tvices to the hospitality develpment and construction industry
I have made a career out of applying non traditional analysis and innovative thinking arriving at solutions to construction problems that were accurately described as “project killers”.
As a result, we don’t operate like many Hotel Development Companies that use a standard cost template and spend the development cycle justifying cost over runs and time extensions. Some examples? During the design development of the Governors Plaza (Sinclair Oil Corporate Headquarters) on at least a half dozen occasions the top notch Architectural or Engineering consultants announced that the project was dead. Early in the schematic stage, the design team realized there was insufficient provision for a 100 year flood on the zero lot line mixed use development and that the entire below grade parking structure would be flooded and still not contain the required volume. At the next meeting I took out a pack of cigarettes during the meeting. I positioned the cigarettes side by side and then set the package on top of the row of smokes. We then began discussing what size of RCP we needed to use to store the surplus storm fall as we monitored it’s discharge into the storm drainage system. Although this was a cost extra, it meant that the project could proceed (and I generated enough savings in other line items to cover it). I have since seen that this has become a standard solution in heavy and highway work under bridge and overpass construction where surface retention is not an option. When told that the budget (my budget!) for the exposed architectural spandrel panels was only a quarter of the amount necessary based on bids from the three precast concrete companies in the state, I was stunned at first. Until the next meeting that included discussions about abandoning the project which by this time included extensive excavation and post tension raft slab, I had my tower crane operator lift what appeared to be sidewalk sections, poured on the slab. The realization dawned that for the cost of a “sidewalk” we had the exterior panels. We did it for less than the “inadequate” budget. Chateau Brickyard a retirement residence in Millcreek Utah for my friend John Grey (Retirement Inns of America, American Residential Chateaux) was pronounced dead when the selected General contractor delivered a bid that was 25% over the firm budget. After some research I determined that with a modest redesign, I could meet the budget. It required extensive interaction with local building authorities and delivered a finished product within the budget. The key to meeting income performance criteria and keeping costs within budget limits isn’t easy but it is simple. First, a thorough working knowledge of the revenue that will justify the capital expenditure is a cause and effect relationship. A certain quality of asset will generate a predictable income. It is not a mystery, it is a constant and establishes a ratio. Adjust the quality, adjust the revenue. Everything else about producing the asset, however, is fair game. This means not only can you discard every conventional assumption, it means you have to initially, to be competitive. It is not just thinking outside of the box, it is starting as if there were no box. The optimum formula includes a hands on approach to managing the value of the finished product and controlling the cost of delivery. This includes elements such as 1. Land Acquisition – A firm budget that is below market and terms that benefit all parties. Also alternate approaches to acquiring the ground. Most importantly, pick the right location. 2. Design – typically have a concept then deliver the concept to your design team for execution. There are great economies of scale in repetition but there may be significant cost reductions in rethinking the design. 3. Construction Management – this includes an interactive role during production that may direct subcontracts, materials procurement control, ongoing value engineering, disbursement control, risk management systems, claims and change management, consistent project communication and interaction. 4. Operations management team on board early. 5. Marketing starts at project inception Once the economics of a potential development opportunity are established, then it is up to the creative forces of the proponents to “imagine” a property into existence. By this I mean, pull out all of the stops, consider all options, look at all possibilities (including evolving approaches). Take the best, fastest, least expensive options without reducing required revenue the asset MUST generate. Focus on essential elements, add features or upgrades where savings allow and income is flexible. Just remember, there is no project unless you imagine the concept to which you can bring the resources. Don’t start with any preconditions or preconceptions except your absolute awareness of market income (capped Value) and the most flexible innovative approach to production (Cost). It’s magic but it works like science. Oh and by the way, keep it green! When done thoughtfully and thoroughly each delivered property will represents proportionately greater value versus investment in time and money.
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AuthorRobert Brooks Builder Developer Entrepreneur Seeker Archives
July 2019
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