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Prefab Review (PR)

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 Steve Linton, President of Deltec.

Deltec Homes

Thanks, Michael. It’s great to be here.

PR

So I am very excited to learn more about your firm. But first I was hoping to learn a little more about you. How did you get into this business?

Deltec Homes

Sure, so I was a student of structural engineering in college at Cornell University. I was always interested in buildings and construction architecture. And after graduating, I went to Boston and worked as a project manager on quite a few large construction projects. A lot of historic preservation projects, which is kind of really where my interest began on the green building and the sustainable building front. And after that, my wife and I moved to North Carolina to be closer to family. And I decided to do something completely different and actually taught school for a while. I taught middle school math and science for several years. And that was actually invaluable to me. I often joke that I learned everything I need to know about leadership from teaching sixth and seventh graders. But then, yeah, after that chapter I came to Deltec and I actually started in 2007 here as a green building consultant and really was able to work in all parts of the business. I was consulting with customers. I was doing engineering work. I was doing design work. New product development really kind of gave me a good sense of the entire business and was also at that time doing energy audits for a sister company that Deltec had. And it was really at that point I started to see how energy inefficient existing houses are. And so I kind of began to frame the essential question for Deltec, as you know, what will the home of our grandchildren and great grandchildren be like and how can we build that home today? And so, you know, sort of with that mindset in 2011, I took over as president here at Deltec and have really just been blessed. I've got an awesome team. There's an amazing group of homeowners from decades-ago that really all believe strongly in what we're doing. So, yeah, that's my quick background. 

PR

That's awesome. So obviously, it seems like you, I went on the website, it said that Deltec, it's been around since 1968, so it sort of pre-dated you, so to speak. How did it start? What's the sort of evolution been like to sort of what you are today?

Deltec Homes

Yeah. So the company started in 1968 and it was actually founded by two brothers. One was the entrepreneur, one was the engineer. And they originally set out to build houses that were a little bit different. And their first pass was actually an A-frame style home. And they quickly realized that was not the house of the future. And they got interested in a different style of architecture, which is what we know our flagship product is today, which is this round or what I call panoramic home. And so they began building these homes for actually the resort industry pretty much exclusively. And so people would go and stay at these homes, at ski slopes, at beach resorts, and they would experience just a different way of living. And that that living is unique to Deltec and that you really establish this real connection with kind of the natural world outside, capturing these amazing views. And so people remembered that and over the years, started asking more and more to build a Deltec home of their own. And so, you know, from the 70s and early 80s, transitioning forward into today, you know, we're building probably ninety five percent of our homes now for individuals, whereas we really started building them for resorts. That makes sense. 

PR

And then let's talk about the exact price you're offering today. So I guess the panoramic, do you call the 360 houses or something like that on your website? 

Deltec Homes

Right. 

PR

You have the distinctly round homes, but then you also have, I guess, a couple other lines of homes, to get some sort of understanding on what exactly your product line is.

Deltec Homes

Sure. Yeah. There are three different parts of our product line. What we call the 360 collection is that panoramic home, that round design that's been our flagship since 1968. And then we also have the Renew collection, which are traditional and modern designs that are really optimized for energy efficiency and sustainability. And we also have what we call the crescent collection, which is essentially a around home that's in an elongated shape. And so it's almost a mid-century modern style of architecture with rounded ends. And so, you know, I think the important thing for folks to realize is whichever product most interests them from a look and feel standpoint, you know, they're all built the Deltec way. And so for us, that means designing and building the house the right way the first time for the benefit of future generations. That's what we call building a legacy home. And you know that Deltec Way is thinking about excellence and thinking about being better stewards of our planet and building homes that protect us from the most severe weather on Earth. And, you know, really also, as I mentioned earlier, help us to experience that connection with the natural world around us. So all of those parts of the Deltec way find their way into the different products that we offer.

PR

Cool. So let's let's jump into, when you say your houses are green, or more green, or more sustainable than other homes, what specifically are you referring to? You're referring to like, r values,  right? Like levels of insulation? 

