaps most important, sales and marketing support. “Rather than have a large in-house sales force, it’s better to align with agents out there,” says Flaherty. Dan McMurtrie, Champion’s vice president of corporate development, adds that USModular’s expertise in project planning, logistics, and general contracting “enables the client to realize the full potential of modular construction.”

USModular buys product from virtually every major module supplier. It had a similar teaming arrangement with Palm Harbor Homes before that manufacturer went bankrupt and sold its assets to Cavco Industries’s Fleetwood Homes division earlier this year. But while it’s looking to establish teaming deals with other suppliers, finding willing partners is easier said than done, says Todd Kesseler, a principal with USModular.

“Modular manufacturers, especially on the west coast, have not done a good job at marketing themselves or their product,” he tells Builder. Kesseler and two other principals at USModular, Bill Cavanaugh and its CEO Abe Ferreira, reiterated several times during an interview that Champion was the sole manufacturer that was willing to “step up” and provide the corporate support USModular needs to be able to pitch a complete turnkey program to developers.

USModular, says Ferreira, has a “long list” of developer prospects with “broken projects” they’re looking to fix. Many of these were originally planned as stick-built projects, but USModular is convincing developers to switch to modular construction. One such example is the first phase of a project in New Mexico with 22 single-family for-rent homes that eventually will be part of a larger community that includes housing for seniors, for-rent townhouses, and single-family rental and for-sale homes.

Cavanaugh says that Champion is taking a “centralized approach” to such projects. It is allocating resources for design and engineering at the corporate level, and then deciding which of its factories will handle the manufacturing. The principals note that some of these multifamily projects are larger than what Champion typically takes on, and may require using more than one of its factories at a time.

What also attracted USModular to Champion was the manufacturer’s willingness to, in Kesseler’s words, “think out of the box and fabricate more than what is usually done at the factory.” He points specifically to decks and garages, which modular manufacturers usually let on-site crews build. “Champion’s attitude in this deal is ‘bring us the project and we’ll do everything we can to modularize it,’” says Ferreira.

Flaherty estimates that Champion generates about 15% of its total volume from western states. However, modular is only recently catching on out West: Kesseler says single-family modular homes were all but “nonexistent” in Southern California until 2005. And when USModular recently wanted to show a client an example of a three-story modular building, “we had to go to northern California because there are still none down here,” he says.

USModular’s principals were a little vague about their company’s backlog and how many projects it has sent Champion’s way so far. But Ferriera implies that more multifamily developers are seeing the time- and cost-saving benefits of modular construction, particularly when sales, manufacturing, and job-site management are coordinated. “They’re coming to us,” says Ferriera about new clients. “We’re not chasing them down anymore.”

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