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YOUR PERIODIC UPDATE FROM BOZZUTO CONSTRUCTION

 

FROM THE DESK OF

September 2014

Mike

 

As part of our commitment to ensuring that our projects are delivered on time, and most importantly on budget, we constantly keep our fingers on the pulse of our nation's economy. Thus, I thought I would share with you today some of our insights on how the current economic climate is affecting our industry.

The most significant consequence we've observed is that many projects currently in the pipeline are now struggling to meet underwritten budgets, especially if those budgets were created more than six months ago. Let me explain why.

Apartment completions approached record levels last year, as developers delivered around 10,000 units in the region. We expect builders to surpass this number in 2014, and deliver upwards of 18,000 units. This dramatic increase in activity is only magnified by the current capacity issues our industry is facing. A number of our subcontractors are reporting that they are at or in excess of their capacity through early 2016 because of this increase in activity. As a result:

  • Our subcontractors and the skilled labor force now have the ability to be selective when choosing projects. They tend to favor large scale, repetitive work projects as these result in the most efficient allocation of their resources.
  • Material prices remain relatively stable, but labor costs are rising. For instance, within the last year, we have seen a 25% increase in bid day numbers from our wood frame subcontractors alone, while lumber prices have barely moved. There just are not enough framers in the market to do the work coming through the pipeline.
  • We have seen a dramatic increase in the financial stress on our subcontractors.

This means that smaller, complicated projects with work-flow or access issues are at greater risk for inflation than are larger projects with few constraints.

What can we do to combat this issue? Bozzuto Construction remains diligent in taking a strategic approach to managing costs for our clients. To ensure that we deliver the most competitive costs available in the market, we have:

  • Ensured that we are receiving favorable pricing from subcontractors and suppliers with whom we have been working for many years.
  • Expanded our subcontractor and supplier relationships, both to minimize risk and to keep the level of competition high.
  • Implemented an early pay program with subcontractors who have favorable credit. We find that this leads to the most favorable pricing available from these subcontractors.
  • Promoted joint purchasing of subcontractors over multiple projects.
  • Increased the capacity of our Preconstruction group, which allows them additional time during the design phase of the project to explore all value engineering possibilities while working out constructability issues. This early process with Preconstruction team allows for better drawings that are ready to bid/build which reduces ambiguity and costs related to that.

We believe we will continue to see some inflation in costs until the middle of 2015 and are hopeful that costs will flatten at that point. I would welcome the opportunity to discuss these issues further, and look forward to continue to serve as a trusted partner in achieving your project goals. If you have any questions, please feel free to contact me at (301) 623- 2240 or at mschlegel@bozzuto.com.

 

Best regards,

Signature

Mike Schlegel  |  President, Bozzuto Construction

 

 

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GET TO KNOW


Laurie

Laurie Allen Bilksi Project Manager, Bozzuto Construction Company

Please describe your role at Bozzuto Construction Company in your own words.
I am a Project Manager and am currently working on Wellington Glen, a phased development for a third-party owner in Manassas, Virginia.

How did you become interested in the industry?
Growing up in New England, we watched a lot of This Old House.After college, I renovated houses for a non-profit organization in Philadelphia.I've enjoyed the process of watching something be built from scratch, and shine with my own handiwork. There aren't a lot of careers that give you a concrete end product that you can say, “I helped make this what it is.”

What do you like most about working at Bozzuto?
I like that I can count on my peers to do a great job and hold me accountable to do the same. Everyone is so friendly and the bar is set really high at the expectation of a job well done.

What do you like to do in your off hours? Any hobbies?
I like playing with my kids and do home renovation projects.Most projects these days are more decorative than anything that might involve demolition, but I am always juggling at least two or three projects and ideas.

What's one thing your colleagues and clients would be surprised to learn about you?
I have a graduate degree in City and Regional Planning.

What music are you currently listening to?
I'm an NPR junkie, so anything I listen to, music-wise, is generally '90s era throwbacks.The latest current music concert I attended was Lorde, last winter.

What do you enjoy reading: favorite magazine/book?
I enjoy non-fiction, but for a quick read, I like DIY design and decoration magazines and blogs.

What professional achievement are you most proud of?
My relationships with the clients I have worked for.

What personal achievement are you most proud of?
Though I feel cliché about it, I would have to say my kids. They are turning into really awesome people that I enjoy hanging out with.

If you could go anywhere on your next vacation, where would you go?
Mexico - I enjoy Cancun. I'm in a “relaxing on a beach” phase of vacations these days.

