There is no shortage of developers or builders who have tried prefabrication and now swear against it. I hear more and more, “we tried it and it didn’t work.”
Yet, some are achieving huge success. But how?
By chatting with several experts in the field, I discovered that success comes from forgetting what you know about stick built projects and starting over with a clean slate. Modular projects need different timelines, a different set of stakeholders, and therefore deserve a different process to be successful.
As Daniel Gehman, principal at architecture firm Danielian Associates wrote in a recent blog post:
I offer a fundamental encouragement to anyone considering a modular project: conceive of it as modular or prefabricated from the very word “go.”
Anthony Gude serves as the director of operations at R & S Tavares Associates, a company that provides services that include design, structural engineering, consulting, and project management for prefabricated buildings. He emphasizes the critical need to bring all the key players on a project together from the very beginning.
“If the design team is brought in too late, or if the wrong fabricator is chosen for a project, then you’re setting yourself up for failure,” Gude said.
Leaders at vertically-integrated multifamily housing solutions group VBC, or Volumetric Building Companies, add that design schedules and decision timelines for modular projects can be significantly different from site-constructed projects.
“Approvals, decisions, and details have to be finalized prior to groundbreaking for the best opportunity for success,” says VBC’s president Vaughan Buckley. “This is often reflected in compartmentalized budgets that only consider the ‘trees’ of the phases versus the ‘forest’ of the entire project cost and timeline.”
So, modular construction actually becomes a great opportunity to rework the process for more efficiency, for better teamwork, for more transparency, and ultimately for more effectiveness.
It necessitates a clean slate and an overall different work culture. Culture change may seem like an exaggeration, but it truly isn’t. Modular construction takes everything that a builder knows about building and changes it. The team is different, relationships, accounting, labor, design, process, organization…, and the list goes on.
So, it’s easy to see why it isn’t more broadly adopted—it’s just too radical of a change.
But, here’s the hook. The change is worth it.
Saving More Than A Year Construction Time
In 2019, VBC completed a multifamily project in Philadelphia that took 11 months, when a project of that size typically takes about 24 months. The $15.6 million wood-framed project, called 4125 Chestnut, was made up of 75 modular units for a total of 130 units and completed in 2019.
“Prefab project success can only be quantified by exceeding the schedule of a site-built project, in my opinion,” said Gude. “No other metric is as important. If we’re not delivering speed with all the advantages of modular, we’re not succeeding.”
The time savings are incredibly important for the reduction in carrying costs and the ability to have faster cash flow with access to finished units sooner.
“In addition to reduced timelines, the benefits of modular can be measured in few to no change orders, less contingency financing needed and fewer difficulties in the project due to weather, crew retention and local inspectors demanding last minute changes that cost time and money in on-site construction,” Buckley said.
Saving Six Months In Construction Time
VBC developed another project of 36 units called The Annex. The zoning approvals for the project began in May 2016, and the certificate of occupancy was delivered in April 2017.
This 37,500-square-foot project was finished six months faster than what a comparable site-built project would have needed. Plus, the management company was able to stage and lease apartments while the exterior was still being completed because the build was water tight and had a safe interior environment.
The manufacturing costs were $2.75 million and the on-site construction costs were $2.5 million, bringing the total project cost to $6.7 million, including the price of the land. The developer was then able to sell the project in just a few months for $9.2 million.
Not All Designs Are Created Equal
These experts in modular construction have seen typical designs being forced into modular to try to cut costs, but it typically ends up not producing the results that they expected.
“Not all designs are created equal when it comes to modular construction,” said Sara Ann Logan, vice president of design at VBC. “Stakeholders who believe that a more traditional design can be modularized can put extreme strain on the speed, consistency, quality, and profitability of a modular project. Design schedules and decision timelines for modular projects can be significantly different from their site-constructed counterparts.”
VBC recommends doing modular feasibility studies to see if modular construction makes sense for the project. Then, the modular builder needs to take the lead to develop the most efficient use of modules to accomplish what the owner wants.
Darren Seary, principal at real estate consulting firm Optimum Modular Solutions, not only recognizes a need for better education on modular design, but also a need to educate contractors and subcontractors so they know how to accurately price the work.
“Contractors price 10% more even though they are only doing a fraction of the work because they are unfamiliar,” Seary said. “Subcontractors aren’t familiar so they end up pricing a lot of things that are already included in the modules. They pull everything together and then it’s more cost than conventional. Then, the project owners go with conventional because they know it.”
