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Episode 12 - Chris Krager, Ma Modular
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Transcript
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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Transcript
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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