Builder - September 2008 - (Page 68) UPDATE the company’s debt payments, is planning to build through the down cycle. He will sell off commercial property the company has developed, as needed, in order to keep the home building operation afloat. One major reason he decided against shutting down, even temporarily, was family. “We’ve been at it a long time, and our vision was that this is a business that was going to be generational and carry on into the future,” he says. “So it’s very difficult to just pull the plug and stop.” Which builders can cocoon depends on where their debt is, how many people they employ, and how many on-going projects they have. In particular, if a builder has debt with banks, it may be nearly impossible to suspend operations, unless the banks are willing to take less than what their loan is worth, an unlikely proposition. REVAMPING “They need to be dealt with, and they like to be paid,” says Steven Friedman, Ernst & Young’s national director of housing. “So the question is, do you pay them off in part? Do you pay them off at a discount? They’re not going to allow you to sort of cocoon the operation without dealing with them on a real-time basis.” Large public builders, which have Wall Street debt, might be able to cocoon divisions—keeping one person in a market while the company otherwise pulls out. But a public builder has far too much inertia to stop building entirely, not to mention stockholders who would never stand for it. Medium-sized builders, such as Ennis Homes, may be in the worst position to try cocooning, and banks are the reason. Truly small builders, those doing just a few homes a year, may be in the best THE position to make such a bold move. “It’s easy for a small-volume builder because you have a superintendent, a bookkeeper, and yourself,” says Chuck Shinn, president of Littleton, Colo.–based Shinn Consulting. “You don’t have a whole bunch of land or a whole bunch of land debt.” But no matter the size of the builder, there will be complications. Even an operation that has been shuttered must have somebody to manage lingering aspects of the company: watch over assets not sold off; maintain owned office space; manage warranty issues; and handle post-employment and insurance benefit problems of former employees. There’s also the matter of having to pay off all the costs incurred while closing up shop. “There are lots of issues to think about, it’s not a simple process,” Friedman says.—E.B. CYCLE BUSINESS CONSTRUCTION Facing the Future A new builder aims to take “construction” out of home building. N ew Englanders Jack McBride and Bob Wildes are out to fundamentally change both the way homes are built and how a home building company functions with the launch of a hybrid modular green builder: ABODE. McBride and Wildes, principals of New England developer Commons Development, have been tinkering with their design and construction processes for several years, incorporating modular components and panelizing into the homes they build around New England. By launching ABODE in July in Nashua, N.H., McBride and Wildes are committing whole-hog to a new system of building, one where sections of homes and panelized parts of homes will be constructed in modular factories, shipped to a site, then erected incorporating custom finishes done by hand in a more traditional manner. McBride is so confident in ABODE’s potential for success that he isn’t shy about discussing his plan to phase out Commons Development and do all future developing and building under ABODE. “We are fully committed—this is how we’re building homes in the future,” McBride says. Because the process is so streamlined, ABODE will not have to hire additional project managers, estimators, supervisors, or subcontractors as they bring new projects online, and the time between contract and closing will be only 140 days. “We are looking at the modular manufacturers as our primary subcontractors for framing, electrical, plumbing, PRINCIPALS: Pictured from left to right are Bob Wildes, Sue Hawkes, and Jack McBride. whatever they can do,” McBride says. ABODE has three styles of home it will offer: an interpretation of a Coloradostyle lodge, a traditional New England farm house, and a cottage or bungalow design. Each design will be customizable with no pre-set square footage or price. The homes will all be Energy Star, LEED, and NAHB National Green Building Program certified. ABODE is also using locally sourced wood and other supplies for the interior fi nishes. And constructing the homes in factories will result in far less building waste. ABODE already has signed deals with two manufacturers and will try to work out agreements with other factories to prevent supply limitations. Maintaining a consistent supply of modular parts is going to be essential because ABODE has ambitious growth plans including branching out into light-commercial and institutional housing construction. On the residential side, ABODE expects to take its low-hassle design and build process to New England ski resorts, beach communities, and even the forests of western Massachusetts, says Sue Hawkes, the third principal at ABODE and CEO of marketing firm The Collaborative Cos. in Burlington, Mass.—E.B. HAVE BUSINESS TIPS OR STRATEGIES TO SHARE? 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