Seary is obviously making the numbers work. He has been able to get a 150-unit permanent supportive housing project to between $200,000 and $225,000 per unit in Los Angeles, where units usually cost more than $475,000 to develop.
Technology is evolving quickly, which means that there are more and more tools available for modular construction. First, there is software available, such as Archistar, Hypar, and Kreo, that can look at site feasibility, along with producing parametric design and modeling.
An exciting evolution that Gude foresees is the ownership and distribution of designs as digital products, much like the recent explosion of NFTs, or non-fungible tokens. This development will be incredibly beneficial in a world where illegal use of designs is becoming more frequent, presenting safety and legal issues for the stakeholders involved.
Much like NFTs, the designs would have digital ledgers that would act as a certificate of authenticity, giving the owner a benefit every time the design is used, similar to book or music royalties.
“All the technology for this already exists,” Gude says. “As it becomes more widely adopted, it will be a game-changer for permitting, design workflows and allow us all to maximize the benefit of modularization and industrial design in construction.”
Gude believes that engineering firms that are fabrication and manufacturing specialists will even learn to own and distribute fabricator specific details, therefore making design more economical and the fabricator’s workflow much smoother.
“This is the real thing holding back economics of low margin work like multifamily housing where the fabricators are the last to adopt the best of technology,” Gude said. “A major advantage of modular construction is being able to re-use design elements on multiple projects, thus reducing costs.”
VBC also sees advantages in leveraging the integration between file storage, project documentation, and intra-software communication in order to reduce or eliminate redundancies and allow design, manufacturing, and construction teams to reduce the amount of time they spend tracking, locating, and managing responses. The evolution of this would mean systems that can collaborate across national and international borders.
Mohamed Al-Hussein, a professor and the NSERC industrial research chair in the Industrialization of Building Construction Department of Civil and Environmental Engineering at the University of Alberta, is very excited about the advances of technology here in North America. He has been researching modular construction for a number of years and after visiting Europe and seeing the traction of the industry there, believes that there is a huge opportunity here.
In Europe, the buildings are made with structures to last a long time. Here, we build with lightweight materials like 2x4s, which means that the machinery can be lighter and work faster. With that in mind, Al-Hussein is commercializing machines this summer that will be a fraction of the cost of what is currently on the market and will fabricate and frame for light weight wood and light gauge steel.
What About The Risk?
There is no avoiding risk—both conventional construction and modular construction have risks.
“The industry has grown accustomed to the risks in conventional construction, and accepts them,” says Seary. “They know they aren’t going to hit time, quality and cost. If you weigh those out and bring conventional risks to the surface, you could argue that modular is less risky if managed correctly.”
In a side-by-side comparison of the risks involved in both processes, Seary shows that modular can be a very attractive, low risk option. One of the higher risks is obtaining financing, but one cause of that is that financiers do not have comps, which will be removed as modular gains more traction.
“There are unique challenges to financing modular projects,” said Elizabeth Selby, housing innovation, senior project manager, Los Angeles’s Office of Mayor Garcetti. “So, we are looking at it as a city so that our developers have a way to finance them.”
Selby is excited about the promises of modular construction and how the city can support it more with better ways to finance and also ways to review the projects more expeditiously.
“Building affordable housing is as costly as building anything else,” Selby said. “You can build with simpler finishes, but it’s not super impactful. Costs are what they are. Affordable also is expensive because finance is a very complex transaction, very time consuming, very competitive and requires a lot of expertise.”
She explains that in conventional builds, the supplies for construction are ordered, such as lumber, and after it shows up on site, an inspector arrives to approve it and then the finance from the city is approved. Typically, the city has to confirm that all the materials are on site, before the project owner is reimbursed for the purchase of the product.
But in a factory-built project, it’s very different. When construction starts, the project owners have to pay a deposit to the factory. So, it is a capital outlay that isn’t an investment in materials. The deposit is only reserving a place in line. Then, there is a large deposit to buy materials for the factory to get started. Then, the prefabricated units get shipped to the job site.
Al-Hussein also recognizes the shortcomings of the financial structure. He points out that 80 to 90% of the construction cost is already spent, and the unit is still sitting in a factory.
