Green Galaxy Builders, Inc. provides planning, design, permitting and construction services for accessory dwelling units (ADUs) like the one shown here, which was built using structural insulated panels (SIPs).

Michael McCarthy Jr., President and CEO, Green Galaxy Builders, Inc.

“It’s all about the ‘law of the bench,’ “ says Michael McCarthy Jr., President and CEO of Green Galaxy Builders, Inc., as he reflects on why his company, which specializes in factory-built construction, is experiencing strong, steady growth. According to this adage, success requires a broad range of experience, a team with a complementary skill set, constant improvement and the agility to adapt to changing conditions.

A key step Michael took toward applying this philosophy was to learn all he could about the micro-niche markets he was targeting: manufactured and modular housing.

Amplifying Experience

“I started in the manufactured home business in 2006,” Michael says. “After leaving the Navy, I worked as a business consultant for 17 years. Once I decided I wanted to get into real estate, I went to work for Clayton Homes, the largest retailer and fabricator of manufactured homes in the U.S.” This decision also allowed Michael to draw upon knowledge he acquired as the owner of a high-end manufactured home.

“My wife and I have lived in the Plaza Del Rey mobile home park in Sunnyvale, California, for the past 20 years,” he says. “We love being in the heart of Silicon Valley, but it’s very hard to find affordable housing out here. The 1,900-square-foot home that we bought in 2001 cost $275,000. It would have cost several times that amount ‘across the fence’ in a nearby housing development. This fed my interest in understanding the manufacturing process so I could deliver a quality, affordable housing solution to customers.” He needed to clear a few hurdles to achieve this vision.

Identifying Challenges and Opportunities

“A problem within the manufactured home industry is that consumers typically don’t know what they are buying—so they shop price,” Michael says. “I believe our job is to help educate them. For example, upgrading a home’s exterior wall framing from two-by-fours to 2 inch by 6 inch is usually a standard upgrade. Did you know, though, that some manufacturers consider it an upgrade to have the electrical boxes nailed to a stud? Why would you ever build a home where you have the electrical boxes floating in the wall?”

So, Michael started walking through the homes he’d sold with the general contractor to make sure the construction met his standards. “Once I was satisfied, I’d tour the home with the clients to address any concerns immediately. One bad review can kill your brand.”

By 2012, he was ready to strike out on his own. He established Green Galaxy Homes, Inc. to sell manufactured and modular homes. Three years later, knowing that synchronizing sales and construction activities could enable him to maintain quality while reducing costs, he founded Green Galaxy Builders. The companies are collocated in Santa Clara, California. “I am not a general contractor by training,” Michael notes. “For the first few years, I subcontracted all the construction work.”

In addition to selling and installing manufactured houses, Green Galaxy Builders’ team constructs homes using modular parts—structural insulated panels (SIPs), in particular. “We represent and use Premier Building Systems, Inc.’s SIPs, which are rated for all seismic zones,” Michael says. He explains that since SIPs are made from an insulating foam core sandwiched between two structural facings—typically oriented strand board (OSB)—they require less lumber for construction. So, as shortages of labor and lumber have sent the cost of traditional stick-framed construction through the roof, construction with SIPs has become more competitive.

Building a Core Team

Another key aspect of the law of the bench is that “great teams have great depth.” Once demand for the products and services his companies offered was solidly established, Michael began assembling a core team, which includes Delfino (Del) Alvarado, Qualifier; Gregory (Greg) Koepf, Senior Vice President of Construction Management; Mirzi Ompad, Construction Coordinator; and Faviola Orozco, Operations Manager.

“Del carries class A and B contractors’ licenses in California,” Michael says. “He assembles the construction crews and supervises their work. He also owns a company that specializes in concrete construction and SIPs framing. His employees can construct foundations for manufactured homes and build residential and commercial structures using SIPs. Del, Greg and I are principals for Green Galaxy Builders. Mirzi and Faviola run the back office and provide construction coordination services.”

Michael says he focuses on equipping his team with the resources they need to perform well. “They are salaried employees to give them the most flexibility. I provide a great compensation package with a 401(k) plan. Their bonuses are tied to the profitability of each project. Since I am out in the field growing my company, I need to rely on my team—and I do. They understand how we make money and how every project matters.”

