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Vallejo’s Factory_OS gets $17M from Google, Autodesk to build thousands of affordable apartments

About two years after it opened its cavernous plant on Vallejo’s Mare Island, Factory_OS has expanded its production facilities by 50% and workforce by 25%, fueled by new funding to turn out orders for thousands of modular apartments.

At midyear, the 5-year-old startup factory residential unit builder received $17 million from Silicon Valley-based Google and Autodesk, according to CEO and co-founder Rick Holliday. In an earlier round in mid-2019, the San Rafael-based design software maker and global bank Citi had contributed to a combined $22.7 million round of funding.

“We’ve gone from a brand new startup to functional and now from functional to stable,” Holliday said. Revenue is on track to end this year with $80 million in revenue and is projecting $150 million next year. The company received a $40 million deposit for six projects to be built in 2021–2022.

With the second round of capital, Factory_OS hired 100 workers and in September started operating in a 125,000-square-foot former shipbuilding facility at 1275 Nimitz Ave., located a block behind its existing 250,000-square-foot plant in Building 680.

And in the next six months, the company plans to add robotics, unveil three new funders and roll out plans for a multibuilding housing research, development and production campus connecting the two facilities.

“We’re doubling down on Mare Island,” Holliday said. “Demand for what we’re doing is increasing.”

Faster, less-expensive homebuilding

Factory_OS produces multifamily housing in modules that can be trucked to the job site and hoisted into place like Lego blocks. Housing per module can range from 300-square-foot microstudios to 1,000 two-bedroom units, but larger units can be created with multiple modules. Average unit sizes built so far have been 400 square feet for studios, 600 for one-bedroom flats and 800 for two bedrooms.

The “OS” in the company name is said to refer to both “operating system” for the high-technology approach to housing construction and to “off site” for factory-based homebuilding.

By framing, plumbing, wiring, insulating, wallboarding, painting and finishing the units in the factory, the company said it currently can cut 25%–30% off the cost of constructing the dwellings at the project location, which can be $700,000–$800,000 a unit in downtown San Francisco and Oakland.

Other touted benefits for factory homebuilding are 40% faster project completion and 70% reduction in materials waste.

In two or three years after automation is added and other efficiencies are realized, the company’s goal is to achieve savings of 60%–70%, Holliday said.

Its long-term strategy involves turning out tens of thousands of affordable-housing units this decade. With the two factories fully running within two months, the company expects output to be 2,000 modules annually, each module containing an average of 1.5 housing units.

Building houses the way cars are

Working with Autodesk and getting input from housing factories around the world, Factory_OS has set up production to approximate an automobile plant.

Lumber is pre-cut to needed lengths, and subassemblies of walls and floors are prepared in the wings of the factory buildings, while the modules are assembled as they move down the length of the towering center aisle, the way submarines did in Mare Island’s days as a naval shipyard.

“The advantage of building a house like a car is you can do a lot of things at the same time,” Holliday said.

And these tasks can be completed without the job-site limitations of daylight and the elements.

Using a blend of Autodesk’s BIM 360 building information modeling software and proprietary code, Factory_OS compiles data and images of how each housing module, or box, is built as it moves through the facility. That way, construction crews and maintenance crews can scan a QR code stamped on each box to pull up as-built plans and pictures of what the inside of walls look like, to help with later jobs such as installing seismic bracing or stopping leaks.

Several projects under construction

The company has produced over 1,000 units already and has several projects in production, including affordable housing around the Bay Area and employee housing for Google.

Completed modules for these projects have been accumulating on Mare Island, awaiting their turn to ride to the job site for assembly.

One project finished recently is the 110-unit The Union in Oakland. Though the initial assembly of modules happened in just 10 days, the timeframe for completion was pushed back four months because of limited availability of city building inspectors during the coronavirus pandemic, Holliday said. As a builder of affordable housing, Factory_OS is deemed an “essential” business and has been allowed to operate with worker-health precautions.

And as a modular-housing builder, state law allows the company to base a building inspector in the factory. That allows over two-thirds of a project’s needed inspections to happen off site, Holliday said.

In the Lake Tahoe area, the 76-unit Truckee Artists’ Lofts below-market-rate project is set to be done by year-end.

Construction started this summer on 106 units for Maceo May Apartments, a Treasure Island project for veterans.

In San Francisco, the first of 100 modules built for 146 microstudios started snaking through the city streets in the pre-dawn hours of Oct. 19. To avoid snarling traffic as the boxes move to the 833 Bryant St. site and are lifted from trucks then stacked and fastened into position, the schedule for delivery is eight modules a night.

In early November, delivery of modules for the 156-unit Mayfair Apartments complex near the El Cerrito BART station are set to begin.

The 110-unit West Oakland Phoenix project, housing the formerly homeless and with adjacent social services, recently received a city green light.

And early next year, modules now being built in the 1275 Nimitz factory are planned to be delivered for Google’s planned 250 employee apartments near its Mountain View headquarters.

Last year, Google pledged to give $1 billion toward solving the shortage of housing in the Bay Area, one-quarter to fund housing and three-quarters in land donations. According to Fast Company, the tech giant already has allocated to affordable housing $115 million of the $250 million investment fund created from that pledge, and Factory_OS was one of the recipients. The philanthropic arm of Google expects around 24,000 new affordable housing units will be built over the next decade, up from 5,000 units through modular construction.

In Factory_OS’s back yard, the city of Vallejo has entered into exclusive negotiations with the company for construction of a mixed-use project along the waterfront, according to city spokeswoman Christina Lee. It would have 150 housing units on top of a new parking garage with first-floor shops around the perimeter.

Proving ground for homebuilding technology

Factory_OS’s new facility also is where it will be testing and implementing robotics first. The 100,000-square-foot factory floor is being leveled, and production jigs are being built. Based on input from other factory homebuilders about automation with the best return on investment, the company plans to install in the next six months a TigerStop computer-controlled saw, which will turn out pre-cut lumber based on the digital designs, speeding the work of plant assemblers.

“We plan to run the factory with a lot of human horsepower and, enhanced with technology, to be more efficient,” Holliday said. Innovations perfected in the new facility will be added to the main factory over time.

Autodesk said the second investment in Factory_OS is helping the software company too.

“Most importantly, Factory_OS is helping us improve our products to support these workflows for ALL customers, so the benefits will be spread throughout the industry and will advance prefabrication and digitization practices,” wrote Jim Lynch, vice president and general manager of Autodesk’s Construction Business Unit, in a company blog post about the second round of funding. “This work also allows us to learn how to reskill workers as the industry continues to evolve through technological innovation and machining.”

Jobs for the newly reskilled

The contract between Factory_OS and the Carpenters Union Local 180 to supply workers has grown from 60 employees when the plant opened in early 2018 to around 500 today. Many of the workers were unemployed or working minimum-wage jobs before this. The union provides health, retirement, holiday and vacation leave, and other benefits.

Seismic retrofits on roughly 25,000 square feet of office space above the 1275 Nimitz factory are being prepared for office space, allowing modular offices for design, operations and inspection staff now on the floor of the main factory building to be removed to free up production space.

Factory_OS is negotiating with Southern Land Co., master redeveloper of much of Mare Island for property owner The Nimitz Group, to secure the currently unoccupied property between Building 680 and 1275 Nimitz. If secured, the vision is to raze the current metal buildings and construct two new ones to for housing research facilities, with a breezeway in between.

“The factory is a working business and is also a laboratory,” Holliday said.

This video from Autodesk’s multimedia magazine Redshift shows how Factory_OS has been expanding production while implementing COVID-19 safety protocols:

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

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