“There is a strong learning curve,” admits Selby. “We have to put money out there and we need to be sure we can get it back. We are asking ourselves, how do we underwrite a factory? How do we make a large capital outlay with the confidence that the units will show up on site later? How do we put bonding in place so that the city is protected?”
The Bottom Line: Discipline
Many developers have incredible examples of time and cost savings, in different parts of the country, on different types of projects. The examples are becoming more and more frequent.
As Gehman says, “The main ingredient for success is discipline. The development and design team must be prepared to respond to ideas outside of the scope with firm resolve to the mission because they will almost always lead to bespoke solutions that frustrate the original intention of simplicity. One or two little customizations along the way can usually be incorporated, but by about the time of the third one, I alert the team it’s time to pull the plug. Also, production lines hate changes, so a firm resolve in decision making long before fabrication begins is vitally important; stopping a production line to make a change will squander the entire advantage of the process.”
Producer’s Compound In San Miguel De Allende Is A ‘Catch’ At $6.25 Million
If old town charm, modern luxury and outdoor living spaces are high on your wishlist, the vibrant home of “Deadliest Catch” and “Storage Wars” producer Thom Beers in the inland Mexican state of Guanajuato checks all the boxes.
Set along a cobblestone street two blocks off the central plaza of the colonial-era city of San Miguel de Allende, the three-time Emmy-winner’s fully furnished compound blends artistry with comfort.
Called Casa Tres Cervezas, the turnkey property features two courtyards, plus rooftop and patio areas, that make the most of the temperate climate with indoor-outdoor living. Views take in the pink “wedding cake” towers of the neo-Gothic Parroquia de San Miguel Arcángel as well as other church spires.
“The rooftop garden has a remarkable direct perspective of the churches that transports you into another time and space,” said Joseph Lown of CDR San Miguel, who is co-listing the property with fellow agent Eduardo Mora.
A heated swimming pool and spa sit in one of the courtyards, which connects to a yoga studio and a full bathroom with a changing area. Hand-carved stone walls and columns bearing botanical motifs surround outdoor spaces framed by plantings.
A lanai courtyard across from the living-dining room, bar and kitchen includes a shaded loggia with a lounging area and an in-ground fire pit. The rooftop deck contains an outdoor kitchen.
The grand entry opens into a living room with a stone fireplace and large skylight. The domed and arched boveda ceilings are made of brick. Metal and glass lighting fixtures, ironwork and concrete Mexican tile are among other details throughout the more than 11,000 square feet of living space.
Lown said the level of craftsmanship reflects Beers’ appreciation of the vibrant community, roughly 10% of which is made up of expats. To create the compound, the producer pieced together five parcels of land and sourced artisans from all across Mexico to update the property while keeping it entirely authentic.
“Rarely do you find someone so in love with the Mexican culture that they are willing to work with an architect to keenly preserve and enhance a property such as this,” Lown said. “[Beers] sourced the best artisans from across Mexico to do the stonework, carvings, glass etchings, metalwork and even some of the home’s paintings.”
The attention to detail is further evidenced in the formal dining room, which pairs rustic stonework with a fireplace, cantina-style bar and floor-to-ceiling windows.
The stone-walled kitchen is large enough to accommodate a table for eight. A seating nook with a fireplace anchors one corner of the room.
Among the nine bedrooms is a suite with a loft. Another room has a skylight view of the koi pond for a total of nine bedrooms and nine bathrooms—and those are just the main living areas.
“There’s even a recording room with soundproof walls that doubles as an Xbox lounge,” Lown said.
The $6.25-million asking price includes a separate adjoining property consisting of a garage, a ground-floor restaurant space, some rustic apartments and a garden area—though most aspects can be negotiated separately.
Suppose the owner is open to offering the property as a short-term vacation rental. In that case, the income produced is capable of paying for the carrying costs of the house, maintenance, utilities and staff fees, according to Lown.
Private parking is another added bonus. “Parking in the city center of any colonial town is golden,” Lown said.
The Baroque Spanish architecture, cultural festivals and an active arts scene are among the attractions of San Miguel de Allende, which draws tourists and expats from around the world. The town’s historic core is designated as a UNESCO World Heritage site, requiring structures to retain their historic appearance. Homes painted in a palette of mustard yellows, red and orange hues line the narrow streets.
