September 15/22, 2014; Volume 28/Number 7
By Steven Feldman
Home Solutions, MultiFamily Solutions members report strong growth
Lake Tahoe, Nev.—Despite the new housing market lagging behind initial projections and a delay in the prime season for multifamily, FEI Group members are doing just fine. As supporting evidence, Jay Smith, president of the organization comprised of three networks—Home Solutions, MultiFamily Solutions and KBx (cabinets and countertops)—called FEI Group’s recent gathering “the best conference we’ve ever had,” citing mood, enthusiasm, and member attendance and engagement. “The group is rolling.”
This all correlates with significant increases in both 2013 and 2014. Smith said FEI Group members are taking market share and seeing an improvement in product mix along with greater compliance with national programs. “Our members have dedicated themselves to new approaches to the business.”
For MultiFamily Solutions members, who service large property management companies, real estate investment trusts and privately owned properties, the rental segment remains strong with occupancy rates high. However, they did have to endure a delayed start to their peak season that traditionally begins right after Memorial Day, which this year didn’t spike until July.
“If you are in multifamily, 40% of your business is conducted late May to August,” said Dave Gheesling, CEO of FEI Group. “People want to be in place by the school year. But until these last couple of months we were flat on apartment turns vs. last year. Occupancy rates were at all-time highs. But July, August and September have been record months in most regions of the country.”
What’s driving the spike? Two factors, Gheesling said. First, members believe there may have been more movement across markets. Second, for the past few years younger people were graduating college and moving back home in the throes of a suffocating job market. “Now we are seeing these people moving out of their existing situations and getting their own places.”
With that said, new multifamily construction is up 40% in 2014. “That is being driven by people getting out of college today who are not interested in diving straight into home ownership,” Gheesling said. “They saw what happened to their parents [with home values]. That’s why builders are scrambling to get new units into the marketplace.”
On top of that, he noted that financing remains tight in new home construction. “If you look at the buyer database, 25% to 27% are first-time buyers, and these people are still having a problem qualifying for a mortgage, in many cases because of student loans. Then you have 10% to 12% who are credit impaired. So we can only sell to less than two-thirds of the market who want to buy homes.”
FEI Group is driving business to MultiFamily Solutions members through an extensive national accounts program. “Our efforts are to engage and create large programs with regional and national management companies,” said Graham Howerton, vice president. “Because we cover 135 markets nationally, we are able to create one turn-key program for a management company for every community in which they have units.”
Howerton said the group had secured more than 400,000 units for its members heading into 2014, and through the first nine months of the year the number of new units brought into the program has grown 12%.
Mike Schreiber, Mikes Flooring Co., Chantilly, Va., a MultiFamily Solutions member for eight years, noted that the national accounts program has been good for his company—so good, in fact, he is up “strong double digits” this year. “New multifamily construction has been great, but in the DC area we have seen a slowdown in government spending. If growth continues, labor will become more of a challenge; no one is coming out of high school [into the trade].
The Home Solutions division of FEI Group is comprised of single-family residential flooring contractors who service the top 50 builder markets in the U.S. And, while new home construction has failed to live up to some lofty expectations set for 2014, members are outpacing the market, Smith said. “Nationally, the year has not quite been what forecasters thought it would be. Starts and sales are under forecast in some markets. That said, there are a few markets that are very hot currently. The bottom line is that Floor Expo members are doing very well. We think this year simply means that the upswing cycle will be longer.”
On a positive note, Smith said members are seeing a change in product mix. On the flip side, they are challenged by labor constraints and access to credit. “We have to do more to get the first-time homebuyer in the market. That’s what is lagging.”
Home Solutions member Jim McGee, CFO and minority partner, Great Floors, with 15 locations in the Pacific Northwest, agreed labor has been his biggest challenge this year. “In Spokane, we had a lot of skilled labor that went to North Dakota when the oil boom hit, and I am surprised they haven’t returned. Young kids need to realize they could make $60,000 a year with one year of training.”
Home Solutions 2013 Member of the Year Roy Lomas Carpets, Harleysville, Pa., is seeing a mid single-digit uptick this year, but it’s not coming from its traditional new single-family home construction business. “This year, new multifamily construction has been good for us,” said Rick Forbes Jr., secretary/treasurer. “We normally have one to three projects a year, but we have six going right now with a seventh coming on board. The owners of each building say they will be fully rented before they are done with construction.”
The theme of the convention, Impact 2020, focused on developing a five-year plan so FEI Group members can maintain their leadership position in the industry. “The only way you do that is to challenge yourself to stay ahead of the curve, to be on the leading edge of the market,” Smith said.
The idea, according to Gheesling, is to think about what the group is doing, how it is doing it, why it is doing it, where it wants to go and “put some meat on the bone.” In illustration, he cited how a member’s design center will function and what it will look like. “We want to make sure our members have the finest design centers.”
One idea that has been working for members is improving their product mix in their design centers. “During the recession we got into the mindset that we were going to get into the cheapest products,” Gheesling said. “Now we have a flow of business and more confidence at the consumer level. They expect to be in their homes longer than they may have [anticipated], which presents an opportunity for them to invest in better products.”
The convention also saw a series of think tanks on critical topics such as the challenge of finding qualified labor, subfloor issues and people cost. “People are the most expensive cost for the contractor,” Gheesling said. “The idea is to keep our members as profitable as possible.”
Suppliers chime in
Now owned by industry icon Peter Spirer, Max Woods—the reincarnation of the Max Windsor brand—showed at the FEI Group convention for the first time.
The company brought products from promotional to mid price points. “The heart and soul products are what we brought to this market—birch, hickory and oak,” Spirer said.
He was attracted to FEI for a number of reasons. “As a wood company, we can’t lose sight of the fact FEI is on the ground floor of the action. They do individual homes, tracts, multifamily, institutional stuff, and they do it in a very professional manner. We always knew about their prowess and importance to the wood flooring business. To underscore, there is not one member who said their business is not moving from carpet to hard surface, including wood.”
Bamboo supplier Wellmade was a second-time vendor at the supplier showcase. Vice president of sales Rob Tarver said this group has been on its radar “because they are the best and largest contractors for new construction and multifamily. Our bamboo is perfect for new construction and multifamily. Certainly, FEI membership is best at penetrating those two markets, and they have the best installers.”
Second-year exhibitor Schönox was presenting its subfloor technology to the group after enjoying a relatively successful first year. “The industry is still in the mindset of putting a band-aid on a poor subfloor as opposed to addressing it for a long-term solution with adequate warranty,” said Doug Young, executive vice president. “FEI can be at the forefront and create value for their customers in that a property manager doesn’t ever have to worry about subfloor issues.”
Canadian carpet manufacturer Venture Carpets displayed its restyled lines of nylon and polypropylene carpet tile and broadloom for the Main Street market. Johanna Paul, director, business development, appreciates the professionalism of FEI Group. “What I value most about this group is how they focus on their supplier partners and truly make you feel like you are their business partner. They are the most successful entrepreneurs.”