2004-25657 Reso
RESOLUTION NO. 2004-25657
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, APPROPRIATING FUNDS, IN THE
AMOUNT OF $1,450,578, FROM THE FOLLOWING FUNDING
SOURCES: $777,004 FROM THE GENERAL FUND CAPITAL
REPLACEMENT FLEET FUNDS FOR FIRE DEPARTMENT VEHICLES
THAT HAVE BEEN OR WILL BE ACQUIRED FROM OTHER FUNDING
SOURCES; $226,972 FROM THE 2% RESORT TAX FUNDS; $443,512
FROM THE 1999 GENERAL OBLIGATION BOND FOR SHORELINES
AND SEAWALLS; AND $3,090 FROM THE STORMWATER BOND
FUND SERIES 2000, TO PROVIDE SUFFICIENT FUNDING TO
COMMENCE CONSTRUCTION OF THE NEW FIRE STATION NO.4
PROJECT AND THE ADJACENT SEAWALL REPAIRS AND
RESTORATION SCOPE.
WHEREAS, on March 20, 2002, the Fire Station NO.4 was designated as a historic
site by the Mayor and City Commission and is classified as a contributing building in the
City's Historic Properties Data Base; and
WHEREAS, due to site constraints, the proposed improvements were to be
conducted in two phases: relocation of the exiting structure to a southwesterly position on
the site, and design and construction of a new state-of-the-art, three bay apparatus building;
and \
WHEREAS, on July 2, 2003, the Mayor and City Commission directed the
Administration to pursue demolition of the existing structure based on the fact that the cost
for the relocation was significantly higher than initially estimated; and
WHEREAS, pursuant to City Code, Section 118-563, Certificates of Appropriateness
for Demolition of such structures are granted or denied in accordance with the procedures
set forth therein, including the requirement that the Historic Preservation Board (HPB) hold
a public hearing and transmit the recommendation to the City Commission, and if
appropriate, that the City Commission then hold a public hearing and vote on the request;
and
WHEREAS, on September 9,2003 the City's HPB held a public hearing to consider
the request and then voted 4-3 to recommend granting the request; and
WHEREAS, as part of the review, some requirements were added with regard to
landscaping, breeze block, location of a commemorative monument, and shade trees along
Indian Creek Drive; and
WHEREAS, the HPB's recommendation was submitted to the City Commission and,
on September 10, 2003, Resolution No. 2003-25336 was adopted, setting a public hearing;
and
WHEREAS, on October 15, 2003, Resolution No. 2003-25378 was adopted by the
City Commission, granting a Certificate of Appropriateness for Demolition for the existing
Fire Station NO.4 structure; and
WHEREAS, the review by the Building and Planning Departments of the new Fire
Station NO.4 construction documents was completed on June 14, 2004 and a demolition
permit was issued on July 9, 2004; and
WHEREAS, Carivon Construction, Inc. (Carivon) was selected through the Job
Order Contracting (JOC) Program to demolish the existing building; and
WHEREAS, demolition of the existing structure is expected to be completed by the
end of July 2004; and
WHEREAS, the seawall restoration at the Fire Station NO.4 site was also added to
the Project Scope due to its proximity to the fire station foundation; and
WHEREAS, the seawall repairs will be more economical and efficient if performed
prior to the construction of the fire station; and
WHEREAS, the designer, Coastal Planning Engineers, has prepared the
construction drawings for the seawall restoration and completed the permitting process
through both Miami-Dade County DERM and the City's Building Department and the permit
is ready to be issued; and
WHEREAS, the seawall portion of the Project is fully funded by the GO Bond
allocation for Shorelines and Seawalls; and
WHEREAS, although staff has made every effort to maintain the Project within the
funding allocation, this has ultimately not been possible given the programmatic needs of
the facility and requirements imposed by different regulatory entities that were not originally
anticipated; and
WHEREAS, for the past few months, staff has been reporting that these elements,
together, were expected to place the project about $500,000 over budget; and
WHEREAS, included in this listing are: an increase of the square footage of the new
building; upgrading of the venting system to more efficiently eliminate the fumes created by
running engines; regulatory requirements for landscaping, exterior parapet wall, and utility
connection locations; and the need for a construction contingency.
