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2012-RB-Annual-Report

Relocatable Buildings 2012 AnnuAl RepoRt

The Voice of commercial modular consTrucTion?

COMPANY PROFILE:

MODULAR BUILDING INSTITUTE

Founded in 1983, the Modular Building Institute (MBI) is the only international non-profit trade association serving

the commercial modular construction industry. Members are manufacturers, dealers and contractors of commercial

modular building projects, as well as associates supplying building components, services and financing.

Members are located in 12 countries around the globe and provide all types of building space, from relocatable buildings

to complex multi-story permanent construction projects. MBI’s mission is to grow the industry and its capabilities by

encouraging innovation, quality and professionalism through communication, education and recognition.

Each year, MBI hosts World of Modular, the largest gathering of professionals in the modular construction industry.

The next World of Modular will be held March 16-19, 2013 in Scottsdale, Arizona.

For more information about the industry visit, https://www.wendangku.net/doc/518300924.html,.

ABOUT THE INdUsTRY:

COMMERCIAL MODULAR CONSTRUCTION

Commercial modular buildings are non-residential factory-built structures designed to meet federal, provincial,

state and local building codes and in some cases designed to be relocated. The commercial modular building

industry is comprised of two distinct divisions:

Relocatable or Industrialized Buildings – A partially or completely assembled building that complies with

applicable codes, and state regulations, and is constructed in a building manufacturing facility using a modular

construction process. Relocatable modular buildings are designed to be reused or repurposed multiple times and

transported to different building sites.

Permanent Modular Construction (PMC) – PMC is an innovative, sustainable construction delivery method

utilizing offsite, lean manufacturing techniques to prefabricate single or multi-story whole building solutions in

deliverable module sections. PMC buildings are manufactured in a safe, controlled setting and can be constructed

of wood, steel or concrete. PMC modules can be integrated into site built projects or stand alone as a turn-key

solution and can be delivered with MEP, fixtures and interior finishes in less time, with less waste, and higher

quality control compared to projects utilizing only traditional site construction.

this report focuses on the relocatable buildings division.

Philadelphia Dallas Houston

Tampa

Orlando

Charlotte Las Angeles

San Francisco

Calgary

Toronto

South Bend

highest concentration

of Relocatable Members

TABLE OF CONTENTS

A sOUNd INVEsTMENT 4-7kEY MARkETs sERVEd 8-10FINANCIAL dATA & sURVEY REsULTs 11-15MBI sEALs 162011 sUMMARY 17dEPRECIATION / REsIdUAL VALUEs 18-19 sTATE AdMINIsTRATIVE PROGRAMs 20BOARd OF dIRECTORs & MBI sTAFF 22sPONsORs

“non-coded” units such as storage and shipping containers, although these units typically make up about 15 percent of a provider’s typical fleet.

The total estimated value of industry owned relocatable buildings is between $5.5 - $6.0 billion, with estimated annual revenue of $3.0 billion in North America. The Process:

Primarily, four steps make up the relocatable building cycle. authorities

qualified plant to be repurposed

range in size from single location providers with little or no lease fleet to large, well-capitalized companies with very large fleets.Modular manufacturers produce buildings generally in independent, single-location facilities. Responding to fleet owner or customer requests, they generally operate as suppliers of modular units. Construction primarily occurs indoors away from harsh weather conditions preventing damage to building state, sole

University of Washington Dining Pavilion

Days to complete: 34

Interior Below

FIRST PlACE

Temporary Education 2,000 - 10,000 sq. ft.

Remote Locations

Given that relocatable buildings are constructed off site in controlled settings, finding a skilled labor force in remote locations is less of an issue. From the hottest, driest desert locations to the coldest, most severe winter climates, relocatable buildings can be utilized anywhere.

FLexibiLity

Some facilities are used as an adjunct to existing buildings, while others are stand-alone buildings. Flexibility and reutilization are the hallmarks of relocatable buildings. Unlike structures built onsite, which generally have fixed utilization and occupancy design, relocatable units fulfill a unique function of reutilization that is not site-specific. It is not unusual to have a relocatable building serve a wide variety of users during its long life span.

