The people surrounding an entrepreneur make or break the success of any business plan.
Jay Madia helps manage the $15 billion investment portfolio of AXIS Capital, a Bermuda-based insurance and reinsurance company (NYSE: AXS) at its offices in the News Corp. building in midtown Manhattan. As Head of Risk Assets, Jay (Jayen) Madia oversees a diverse set of assets, including private credit, private equity, and real estate, globally. Previously he served as Managing Director and Deputy Chief Investment Officer of PartnerRe, a Bermuda-based reinsurer. The two companies had agreed to merge in 2015, but that was thwarted by the hostile takeover of PartnerRe by Turin, Italy-based Exor, the Agnelli/Elkann family investment company that owns Fiat Chrysler and Ferrari. Mr. Madia also holds an MBA from Columbia Business School and a B.A. from Harvard College.
Where did your interest in real estate and ICF construction come from?
I have always had an interest in real estate as an investment class, and early on began to think of residences as investments. Perhaps it was time spent in Asia. If you own a flat in Hong Kong or Mumbai, labor and maintenance costs are low, property taxes are zero, so your residence can essentially last forever with no annual costs. Generations of unemployed old money families have achieved this. In Europe and Latin America, single family houses can be passed down for hundreds of years, because of sustainable masonry construction (plaster, stone, brick). But in the States, multimillion dollar homes are seen to have dilapidated and thus razed every thirty years. A depreciating asset is a bad investment. The Northeast, the Midwest, Canada, and Australia are among the minority of geographies around the globe that openly favor wood-framed construction. The wood eventually gives in to the stress of humidity and natural disasters. After Hurricane Sandy and some additional consideration, I set out on an experiment to build a home for my family in Greenwich, CT using a modern version of masonry construction called Insulating Concrete Form (ICF).
If you want the low-calorie pie crust, you might choose the one that is gluten-free even if you don’t care about gluten. If you want sustainable construction, talk to the community that is obsessed with energy efficiency, even if energy savings are your second priority.
ICF construction is extremely energy efficient. Houses are made of thick polystyrene blocks, notched with steel inside, and then concrete is poured into their interior hollow space. This creates a monolithic steel-reinforced bunker with 2-3 inches of solid, gap-free polystyrene sheathing on either side. Along with the help of local and out-of-state expertise, I GC-ed the first major ICF residential project in Fairfield County.
What does your typical day look like and how do you make it productive?
Insulating Concrete Form (ICF) construction is an energy efficient and durable form of masonry construction used in residential and light commercial structures (small office buildings). Notched 1 ½ – 4-inch-thick polystyrene blocks are stacked on top of one another such that their hollow interiors line up to form a large vertical cavity that spans the entire sidewall of a home or building. As they are stacked, steel reinforcement (rebar) is fastened inside the blocks to preformed slots, as would be the case with a standard steel-reinforced masonry wall. Finally, concrete is poured into the foam cavity from the top and agitated. The walls are braced from the side so the heavy concrete fill doesn’t bend or topple the foam blocks. Traffic can slow down the concrete trucks as they make it to the job site. Two checks are done when the trucks arrive.
First, check the timestamp on the truck and make sure it has not exceeded 90 minutes from the departure site. If it has, then turn it away, for fear the concrete may have hardened, causing brittle areas and cracks. Second, check the additive menu. This page will show which concrete additives that were originally elected are actually present in the mix. Additives can allow for flexibility in the water to cement ratio, create internal crystalline waterproofing of the substrate, made it suitable for winter pours, and achieve a whole host of other desired effects. When the concrete is dry, a monolithic building has been created. The building has no insulation gaps, is vapor impermeable, fire resistant, waterproof, and hurricane-proof.
How do you bring ideas to life?
Just about any design an architect can imagine can be done with ICF construction. There are some aesthetic features such as balconies, cupolas, bump-outs, dormers, domes, and curvatures that are easier accomplished with wood. There are also structural approvals, such as joinery from interior wood to ICF, minimum bracing requirements for safety during construction, or load-bearing steel in below grade walls that sit against wet soil. Building code regulators care about legal liability, and tend to close their eyes when any proposal is signed by an engineer. That transfers the liability away from the building department and into the lap of the engineering firm. To bring the project to life you need an ICF team that has three skills: ICF framing, wood framing, and structural engineering. If all three of these tradesmen are on the same team, it makes life easy in terms of getting the final structure approved and coordinated. It may be necessary to bring in a remotely located team (out of state) and pay for their boarding during the few months that it takes to build the structure. In that case, a local structural engineer will have to sign off on the same documents produced by the out-of-state engineer. All of these costs are well worth the peace of mind of being able to draw a design and have it placed into the ground without the friction of coordinating multiple parties or translating a new technology to regulators.
What’s one trend that really excites you?
