The Autovol Solution

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9 min read

Volumetric-Modular Automation Saves Time and Money

“I’ve been developing in the Bay Area for quite some time. It got to the point where the costs were so high that building became very difficult. I’ve worked with modular construction for about 15 years, but there is a limited number of modular suppliers in the West. So, I knew I had to do something myself.”

The speaker is Caleb Roope, CEO and president of The Pacific Companies of Eagle, ID, which, since 1998, has completed more than 160 multifamily and charter school projects in the western states, with a special focus on California. And this, in a nutshell, is the origin story behind Autovol, the first automated volumetric modular plant of its kind.

Volumetric-Modular-Automated
What does that string of technical terms actually mean? As the Autovol website explains, “volumetric indicates high-volume, multi-unit housing complexes as opposed to single family homes. Modular means that apartments, hotel rooms and other units we build are built in a factory as individual modules, complete with all wiring, plumbing and final fixtures before they ship from factory to building site. Automated means this factory, unlike other volumetric modular factories, will use advanced robotics somewhat similar to those seen in modern car factories.” For the one industry that has not changed its hand-built construction techniques in more than a century, this has the potential to be a game changer.

“The Pacific Companies really exist to address a crisis that certainly is emerging more frequently in the last ten years, and that’s the supply of affordable housing for the working class,” Roope says. “When I started using modular construction, I was faced with the limited building season and the labor shortage in the early 2000s. I was fortunate enough to be here in Boise and developed a relationship with a builder here locally who introduced me to the concept of modular construction, and I took a chance on it. I was kind of faced then with the problem I face now, which is a lack of labor and execution strength to build these housing projects.

“The potential I see for automated volumetric in the affordable housing space is one of a complete reset of both the cost of developing these buildings, as well as the time to build them; something that’s so critical when you’re dealing with the limited supply of government funding to support these developments, when you’re dealing with a crisis situation like we are seeing in many metro markets in the West, especially California.

You can deliver these buildings 30 percent faster and you can build them for a cost that’s 30 percent less and save those government subsidies or make projects feasible that weren’t before. It’s a tremendous advantage to affordable housing.”

Roope’s co-founders are CEO Rick Murdock, whose modular factories Roope employed, and chief technology officer Curtis Fletcher, cofounder of Prefab Logic modular construction consultants. “I contacted Caleb and asked for a meeting in his office. He agreed,” Murdock recalls. “I talked to him and gave him a vision of what I’d like to do with an automated manufacturing plant and it just so happened that he had wanted to do something similar but didn’t have the human capital to do it, nor did he understand manufacturing that well. So it was really just a good meeting in which we discussed how we could help each other, the company we could grow, the benefits that could come out of that company, and, also, that we could start something new that wasn’t in the U.S. market. We had an agreement by the time we left his office.”

“Through Caleb’s great work and influence in the community we were able to put together quite a deal for the Autovol factory,” Fletcher adds.

The 400,000-square-foot factory, located on 52 acres, currently has 90 workers, but will be staffed by a team of about 350 in a wide variety of functions when it is fully up and running. It is located in Nampa, ID, close to Eagle and Boise. Its trademarked slogan is “Making Smart Construction Brilliant.”

“We’ve invested $30 million, we have $50 million in equity from 108 investors and $54 million in debt from banks,” Roope notes. “We’ve received substantial investment from Idaho in the form of tax rebates for payroll, income and sales taxes. The factory was completed in November 2019; from concept to completion inside of two years. That even impressed me.

“Automating robotics to build walls is still in development. We hope to begin with floors and ceilings in September. Fortunately, Covid-19 has not derailed the timeline significantly; maybe by a month. We’ve already achieved a break-even point and expect to be profitable this year. When we’re up and running we should be able to complete eight modules during a shift. I think we’ll achieve that some time toward the end of 2021. At full capacity, we will be able to produce 2,000 modules in any given year and are hoping for $150 million in revenues.

