By Eric Peterson | Apr 06, 2021
"I'm a second-generation developer, learned the business from my father. I've been building homes for the last 30 years in California," says Rowland. "I've always had a passion for pushing the envelope and for sustainability."
The 2015 launch of the Tesla Powerwall spurred him to push the envelope even further: After meeting with Tesla engineers, Rowland designed and built a "Tesla-powered smart home" that would run exclusively on solar power using the electric automaker's residential battery products.
He next built an off-grid home in Murrieta. "This was the second Tesla off-grid home in all of North America," says Rowland. "It ended up being the most energy-efficient one that's ever been built, and still is today. Tesla's flown out their engineers to take a look at the home and see how it runs."
That success with the "lowest-voltage, lowest-amperage home in the United States" represented the start of S2A Modular. "I decided I wanted to scale it," says Rowland.
A scuttled partnership with a contract manufacturer left Rowland frustrated, leading to an epiphany. "I decided I needed to open my own factory where I could build the product I wanted," he says.
Soon thereafter, Rowland connected with Brian Kuzdas, now S2A's CEO, and they devised a plan. "We decided we were going to take a run at this together," says Rowland. "[Kuzdas] was wanting to build 500 homes in Southern California, and I had several 55-and-over communities and projects I wanted to build out, so we were planning on filling the production line with our own builds."
The business plan launched with private-placement fundraising to build a single factory in Southern California. Rowland says each modular home (built to more than 35 customizable floor plans) can be as much as 30 percent less expensive than conventional construction. "We had to go indoors," he explains. "That's the big advantage. When you think of rain and weather delays and theft and vandalism and all the things that happen in traditional building, it had to be taken this way."
He adds, "The savings is not really in the materials, it's in the time -- and the waste."
In-person investor outreach went virtual with the onset of the COVID-19 pandemic in 2020. The pivot proved an unexpected catalyst. "When the pandemic hit, we were doing live seminars a couple days a week all across the country," says Rowland. "When we got shut down a year ago in March, we shifted in a three- or four-day period."
The payoff? "We were immediately in front of a worldwide audience, and we started getting people wanting us to build products for them all around the country and all over the world," says Rowland.
The company has since closed on more funding and acquired four parcels -- in Murrieta and Patterson in California as well as Waco, Texas, and Macclenny, Florida -- to build four "MegaFactories." Construction is now underway at all four sites . Each facility is slated to launch operations by the end of 2021 with 100,000 square feet of production and showroom space for model homes.
S2A practices what it preaches by using Big Top Manufacturing to build the company's factory structures offsite in Florida. "The factory itself is just as sustainable as our homes," says Rowland. "I've been doing net-zero since 2015, so we've stepped it up to where we engineer for net-positive now. Our factory is the most energy-efficient, most energy-net-positive factory in the United States, bar none."
Rowland says the facilities will open before the end of 2021 with 125 employees apiece, then scale to about 250 as the structures are built out to 250,000 square feet to handle an expansion of the product line.
In the first phase, a MegaFactory will have the capacity to manufacture about 1,000 units annually per eight-hour shift. Initial products include the Model A home, starting at $129 per square foot, and the #GreenLuxHome, starting at $169 per square foot. Each facility will move into commercial structures after the buildout is complete.
The Model A "is still the lowest-voltage, lowest-amperage home in the world," says Rowland. "The #GreenLuxHome is the fully sustainable version. That includes the solar and the battery, so there is an upgrade cost. . . . Everything is controlled through our proprietary app. That's free and on all the homes."
"Once your home actually gets on the production floor and started, from start to finish, it's a 10-day process," says Rowland. "Every two hours, the buzzer goes off and the line moves. That means every two hours we have a finished product coming off the line, ready for delivery, so it's very efficient."
The company will deliver some of its first homes to a pair of Bahia Village projects in California, in the second half of 2021. "Those are full net-positive homes, the whole community," says Rowland. "There's no electric bill, no gas, no propane."
The first four MegaFactory locations are just the beginning, says Rowland. He envisions a nationwide network of 35 S2A manufacturing facilities -- meaning the company could hit nearly 9,000 employees if the plan comes to fruition.
"We've got 17 other locations where we're already working with the EDCs [economic development corporations] and finalizing contracts on the land," says Rowland. "So we've got the first 20 locations mapped out very well, then next year in 2022 we will map out locations for the next 15."
Challenges: "The hurdle is actually demand," says Rowland, noting that S2A Modular has an order backlog of 300,000 units. "We're literally having to meet every day with developers and review each project and see what's going to go into the pipeline first."
He ultimately envisions establishing a "McDonald's system" to replicate manufacturing best practices and maximize efficiencies.
Opportunities: Rowland calls offsite manufacturing of modular structures "the future" of construction. "Ever since '08 when the market crashed and a lot of the labor force went away and into other industries, they just can't keep up," he says. "Some of the big builders in Southern California . . . are 70,000 homes in the hole right now. It's 50 percent labor and 50 percent lumber that are giving them the challenges."
Commercial projects, especially hotels, will be a big part of the mix at S2A. "We will have the crane set up in a manner to where we can build anything," he says. "The second phase is strictly commercial. We do have orders for several hotels -- we have a Marriott in Florida we're going to be building and several other branded hotels in the Bay Area we've been contracted to build."
The recent grid failure in Texas led to a spate of inquiries. "We're excited to get the Waco plant open and see what we can contribute to the grid out there," says Rowland. "With 35 factories up and running, we're putting 70,000 homes onto the market every year that will relieve the antiquated grid and help the grid all around the country."
And international expansion is also on the list, he adds. "We're literally getting hit all over the world. The demand for this type of green building product, it's not just the U.S."
Needs: "There's a lot of needs," says Rowland. Employees is a big one, as the company plans to hire more than 400 employees to staff its first four MegaFactories by the end of 2021.
Other S2A needs include investors and sites for the planned national expansion near major metropolitan areas. "We try to stay 45 minutes to an hour outside of those areas, so we can find a smaller community we can really come in and impact," says Rowland.