Deltec Homes

Yeah.

PR

What are the sort of metrics or sort of standards that you use in trying to define like, sort of what hits that threshold? 

Deltec Homes

Sure, that's a great question, Michael. So for us, it's been a lot of different things over the decades that define sustainability. And there's a couple of big themes. I would say one theme is the actual sustainability of the home. And so that's what we're looking at. How are we building? What techniques are we using? Whether that's increase r values, increase air tightness, looking at passive solar design, or ways to essentially, you know, optimize the amount of energy that the home is using and really drive down the energy that the home is using. So that if you do pair it with renewable energy, you've got a really, really smart design. So, you know, an example would be when we build our energy wall product, it uses gaskets. And so, you know, between the plywood and the framing of the actual structure, there are gaskets to help make each and every piece airtight, which is something that's relatively easy for us to do in a factory setting. But not so much in a, you know, on-site environment. And so that's kind of one side of how is the product actually sustainable? And then the second side is, you know, how is the operation sustainable? And so for us, that's, you know, building with a hundred percent renewable energy here in our factory. So back in 2007, we were the first in the world to build homes with one hundred percent renewable energy. We have 273 solar panels here on the facility. We also really strive to lower our waste. We produce about 85% less waste than a stick built home. And so, you know, thinking about how we operate to also compliment the sustainability of the product. And then I think the third piece, which is really something special that I believe Deltec brings to the table, is kind of a combination of all three of these and that third piece being resiliency. So we build a lot of homes in, you know, environments where that are gonna be subject to hurricanes, or other very challenging situations, whether that's earthquakes. And so thinking about the resiliency of the home and building a home that's going to last for generations and generations. Like I said earlier, what we call a legacy home. And so if we can build a home that's around for a super long time, that doesn't have to get rebuilt after these severe weather events, then that also is really contributing to the overall sustainability.

PR

That's cool. So let's talk about exactly what part Deltec does. So are you a 100% design envelope or do you end up being the architect of record on projects? It'd be great to sort of understand what parts of the process you guys offer? 

Deltec Homes

Sure. So we really focus on providing the items where we feel like we're adding a unique value. And so, for example, you know, the structural shell of the home is really where we're building in that exceptional strength and also building in that sustainability. And so that's you know, that's the heart and soul of what we're offering is the you know, the walls, the floor, the roof. That package typically includes windows and siding. And then, you know, the things that we don't really add value on like sheetrock or flooring, things that a builder can get locally. You know, we don't do that because we don't feel like we're really offering anything to the customer. Now, on the design side, we are doing all the design work for the customer in terms of creating that custom home. You know, all of the floor plans and associated drawings that go with that. In most states that ends up being all that a customer needs. There are some states, you know, California is an example where, you know, there may be an architect that would be brought into the equation and that would be an architect in California who we would work with to accomplish that. But we do not do that service in-house. We would use consultants for that.

PR

To what extent are plans customizable? This tends to vary a lot from sort of company to company we talk to and work with.

Deltec Homes

Yeah, exactly, that's a that's a big part of the way our system is set up. And so the vast majority of our customers are custom designing their home from our basic building blocks. And so that's the way that we describe it, is there are in the 360 collection, there are 10 different sizes of round structures. And then there are different wings and connectors and pieces that you can use to connect them together in different ways. And there are actually millions of combinations. And so starting with those building blocks, we will create a custom designed for folks really to kind of meet any interest or need that they have. On the Renew Collection and the Crescent Collection side, those are much more standardized. Then the idea there is you know, some people want to go faster or, you know, are happy kind of starting with a plan that's already fairly set, maybe making a few adjustments along the way. And, you know, sort of short cutting some of the design process. And it really is up to the customer that in terms of how much they want to put into custom designing versus going with something that's more standard. 

PR

That makes sense, In terms things like garages and stuff like that, which I guess often are site built, what do you guys do? Do you include garages or are they site built or do you do those in the same panelized way you do other stuff?