“There are some constraints,” Roope points out. To be cost effective, you can’t go outside a 15- by 74-foot width and length for shipping considerations. But we’re learning the grammar of the new techniques.”

Boxes Out of the Box
The first project to emerge from Autovol will be Virginia Street Studios, a 301-unit affordable senior studio apartment project in San Jose, CA, south of San Francisco, in one of the most expensive real estate markets in the country. The Pacific Companies are partnering with USA Properties Fund, Inc. of Roseville, CA. The project is utilizing four percent Low Income Housing Tax Credits and tax-exempt bonds. Gap financing is private debt raised in a secondary position between California Bank & Trust and Deutsche Bank. CREA provided the equity investment.

“I’ve known Caleb really well for 12 years. We’ve done four projects together, worked on industry policy issues together, and I think the world of him,” states Geoff Brown, USA’s president and CEO. “I’ve admired Caleb for being very innovative, but we’d never done a modular deal. But in the last five years, there’s been a serious rise in construction costs. In some places, they’ve almost doubled. A big part of that is that in the 2008 recession, a lot of people left the business; a lot of contractors left. We knew that when the industry came back, we weren’t going to have enough capacity. The cutback in immigration has contributed to this vacuum. High schools don’t offer technical courses like they used to, and more people are retiring from the industry than going in. We’ve been worrying about the labor shortage for a while. The whole modular movement morphed out of this.

“Two or three years ago, Caleb came to me and said, ‘I’m working on this deal.’ He proceeded to get the land tied up, he had an investor prospectus and asked, was I willing to invest in this factory. Part of the motivation was it was not just for Pacific’s customers, but others are not going to invest if they don’t think they can use it. So, my motivation was not just to make a passive investment, but also consider it a real R&D expense. That’s when we decided to partner with him on this modular deal.”

Virginia Studios, at 295 East Virginia Street, near the corner of South Seventh Street, will be a five-story structure with underground parking and community room, reading room and fitness facility, aimed at seniors earning up to 60 percent of area median income (AMI) for Santa Clara County. It is about a mile away from the city’s downtown, in an area that is seeing a burst of development activity. Food, cultural and transportation resources are nearby.

“It is very challenging,” says Roope. “We spent years on cleanup because the property was owned by a gas company. We received no financial support from the city. But modular saves us about $100 a foot over conventional construction.” Site work has commenced, and it is expected that the first modules will be set on the concrete deck in October.

“It’s a fairly high-density project,” Brown notes. “In the Bay Area, with rents as high as they are, we thought studios were the way to go so tenants won’t have to pay as much for a one-bedroom. We wanted to deepen the market in studios so more people can afford them. I like this deal because of the location, and it’s a project we can replicate. I’ve seen enough in the factory to know it’s amazing the way they produce the entire finished unit, even carpeting.”

Each apartment module will be shipped from the factory complete with paint, cabinets, countertops, flooring, appliances, doors, windows, finish hardware and insulation. Among the cited advantages of modular are the abilities to: reduce construction costs; compress construction schedules; improve quality and worker safety; build in difficult climates; address labor shortages; lessen prevailing wage costs; reduce neighborhood impact and reduce municipal inspection burdens.

“It will not replace stick-built construction,” Brown says, “but it will fill a vacuum and be an important supplement. I wouldn’t do it if I didn’t hope this would be an ongoing part of our portfolio. It’s very important going forward for our industry and it’s certainly going to work well in the Bay Area.”

“It’s definitely a big bet, but at the same time, I understand the business model and what I can do,” Roope says. “We need an inventory of projects to help developers see that this is something good to do. The California Governor’s office is very interested, but others need to see successful efforts; to see it work. We need a solid book of business to justify the factory.”

Roope has become an evangelist for volumetric modular fabrication. “Our intention is for the factory to service other developers. One of my jobs is to really help educate architects, developers and contractors to have good experiences with modular. I want other developers and companies to be successful in this, and I’m willing to help them do it. We need input from the entire industry for it to work.”

Story Contacts:
Geoffrey C. Brown, g[email protected]
Caleb Roope, [email protected]