The nearest international airports are Del Bajío International Airport in Guanajuato, about 58 miles to the west, direct flights to Los Angeles, and Querétaro Intercontinental Airport, some 56 miles away in Querétaro. San Miguel de Allende is about 150 miles north of Mexico City.
CDR San Miguel is an exclusive member of Forbes Global Properties, a consumer marketplace and membership network of elite brokerages selling the world’s most luxurious homes.
Julian Lennon Discusses Art As A Calling Upon Launch Of Partnership With Aston Martin Residences
“I know how it feels to have your privacy invaded by photographers, whether it is in work mode or privately. So I have always been sensitive to that,” says Julian Lennon, describing the philosophy that has driven his decades-long career in photography. “I’m a fly on the wall. Nothing is staged. I don’t want to be in [the subject’s] way.”
Lennon has just launched a virtual exhibit called “Vision” in partnership with Aston Martin Residences, the 391-unit condo building in Miami and first residential project for the luxury carmaker. Now 70% sold, the building made news for its $50 million triplex penthouse, which comes with a hard-to-find Aston Martin Vulcan valued at over $3 million.
“It is every young English boy’s dream to not only be James Bond, but…Aston Martin…are you kidding me?” says Lennon. “As a kid I used to have the little matchbox Aston Martin. So how can I not be happy for the relationship?”
The partnership with Lennon came about after a serendipitous meeting between Lennon and reps for the building at Miami’s annual Art Basel festival. Since The Residences borrows design themes from the original aesthetic of Aston Martin cars, and there are echoes of the same level of artistry in Lennon’s photography, the amenity program organizers invited Lennon to be the inaugural artist on the program.
“That’s why we called the exhibit Vision,” said Lennon. “It’s all about design and angles. In many respects a lot of people can tell the shots that I do because of the angle I take. There’s always a little bit of an angle or an edge or something different. Otherwise anybody could take the shot. You have to define that it’s your work.”
While the building is still under construction the team has created an online immersive exhibit to showcase what will be one of the building’s high-end amenities—a private art gallery for residents. The complete collection launched yesterday and can be accessed here, though organizers for the gallery have provided a few images and an early interview with Lennon exclusively for Forbes readers. The wide-ranging exhibit consists of everything from the artist’s celebrity photos to shots of his travels of far-flung places around the globe.
As the eldest son of John Lennon, Julian Lennon has sought to define his own artistic path. “Whether that’s been through the charitable efforts for the foundation, children’s books, the independent films I’ve been part of executive producing—that’s been my thing. Just creating a relatively large body of work on so many levels.”
His foundation largely supports environmental causes and the needs of preserving indigenous populations. Named The White Feather Foundation, after the shiver-inducing moment when—having been told as a child by his father that if he ever passed away he would send him a white feather to let him know he was alright—Julian was touring in Australia in support of one of his albums and was presented with a white feather by an Aborigine tribal elder in Australia who said, “You have a voice, can you help us?”
“On all those mediums that I’ve been involved with I’ve done my graft on these things,” says Lennon. “If I become more recognizable because of certain pursuits, then it’s not because I’m John’s son or this and that. It’s because I’ve been there doing the work.”
When it comes to photography, Lennon explains he relies almost exclusively on natural light and taking all the time needed to work on the photo in post-production. He says of photographing Charlene Wittstock the morning of her wedding to Prince Albert of Monaco:
“She’s not only got the hairdresser, but the hairdresser’s assistant, the makeup artist, the makeup artist’s assistant. Then the tailor, the tailor’s assistant, and the assistant who is steaming things on the side. All in this tiny little room. I was literally being pushed by all the assistants and have never been in a situation like that so I was really panicking. And I’m going, ‘what am I going to?’ She says, “Jules, I think this is making me feel too anxious I don’t think we can do this.’ I said, “Charlene, this is a moment in history. This is ten minutes before you’re becoming a princess.”
Lennon was able to get a few shots but didn’t think any of them matched the importance of the occasion. “So I desaturated [the colors in one] picture and I got goosebumps. It just took me back to a time and an age.” He applied the same effects to the rest of the photos and was able to create a collection that captured the momentous nature of the event. “It truly reminded me of Princess Grace of Monaco.”
Lennon has also just released to the public an extensive collection from his time in Havana, Cuba and several of the images from his collection are on display in the “Vision” exhibit.