The flexibility of these buildings makes them a secure investment. During severe economic downturns, these conditions allow lessors to enjoy cash flows adequate to service debt. This flexibility is further enhanced by the ability to relocate buildings to more prosperous cities or industries as opportunities arise. Certain market segments of the industry are counter-cyclical. This is particularly true of schools, prisons and governmental agencies that want to transfer funding for facility needs from capital budgets to operating budgets. This concept also applies to industries that may want to expand but are uncertain about the long-term strength of their growth. Budget RapidLy depLoyabLe

No other method of construction allows for such rapid deployment of space. In cases of large scale natural disasters, code compliant relocatable buildings can be deployed within days to provide shelter, medical clinics, and classrooms to help restore a sense of normalcy to a community.

FIRST PlACE

shoRteR depReciation scheduLes

The primary difference between permanent construction and relocatable buildings is that in many cases, relocatable buildings are not permanently affixed to real estate. This allows for the building to be considered personal property or equipment and depreciated over a shorter span. While MBI provides a guideline in this appendix, it is important to consult a professional tax advisor on this matter. sustainabiLity

Relocatable buildings have been frequently criticized as being less than energy efficient structures in and of themselves. However, in recent years, many end users are beginning to realize the positive environmental impact relocatable buildings have. The very fact that the building is designed and constructed to be reused and relocated at multiple sites eliminates the need to build new structures at each of the subsequent locations of the relocatable building. In short, one relocatable building moved to ten different locations throughout its life takes the place of the energy required and waste associated with constructing ten separate buildings. Relocatable buildings are 100 percent reusable.

In 2011, the uses and sizes of relocatable buildings varied greatly. In MBI’s annual Awards of Distinction competition, relocatable building entries ranged from a 600 square foot construction office to a 450,000+ square foot workforce housing facility.

key

MARkETS

sERVEd

R E l O C A T A B l E

Education

Relocatable buildings have become a critical factor in managing student demographics and increasing enrollments. Relocatable classrooms are also ideal for swing space during new construction or renovation. Convenient, flexible, cost-effective temporary buildings can be delivered and operational in as little as 24 hours. These classrooms are measured for quality and code-compliance by state or third-party agencies through routine and random inspections, testing, and certification services.

Choose single classrooms or arrange multiple buildings in clusters to create a campus feel. MBI members supply steps, decks, ramps, and even furniture. Members also offer lease, purchase, and lease-to-purchase financing for a variety of public and private school needs. These classrooms are sometimes referred to as temporary, portable, or mobile classrooms.

School districts across North America are collectively the largest owners of relocatable classrooms, with about 180,000. California schools own close to 90,000 units; Texas schools own about 20,000; and Florida owns about 17,000. Typically larger school districts with high growth are more likely to own the units, which explain why California, Texas and Florida own so many. States like Georgia, North Carolina, Virginia, and Maryland own and operate about 3,000 each.

GEnEral officE

When production demands increase, relocatable buildings can temporarily enlarge a current facility without permanent alterations to the site. Because the space is not permanent, many companies are able to expand without the budget approval process necessary for traditional capital expenses. Relocatable offices can be single- and multi-story buildings configured to include independent offices, conference rooms, and large open spaces for cubicles or other partition systems. large and small businesses, as well as local and state governments, are typical users of relocatable office space.

rEtail

Earlier occupancy means quicker return on investment. For retail occupancies, this can mean significant cash flow advantages. Standard floor plans are available for immediate delivery while custom buildings are built to customers’ specifications in weeks, not months. Unique to modular construction is the fact that while buildings are being built in a quality-controlled factory, site work is occurring at the same time.

Typical retail applications include new home sales centers, banks, golf pro shops, automobile dealerships, college bookstores, and concession stands. If a client’s emerging business needs are short term, temporary space will accommodate their financial situation, space requirements, and deadlines.

