DWI Corp. Homes In on Modular-Housing Design
DWI Corp. in Mission Viejo designer of the Samsonite attache case and an array of other products--will use its expertise to design affordable housing under an agreement with a Maryland manufacturer of modular homes.
DWI, which does business as Design West, has been floundering in recent years but is still looking for unusual business ventures. Its latest deal--with Housing Developers Unlimited of Maryland--may be its most unusual yet.
After swapping stock with the new company, DWI gets a contract worth about $500,000 a year to help Housing Developers turn out housing units more cheaply.
“It’s a good deal, because we’re taking an equity position and also getting a substantial research and development contract out of it,” said Robert Fujioka, chairman of DWI.
Affordable housing is a hot topic not only in California: Building enough of it is also a major problem in such East Coast cities as New York, Philadelphia, Baltimore and Washington. Housing Developers hopes to find markets in all those locations.
Housing Developers is the brainchild of William J. Hampton, a developer from New York who believes that modular housing could be a way to provide low-cost living quarters in the nation’s cities.
“We’ve got people who are working and yet they can’t afford a house,” said Hampton. “That’s ridiculous in an economy like ours.”
Hampton wrote to Baltimore Mayor Kurt Schmoke and interested him in the idea of low-cost modular housing, said Hampton.
The city is now considering giving Housing Developers a $1-million Urban Development Action Grant to get a factory running. In return, the city would get a projected 400 jobs after the factory has been running for three years.
Each building module--usually one or two rooms--is connected to others to form a house or condominium at the building site. Housing Developers plans to make an entire housing unit at a maximum cost of $40,000. Even after adding the cost of land, the cost of transporting the units and assembling them and a profit for the company, Hampton says he can sell single-family homes in disadvantaged areas of such cities as New York for less than $100,000.
But Hampton acknowledges that there are pitfalls to this business. The chief one is the cyclical nature of the real estate industry, which swings sharply between boom and bust.
Keeping a housing factory running profitably during the bust part of the cycle, when nobody is buying homes, could be difficult.
“That’s part of the hazard of the business,” said Hampton. “We can keep our fixed costs low enough to get through a downturn.”
Hampton worked with Harlem Congressman Adam Clayton Powell Jr. on forging some of the federal housing programs the Reagan administration has abolished or cut back in the 1980s.
Despite those cutbacks, “the system is still loaded with money” for low-cost housing, said Hampton.
Fujioka, a Japanese internment camp prisoner during World War II, started DWI in 1962 in Los Angeles.
The company became a subsidiary of Samsonite shortly afterward, designing the company’s patio furniture and luggage in addition to its classic attache case.
When Samsonite was bought in 1972 by Beatrice Cos., Design West became Beatrice’s in-house design firm.
In 1980 Fujioka, President Arthur Ellsworth and another executive regained control of the company in a leveraged buyout. The company sold stock to the public in 1983, becoming the nation’s only publicly traded design firm.
Big Ambitions
But it hasn’t been easy. DWI has lost money in all but one year since it split from Beatrice, despite having designed an array of products during its 26 years in business. DWI has had bigger ambitions than most of its competitors, which are small and privately held, so the company’s fall has been harder too.
During the first nine months of its fiscal year, DWI lost $76,349 on revenue of $1.5 million. Results for the full fiscal year, which ended June 30, have not been reported.
As it looked around for ways to make money, DWI hit upon a San Francisco real estate developer called Otec Corp., which was just emerging from bankruptcy proceedings in 1986. The idea was to merge the two companies, sell off some real estate and use the money to launch some of DWI’s own products, including a three-dimensional video screen.
That deal fell through. But another real estate connection surfaced when New York investment banker Oppenheimer & Co. introduced DWI to another of its clients, Hampton’s fledgling company.
Not surprisingly, Oppenheimer is bullish about its clients’ futures.
“We see modular housing as a market with potentially enormous growth,” said Gail Dunlap, a vice president at Oppenheimer and a financial adviser to both companies.
‘Not Terribly Creative’
Most of the modular units built now are for the hotel industry and are constructed by smaller companies, often mobile home manufacturers, she said.
“A lot of the people involved have not been terribly creative,” said Dunlap. “There hasn’t been a lot of imagination.”
Under the deal between the two companies, DWI agreed to buy $175,000 worth of preferred stock and take 12% of Housing Developers’ common stock in return for giving Housing Developers’ a 10% stake in DWI.
DWI then gets 1% to 2% of Housing Developers’ revenues in return for designing its modular housing.
Under another agreement, a publicly traded DWI subsidiary called Inocan Technologies will also swap stock with Housing Developers in return for funds to finish developing a water purification system that uses no electricity. Inocan also gets a market for the system, which will be installed in each Housing Developers modular unit.
The two companies predict they’ll be producing housing by early next year.
“DWI is getting in on the ground floor of what could be a real strong niche, given the political impetus for affordable housing these days,” said Dunlap. “And there’s not a huge amount of downside in the deal.”
Said Fujioka: “We spent six months negotiating with (the San Francisco real estate company) and we couldn’t come to terms.
“So we’re excited about this deal.”