Deltec Homes

Yeah. So we build garages and in a panelized way, just like the rest of the home. And sometimes they're connected. Sometimes they may be standalone, but yeah, that's an offering for, you know, for any of our homes, a garage if that's something that the customer wants.

PR

And then, just in terms of all the stuff, we actually really talk about this, So I order a house from Deltec and I live in California. If I wanted it in California, then just it's flat packed and shipped to California? Is that how it goes?

Deltec Homes

Correct. Yes. We would look at a couple different ways of shipping it there. Most of the time it ends up being, you know, on a 53 foot tractor trailer. But, you know, we ship all over the world. So sometimes it's on a container, even on a rail car, if that's more cost effective. But yeah, it would be flat packed and would be sent to you and then the builder partner would be there to put it together on the ground.

PR

So you actually serve outside the US as well?

Deltec Homes

We do. Yeah. We've shipped homes to over 30 countries in our history. You know, the Caribbean tends to be one of the most. It's one of the strongest areas for us because of the hurricane work that we do. But yeah, we ship all around the globe.

PR

So let's say what's the pricing and cost and I know this can be sort of complicated because particularly for providers like you that are not doing the full home,the local side is probably a lot more expensive. Whereas, I live in the Bay Area versus like, you know, parts of North Carolina. But let's just take a look. Washington, D.C., is a fairly expensive, fairly local city. What are we looking at kind of from a price point, cost perspective? And then can you sort of help break that down? I find it helps to break these things down. Components, like what am I looking at in terms of the shell? What is a frequently cost efficient shell? And how does that vary in terms of size of home? I'm sure as you get bigger, it gets to be a little less expensive, like a dollar per square flat rate range at least.

Deltec Homes

Yeah. Yeah. So that's you know, that's the question that everyone asks. And you're right, it is a little bit tricky to give specific answers. But I think there's several things that I can share that will be helpful. You know, as you said, it can be helpful to break it down into parts. And so the shell package price is something that's instantly ascertainable for us. And that's you know, that's one of the benefits of building off-site, as you know, precisely the cost of that portion of the build. But really, until the complete design is done, it's hard to get exact prices. But, you know, I would say and you know, we actually have the benefit of here in Asheville, North Carolina, where our factories are based, we have a general contracting division as well. So we actually turnkey the homes in this area, which I think gives us a really good understanding of what the builder partners that we work with are also seeing in terms of cost standpoint. So we can, you know, help customers understand what costs make sense and in a range see whether things are coming at the right numbers or not. So, you know, I would say in the Washington, D.C. area, that's going to be, you know, a more urban, more expensive area to build. We do have a builder partner up there. I think most of the homes in that area are going to be probably in the $300 a square foot range. Just on the upper end of what we're seeing sort of, you know, countrywide, we usually tell folks that, you know, the total cost is going to be between $200 and $300 a square foot. And that includes the Deltec shell, as well as all the work that the builder has to do. The only thing that wouldn't be included would be the cost of the land. And so I was just going to say, just to help break it down, usually about one third of that total cost ends up being the Deltec Shell package. So, you know, anywhere from, say, $70 to $100 per square foot is, I think, a range of what most people see. And then if you multiply those numbers by three, you get $200, $210 to the upper end, about $300 per square foot in total. Now, I think a couple things that I would note, I think that are really important when folks are thinking about cost. The first is really thinking about the quality of space versus the quantity of space. And I think the danger of thinking about this in a cost per square foot way is that we forget the other variable in the equation, which is how big is the home? And so, you know, one thing we really work with folks to understand is what is the right sized home for them? And if there are, you know, ways that we can use our designs and the unique things that they can do to help people build fewer square feet, that can be really one of the most meaningful ways to control costs. The second thing that I often share with folks, I think it is really important, which a lot of people don't think about, is the total cost of ownership. Right. So this the upfront cost that you and I are talking about, Michael, that's a number everybody's used to because everything has a price tag. But the cost to operate and maintain a home can vary dramatically over time from different types of homes. And that's where Deltec really shines. Energy bills are going to be less, the maintenance is going to be less because of the way that we're building these homes to be resilient. And especially if you're building in a hurricane prone area, you know, the cost savings to avoid having to rebuild is really substantial. So, you know, if folks think about cost, it's really important to think about the total cost over time, especially since most of us are paying for our homes over time through our mortgage as well.

