HORSEHEADS — In September, Rick Searles, of the commercial real-estate company CBRE (Syracuse office), announced that Northeast Commercial Interiors, Inc. (NECI) had leased 58,000 square feet of industrial space at the Horseheads Sand and Transloading Terminal in Horseheads. NECI signed a seven-year lease with options to renew and expand the contracted square-footage. “We’re moving our
HORSEHEADS — In September, Rick Searles, of the commercial real-estate company CBRE (Syracuse office), announced that Northeast Commercial Interiors, Inc. (NECI) had leased 58,000 square feet of industrial space at the Horseheads Sand and Transloading Terminal in Horseheads. NECI signed a seven-year lease with options to renew and expand the contracted square-footage.
“We’re moving our business from Colchester, Vermont (two miles north of Burlington) to Horseheads,” says Dave Smith, company president and a principal. “The timetable is very tight, because we have to be fully operational by Dec. 15. Eight of our 10 employees are moving with the company, and we need to hire 10 more by November to meet the growing demand.”
Smith launched NECI in 2014 and began operations in 2015, supplying kitchen and bath products to student-housing and assisted-living projects in the Northeast.
“I started the business with Erik Heikel, reaching out to builders, developers, and maintenance companies to offer a turnkey delivery of interior finishes,” says Smith. “I spent days on the phone talking to industry buyers I had worked with in the past. The first year in business (2015), we sold nearly $1 million, and I knew the concept had great potential. In 2016, Frances McEwen joined the company as a project manager and our sales quadrupled. We incorporated NECI that year and formed Renova Cabinetry, Inc., a company that manufactures cabinets and countertops, but offers no installation.”
McEwen is the president and a principal of Renova.
NECI generated most of its growth in 2016 in the Greater Syracuse area. “We really got traction in Syracuse,” recalls McEwen. “To meet the requirements of OCIDA (Onondaga County Industrial Development Agency), Dave formed another corporation called NCISource, Inc., which operates exclusively in the five-county area around Syracuse. NCISource has contracts to supply the ICON Tower on Warren Street in downtown Syracuse, a project that includes 89 market-rate apartments; Aspen Heights, a student-housing project on East Brighton Avenue; and The Landings at Meadowood, a 234-unit, luxury-apartment complex in Baldwinsville developed by Morgan Communities [of Rochester]. What we’re finding is that local suppliers are reluctant to undertake these large projects.”
NECI is on track to grow at least 100 percent this year.
“We’re projecting to close out this year with sales in the $8 million to $9 million range,” notes Smith. “The company already has contracts for 2018 worth $9 million, which should top at least $15 million in sales by year-end. The secret to our explosive sales growth is that we listen to our customers … Looking back, we have already sold 2,500 apartment units and 35,000 cabinets in under three years.”
Smith and McEwen began listening when the two worked together at Rynone Manufacturing, a manufacturer of marble and granite tops, laminate countertops, and casework. The family-owned business is headquartered in Sayre, Pennsylvania and has manufacturing facilities in Waverly, New York as well as a retail kitchen-and-bath outlet. Rynone employs 250 people.
“Every day I heard the same refrain from our customers: ‘In order to compete, I need lower prices. I also want one-stop shopping, so I don’t have to work with multiple vendors, and I want turnkey projects,’” avers Smith. “Frances and I made multiple presentations to the owners that we needed to change Rynone’s business model in order to respond to the market. The brothers, who are currently in their 60s, weren’t interested in disrupting what had worked for them since the company was founded [in 1945]. Frances and I both left Rynone in frustration.”
Responding to their customers meant changing the business model. “Offering the lowest price-point required sourcing our materials and products from around the world,” emphasizes Smith. “NECI has the experience and contacts to import from countries as widespread as China, Canada, and Brazil. In January [of this year], the company hired Lizhen Chen as a student-intern who was in the process of completing her Ph.D. requirements in nano-biochemistry. Lizhen quickly learned the opportunities for employment in her field were limited, so she joined our company in June as a full-time employee and returned to her native China. As an international buyer, she is now opening up new manufacturing sources for us in China and Vietnam.”