GENERAl OFFICE

White Sands Missile Range MEADS Building Days to complete: 42

EDUCATION

Anoka Middle School for the Arts Days to complete: 109

RETAIl

Home Federal Bank Days to complete: 81

HEaltHcarE

Relocatable buildings for healthcare applications are designed and

uncompromising standards of quality. A customers new clinic,

an unlimited choice of interior décor, furniture and equipment leasing.

construction-sitE & in-Plant

Relocatable b uildings h ave t heir r oots i n c onstruction-site t railers, w here s

space, and relocatability are important. Used as standard field offices, buildings are available as single- or two-story units for industrial environments with noise-reducing insulation and are typically moveable by forklift and include electrical and communications wiring, heating, air conditioning, and even plumbing.

sEcurity

Relocatable buildings can be custom built for a variety of access and control situations. Toll booths, tickets sales offices, guard stands, and weigh stations are common applications. One and two-story wood and steel buildings have straight walls or walls that are tilted to improve views and reduce glare. MBI members supply a full line of portable storage containers for either short- or long-term. Heavy-duty storage units feature ground-level storage, equipment storage, warehousing, manufacturers, retailers, and others.

Economical and convenient equipment and storage buildings offer onsite protection from inclement weather and theft. Day in and day out, relocatable buildings offer durability and strength. Equipment shelters, temporary generator housing, and other applications are designed and built by MBI members to guard a client’s investment. These buildings can be as simple as steel containers to units that are heated and air conditioned with exteriors of brick, stone aggregate, or stucco.

EMErGEncy HousinG/disastEr rEliEf

There is simply no other means of providing fast, transitional shelter and basic community needs following natural disasters than relocatable buildings. Relocatable buildings can be quickly and efficiently deployed for emergency housing, medical, educational needs, or to accommodate relief workers.

dATA COLLECTION

RELOCATABLE BUILDINGS

data for this report was compiled from a variety of sources, including data from a prepared survey questionnaire sent to members and non-members in the industry, public sEc filings, information obtained from state and provincial modular regulatory agencies,

and direct communication with company leaders.

of the estimated 350,000 code-compliant relocatable buildings owned by the industry, MBi obtained data from companies owning 238,441 or 68 percent of the market.

Educational Units

21% General Offices

20% 7-10 yrs.

36% Construction Site Offices

20% 1-3 yrs.

Year Type of unit Unit Count Share of

total On Lease Utilization Average rent/

month

2004classroom30,28625%25,49884%$266 Mobile office41,54835%32,35978%$245 Modular complex20,18717%15,54577%$456 Miscellaneous2,1452%1,56673%$324 storage24,74721%19,59879%$104 total/weighted average118,91394,56680%$257

2005classroom31,35625%26,20784%$279 Mobile office42,11734%34,74883%$250 Modular complex23,99219%20,04384%$507 Miscellaneous1,6011%1,01463%$541 storage24,16520%19,18779%$95 total/weighted average123,231101,19982%$282

2006classroom30,96424%24,20578%$293 Mobile office45,11134%37,35683%$302 Modular complex25,31519%20,63782%$557 Miscellaneous2,5492%1,77370%$991 storage27,40021%21,00677%$101 total/weighted average131,339104,97780%$321

2007classroom28,95122%22,73179%$275 Mobile office51,41239%42,91283%$289 Modular complex26,36420%21,27681%$584 Miscellaneous2,5112%1,77271%$976 storage24,18818%18,66277%$99 total/weighted average133,426107,35380%$323

2008classroom35,81120%25,48971%$297 Mobile office64,01336%48,49676%$327 Modular complex46,53226%35,74577%$531 Miscellaneous4,5823%3,15269%$902 storage29,34616%22,03375%$107 total/weighted average180,285134,91575%$353

2009classroom32,98119%23,25571%$299 Mobile office61,57636%45,48874%$316 Modular complex44,84426%34,29476%$526 Miscellaneous5,7823%3,90868%$983 storage26,91016%20,12275%$101 total/weighted average172,092127,06774%$356

2010classroom30,08718%17,17257%$304 Mobile office58,58936%35,57761%$298 Modular complex42,65126%28,68967%$495 Miscellaneous6,9414%5,40278%$455 storage25,17315%19,52178%$88 total/weighted average163,441106,36165%$322