 

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IN OUR COMMUNITY


Boxing for Books


Each year, Bozzuto Construction sponsors UMAR No Hooks Before Books' “Boxing For Books” charity event, which raises funds to support the organization's afterschool program for at-risk youth in Baltimore City. This year, the event will be held on September 18th at our Union Wharf apartment community.

Their motto is “No Hooks before Books” as the organization combines academic development and athletic training under one roof. While boxing is an exciting draw and integral part of the program, academic development is the paramount goal. Children must actively participate in the academic program in order to participate in the boxing program.

For more information about the Boxing for Books event, or to register or sponsor, click here.

 

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CLIENT SPOTLIGHT

Roizman Development


Since 1988, Roizman Development and its affiliated companies have successfully developed over 3,000 high quality rental units throughout the East Coast of the United States, from New York to Florida, with 17 developments in seven states and the District of Columbia. Of Roizman's total portfolio, 90% are designated to low and moderate income households, and the remaining 10% to market rate households. Of those units devoted to low and moderate income households, approximately 20% are Public Housing developed under the HOPE VI program.

The company develops successful complex real estate initiatives by integrating Roizman Development Inc., with a hands-on management company, S.H.N.I.R. Apartment Management Corp. The professionals in these two divisions work together to formulate a unique perspective on how development initiatives should evolve, from site selection through development, construction, lease-up and operation.

In 2013, Roizman engaged Bozzuto Construction for the renovation of Tyler House Apartments, a 284-unit affordable housing community located at the southwest intersection of North Capitol Street and New York Avenue in Washington, D.C. The $28M renovation project includes a new building-wide HVAC system, new plumbing, improved elevators, enhanced community center spaces, a new computer learning center, and new kitchens for residents. Construction is expected to be completed by late 2014.

For more information about Roizman Development, click here.

 

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IN THE PRESS


National Real Estate Investor’s “10 Admired Individuals in Multifamily”


Bozzuto CEO Tom Bozzuto was recently named one of the “10 Most Admired Individuals in the Multifamily Industry” by National Real Estate Investor (NREI). To create the list, NREI surveyed more than 1,000 professionals involved in the multifamily sector as investors, developers, brokers or lenders.

Survey participants responded that Tom Bozzuto has a reputation for “honesty, integrity and success” and is known for being a “class guy.” To read the full story, click here.

 

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PROJECT SPOTLIGHT


petworth

 

Bozzuto Construction was proud to serve as the general contractor for one of Washington, DC's most high-profile, mixed-use developments, the Petworth Safeway and The Swift residences, located at 3830 Georgia Avenue, NW. The community, which celebrated its grand opening on June 27th, consists of a 62,500 square-foot urban concept Safeway retail store, two levels of below-grade parking and five levels of apartments.

The 218-residence community was developed by Duball, LLC, designed by architect Torti Gallas and Partners and is expected to achieve LEED Silver certification. More than 51% of new hires for the project, across all subcontractors, were Washington, D.C. residents.

 

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UPCOMING EVENTS


ULI Baltimore Housing Forum


Join Bozzuto Construction on September 10th at ULI's Baltimore Housing Forum to hear two panels of experts discuss their views on various segments of the Maryland housing industry. The following market sectors will be represented: Senior Living, Rental, Land Development, and For-Sale.

The first panel will engage leading Market Analysts who study various sectors in Maryland and will be moderated by Bob Aydukovic, President of MCCEI. Confirmed panelists include Brenda Desjardins, Joe Cronyn, and Bob Lefenfeld.

The second panel will engage four leading development firms who have a deep knowledge and focus on projects in Maryland and will be moderated by Steve Rubin, Director of Project Development at Harkins Builders. Confirmed panelists include Josh Fidler, David Flanigan, Ed Gold, and David Carliner.

Lastly, attendees can listen to a bonus briefing from a member of the Maryland Sustainable Growth Commission on the State's efforts on infill/redevelopment/revitalization and how they may impact the residential market. For more information, or to register, visit the ULI events page here.


ULI WaveMaker Awards


You're invited to join Bozzuto Construction on October 9th at the brand new Horseshoe Casino in Baltimore to celebrate some of Maryland's most successful real estate developments, as well as to honor the 2014 ULI Lifetime Achievement Award recipient, Chickie Grayson, President & CEO, Enterprise Homes. Bozzuto Construction is proud to sponsor this premier real estate event and we hope to see you there! For more information, or to register, visit the ULI events page here.

 

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