A SoftBank-backed real estate startup with a broad vision has reportedly backed out of several deals this year — but its name isn’t WeWork.
Katerra, a Menlo Park-based prefab construction startup valued at over $4B, has stopped work on at least six projects this year, according to The Information, and is raising eyebrows among CRE sources Bisnow spoke to recently.
Consistent with the other startups in SoftBank’s Vision Fund, Katerra has received hundreds of millions of dollars in funding from its Japanese multinational backer based on its ambitious, tech-driven value proposition.
Courtesy of Katerra
Katerra has reportedly had to back out of several construction deals this year
Katerra shares some of SoftBank’s disruptive DNA: The Silicon Valley company says it can transform the global construction industry through its off-site building and management of most of the building process, from design to construction.
“Given how much money they raised, I wanted to make this bet on them,” Cameron Lamming, an executive at property developer RAR Hospitality, told The Information about a failed deal RAR did with Katerra. Lamming said RAR had to find a new contractor mid-project after Katerra’s team kept extending the timeline, and then eventually pulled out all together.
“It’s a good pitch. They didn’t deliver on any of it,” Lamming said. “It was a nightmare.”
Bisnow sources, too, said the startup’s attempt to transform the building process from A to Z has yet to manifest. To a couple of developers that Bisnow spoke with on the condition of anonymity, Katerra’s dearth of work in its home region is puzzling.
“I do think that it’s a little bizarre they haven’t gotten one down in [the Bay Area],” said one developer who met with Katerra in late 2016. “This is ground zero for the places that need prefab.”
SoftBank and its leader Masayoshi Son have been under intense scrutiny over the last few years for their hard-charging investments in now-struggling startups Uber and WeWork. Their interest in Katerra has shown similar zeal: By the end of 2019, Katerra will have completed 26 projects and 950 prefab units in the U.S. across six locations, from Spokane, Washington to Austin, Texas, the company told Bisnow.
It also has plenty of work in India and Saudi Arabia, having won a contract to build 4,100 homes in the latter country.
The company is underway on a project in the Bay Area, a 97-unit apartment building in Hayward. But that project and a 120-unit property recently completed in Santa Rosa amount to the startup’s Bay Area footprint.
Projects in Sunnyvale and Dublin, California, both fell through due to cost issues, according to The Information.
“They raised a lot of money, but where are their projects?” another developer, who does prefab work in the Bay Area but hasn’t worked with Katerra, asked Bisnow.
As part of its quest to vertically integrate, Katerra has acquired a number of companies over the last two years, including two traditional construction companies and architecture firms. It also recently opened a mass timber factory in Spokane, Washington.
“It seems to me they’re doing everything at once,” said the developer who met with Katerra. “One of my colleagues described it by saying they’re trying to boil the ocean.”
Katerra declined to comment on whether it was in litigation over deals that have fallen apart, or expand on recent reports that it had overpromised on now-defunct projects.
“It is common for construction deals to pause or stop for a myriad of different reasons,” Katerra spokesperson JZ Rigney told Bisnow in a statement. “The changes we have made are a sign of a healthy, but evolving and fast-growing firm. The vision of our company remains unchanged.”
SoftBank did not respond to request for comment by press time.
Since its founding in 2015, Katerra has endured flux in its C-suite. The company is now led by its third CEO, Michael Marks, the former CEO of electronics company Flextronics, and is also on its third chief financial officer, according to The Real Deal.
Clues to the temperature inside the company have also emerged. One recent commenter on career website Glassdoor wrote that while the environment was decent, “literally no one knows what they are doing.”
Another commenter, who said they had been working at Katerra for a year, echoed that, saying, “Great potential, easy, fun, and the right values in a company. There are a lot of great things in motion, things that can really make a difference … a lot of ‘trying to run before crawling’ issues, again typical for a start up.”
Their advice for management? “Hire more people, and actually leave decisions up to employees instead of trying to micro manage. And hold people to more accountability. And more transparency in lateral positions.”
No comments:
Post a Comment