Vallejo’s Factory_OS gets $55M in new funding to increase production of affordable apartments, build housing research center

A large-scale producer of modular multifamily housing from Vallejo on Friday announced a $55 million injection of equity funding from Bay Area technology and global banking giants that’s already allowed Factory_OS to significantly expand output.

And another goal of the new funding is to create on Mare Island a center for research on faster, less-expensive construction of affordable housing to address what’s becoming a crisis where workers in a number of Bay Area communities don’t make enough to live near their jobs.

This series B round was led by Lafayette Square and includes Autodesk, Citi, Facebook, Google and Morgan Stanley. It rolls in $17 million in loans from San Rafael-based Autodesk and Silicon Valley-based Google received in July to allow the factory expansion to open in September, co-founder and CEO Rick Holliday told the Business Journal. That expansion included a 125,000-square-foot second production building and the hiring of 100 more workers.

Autodesk also kicked in additional money for this funding round, according to spokeswoman Stacy Doyle.

Factory_OS said the new funds will help it expand to Los Angeles and open a housing innovation center that will model technology and design advances as well as partner on research and education activities to spur industry adoption of housing innovations.

Cost reductions of 50% over the next year are expected via the partnership with Autodesk, whose design and manufacturing software enables further integration of the design, technology and construction processes. That cost savings doubles the amount of housing that Factory_OS can create with the same investment, the company said.

Construction of new offices in 25,000 square feet in the mezzanine above the new plant are projected to begin in three months as permits are secured, Holliday said. That will allow the company and partner offices to move off the production floor of the main building, freeing up room to work on the housing modules.

A 5,000-square-foot area will be created at the back of the main factory to accommodate a testing center for materials and robotic processes in conjunction with Autodesk, Holliday said.

With the new offices and factory upgrades complete, the company will move toward connecting the two plant buildings together, but that will require completing negotiations for additional space from Mare Island property owner The Nimitz Group, he said.

The company targets project cost savings of 20%–40% from conventional multifamily construction.

“With a shared vision of improving construction outcomes through technology, we’re excited to build on our original investment in Factory_OS to improve the home-building process, from design through fabrication and supply chain management,” said Andrew Anagnost, CEO of Autodesk, in the announcement. “Our two-way collaboration not only helps us improve our products, but also helps ensure more homes can be built faster, less expensively and more sustainably. Factory_OS is a 350,000-square-foot laboratory that enables us to continue proving innovations in construction.”

Lafayette Square Holding Company LLC was started this month in New York City by Damien Dwin, a Black businessman, philanthropist and “credit-impact investor,” according to his LinkedIn profile. The goal of Lafayette Square, he wrote, is to use debt financing to “materially impact under-realized housing, employment, and financial market inclusion opportunities.” Previously, he was as co-founder and co-CEO of Brightwood Capital Advisors from its founding in 2010 to last month.

“Our strategic partnership is a great first step in fundamentally changing the business of housing,” Dwin said in the announcement. “Looking at the industry from 360 degrees—from design and development, to financing and construction, to resident services and employment—is key to creating a sustainable model that elevates our communities.”

Factory_OS opened in the 250,000-square-foot former Blu Homes plant in Building 680 on Mare Island in early 2018. Since then, it has produced nearly 1,000 modular apartments for supportive, affordable, student and market-rate housing projects in San Francisco, Oakland, the Peninsula and Lake Tahoe area.

Factory_OS has received $77.7 million two funding rounds so far. In mid-2019, design software maker Autodesk and Citi had contributed to a combined $22.7 million series A round.

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.

This story has been updated with additional comments from Rick Holliday and Autodesk spokeswoman Stacy Doyle.