March 27, 2008

Inside Third & Bond: Week 30

This week the Hudson Companies bloggers tackle the topic of piles and realize that, lo and behold, they are about 1/3 of the way to the finish line!

Thirty weeks, dear readers, that’s how long you’ve been tagging along on this real estate venture. Thirty weeks of decisions, problem-solving, and money paid out. And not even a nail for the new building is on site yet. Yes, this is the glamorous world of development. And speaking of glamour, this week we continue our discussion on piles—those long, thin columns that keep buildings where they are supposed to be, like toothpicks through canapés.

Last week, we went over the foundation design decision process and left you with the “what kind of pile?” cliffhanger – gasp! As you’ll remember, there are a lot of different pile types. They’re like sports teams or little black sweaters or Democrats. They might seem identical but are actually very, very different. There are different ways to get piles into the ground, different ways that they support the weight of the structure, and different amounts supportable by a given pile type. There are also different materials. Here we’ll try to give you some basics – sure to make you a favorite at happy hour...

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Categories: Gowanus, Third & Bond Blog

March 20, 2008

Inside Third & Bond: Week 29

Today, the Hudson Companies bloggers describe their efforts to get their foundation in before the 421-a deadline in June.

In building foundations, much like in people, there are two major categories: shallow and deep. Shallow foundations include slab on grade, spread footing, wall footing, and mat/raft foundations. Just imagine these as foundations that are poured concrete forming either a thick floor or thick walls and you’ll have the general idea. Deep foundations include piles and caissons. Here you can imagine a column of wood, concrete or steel that is driven into the ground and acts like stilts that go deep into the earth—that’s close enough for government blog work. Speaking of which (government), we have to get our piles going in order to meet the 421-a deadline of June 30, 2008 – and we have a ways yet to go.

Deciding what kind of foundation to use requires you know:
• Soil strength and stiffness
• Loads from the building (how heavy the stuff is pushing down on the ground)
• Neighboring conditions
• Foundation type best for all the above

Soil strength and stiffness: Some find borings boring but those people are fools. Understanding your soil is numero uno in knowing what kind of structure you can put on a site. Even if zoning permits you to build something, the soil has final say on whether it can be done (and for how much money and headache). Borings are taken by machines like the one pictured here.
They bore 100’or so into the earth and pull out long cylinders from which samples are taken at 5’ intervals. The sample depth is carefully recorded for each. The samples are then taken to a lab to be characterized: sandy, fill, gravel, peat, glacial rock, medium-bodied with hint of cherry and leather, etc.

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Categories: Gowanus, Third & Bond Blog

March 13, 2008

Inside Third & Bond: Week 28

What is reputedly the most common cause for construction lawsuits in NYC? Underpinning woes. This week we are bringing the blog back to the physical development of the project with a look at what underpinning is and what underpinning we anticipate for Third & Bond.

If you google “underpinning” you are just as likely to end up with pictures of ladies in their undergarments as you are construction sites. To save you the embarrassment of an unintended nudie search (isn’t it enough that you read about Spitzer while at work?), we’ll explain the basics here. Underpinning is the process of strengthening foundations of an existing building. There are a couple of different reasons underpinning might be done; the most common for us is that we are excavating on our lot and that excavation will reach below the foundation of an adjacent building. Our excavation work could potentially destabilize the adjacent building’s foundations even though we are working solely on our property—the ground beneath the neighbor’s foundation doesn’t know about property lines and shifts as it likes.

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Categories: Gowanus, Third & Bond Blog

March 6, 2008

Inside Third & Bond: Week 27

This week, the Hudson Companies bloggers turn their attention from waterproofing a neighbor's building post-demo (above) to consider the world of high-finance.

While most of the news from the financial world continues to be negative, in the world of real estate financing, there has been one bright spot amidst all the chatter about subprime loans, bad loans and “condo” becoming a bad word for lenders: interest rates. As we discussed back in week 14, most construction loans have an adjustable rate based on the LIBOR index. As of this past Tuesday, the rate was 3.08%. Next week, it could be 2.5% or 4%, the rate adjusts daily (every morning at 6 am) with no guarantees about where it’s headed. The construction lender, in this case Wachovia, adds its spread to the LIBOR index to calculate the full interest rate we pay. A standard spread in today’s world is 250 basis points (aka 2.5%). The spread is meant to account for the bank’s risk and profit in lending on the project, and spreads are rising. If we close on our $25 million construction loan today (we’re aiming to close in the next 30 days), we’d be paying approximately 5.58% interest on the funds outstanding as long as LIBOR stays at 3.08%.

When we take a broad view of everything we do as developers, we’re conscious of the incredible risks to which we’re vulnerable: the risk of the sales market, construction cost inflation, interest rate risk, environmental risk, etc, etc. Any one factor can upend a project whether it’s the price of condos, the price of raw materials, high interest rates, terrorism, fear of terrorism, you name it. If we can mitigate our risk in any way, it’s one less thing to worry about at night. So even when interest rates are looking favorable, we have a debate on every project regarding whether we should “swap” our floating interest rate to a fixed rate in order to give us some peace of mind and offer some certainty about what our interest rates will be during construction.

Here’s where it gets fun...

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Categories: Gowanus, Third & Bond Blog