Table 1

Source: Sage Policy Group, AccuVal

Fleet owner’s participating in the survey had revenue ranging from $150,000 to in excess of $600,000,000. Income from the three largest companies primarily engaged in the sale and lease of relocatable buildings exceeds 50 percent of the total industry revenue. The ten largest fleet owners account for greater than 75 percent of total revenue while the top twenty account for 90+ percent.Among the regional fleet owners with branches in multiple states and territories, average revenue is in the $30 to $50 million range. Finally, there are numerous independently owned small fleet owners with one or two local branches. Typically, these fleet owners generate less than $5 million in annual revenues. About 75 percent of all inventory of relocatable buildings in North America is controlled by the ten largest fleet owners, with 90 percent controlled by the top 20 largest fleet owners.

Sales activity comes from the sale of both new and used buildings. Our survey has demonstrated year after year that fleet owners are able to sell their used buildings between seven and ten years after original purchase for at least 100 percent of the original cost. For 2011, fleet owners reported selling units on average after 9.5 years at an average sale price to original cost ratio of 1.15:1, up from 1.01x in 2010.

BUSINESS OPERATIONS

In order to recoup the initial capital investment in a unit, a fleet owner typically needs to have the unit on lease for about 44 months. The average lease term per customer is 24-28months. Once the initial investment is recouped, it is not uncommon for a fleet owner to continue leasing the unit to recover the investment a second time, and finally sell the unit (on average after 9.5 years) at an average sales price to original cost ratio of 114 percent of the original investment.

When asked about depreciation and residual values of the lease fleet, responses varied based on condition and capital improvements to the fleet, market use of the fleet, and the composition of the types of units in the lease fleet, (construction offices, classrooms, etc.). A majority of the units in the industry lease fleet are depreciated over a 20 year period with a 50 percent residual value.

The economic life (different than depreciable life) of a leased relocatable building is determined by comparing the total cost of maintaining the asset with the income producing capacity over its useful life. Cost includes the initial manufactured cost plus all expenditures for items such as maintenance and taxes incurred during its life. Income includes lease revenue during the buildings useful life and sale value upon disposition.

Residual value is understood to be the anticipated “value” of the building at the end of the lease.

Fleet owners generated revenue from the following sources: leasing activity – 45%

Sales – 30%

Service – 25%(Transportation, installation, stairs, ramps, etc.)

Based on a 2011 report by Sage Policy Group analyzing thousands of relocatable building transactions over a 10 year period, the average annual return on investment of a relocatable building sold was 18 percent, which was achieved after an average holding period of 5.8 years. (Source: Sage Policy Group, Inc. The Economic & Financial Performance of the U.S. Modular Building Industry)

In general, relocatable buildings, if property maintained and operated, have useful lives comparable to any other building type. Capital improvements, such as HVAC and roof replacement, are frequently made to these units, which can extend their useful lives for several additional years.

The typical relocatable building will be moved an average of seven times over its life. Again, this varies based on the size and type of the unit. For example, a smaller building made up of one or two modules may move 12 to 15 times over its life. Construction site offices are good examples of this. larger complexes on the other hand may only move three to five times over their life.

Tufts University Student Information Center 7,200 total sq. ft.Days to complete: 181Medford, MA

HONORABlE MENTION

Temporary Education 2,000 - 10,000 sq. ft.

Salem Transit Days to complete: 14

longview Wellness Clinic Days to complete: 82STATE lABElING PROGRAMS & MBI SEAl

Pulte Homes Sales Office Days to complete: 38 2,520 total sq. ft. Interior Above

HONORABlE MENTION Temporary Retail Over 2,000 sq. ft.

DEPRECIATION & RESIDUAl VAlUES

The economic value of a leased mobile office or modular building is determined by comparing the total cost of the asset with the income producing capacity over its useful life. Cost includes the initial manufactured cost plus all expenditures for items such as maintenance and taxes incurred during its useful life. Income includes lease revenue during the buildings useful life and sale value upon disposition. Residual value is understood to be the anticipated “value” of the building at the end of the lease. The mean annual depreciation has ranged between 5 to 6 percent for the last several years.

