WeWork's initial public offering (IPO) flameout arguably owns the title for SoftBank's most famous failure, but this year's announcement that modular construction company Katerra filed for Chapter 11 bankruptcy might run a close second.
Chapter 11 isn't necessarily the end of a company, but it's not good news for a proptech unicorn that raised over $1.6 billion in venture capital and was headed for its own IPO. But while Katerra's dream of creating factory-built homes at scale in the U.S. may be dead, its factories may live on.
A new start
Volumetric Building Companies (VBC) will purchase Katerra's facility in Tracy, California, for $21.25 million. The 577,000 square foot factory was designed to pump out pre-built components such as wall panels and floor systems. The property includes 50,000 square feet of showrooms and office space.
VBC isn't just buying the space -- it plans to pick up where Katerra left off. The company will start with windows, cabinetry, countertops, and other components within the next several months, and its goal will be to produce modular housing in 2022.
VBC has also extended an invitation to Katerra's former employees in the Tracy area to apply for jobs at the factory. VBC hasn't announced that it is picking up any of Katerra's contracts, but in a press release, CEO Vaughn Buckley did say that they are looking to address the needs of Katerra's customers.
VBC is a private company based in Philadelphia. Originally founded in 2009 as Vaughn Buckley Construction, it specializes in building modular townhouses, triplexes, and apartments.
In July, it announced the creation of the VBC Giving Foundation and the construction of a 47-unit permanent housing community for veterans in Northeast Philadelphia's Frankford neighborhood. The project is slated for early 2022 completion, and the company has pledged to build one similar project each year.
Capitalizing on the cross-laminated timber (CLT) boom
The Tracy, California, factory isn't the only Katerra asset that has found a new home. A subsidiary of Mercer International will buy Katerra's cross-laminated timber (CLT) factory in Spokane, Washington. Mercer International is based in Vancouver, British Columbia, and its core business is wood pulp and lumber.
The 270,000 square foot factory is on 54 acres and has one of the largest CLT presses in the world. CLT is made by sandwiching adhesive and wood panels together. The end result is strong, highly durable, and fire-resistant. CLT has found favor in Europe, where it has been used to construct attractive buildings.
The adoption of CLT is less widespread in the U.S. Still, a variety of high-profile projects have adopted it in recent years, and the sustainability factor makes it an increasingly popular choice.
Mercer has also hired nine former Katerra employees and will focus on being a provider of CLT rather than a developer of finished products. The company plans to step up hiring as it aims for a November opening.
The Millionacres bottom line
The quick sales of Katerra's factories show that while Katerra the company may have floundered, the principles underlying its business are still solid. There's plenty of future value to be extracted from streamlining and updating the construction process, and we are still in the early days of modern modular.