A Skyrocketing Problem - U.S. crane shortage holds up construction.A shortage of construction cranes has left many developers’ projects up in the air—figuratively speaking.
Traditionally, about one-third of the world’s mobile cranes—the kind most frequently used in construction—reside in the United States. But construction booms in places such as Dubai, Macau, and the United Arab Emirates are depleting the domestic supply.
The situation is very tough,” admits Robert Edelman, president of Dallas-based Drexel Development. “Not only can you not rent a crane, but crane operators are extremely hard to find.” That just adds insult to injury for developers trying to complete a project on time and on budget.
Drexel, which builds high-end infill multifamily product, felt the pinch several years ago and took the dramatic step of buying its own cranes instead of renting. “We own two cranes and have had two operators on the payroll for years,” Edelman says. Of course, with prices for cranes in the millions, not everyone can afford this approach. Drexel figures they save plenty,not just in rental and subcontractor fees but in lost time waiting for equipment. Still, Edelman says, forming an alliance with a nearby company that does have a crane and someone to operate it isn’t a bad idea. “I have not kept a record of how many calls we have received to rent our cranes, but suffice it to say, we get a call at least once a week,” Drexel says.
“Unfortunately, we are using both our cranes at the present time,” he quips.
Imagination at Work - GE greens its portfolio.
Think one company can’t make a difference? GE Real Estate begs to differ. In November 2007, the Norwalk, Conn.-based firm launched a major initiative to green its entire apartment and commercial property portfolio. GE will evaluate its current holdings and invest in green retrofits and upgrades where it makes financial sense, as well as green its acquisitions going forward. The effort is bound to have a big impact—the firm generates more than $30 billion in annual transaction volume across 28 countries.
“We have been going green on an ad hoc basis for several years now,” says Jonathan Kern, GE’s global chief investment officer. “What is new and important for an organization of our size and scale is that we said it’s not enough to do this on an ad hoc basis.”
GE’s green commitment includes a partnership with the Clinton Climate Initiative, a program launched in August 2006 by The Clinton Foundation to work with major cities and members of the business community to reduce greenhouse gas emissions in large urban areas.
The firm will focus on retrofitting buildings, since 90 percent of the company’s portfolio consists of acquired assets. The green retrofits will include everything from swapping light bulbs to overhauling HVAC systems. “If you look at the world of real estate, we build 1 percent or 2 percent a year compared to what’s already in place. So obviously, the opportunity is much,much greater for buildings that are in place,” Kern says.
GE plans to share its findings to show that going green—while earning green—is possible.
- Rachel Z. Azoff
Have Faith
A new program helps developers enter the industry with two powerful allies: God and Wharton.
A two-year trial program at the University of Pennsylvania’s Wharton School will teach preachers, ministers, and faith leaders the often-complicated process of real estate development, something these leaders are rarely taught in divinity school, but which more of them need as faith-based organizations enter the industry.
Sidney Williams, a graduate of Wharton and a minister at Bethel AME Church in Brandywine, Md., pitched the project to Wharton professor Bernard Anderson after seeing one too many preachers in Philadelphia delve into projects with “just a wing and a prayer,” Anderson says. Beginning in February 2008, the one-year Wharton/Ekos Community Revitalization Leadership Development Program will teach 35 to 40 faith-based leaders about the not-so-spiritual dynamics of accounting, management, public policy, and basic banking principles. “It’s about cold, hard business,” Anderson quips.
But the program is also helping developers and pastors understand the development of assisted-living complexes, housing, and even shopping centers. “The for-profit community can [get] frustrated with the nonprofit community because [they] don’t speak the same language,” says Williams, who owns Fort Washington, N.Y.-based Ekos Ministry, which helps churches create and manage development projects. “We want to equip pastors so they can be more efficient players in the market.”
After a trial period, Ekos and Wharton will decide if the program should become a permanent part of the school’s executive education lineup.
Leery of Gehry
The Massachusetts Institute of Technology is suing famed architect Frank Gehry and Parsippany, N.J.- based Skanska USA Building for “design and construction failures” at the institute’s $300 million Stata Center. Opened in 2004, the facility features angular sections that appear to fall on top of each another. The school says the facility suffers from leaks, cracks, and drainage problems. Gehry Partners of Los Angeles is accused of negligence and breach of contract in the design of the classroom and office building.
Agree Announces Project
Agree Realty Corp. of Farmington Hills, Mich., announced plans to develop 37.8 acres in Plainfield, Ind. Located 15 miles southwest of Indianapolis, the development will include more than 225,000 square feet of retail and restaurant space when completed. Meijer Inc., the Grand Rapids, Mich.-based operator of more than 180 retail supercenters in five states, will lease approximately 32 acres.
Gulf Recovery
Housing International Gulf Coast of New Orleans began production late last year as the first unionized housing manufacturing plant in Louisiana. The facility will create affordable housing and support long-term economic opportunities in the Gulf Coast region.
Record Price Paid
Lincoln Property Co. acquired two fully entitled parcels in San Francisco’s financial district for $65 million, a record price per square foot for land in the downtown area. The company plans to spec two office buildings for the sites.
Infrastructure Investors
In November 2007,California Gov. Arnold Schwarzenegger proposed using private companies to finance, build, and/or manage state and local public works projects such as roads,schools, hospitals, and waste-water treatment plants. Developers then would rent the facilities to the governmental body or collect fees directly from users. The practice, still unusual in the United States, is used frequently in Canada and Europe.
New Firm Emerges
David Carlson, former vice president of acquisitions for Chicago-based Equity Residential,and Mark Isaacson, former executive vice president and CFO of Alliance Holdings (also of Chicago), formed Redwood Capital Partners in December. The company will specialize in the acquisition and management of high-yield multifamily real estate properties primarily in the Midwest, Southeast, and Sunbelt states.
