Modular builder Kinexx eyes ‘hidden-in-plain-sight’ lots for growth

While modular construction comprises a small niche in the U.S. ground-up residential development market – roughly 3% of new homebuilding – it’s an outsized opportunity for urban infill projects, where developers face tight labor constraints, regulatory barriers and high land costs. 

Kinexx Modular Construction, which has built more than 100 housing units on urban infill sites in Chicago, believes it has identified an opportunity to leverage modular construction to deliver attainable for-sale and rental housing in neighborhoods in the inner rings of downtown urban centers, frequently overlooked by developers. 

Having proof-tested its concept in Chicago, the company is eyeing other cities for expansion and has recently announced a new crowdfunding campaign to finance its growth. 

The developer has a roster of about 20 current and former pro athletes who have invested in the business, including the likes of NFL quarterbacks Jameis Winston and Cam Ward, former Pro Bowl running back Mark Ingram and retired MLB stars Rickie Weeks and Edwin Jackson. 

“We have the blessing of being backed by a number of professional athletes. This adds some measure of influence to that campaign as well,” Adrian Muhammad, Chairman, Kinexx Modular Construction and Managing Partner at LaPhair Capital Partners, told HousingWire’s The Builder’s Daily. 

But beyond the buzz that comes with celebrity investors, Kinexx believes it has a proven and profitable model – focused on often-overlooked infill parcels in underserved communities, paired with the cost savings and production efficiency of modular construction.

Converting speed into savings

Kinexx, founded in 2020, builds a mix of detached and attached single-family homes, small ranch homes and multifamily buildings. The company builds housing on both scattered lots and larger projects that can span an entire city block. 

“We thrive in both environments,” Paul Tebben, Kinexx Modular Construction Co-Founder and Chief Design Officer, said. “Whether those 20 units go to a single lot or to an entire block, it equals the same efficiency for us, because we’re building off-site.”

Modular construction can work well for Chicago, a city with high labor costs, stringent building codes and a lot of narrow lots and tight streets, Tebben explained. The company further says that it can build at roughly 20% lower cost and 30% to 50% faster than traditional site-built methods. 

That speed lowers financing and carrying costs, generating savings that can be passed on to buyers. Because Kinexx can build homes more quickly, it can borrow money for a shorter period of time, which lowers the overall cost of financing each project.

“Modular is a process. It’s not a product,” Muhammad said. “The process is where the value is, and the process gives us speed.”

Beyond accelerating construction timelines, Kinexx’s modular approach can make assembly more efficient by utilizing precision-built components produced in a controlled factory setting. This process reduces costs by minimizing material waste, improving quality control and keeping costly mistakes to a minimum. 

The company operates a roughly 60,000-square-foot factory in Chicago that can produce four to six modules per day. A typical 1,600-square-foot single-family home requires six modules, so production allows such a home to move off the assembly line roughly every one to two days.

Keeping production indoors at this facility means that the developer eliminates many of the variables that drive up costs in traditional construction, including weather delays, labor constraints and material disruptions.

Leveraging crowdfunding to expand

Kinexx’s recently announced crowdfunding campaign allows investors to participate starting at $500 with no institutional minimum. 

As Kinexx leadership put it, crowdfunding enables everyday people to invest, broadening access to capital while generating public engagement. Crowdfunding can also help bridge a financing gap created by the modular construction model, which often moves faster than traditional development and construction lending systems are designed to accommodate. 

With the crowdfunding campaign launched, Kinexx plans to ultimately expand its model into eight additional cities, including Baltimore, Cleveland, Philadelphia and Detroit. 

As Muhammad put it, every modular construction company struggles with generating a consistent pipeline of projects that produces a stable and predictable revenue-based company. However, Kinexx believes that it has a successful and proven model that it can bring to other cities, and that it has found the solution to this problem in plain sight. 

Muhammad cited Bronzeville, a neighborhood in Chicago located just south of the city’s Central Business District, as proof that the Kinexx model works. According to Muhammad, the average value of townhomes, condos, and single-family homes in the neighborhood is roughly twice what it costs Kinexx to deliver a home there.

At the same time, there is little competition from other developers in the neighborhoods that Kinexx builds in, as many traditional site-built operators have dismissed those lots. 

“We don’t have to worry about competition, because no one wants to build there for some ungodly reason. Well, we found gold there, and if we can summon the capital, and we can produce units that actually can service the aesthetic and the value reflected in those markets, then we believe that not only will we service a legitimate good, but we can actually profit in a very meaningful way,” Muhammed said.

The company further believes that there is an unmet need for smaller, newly built homes around 1,600 square feet or less.

Data from the National Association of Home Builders indicates that only about 13% to 16% of newly built single-family homes are under 1,600 square feet, despite roughly 26% to 28% of buyers desiring a home of such size. This supply gap indicates that there is a great deal of demand for smaller, more affordable homes that isn’t fully met by the market. 

Kinexx believes its focus on smaller infill projects and a disciplined growth strategy positions it differently from many of the off-site construction companies that have struggled to scale.

Despite attracting significant investment and attention, many well-known off-site construction companies have struggled to successfully scale their operations in recent years. Katerra, which received over $2 billion in funding before filing for bankruptcy in 2021, is the most prominent example. 

Tebben argued that, as Kinexx expands to other cities, maintaining design flexibility will be key. While the construction process will remain standardized, the finished product can be adapted to reflect the unique look and feel of different cities and communities.

“I think one of the resounding mistakes or undertones of those failures has been that they have painted everything with the same brush. I think the idea is that they have a formula that works, and without alteration, they should apply it one-to-one to another market, and that’s not true,” he said.