Sunday, May 31, 2020

Modular Manufacturer Moves into Total Vertical Integration

In a move not seen before, a major modular home manufacturer has decided to take a huge plunge into offering developers a complete ‘turn key’ development solution.


Ilke Homes, the British modular home factory, is reorganizing its sales efforts by giving developers something no other factory has done before. Ilke will acquire the land, get planning and zoning approvals, design and manufacture the modules, transport, set and finish the entire development.

Could something like this work in the US? Probably.

Will It? I doubt it without a lot of planning and commitment by everyone involved.

The US is so large and with each state and local code official wanting to put their “special” stamp on every single modular home and project, one of the first hurdles to overcome is arriving at a national code everyone can agree with. 

That first hurdle is so tall that if the modular industry is able to actually jump over it, all the others should be easy to overcome.

A few US modular construction factories are currently doing parts of this total vertical integration but as far as I know, none are even attempting to take a project from cradle to grave as a single source supplier.

All it would take is the consent of every single state and local code office and an organization with pockets deep enough to self fund it and we’re off to the races. I almost forgot, we would need a bunch of new factories if we were to produce 100,000 more modules a year.

I don’t see any problems with this. Do you?

Gary Fleisher is a housing veteran, editor/writer of the ModcoachNews blog and Modular Construction Industry Observer and Information Gatherer

Contact modcoach@gmail.com

9 comments:

  1. Super interesting. Thanks for sharing. Are we sure they’re buying the land? That really makes them the developer and if they did that I don’t know why they would need a developer in the first place... their website refers to their turnkey services as taking a land plan and handling it from there. Those services are identical to the design build service offerings we provide at VBC. Until we can get the volume of the industry collectively high enough to have enough associated support companies to reduce the need for in house services vertical integration is the key to unlocking available capacity.

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  2. Vaughan, I think you're right about the land. The information I received is they acquire the land, not actually buy it.

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  3. From Ilke's perspective, It would make sense to offer such services rather than land bank. This external Real Estate Developer would be acting more as a financial and transnational partner and would be empowered to go and look for more acquisitions. Land use is a very segmented in the US, making this a great solution for smaller development firms.

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  4. Companies in the Northeastern United States have attempted this with limited success at first look. However when you take the service costs that are majorly reduced then you can really see the true savings.The real issue becomes the high end finishes and materials that most modular people do not know how to handle or finish.

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  5. Interesting - thanks for sharing Gary. One of the challenges of vertical integration in the U.S. is what Anthony mentioned above. The U.S. is a large area made up of many different markets, codes, and preferences.
    Another challenge is that, while a company may be great at manufacturing, they may not have the experience or skill set for real estate development, or outside sales, or any number of skills required to offer turn key solutions. We have seen examples where a developer decides they want to also become the manufacturer so they can be more integrated, and those examples do not always pan out.

    It takes a ton of capital to try to pull all these pieces together and if they fail, their stories are often shared here as cautionary tales for others.

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  6. After working for Gene Kurtz's Inland Homes Corp in 20 states and getting involved in land acq I quickly found first hand that it is indeed a very... localized.. skill. Doing so anyway despite that fact has caused many a early vertically integrated region housing giant to go bankrupt; here are several I worked with, around, etc ..way back when: Don Scholz, Jim and George Price for starters. Later, working for West Coast ...now national consulting.. pros like Steve Johnson and Jeff Meyers indeed confirmed that suspicion while I was in ultra complex entitlement SCA. Your right Gary, et al, land acq, planning and approvals, plus funding yet is not an easily acquired skill. Dirt work be it one "simple" lot or a planned community is for specialized pros! The short of is: I may not know precisely how to proceed, but I sure know..what not to do. So plan to hire local dirt regional pros.

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  7. The vertical integration described sounds similar to what Blokable is doing, including a new factory in Sacramento.
    https://blokable.com/solution/

    ""We don’t sell boxes, we develop real estate.... We partner with market rate and not for profit land developers and service providers to make housing happen.""

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  8. Sounds good in theory
    However, if Modular Co is going to do everything, what's left for the developer?

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  9. Gary, Arris is a fully vertical integrated company. We started the company last year and currently have land holdings in 5 locations in the Southeast. The company was founded by a large developer out of Atlanta. Our team has experience in all segments including Development, Manufacturing, General Contracting and Property Management. Give me a call if you would like to learn more about what Arris is doing. Andy Miller

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