When a professional sports team threatened to leave a major city unless a new stadium was built, civic leaders sprang into action. They hired an architect, and in just four months had developed renderings that pleased the itinerant franchise. They budgeted based on the renderings and pre-sold a significant number of luxury suites and thousands of season tickets to help secure financing for the new facility. In short, the stage was set for the team to stay — or was it?
The owner of the proposed facility (a local non-profit authority) and the state (the owner of the land) had never built a stadium. When they hired a contractor, they were stunned to learn that their original budget was off by $40 million, which significantly affected the financing formulas. Local interest groups, who weren't considered a factor early on in the process, began working to stop the project unless they were provided with guarantees of jobs, minority involvement, new homes, parking revenues and a list of other demands.
Meanwhile, organized labor demanded a seat at the table. The local government squabbled with the state over building codes and jurisdiction. In the end, the facility was built and the team stayed, but not before several parties emerged with figurative black eyes.
This is just one example of the “ready, fire, aim” phenomenon that often occurs on major urban projects. The phenomenon is the result of excitement generated by prominent in-town projects, where the rush to build overwhelms the prudence that must be associated with developing multi-million dollar structures.
Ask the Right Questions Upfront
“Ready, fire, aim” most often troubles professionals who move outside their comfort zones to build unique projects: a non-profit proposing a landmark building; a philanthropist considering a legacy landmark; a suburban office developer working on an in-town parcel or a huge public facility; or an investor with a massive stake in a mixed-use high-rise. Professionals proposing unique buildings in infill locations often forget to ask four critical questions:
Do I need a third party to get me on the right track? When building beyond their experience, owners and developers should seek expertise that is not trying to sellor contracting services. Having an independent voice involved early in the project will involve minimal cost and provide a realistic picture of what to expect and how to plan. An independent expert can also mediate when challenges arise in midstream.
Who are the key audiences? When a large project is announced, various groups will come calling with “wish lists.” This can include anything from air-conditioning for a local school to jobs for residents. Pre-selling and engaging in a meaningful dialogue with these groups is a must. Neighborhood groups, unions, city officials and environmentalists often expect to be heard, and can cause problems if they are not considered early on.
What can derail this project? It behooves all parties to consider scenarios that could stop or delay the project. Brainstorm these scenarios and develop a crisis plan, in case they occur. Be sure to consider worker safety issues, environmental policies, site-specific challenges, political sensitivities and other non-design issues. Remember that in urban areas, privatewill have public elements. Even a privately financed, privately developed office tower impacts surrounding public spaces, utilities and the crowded urban street grid.
What is our plan when disagreements arise? On large projects there are often numerous parties with the power to add scope or stop work, but very few who can authorize payment for these additions or stoppages. When changes are made, the costs of the delays associated with the change are often exponentially more expensive than the change itself. Developing a plan for moving forward after disputes, authorizing an individual to make critical decisions and developing a secondary process for working out disagreements are critical to bringing large projects in under budget and on schedule.
Seek Outside Help to Avoid Pitfalls
For investors, developers, municipalities and owners who are considering landmark projects in urban areas, there is only one cure for “ready, fire, aim”: thoughtful planning before hiring the first professional. Consulting an outside expert — and one without a vested interest in “selling up” for other services — is the wisest initial investment many owners, developers and investors can make.
Larry Gellerstedt III is CEO of Gellerstedt Consulting, an Atlanta-based real estate company, and is the former CEO of Beers Construction. For more information, visit www.gellerstedtgroup.com.