Sustainable construction has macroeconomic impacts that have not yet been widely discussed. Surely it will create financial value for the individual owner, but what about the housing industry? If wood-framed housing stock were replaced by ICF construction, the number of viable teardown and rebuild projects would decrease over time. The gap in value between newer homes and older homes would narrow, and soon enough, real estate brokers would have to adjust the way they value homes. Catastrophe insurance costs would decrease, because ICF homes are hurricane-proof and fire resistant. The price of concrete would likely increase, and the price of lumber would decrease. I wouldn’t invest in foam block manufacturers, because there are plenty of them, and the barriers to entry are small. Nudura is probably one of the best, because the blocks fold down for easy transport, and furring strips per square foot are plentiful. Carpenters would undergo training in concrete masonry techniques, and plastic furring strips embedded into foam would become the new 2×4 stud. Electricity prices and natural gas prices would be impacted due to the energy efficiency. Manufacturers of coated, treated, and stranded window bucks for raw masonry openings, such as PreBuck, would enjoy a rise in demand for their products. Larger windows and higher ceilings would become prevalent. I’m sure I missed some points, but a scale increase in market share for ICF residential construction would represent the largest shift in residential housing since central air.
What is one habit of yours that makes you more productive as an entrepreneur?
The people surrounding an entrepreneur make or break the success of any business plan. It’s the same in ICF construction. When you find a subcontractor, who is uniquely qualified, fairly priced, hard-working, and ethical, don’t let him go. Give him additional work and even assignments slightly outside of his core area of expertise. He will figure it out. Ask him for referrals, as they are likely prescreened for the same personality characteristics you admire in him. Never go with the cheapest proposal. Is the old adage true that you get what you pay for? For the most expensive of five bids, you don’t get what you pay for. For the cheapest of five bids, you do get what you pay for. That’s my general rule of thumb. At last resort, hire him on a per hour basis to be an advisor or construction manager/consultant. His brainpower will save you money in the end and is therefore money well spent.
What was the worst job you ever had and what did you learn from it?
Site preparation is the worst part of construction – if and only if – you are building in a finicky neighborhood with tight planning and zoning regulations and on a difficult plot. By contrast, when Toll Brothers puts down one hundred boxes in the middle of Nevada, site prep is simple and cost efficient. But a job site in a tightly neighbored, heavily manicured, historic neighborhood is more difficult. A job site can be thought of as a golf course. Par is based on the number of obstacles, traps, turns, slopes, and waterways. I’m a numbers guy, so the mathematical calculations to get zoning approval are not so bad. Do it yourself first before you hire a surveyor. But the flowchart is as follows. Check the site plan for buildable square feet (FAR ratio), variance requirements, setbacks, easements, wetlands, wetland buffer zones, and aesthetic layout. Then perform a boring analysis and test pit analysis using a civil engineering firm. This will tell you how deep the water table is, and how deep the virgin soil is. You want virgin soil for foundation stability, and you want to be above the water table (the highest water level that existed over 10,000 years is called the “mottling”). Ideally, you want high virgin soil and low water table. If you get the opposite result – high water table and low virgin soil – you may need to use expensive gravel fill to bridge the gap. The gravel is worth every penny to ensure your foundation and basement will be dry and never settle over time. Gravel rivals any modern technology in its natural ability to support a foundation while operating as a large storm drainage battery. Next, calculate the weighted average grade plane, and figure out how much soil backfill is required to achieve the desired grade. Retaining walls may be used. The dreaded drainage analysis is next. You should plan on installing underground Coltec chambers to collect runoff from the gutters, leaders, leader drains, footing drains, and exterior sump pump. A sump pump should not be necessary if foundation and rooftop drainage are planned properly. An interior sump pump is undesirable, because it penetrates the underslab waterproofing, thereby puncturing the “bathtub.” The Coltec chambers must be above the water table and below the topsoil by specified feet, so make sure the cross section of the site plan can accommodate. Hire an engineering firm to certify the drainage that believes in the following principle: you would rather spend money on more drainage equipment, than on more drainage analysis of proposed equipment. Finally, get a landscaping expert to put on the finishing touches.
If you were to start again, what would you do differently?
This is going to come as a shock. Many builders have used ICF basements with wood frame construction above grade. I used an ICF basement and a full ICF frame above grade. If I had to do it all over again, I would use a standard block basement (and ICF above grade). When you place the first layer of waterproofing on a basement foundation side wall, you are waterproofing the exterior surface of the side wall. Standard block is easier to waterproof than the polystyrene foam of ICF block, because the foam can get banged up. Tears in the foam from underground rock and debris will also tear up the waterproofing layer. One might mistakenly believe the polystyrene itself provides a layer of waterproofing. The ICF polystyrene is waterproof only above grade. Rainwater will drain down and not sideways through any cracks in the foam. Contact with the concrete via cracks will be temporary and non-absorbent. Wood sheathing behind ICF polystyrene, for example, would not be “waterproof” without additional coating, siding, or flashing. Back to the point, ICF foam in submerged water below grade is not waterproof, because contact with concrete is of long duration. ICF waterproofing is enhanced by adhering another layer of foam on top of the waterproofing layer (as it dries and hardens) as backfill protection, and then a hard HDPE drainage board (dimple board) on top of that for debris deflection and further downward drainage. The objective of below grade waterproofing of ICF is to attempt to recreate an above grade environment.
