My Green Prefab Business, and How It Once Grew |

Link: My Green Prefab Business, and How It Once Grew |

    Michelle Kaufmann, an architect, remembers leading Laura Bush, the first lady, on a personal tour of one of her prefabricated homes, pointing out its on-demand water heater and explaining how the graywater system recycled waste water. It was May 2006, and a full-scale model of Ms. Kaufmann?s Glidehouse design had been erected at the National Building Museum in Washington. It was, Ms. Kaufmann said, one of the high points for her design-build company, mkDesigns.

There were others. The company had its debut with a bang in 2004 when Sunset magazine chose to feature a model of the Glidehouse in its annual Celebration Weekend event in Menlo Park, Calif. An estimated 25,000 people ? builders, architects, potential clients ? waited in long lines that formed even before the doors opened to see mkDesigns? modern take on the prefab home. The overwhelming response jump-started the company, which until that point had been a one-woman operation. It seemed like the right idea at the right time.

Ms. Kaufmann immediately hired a client-services manager to handle the hundreds of customer inquiries she began receiving and set to work building her business. ?There hadn?t been a precedent for a green preconfigured home,? Ms. Kaufmann said, ?and ours struck a chord.? The firm, based in Oakland, Calif., rapidly earned a reputation for its streamlined modular homes and went on to build a total of 53, mostly on the West Coast.

Ms. Kaufmann built more homes than any of the other dozen or so boutique prefab-home companies that have sprung up in the past decade. These include Resolution 4 Architecture in New York, LivingHomes and Marmol Radziner in Los Angeles, and FlatPak in Minneapolis. While most of the firms emphasized custom designs and high-end prices, mkDesigns aimed to reach a middle market with homes that cost $160 to $180 per square foot, not including the site.

Together, the green prefab companies represent a tiny segment of the home construction market, but with their focus on sustainability and affordability, they offer the prospect of genuinely green homes delivered to a mass market ? an alternative to cookie-cutter spec houses and bloated McMansions. ?Before the economic meltdown, all builders were looking at prefab in one way or another,? said Leo Marmol, founder of Marmol Radziner.

One reason was the success of similar firms outside the United States. Of all the new single-family houses built in Finland last year, for example, 68 percent were wholly or partly prefabricated, and the home building company Sekisui builds approximately 15,000 modular housing units a year in Japan.

Predictability is one attraction. Home parts are made in a controlled environment and assembled on site, often in a matter of days, meaning weather is less of an issue. And prefab buildings produce about 50 to 75 percent less waste than site-built homes.

Ms. Kaufmann?s first challenge was to find factories that would produce the parts necessary to assemble her homes. ?Factories wanted high volume,? she said. And some of them did not want to take on the liability of manufacturing green but untested features, like countertops made of recycled paper.

Even when Ms. Kaufmann found factories that would create what she wanted, the alliances didn?t always last. ?We found a factory in Canada that worked well for a while,? she said. ?But they got a big order to build workers? camps in Alaska and told us we would have to add six months to our project schedule, and they doubled the fee. Here we were in contract with a client ? it was not acceptable for us to pass that on to them.?

In late 2006, Ms. Kaufmann decided she had no choice but to buy or build her own factory. With capital from one of mkDesigns?s partners, the company bought a modular-home factory in Seattle that was rapidly reconfigured to put out 14 homes a year.

To run the factory, Ms. Kaufmann hired away a manager who had been in charge of laptop production and distribution for Hewlett-Packard in Tokyo. This was in line with Ms. Kaufmann?s vision of creating a hybrid company that straddled the line between architecture and product design. ?You could compare one of our homes to an iPod ? a really well-designed product that can be customized with different skins and applications,? she said.

Having a manufacturing plant changed the game. ?It allowed us to design the elements we wanted and to grow,? Ms. Kaufmann said. ?We were wearing two hats and the clients were getting a better product.? The factory was so successful that within two years, it became apparent that the company needed another ? larger and more sophisticated. ?We didn?t start off with the fanciest factory,? Ms. Kaufmann said. ?We were in bootstrapping mode.?

At the height of its success, mkDesigns employed 60 people in the design studio and the factory. Ms. Kaufmann attracted a number of investors willing to put up $100 million to help buy half a dozen factories across the United States. In early 2008, before the economy turned, the firm found a plant in Sacramento that it thought would be perfect. Ms. Kaufmann decided to sell the Seattle plant but leased it back and kept production going.

When the economy did turn, the mortgage collapse made it increasingly difficult for clients to obtain loans. With business declining and the housing climate increasingly uncertain, Ms. Kaufmann decided not to buy the Sacramento plant. ?We realized others could do the job much more cheaply than us,? Ms. Kaufmann said. Things had changed. Factories that had previously been reluctant to risk manufacturing unfamiliar parts were now phoning Ms. Kaufmann, hungry for work and offering competitive bids.

But then, in quick succession, two factories she had chosen to work with went out of business. One had taken payment of $700,000 for two homes whose parts they had committed to produce, but mkDesigns had to finance the completion of both homes. The other factory left mkDesigns to finish work on homes whose parts were only partly delivered.

In hindsight, Ms. Kaufmann says she believes that one of her company?s main issues was an inability to create economies of scale. She and her partners had hoped that over time, and as the volume of their output grew, they would create more production and time efficiencies and that their costs would fall. Other practitioners have had similar problems….