San Francisco-based Building Materials Holding Corp. (BMHC) bolstered its already strong BMC Construction division with the Jan. 27 acquisition of a 51 percent interest in RCI Construction, a new firm formed in partnership with Residential Carpentry that will provide turnkey construction services to high-volume production builders in the greater-Chicago market. The launch of RCI now puts BMC Construction operations in 11 states, including California, Nevada, Oregon, Washington, Arizona, Colorado, Texas, Florida, Virginia, and Idaho.
“This transaction is a significant geographical move and advances one of our key business objectives, which is to increase construction services provided to high-volume production builders in attractive geographic markets,” said BMHC chairman, president, and CEO Robert Mellor in a statement. Under the put-call acquisition agreement with Residential Carpentry, BMC Construction may eventually acquire the remaining 49 percent interest in RCI Construction. Primary Residential Carpentry shareholders, including Robert Blose, Keith Kotche, and Edward Levato, will continue to manage Chicago-area operations for the newly formed company.
“They are first-class and we can't say enough good things about that team,” comments BMHC senior vice president of business development and investor relations Ellis Goebel of RCI's management, adding that Residential Carpentry had sales last year of approximately $50 million. “Together, we'll be studying our capabilities and move along to both expand the services [RCI] already has and also get into other services such as distribution, truss manufacturing, and millwork manufacturing.” In addition to Residential Carpentry's core customers, RCI should benefit from what Goebel calls a “built-in customer base”—national builders already familiar with BMC Construction services in other markets.
While BMC Construction has always competed with other framing providers, Chicago is the company's first market where a large, established pro dealer is already offering turnkey services. Elgin, Ill.–based Seigle's began turnkey operations there in September 2003 with the purchase of Michael Nicholas Carpentry, a $60 million framing and carpentry contractor with 400 employees. Fueled in part by support from Seigle's $276 million in 2004 gross sales, Michael Nicholas has continued a track record of success among Chicago-area production builders since joining forces with the pro dealer. On Jan. 17, the company was awarded customer service and contractor of the year awards from Chicago-based builder Wiseman-Hughes. “We were surprised and delighted—we have won the award for three years in a row,” says Seigle's CEO Harry Seigle, adding that Wiseman-Hughes benefits from Michael Nicholas president Ken Kristofferson managing the account himself.
Neither BMHC nor Seigle's is shying away from the new competitive atmosphere in the Chicago turnkey market, and in fact both are embracing the opportunities that competition may yield. “Seigle's is a special organization, certainly a great competitor, and the owners and management are quality individuals that do things right,” notes Goebel.
According to Seigle, Seigle's had been one of Residential Carpentry's largest vendors of framing materials and will remain so even as RCI goes to market under BMC Construction ownership. “We certainly know and respect BMHC,” Seigle says. “We supply RCI with the vast majority of their framing needs and we have obviously met with them in the wake of the acquisition news. They have assured us that it is business as usual pending our consistently delivering good value and service. Chicago has been a vibrant housing market with long order files, and Seigle's is looking forward to working with RCI irrespective of the ownership change.”
“It's a big market that we are really excited about,” agrees Goebel. “We've got a lot to build on and great expectations to expand there—that's certainly our plan.”