So you’ve done your research, put together your budget, presented it to the congregation and the community, gone through the preliminary design process, and received land use (entitlement) approval and building permits, and now you’re finally ready to break ground. Some of the common steps in the construction phase include:
- Drawing on construction financing
- Horizontal construction
- Vertical construction
- Project marketing
- Arranging permanent financing
- Arranging for property manager
Because of all the work you did in the predevelopment phase, by the start of construction, risks should be reduced to factors that have already been addressed and are controlled through good management. That doesn’t mean there aren’t any risks in the construction phase, though they are greatly reduced. Cost estimates, constructability and management all affect project return and viability.
Here are some tips for minimizing risks and maximizing rewards.
Solve Cost Problems Early
This is the stage when the physical work commences on the site and when you must ensure your congregation has adequate funds to meet the progress payments. When making cost estimates, make separate estimates for each cost category as opposed to lumping costs, and make sure you know the market value for construction services.
The cost pro-forma may include:
- Building costs
- Site development (demolition, grading, utilities and landscaping)
- Wood/Metal framing, concrete, windows, doors, finishes, appliances, etc.
- Parking / paving
- Utility Connection and impact fees
- Off-site costs such as traffic signals or road improvements
- Construction administration (architecture, engineering, consultants, etc.)
- Marketing (brokers, advertising, etc.)
- Construction management
- Financing, legal and administrative
- Taxes during construction
When you identify areas of uncertainty, a community-minded developer with experience will be able to help you solve cost problems and make recommendations, such as including a 10 to 15 percent contingency at the beginning.
The earlier you foster a team spirit where every party is working toward a successful conclusion, the better. It’s important to cultivate the relationship between the architect and contractor so that when questions inevitability arise, the architect or engineer is available to respond quickly. Delays in responding can lead to claims for delays and result in additional costs.
The construction period is the time when disturbance to the community — in the form of increased traffic, noise, dust, etc. — is prevalent. Maintaining contact and consultation with these stakeholders is good public relations and may help to keep the peace. Keep them informed, and consider allowing organized site visits to view the progress. You can control risk through due diligence and communication.
Work with Expert Advisers
Many congregation leaders might not want to be involved in the construction phase of development. If that’s the case, you need to find an expert adviser to assist at this critical stage. This adviser should be available to visit the site regularly to listen to any difficulties the contractor may be experiencing, ensure the contractor is constructing to the highest standards and give instructions to try to mitigate conflicts.
When the work is substantially completed, the expert advisor will coordinate the issuance of the certificate of occupancy, which generally marks the end of the construction phase and allows for the commencement of property operations.
If you are a congregation leader interested in the series of steps required to move from concept to completion, check back for “From Congregation Leader to Property Developer Part IV,” which will provide an overview of the final phase of the development process: operations.