Benefiting from the Broad View

Michael’s perspective as a licensed real estate agent has also been beneficial. “I look at everything through a wide lens,” he says. “I evaluate how hard construction costs and property value contribute to return on investment. If the return is two to three times the value of my clients’ initial investment, they like me. For example, in Santa Clara County, homeowners can add up to $1 million to the value of their property by adding an accessory dwelling unit (ADU) in their backyard. These ADUs can be used for multigenerational households, as rental units or as an office. Since the cost of nursing home care has gone through the roof, adding an ADU can help families keep money in an estate. We are completing three of these backyard homes right now.”

Specializing in SIPs

Michael says two pivotal decisions were to get into the SIPs market and to recruit a top professional to lead Green Galaxy Builders’ work in this realm. “Greg is a great resource because he has been at the forefront of the SIPs industry since the mid-1980s. He has completed projects totaling more than 30 million square feet under every condition imaginable.”

This advanced building solution addresses several challenges. “About half the time we are building backyard units, and these can be incredibly difficult to maneuver,” Michael observes. “We can get SIPs into the backyard without using a crane. Because SIPs are engineered, everything is level and precise. The walls are straighter, the windows are easier to frame and the cabinets are easier to install. When you hang the drywall, you don’t have to look for a stud. The electrical chases are precut into the panels. You can quickly enclose the structure and secure it by adding doors and windows. This is especially important in high-risk areas.”

Green Galaxy Builders’ team can convert drawings for conventionally built homes into documents that can be used for SIPs construction. “Del has built structures using all kinds of materials and techniques. Generally, he says structures built with structural insulated panels run about $85 less per square foot than conventionally constructed homes in our area,” Michael notes.

Calculating Cost Savings

Experience working with SIPs also affects construction costs. “We recently sent a SIPs project in Redwood City, California, out to bid,” Michael says. “It includes constructing a duplex and two ADUs to provide affordable housing. The client, Redwood Church, was shellshocked because conventional construction costs had doubled since planning began two years ago. Our quote was about $500 per square foot compared to the $675 per square foot quoted by a different contractor. Both quotes were for SIPs construction.”

This is where the Green Galaxy Builders team’s expertise makes a calculable difference.

“A lot of general contractors (GCs) don’t have experience working with SIPs,” Michael says. “We use engineers such as Brandon Helms, Principal Engineer, from Maple Brook Engineering, Inc. in Harrison, Idaho, to do the design and stamp the drawings. He has SIPs design expertise. Or, we are happy to supply the SIPs and collaborate with the GC.”

Adapting to Changing Conditions

Remaining agile enough to quickly adapt to changing market conditions has also contributed to Green Galaxy Builders’ growth. “Projects that were in the planning phase in March 2020 and that were ready to start construction 12 to 18 months later were affected by soaring labor and material prices due to COVID-19-related supply-chain issues,” Michael says. “Costs for everything—except our SIPs product—more than doubled or tripled in most cases, if you could find the materials and buy them.”

“In December 2020, we received a call to bid a project for Kings County, which was partnering with Cornerstone Community Alcohol and Other Drug Recovery Systems, Inc. to provide 24 two-bedroom, one-bath units of affordable housing. We worked through the holidays to complete a submittal package and won the $4.8 million contract. Initially, the goal was to deliver half the units by March 31, 2021, and the other half by July 1, 2021. Since the project was receiving funding from the state of California’s Homekey program, the project money had to be spent by December 31, 2020,” he says. “At that time, though, all we had to work with was a concept. How do you spend money to purchase materials without a completed design or building permit? King’s County wrote the check to Green Galaxy Builders, and we have been responsible with the money. In January, we had a groundbreaking ceremony. Then we went back to our drawing boards to come up with the design and submitted the drawings.”

Here, supply chain shortages presented scheduling challenges. “Initially, we were going to do 50% manufactured homes and build the other 50% using SIPs,” Michael says. “The supply chain issues led us to use manufactured houses for all 24 units. These are being fabricated by Champion Home Builders. I prepaid for the houses at the factory, but Champion has two years of orders ahead of them and they are mandated to work on projects that have a building permit. So, our project was stalled until we got the building permit, which took eight months to secure. Luckily, Champion put this project back at the front of the line because they are neighbors to the County and want to help meet the need for affordable housing.”

From One-Man Show to Successful Team

For now, Michael is focused on meeting the needs of his expanding customer base. “Two and a half years ago, I was a one-man show and now I have five full-time employees,” he says. “We currently have 55 homes on order at the factory and 19 SIPs projects on the ground. We are negotiating with clients to complete another 20 structures.”

As he surveys the events of the past few years, he attributes the strong, steady growth Green Galaxy Builders is experiencing to the concerted efforts of his partners and employees. “Great companies are the result of having great people on your team,” he concludes.