PR

My sense in terms of what scale you are at right now, I know you're probably one of the bigger companies we've talked to. Like how many, I don't know what metric you think about, but how many shells do you ship per year? How many customers are you dealing with at any one time? 

Deltec Homes

Probably the simplest answer would be a couple of years ago, we crossed our fiftieth anniversary and we had built just over 5,000 homes at that milestone. So on average, it ends up being about 100 homes per year. And I think in our pipeline right now, we have just over 200 customers in various stages of our design process. And, you know, we can build up to about 250 homes per year. And obviously, that number varies from year to year depending on the market. And, you know, as we sit here today, we're in the midst of this coronavirus challenge. And so it's hard to say what it will be this year. But, you know, about 100 but a hundred homes per year has been the average.

PR

And then how do most customers find you?

Deltec Homes

So there's probably two most common ways a lot of folks find us because they're looking to accomplish a couple of things, whether that's capture an amazing view, build in a hurricane zone, or build a sustainable home or maybe all three of those things and they're just searching for us online, that's the most common way anymore. But we also have a really strong network of homeowners that I mentioned before. And a lot of our business comes from referrals from people seeing a Deltec home for the first time, not even knowing it was a thing and then walking inside and just saying, “wow, this is really cool, I want one.” And so, you know, hearing from our five thousand plus homeowners across the globe and across the country is also a really common way that people find us. It's awesome. 

PR

It's been awesome learning a little about Deltec. I want to quickly transition into our fire round. These are kind of slightly more general questions that we get to our site constantly. So I'll ask you a couple questions. You do your best to keep your answers to 1 minute or less, but we don't enforce that too harshly here. So with that being said, so if I want to build with SIPs (structural insulated panels), Deltec or anyone else, like what should I be looking for? What do you look for in terms in terms of experience or competency, in terms of building out of your builder network?

Deltec Homes

Yeah, that's a great question. We get that one fairly regularly. You know, the first thing I would say is engage. Engage us or engage whomever you're thinking of using and let them help because, you know, we can really help you through that process. We've done it a lot and we're certainly there to guide folks through picking the right builder. I think the number one thing that I tell people is to find someone that communicates well and fits with your style of communication. I think that's essential from there. You know, the level of technical expertise that they have, for example, with a panelized home or a prefabricated home, I think is much less important. You know, we can send somebody to assist the builder during the assembly and after that, it's really standard stuff. So I think that the communication piece to me is one thing that I always suggest that people really focus on first and foremost.

PR

How about site feasibility? Particularly for Deltec, but really for anyone. What are the things you look for when people try to understand if it makes sense for a plan. 

Deltec Homes

So, you know, we work with customers in all different stages. Some folks will come to us and we'll actually begin designing the home before they found the property. And that can be a useful technique because they better understand what they want their home to be. And that can help to drive the land, whether that's the size, the orientation, the slope, you know, any of those types of factors. Other folks have already found the property. And we work, you know, starting from that point forward. But it's a really tough question to answer and in a general way, especially since we're building all over the world. You know, the climate and the geography of the region makes a big difference. And so it's kind of not a one size fits all answer there. But what I would say is, you know, our goal in the design process would be to listen to the customer, ask a bunch of questions about what they want their home to be, and then help them translate those wants and needs into the tangible things that they want to look for in their property.

PR

Got it. Are there certain types of sites? We get lots of people in like L.A. or San Francisco or Colorado who have these beautiful, incredibly steep slopes and those can be challenging for some companies to do it. Are there certain types of sites, at least for your product, that makes sense for a lot. 

