Inside Third & Bond: Week 47

Soldier beams installed along the perimeter of the property will be filled in with lagging to provide shoring for excavation. The horizontal timber in the foreground provided a supportive platform for the machinery installing the beams.

It’s not location, location, location that leads to success as the ole real estate CW has it but timing, timing, timing. This is especially true of a condominium project when you only get 1 moment in time to establish your project’s value. We started thinking about timing when we read last week’s comments pitting Biff Champion against our defender, johnife. Are we, in fact, taking too long, and if so, what are the consequences?

When we do our back-of-the-envelope timelines at the beginning of a project, we assume that the time period from site control until a construction loan closing (complete with permits and construction contracts) is 1 year. Looking at many of our current projects, this could be a dated assumption. It today’s world, it takes a lot longer to get a DOB permit, and you really want as much time as possible signing up subcontractors—time for subs to review plans, agree on a scope, and negotiate a good price. What happens to your timeline, and what do you tell Biff Champion, when you send out plans to 20 subs, expect pricing back in 3 weeks, and the phones still aren’t ringing 5 weeks later? We might exaggerate, but you get the picture.

Back to Third & Bond…

…we started the project in May 2007 and closed on a construction loan in April 2008. So far so good. We’ve certainly been delayed in the past 90 days: by annoying stop work orders, by laboring to sign up subcontractors and by other miscellaneous permit woes. We’re also constantly analyzing value engineering proposals from subs. For example, when our sub doing the soldier piles (seen in the picture above) took a look at our shoring drawings—which were not only designed but also permitted, he thought he could redesign the first geotechnical engineer’s work to incorporate less expensive materials while achieving the same end. It took us a couple of days to be convinced that the redesign was as good structurally and that the cost difference was worthwhile. Then, the sub had to work up the drawings, we had to review them, and they had to submit for an amended permit. In the end this took a little over a month to do and we probably saved about $20,000. Was it worth the extra time given interest costs? Was it worth the extra time given that the sub is more comfortable executing the job as redesigned?

We try to stay positive and serve up some lemonade when we’re juggling lemons on an inactive site. For starters, if there are going to be slow spots on the job, it’s best that they happen early, before we’ve borrowed too much money from our construction lender and our monthly carry gets to be much more expensive. Also, extra time upfront gives our construction team more time to negotiate the best contracts with subs. And finally, it’s reasonable to assume in today’s fragile economic times that the longer it takes us to start construction and ultimately open our sales office, the better off we might well be.

This reminds us of a project we did several years ago. We were lamenting all the problems and mistakes we made which caused 4 months of delays, moving the completion date of a rental project from November to March when we realized…..we’re geniuses! Did we really want to be sitting around renting apartments in the dead of winter anyway? So Biff, pour yourself a glass of lemonade, and let’s start driving piles
Inside Third & Bond: Week 46 [Brownstoner]
Inside Third & Bond: Week 45 [Brownstoner]
Inside Third & Bond: Week 44 [Brownstoner]
Inside Third & Bond: Week 43 [Brownstoner]
Inside Third & Bond: Week 42 [Brownstoner]
Inside Third & Bond: Week 41 [Brownstoner]

From our lawyers: This is not an offering. No offering can be made until an offering plan is filed with the Department of Law of the State of New York.”