Over three months after the company’s abrupt Chapter 11 bankruptcy declaration and closure of operations, former construction tech startup Katerra is still dealing with new legal issues and financial claims.
A claim by concrete and aggregates provider Eastern Concrete Materials, Inc. provided another reminder that the company had yet to shake off the trouble stemming from its closed projects, as the company’s $170,811.11 lien claim — which dates back to 2019 — was recently removed to federal court on September 3, 2021.
The New Jersey-based company noted that it supplied ready mix concrete and aggregates for the Montclair, New Jersey construction of a multi-story building for which Katerra was serving as general contractor, but has failed to receive payment in the years since. In response, Katerra and subcontractor E&N Construction Incorporated both have responded in court to deny the extent to which each one is responsible for the non-payment.
The removal action instigated by Eastern Concrete alleges that “E&N breached its agreement to hold Katerra harmless from the lien filed by Eastern Concrete,” while noting that on August 9, 2021, E&N filed a Proof of Claim against Katerra which included $417,225.29 due and owing from Katerra to E&N on the Project.
Since Katerra’s abrupt June 6, 2021, shutdown announcement, the company has worked to sell assets and gain relief from its liabilities. At the time of its closure, Katerra stated that its bankruptcy was caused by “the macroeconomic effects of the COVID-19 pandemic on the construction industry, inability to procure bonding for construction projects following the unexpected insolvency proceedings of Katerra’s former lender, and unsuccessful attempts to secure additional capital and business.”
Prior Levelset reporting noted that before its closure, the company saw significant debt — owing close to $74 million at the time of its Chapter 11 filing — and had notable legal issues, as well. A 2020 fraud investigation by the US Securities and Exchange Commission led to the ousting of then-CEO Michael Marks, and the company additionally dealt with 26 inspections or complaints to the Occupational Safety and Health Administration (OSHA) since the start of 2020.
Other companies are eager to take over Katerra’s assets — while its folding hasn’t discouraged industry investment in tech
Despite the collapse of such a high-profile company as Katerra, it doesn’t seem that the construction tech industry is slowing down any time soon — and other companies are eager to take advantage of Katerra’s misfortune.
Fortune’s Lucinda Shen noted that construction tech investment has been booming recently, with millions in recent investments coming in the months following Katerra’s bankruptcy. On August 24, 2021, “ICON Technology, an Austin-based startup using 3D printing in construction, raised $207 million in Series B funding led by Norwest Ventures. Others in the round included 8VC, BIG-Bjarke Ingels Group, BOND, Citi, Crosstimbers, Ensemble, Fifth Wall, LENx, Moderne Ventures, and Oakhouse Partners.”
“The round comes a few months after another 3D-printed home startup, Mighty Buildings, raised $40 million in Series B funding,” Shen added, “and a handful of companies building housing in backyards like Abodu have also attracted millions.”
A number of businesses that are working in the areas that Katerra helped popularize are also benefiting from the company’s absence in the market. Canada-based Mercer International Inc. purchased Katerra’s former “state of the art” cross-laminated timber plant in August 2021 for $50 million, seeking to move into the market that Katerra vacated — one which specifically has grown in popularity in the United States due to the material’s low carbon footprint and ease of installation.
“Mercer is very pleased with the acquisition,” Mercer International CEO David Gandossi said. “It’s a well-invested facility and I’m sure it will be successful in time. [Cross-laminated timber] is an exciting product that’s really starting to take off…We have a chance to be a big fish in a relatively small pond that’s growing very rapidly.”
Katerra had previously noted that the acquired facility is the “largest single-use [cross-laminated timber] facility in North America, producing 30% of the current North American mass timber manufacturing capacity – two times any comparable manufacturer.”
Though the purchase brings a major source of the material back to the country, it’s unclear whether any of the major projects affected by Katerra’s closure — which included dozens still active at the time of the company’s bankruptcy — would benefit at all from the factory’s return.
Similarly, Volumetric Building Companies announced in August 2021 that it was in the final stages of a $25 million acquisition of Katerra’s former headquarters in Tracy, California.
The purchase will allow the company — which focuses on the off-site building of prefabricated homes — to bring $60 million worth of manufacturing equipment back online in an effort to step into aspects of the market that Katerra worked in. One of Katerra’s main goals had been to streamline the construction process, with the company aiming to bring design, supply, and manufacturing into one business model and theoretically cut costs for real estate developers.
“We’re seeing this as an opportunity for us to service our fellow modular factories around the country whether that is within the [Modular Mobilization Coalition] network that we created or outside with lower lead time, higher quality, and more conducive to modular manufacturing,” said Vaughan Buckley, VBC’s chief executive officer.
Buckley noted that the company’s acquisition would help them greatly to get in front of some of the major supply issues plaguing manufacturers and contractors around the country and world during the pandemic. “We understand the needs of modular manufacturers around the country, and if we can get their windows down from a 23-week lead time to a three-week lead time while maintaining cost and quality, think of what that can do for our partners right now that are really struggling to get product out.”
Within its working in similar areas, the company is also hoping to learn from some of the issues that befell Katerra while supporting the facility’s workers that were formerly employed by Katerra. A significant number of Katerra employees lost their jobs with little to no support from the company after the closure.
“Our biggest push with this facility is righting the wrongs and [getting] to a place where we can take care of the employees that made a difference here,” Buckley said. “Katerra did an amazing job in opening people’s eyes to what was possible. Regardless of what you think about their execution or their business model, they were definitely ambitious, and they weren’t wrong in a lot of ways.”