Deltec Homes

Not necessarily. I mean, to be honest, we somewhat thrive on the more difficult the situations because we're building in, you know, places where one hundred eighty five mile-per-hour hurricanes come through. And so almost anything can be done. I think the real issue for most people is what it's gonna cost to build in a very tricky situation. You know, we've built on islands that have no roads or ports or access and you have to unload them using World War 2 era landing craft. We've kind of seen it all. And so I think, you know, that's in some ways that's what we thrive on. You know, I would encourage folks to do their due diligence on their land. And the advent of GIS and some of those tools has been really helpful for folks to understand, you know, is this in a steep slope regulation area that's going to maybe change how I'm allowed to build? And so I think those are the kind of questions that we would help guide people through when they're in those situations.

PR

And then one thing we see is just the cost of ownership in certain parts of the country is pretty high. We see a lot of residential buyers interested in sort of doing multi-family or kind of like, a single family home with ADU projects. Is that something you do? And how do you help people think through that? 

Deltec Homes

That's certainly become more and more popular. We have done a few projects like that, some recently in California. It's not our focus, but it is something that our product is well-suited for because, you know, our homes go all the way down to three hundred square feet. And so there's lots of different size options for folks. But, you know, to be honest again, because those things tend to be so dependent on local zoning regulations, it's something that we don't have a broad expertise in. We're gonna look at it from a design standpoint and say, OK, what is the design trying to accomplish? And, you know, help that customer explore and make sure they know all the rules and regulations from a zoning standpoint.

PR

So probably our final fire round question. It sounds like you have a history of being passionate about sustainability. And as I said, in some states, we're now actually required to have solar or some other renewable energy source to sort of create zero net energy homes. At least in California right now. I think there are a few other states that have similar types of laws. If I were a homebuyer and I'm not in a state where this is required. What should the calculus be when evaluating? Do I want to add solar or do something else to make this a kind of a zero net energy or negative net energy home?

Deltec Homes

Yeah, that's a great question. You know, I think the calculus has changed from even just a few years ago. I often say that I don't think it's a question of how to build a zero energy home anymore. It's really a question of why not? The costs have become such that it can make really strong financial sense, even without incentives anymore for people to go this direction. And I think, you know, one of the unique advantages of working with us as we do have a green building department. We have somebody that can help you through those decisions. You look at energy modeling. You look at how to accomplish the sustainability goals that you want. And so, you know, I think it's, you know, each person is a little bit different, but I think for most parts of the country, it's coming to the point where the question is, is why not? 

PR

Got it. So this has been really great for getting your perspective on a range of issues and building with Deltec. I have one final question., We ask this to everyone, what are you most excited about for your company? You know sort of the broader prefab industry as a whole sort of going forward for the near future.

Deltec Homes

I would say, you know, I think it really for me and for all of us here at Deltec, it comes back to our big dream, Michael, which is, you know, we want to change the way the world builds one home at a time. And one of the areas where I feel like we're really called to do that is in building in these hurricane prone areas. Back in January, I was down in the Bahamas at a rebuilding summit that the United Nations put on. And something that really struck me there that one of the folks shared was he said, you know, we sit in the shade of a tree that we did not plant and we plant a tree whose shade we will not sit. And that really spoke deeply to me, because that's the mission that we're on, essentially building legacy homes. And so, you know, the week after Hurricane Dorian came through, you know, our engineering team was meeting and we were saying, OK, we're seeing the effects of climate change. We're seeing that these storms are getting stronger and stronger. How do we build for 200 mile an hour storms? How do we build for 250 mile per hour storms? And so I think that's what it's going to take in this changing world. And that's the challenge, I believe, that we're called on to solve for our people and our planet.

PR

Yeah, I agree it's great to see people in the industry taking positions of leadership on all that stuff. Steve, it has been terrific talking to you and learning more about you and the company. For more information about Deltec, check out Deltechomes.com. And as always, you can always visit us at PrefabReview.com for a range of content about the industry. Thanks again, Steve. 

Deltec Homes

Thank you, Michael. Really enjoyed it.