He continues, “In addition to sourcing low-cost products, we also have the experienced staff to oversee our subcontractors and to guarantee the installation of what we sell. When we say NECI is a turnkey operation, we stand behind that term. Listening to our customers also means adding to our current, limited offerings. They want us to expand the concept of one-stop shopping by offering more products, such as toilets, lighting, flooring, sinks, and so on. There doesn’t seem to be an end to the list of requests. There really is a lot of pressure on us to expand what we offer.”
McEwen was the driving force behind changing the business model and moving to Horseheads. “Frances understood that we couldn’t operate conventionally and still compete,” acknowledges Smith. “She convinced me that NECI was not just another company dealing in wood, plastics, and furnishings; rather, we were a logistics company whose role was to make the sale, source the materials, inventory and ship product to the worksites, and oversee the installations. The concept, which requires a staff with multiple levels of skill-sets and experience, is scalable well beyond just the Northeast. Our model also limits the variety of styles and colors for easier inventory management and more product turns. (NECI already inventories more than 7,000 stock-keeping units.) Having bought into the idea of a logistics company, the move to Horseheads made sense, because the area is a major distribution center and shipping is a major cost.”
Amid the relocation to Horseheads, the corporate ownership is changing. Heikel, a 50 percent owner of NECI, is leaving the company by year’s end and plans to sell his shares back. The management triumvirate of Smith, McEwen, and Nate Dutil, the company’s chief estimator, comprise the management team going forward. While sales thus far have been largely in the Northeast and in upstate New York, new sales are popping up along the East Coast. Because the model is so easily scalable, management is already considering Atlanta as another distribution center to handle the growing sales volume in the Southeast. Also, the Northeast Commercial Interiors’ expanding geographical reach is rapidly outgrowing its current name, necessitating changing the company moniker in 2018.
Key executives’ backgrounds
Smith earned his bachelor’s degree in business administration and began his career in building products working in commercial flooring with Milliken and Mohawk Industries in Toronto. In 2005, he transitioned from flooring to custom-millwork fabrication and also became an owner of a millwork company in Ireland. In 2008, he was a sales manager at a millwork company in New England before joining Rynone in 2011 as director of business development with responsibility for national-account management and product development. Smith is a stockholder in NECI, Renova, and NCISource.
McEwen grew up in Waverly and studied accounting at Corning Community College. She joined Rynone in 2003 starting in the accounting and contract-management department, before transitioning 10 years later to sales-and-marketing management. One of her primary functions included product-line development where she created and launched three product lines. McEwen joined NECI/Renova in 2016 where she has been instrumental in developing the cabinetry company and its marketing strategy. She serves as Renova’s president and is a stockholder in the corporation.
Dutil grew up in Champlain, a small town in Northern New York located near the Canadian border, and earned his bachelor’s degree in mining-and-materials engineering at Virginia Tech. He worked for 10 years in the construction-materials division of a multinational mining company before joining NECI. Dutil is the VP of estimating for NECI/Renova and is a stockholder in Renova.
The multifamily market
The timing to launch NECI was propitious. Economic growth following the recession that ended in 2009 “… continues to support strong multifamily fundamentals,” states a July 26 report from FreddieMac titled “Multifamily 2017 Mid-Year Outlook.” The report cites the national labor market which has created on average 180,000 net-jobs monthly, a low unemployment rate, increasing household formations, and a preference by millennials for rental housing. Annual demand for new apartments hovers near the 300,000-unit level, rents are growing at 3 percent annually, and the Federal Reserve has been slow to raise interest rates — three factors that have attracted Wall Street investors. The origination volume of multifamily housing is projected to grow at an annual rate of 3 to 5 percent, a value of $270 billion to $280 billion.
Changing lifestyles and demographics suggest that the U.S. multifamily-housing industry will continue to grow well into the future. The principals of NECI/Renova have positioned the companies to enjoy meteoric growth by listening to their customers and reinventing the business model.
“The only limit to our growth is finding the right people,” concludes McEwen. “Our profile of a great employee is someone who is passionate about our mission and willing to work hard. The ideal member of our team should be curious and eager to learn and grow. The challenge is finding just the right talent and skill-sets.”