As he describes, “I fell in love with the place. It was relatively untouched. You can just imagine harkening back forty, fifty years and feeling what that may have been like. It was captured in time and it still remains relatively as it was. There’s a certain absolute beauty about it. You saw the poverty there and the sadness. You can see a lot of sadness in their eyes but they make the best out of the worst. There’s a lot of happiness within. That’s one of the things that I try and parlay through the photography.”
Here are a few more pictures from the exhibit:
A spontaneous trip to Colombia where a friend had set up an art gallery led to photos such as the street mural above.
The above photo was taken during a songwriting session by U2.
The above photo is of singer Tony Mortimer for the artwork in support of his album, “Songs From The Suitcase.”
For more pictures, the 3D immersive exhibit can be found here, along with an explanation from Lennon about the story behind each photo. For more of Lennon’s photography, complete with several just-launched collections, head to his personal website: julianlennon-photography.com. For more information on Aston Martin Residences, go to their website here.
Costs, Timelines And Steps You Can Take
Cofounder of InstaLend, a non-bank real estate lender providing loans on single-family and multi-family properties for acquisition and rehab.
With the moratorium on foreclosures likely coming to an end soon and millions of Americans still out of the workforce and unable to make their rent or mortgage payments, we may be in for a huge uptick in foreclosure activity nationwide. As a property owner, you may find yourself falling behind on payments to your lender and subject to foreclosure action. Should that be the case, it is critical you have a good understanding of the foreclosure process, timelines and costs.
A foreclosure occurs when a mortgage obligation cannot be financially fulfilled and the lender files a lawsuit against the property owner. The process culminates when the lender sells the property at an auction to recoup the money it is owed.
Property owners usually find themselves in foreclosure as a result of nonpayment of the mortgage obligation. Common reasons that force a property owner to default on their payment obligations to a lender are unemployment, extreme debt, relocation and divorce.
Types Of Foreclosures And Their Processes
A foreclosure can take anywhere from a couple of months to several years, depending on state laws and whether it is a judicial or non-judicial foreclosure.
In a judicial foreclosure, the lender fails to reach a settlement with the property owner and files a lawsuit against the property and its owner. Therefore, judicial foreclosures require the lender to file a complaint, serve the defendant and go through a court motion to eventually get the title (ownership) of the property. This process can last a few months, or it may take several years. States including New York, New Jersey and Illinois have judicial foreclosure laws.
On the other hand, in a non-judicial foreclosure, the lender is not required to file a lawsuit against the property or its owner. Rather, the lender pursues a foreclosure with the help of a third-party trustee, a process that can vary greatly from state to state. Non-judicial foreclosures can be completed in a matter of a few months since they do not require the lender to go through a court process to get the title (ownership) of the property. States such as Alabama and Georgia have non-judicial foreclosure laws.
Once the lender has completed the foreclosure process, the property will be placed for sale at a public auction. Typically, a notice of sale will be published in a newspaper and advertised by a firm of auction organizers.
After Foreclosure: What Happens Next?
The lender is now the owner of the property. Such a property is referred to as REO, or “real estate owned” by a lender. Consequently, the lender may then hire a real estate agent to get the property sold. Being its owner, the lender is now also responsible for the upkeep of the property and must ensure that the property taxes and utility bills are paid.
In addition, the lender must also ensure that the property is kept secured so that no one can break into it. At this point, lenders might seek out experienced and licensed contractors to secure and maintain the property. To secure the property, the contractor must change all locks to the property and seal the windows. Meanwhile, a real estate agent will list the property on the MLS so that the property is visible to all buyers via sites like Zillow and Trulia.
Steps To Take During Foreclosure
Being subject to foreclosure action can be extremely stressful and unpleasant. As a property owner, should you find yourself exposed to foreclosure action, it would be worthwhile to reach out to your lender and transparently share with them your financial difficulties. Do not ignore any communication from your lender and be sure to speak with a foreclosure defense attorney to understand your rights. Understand that since foreclosure action is expensive and time-consuming for your lender as well, they may be willing to settle the matter on reasonable financial terms. Inquire with your lender if they would offer loan modification or a payment plan to resolve the matter. Should none of these avenues prove successful, consider offering a deed in lieu of foreclosure to your lender so you may resolve the matter and eliminate personal liability for any deficiency in loan balance.
With the anticipated rise in foreclosures for 2021, it is imperative that property owners and lenders understand how the process works, the costs and the timelines involved.
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