As an entrepreneur, what is the one thing you do over and over and recommend everyone else do?
If you can afford it, use stranded lumber for your interior framing. Stranded lumber (LVLs and LSLs) carry heavy loads, are dimensionally stable, will not bow, hold fasteners well, create high ceilings and wide headers, and will last forever. Here’s a quick tip though: if you need pressure-treated stranded lumber for exterior applications, order in advance, because supply houses normally don’t stock it. It is also even more expensive, because it’s a special order. For window bucks, use stranded, treated, and coated lumber. This is an expensive material sold by a company called Prebuck. The results are amazing, because the windows will sit tight forever, without movement, air gaps, rotting, or chemical reaction.
What is one strategy that has helped you grow your business?
Believe it or not, many homeowners do not understand the concept of framing. I’ve heard comments like, “That house must be strong because it’s made of stone.” In reality, the heavy stone veneer is hanging off of dimensional light-framed lumber and constantly pulling at the fasteners, causing the wood to weaken and bow. Ironic? An understanding of framing methods used throughout the world and throughout history will create the “aha” moment, causing homeowners to long for something superior behind their visible walls. Educating them on framing technology is important.
What is one failure you had as an entrepreneur, and how did you overcome it?
General contractors make the same psychological mistakes as stock market investors. They brag to their friends (and to themselves) about project details that came in below cost, bottle up and dwell on project details in which they were swindled. That behavior is irrational, because it dwells on the past. The rational thing to do is to budget for an allowance for being swindled, and then focus on future areas where costs can be saved. This will serve to keep the contractor’s head clear, and pocketbook intact.
What is one business idea that you’re willing to give away to our readers?
When I received competing bids for the chimney framing, I was surprised. The chimney framing is the brick or cement block and mortar carcass of the chimney. Thick or thin natural or artificial stone veneer, or even stucco, is then adhered to the frame for aesthetic appeal. But the chimney framing bids came in at $45 per vertical square foot. That could be over $50,000 for a large chimney – just for the frame. I asked myself, why not use ICF construction for the chimney frame? It would come in at the same cost as the sidewall, say $15 per vertical sf. That’s one third of the cost. It would be monolithically connected to the side wall, because the top pour would be simultaneous. It would, therefore, be far stronger than a typical chimney. The interior foam combustibility doesn’t matter much, given that a chimney flue would still line the interior with flashing over its fireplace top connection. That’s assuming that you’re using a wood burning fireplace and not a modern zero clearance natural gas firebox. I proceeded in constructing the first ICF chimney in America (or so I’m told) for residential application. How does one adhere stone veneer to the polystyrene exterior? It’s easy if you use the furring strips (fastening strips) prefabricated and embedded within the ICF blocks to create galvanized steel shelving. Place the veneer and mortar on the shelving. After the mortar has dried, and assuming a thick base block and slight inward pitch has been utilized by a skilled stone mason, the potential corrosion of the galvanized steel would be irrelevant. The stone veneer would be self-sustaining, and the ICF chimney would be maintenance-free forever. Finish with copper flashing, cap, and finials.
What is the best $100 you recently spent? What and why?
The cost of ICF construction is approximately $15 per vertical square foot, measured as sidewall area, inclusive of the subcontractor’s profit margin. That equates to about $75,000 or $25/sf for a 3,000 sf two story home, not including foundation. Throwing in the 5-10% additional material that is wasted, the cost is about on par with standard dimensional wood-framed lumber, or maybe 10%+ more expensive, but far cheaper than stranded lumber for exterior framing. Including the insulation that must still be added to make wood framing comparable, and especially if using open or closed-cell spray foam insulation as opposed to fiberglass batt, the cost is on par. But for high-end homes on expensive land, the equation changes dramatically. Because labor is the majority of the framing cost, and because ICF construction lasts forever, the labor savings over a 100-year time span in maintenance, replacement, or teardown and rebuild are enormous. The ICF framing is far cheaper over a longer time horizon. As a side note, stranded lumber can be twice as expensive as standard dimensional lumber or ICF.
What is the one book that you recommend our community should read and why?
The Concrete House: Building Solid, Safe & Efficient with Insulating Concrete Forms by Pieter A. VanderWerf is a great book. It focuses on durability as well as energy efficiency, explores a lot of concepts in Q&A form, has excellent diagrams, and showpieces marvel projects in both traditional and modern genres of architecture.
Jayen Madia on LinkedIn: https://www.linkedin.com/in/jayenmadia/