While there is no specific iRs ruling pertaining to depreciation of modular buildings, the following are intended to be general guidelines:Always consult a professional tax advisor

Visit the IRS Web site for additional resources: https://www.wendangku.net/doc/518300924.html,/publications/p946/index.html The determination as to which depreciation recovery period to apply to the building is based upon whether the property is considered real or personal.

Generally speaking, the buildings (modular units) alone do qualify for a faster depreciation than real property. However, once affixed to a foundation, the decision as to whether the property is real or personal (temporary or permanent) falls within the jurisdiction of the local code official.

Portable Car Showroom Days to complete: 21

FIRST PlACE

Temporary Retail or Hospitality over 2,000 sq. ft.

FIRST PlACE

Temporary Special Application

To help determine if a property is considered real (permanent, not intended to be moved), consider the following:

The question of real vs. personal can be answered by both investigating the original building design and a term called inherent permanency. Inherent permanency is a definition that addresses the question of “Is this structure designed and intended for permanent use?” This issue is relevant, as nearly any structure can be moved. The question of inherent permanence asks at what point you can consider a structure easily movable and when is it not easily relocatable or reasonably achievable.

Utilizing the six-way test that was established in the federal court cases of Whiteco and further used extensively in the Fox Photo case (a modular commercial structure), the courts recommend that it be viewed under the six-way test as established in the Whiteco case:

1. is the property capable of being moved and has it in fact been moved?

2. is the property designed or constructed to remain permanently in place?

3. are there circumstances that show that the property may or will be moved?

4. how substantial a job is removal of the property, and how time consuming?

5. how much damage will the property sustain upon removal?

6. What is the manner of affixation to the property to the land?

NC State Temporary Dining Facility Days to complete: 81

Interior view above

20statE adMinistrativE ProGraMs:

HUD= Federal HUD Code manufactured housing PMC = Commercial permanent modular construction MH = Residential modular homes

RB = Commercial relocatable buildings

States with Programs

Agency Applies to:Alabama Manufactured Housing Commission HUD, MH, RB,PMC Arizona Dept of Building and Fire Safety/Office of Mfg Housing HUD, MH, RB,PMC California Housing & Community Development/Factory Built Housing MH,RB,PMC Colorado Division of Housing

HUD, MH, RB,PMC Florida Dept of Community Affairs/Manufactured (Modular) Bldgs Program MH, RB,PMC Georgia Dept of Community Affairs/Industrialized Buildings Program MH, RB,PMC Idaho Division of Building Safety/Modular Buildings MH, RB,PMC Illinois Dept of Public Health HUD, MH, RB, PMC Indiana Dept of Homeland Sec ./Industrialized Building Systems MH, RB, PMC Iowa State Fire Marshal MH,RB,PMC louisiana State Fire Marshal RB,PMC

Kentucky Department of Housing HUD, MH, RB,PMC Maryland Housing & Community Development HUD, MH,RB,PMC Massachusetts Manufactured Building Program MH, RB,PMC Michigan Bureau of Construction Codes HUD, MH, RB,PMC Minnesota Dept of labor & Industry (IBC) MH, RB,PMC Missouri Public Service Commission HUD, MH, RB,PMC Montana Department of labor & Industry MH, RB,PMC Nevada Department of Business & Industry HUD, MH, RB,PMC New Mexico Construction Industry Codes Div MH, RB,PMC New Hampshire State Fire Marshal HUD, MH, RB,PMC New Jersey Bureau of Code Services (IBC) MH, RB,PMC New York Department of State HUD, MH, RB,PMC North Carolina Dept of Insurance HUD, MH, RB,PMC North Dakota Dept of Commerce (IBC) MH, RB,PMC Ohio Building Codes MH, RB,PMC Oregon Building Codes Division HUD, MH, RB,PMC Pennsylvania Dept of Community and Economic Development MH, RB,PMC Rhode Island State Building Commissioner (IBC) MH, RB,PMC South Carolina Dept of labor HUD, MH, RB.PMC Tennessee Dept of Commerce and Insurance MH, RB. PMC Texas Industrialized Housing RB,PMC Virginia Housing & Community Development MH, RB,PMC Washington Department of labor & Industry HUD, MH, RB.PMC Canada - Alberta

Municipal Affairs