Katerra, the modular prefabrication startup and timber innovator that acquired Michael Green Architecture (MGA) and Lord Aeck Sargent in 2018, is reportedly shutting down. According to internal communications obtained by The Information today, June 1, the company plans on letting its thousands of employees go and dropping its current construction projects. What’s more, it appears Katerra doesn’t have enough money in the bank to pay severance packages or unredeemed time off.
This all comes after Japanese conglomerate SoftBank heaped another $200 million onto Katerra at the start of 2021, giving it a majority stake in the company. (SoftBank previously invested $2 billion in the company.) At the time, AN reported that the move helped stave off bankruptcy as the COVID-19 pandemic hit the construction industry particularly hard.
The Information confirmed that Katerra’s shuttering is indeed a result of the pandemic; the closure of construction sites, combined with rising material and labor costs, drove the company even deeper into the red. That’s to say nothing of the several rounds of layoffs Katerra endured in 2020, when it slashed its workforce from over 8,500 employees worldwide to only 2,400.
Founded in 2015 by Michael Marks (pushed out by the board of directors last year), Katerra aimed to bring “the Silicon Valley approach to building,” by reducing reliance on skilled labor and automating the building process. In AN’s 2018 profile, Craig Curtis, one-time Chief Architect at Katerra, reiterated that the company’s aim was to show that mass fabrication didn’t have to mean a sea of endless copycat towers, but that every building didn’t need to stand alone as an architectural prototype, either. By vertically integrating every aspect of the supply chain and producing its own materials, then modules it would install on-site, Katerra was aiming to succeed where other modular builders have failed by keeping costs low. That led to the company establishing its own 250,000-square-foot mass timber factory in Spokane, Washington, as well as other facilities.
However, it was clear early on that the Menlo Park, California–based company couldn’t change the world on its own. At the start of 2018, Katerra merged with KEF Infra, an Indian company using automated construction to bring building costs down. More importantly, the move helped Katerra gain a foothold in India and the Middle East.
Michael Green, founder and principal of MGA, provided the following statement:
“MGA is healthy and busy and Natalie [Telewiak] and I remain in control of MGA as Directors. We will now assume 100% ownership and are finalizing details on that front. We had been preparing for possibilities and just continue on business as usual with our great clients, projects and team at MGA.
“This is sad for so many impacted and we feel for them all. We are grateful that MGA is solid and safe and excited about the diversity, meaning and impact of the work we are doing.”
Similarly, Joe Greco, AIA, LEED AP, president of Lord Aeck Sargent, was optimistic as well when reached for comment:
“Lord Aeck Sargent is in active negotiations to reemerge as an independent design firm, backed by our deep history of professional practice since the 1940s. We are excited about our new chapter and look forward to continuing our exceptional client service and responsive design work, long into the future.”
The closure of Katerra marks another stinging loss for SoftBank. In March, Greensill Capital, another of SoftBank’s Vision Fund–backed companies, declared bankruptcy and collapsed. And, with the release of the much-lauded WeWork documentary in April, it became clear how much mismanagement was going on behind the scenes at what was once a coworking juggernaut that touted SoftBank as its biggest backer. (Though to be fair, WeWork is still in operation).
AN has reached out to Katerra and other related parties for comment and will update this article accordingly.