WHEREAS, the plans have been revised to include a site master plan, of which only
the landscaping portion contained within the property lines will be implemented at this
point; and
WHEREAS, other requirements include the re-striping of the parking lot and
corresponding pedestrian connector to the seawall promenade to meet ADA regulations;
and
WHEREAS, Carivon submitted a proposal for the new building and the seawall
scope, including the restoration of the existing rip rap, construction of new capping, and
repairs to the wood dock decking; and
WHEREAS, the current proposed cost for the fire station exceeds current funding by
$1,003,976; and
WHEREAS, In addition to the already identified project increases, it appears that
recent increases for construction materials, such as concrete and steel, are also
significantly contributing to the Project's pricing shortfall; and
WHEREAS, in the past six (6) months, the cost for steel has increased by at least
fifty percent (50%) and the cost for concrete has increased by at least thirty percent (30%);
and
WHEREAS, in order to continue with the Project's construction schedule and to
execute the contract with Carivon Construction, the total identified amount of $1 ,450,578
needs to be appropriated to complete construction ofthe new building and seawall project
scopes; and
WHEREAS, the Project has been included in the Miami-Dade County General
Obligation Bond List for Referendum to be considered in November 2004; consequently, if
the County Bond is passed by the voters, additional funding may become available to
reimburse the additional funding being sought at this time.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby appropriate additional fund, in the amount of $1,450,578, from the
following funding sources: $777,004 from the General Fund Capital Replacement Fleet
Funds for Fire Department Vehicles that has been or will be acquired from other funding
sources; $226,972 from the 2% Resort Tax Funds; $443,512 from the 1999 General
Obligation Bond for the Shorelines and Seawall Project; and $3,090 from the Stormwater
Bond Fund Series 2000, to provide sufficient funding to commence construction of the Fire
Station NO.4 Project and the corresponding seawall repairs and restoration scope.
PASSED and ADOPTED this 28thday of July, 2004.
Yp tL<-L
ATTEST:
APPROVED AS TO
FORM & LANGUAGE
& FOR EXECUnON
~ .ifl/Oy
Daf8
CITY OF MIAMI BEACH
COMMISSION ITEM SUMMARY
m
Condensed Title:
A Resolution Appropriating $1,450,578, From The Following Funding Sources: $777,004 From The
General Fund Capital Replacement Fleet Funds For Fire Department Vehicles; $226,972 From the 2%
Resort Tax Funds; $443,512 from the 1999 General Obligation Bond for the Shorelines; and Seawall
Project and $3,090 from the Stormwater Bond Fund Series 2000, to provide sufficient funding to
commence construction of the new Fire Station No.4 building and the corresponding Seawall repairs and
restoration scooe.
Issue:
Shall the City appropriate funds in the amount of $1 ,450,578 to commence construction scope of the new
building and seawall Project?
Item Summary/Recommendation:
On October 15, 2003, Resolution No. 2003-25378 was adopted by the City Commission, granting a
Certificate of Appropriateness for Demolition for the existing Fire Station No.4 structure. The review by the
Building and Planning Departments of the new Fire Station No.4 construction documents was completed
on June 14,2004 and demolition of the existing building is expected to be completed by the end of July
2004 by Carivon Construction, Inc. (Carivon), a Contractor selected through the Job Order Contracting
(JOC) Program. The seawall restoration at the Fire Station No.4 site was also added to the Project. Due
to site constraints, primarily the proximity of the seawall to the new building foundation, the seawall repairs
will be more economical and efficient if performed prior to the construction of the fire station. Carivon has
provided proposals for both phases of the Project. Additional funding, in the amount of $1 ,003,976 for the
Fire Station is required to commence construction. Additionally, a portion of the funding for the seawall has
not been previously appropriated, so an appropriation for the project is now needed. Funding for this is
available within the GO Bond allocation for Shorelines and Seawalls. The Administration recommends
both appropriations. The Fire Station Project has been included in the Miami-Dade County General
Obligation Bond List for Referendum to be considered in November 2004 in the amount of $1 million.
Consequently, if the County Bond is passed by the voters, funds may become available to reimburse the
additional fundina beina souaht at this time.
Advisory Board Recommendation:
INA
Financial Information:
Finance Dept.
$777,004
$226,972
$443,512
$3,090
$1,450,578
General Fund Capital Replacement
2% Resort Tax
GO Bond - Shorelines & Seawalls
Stormwater Bond Fund Series 2000
Source of
Funds:
D
Ci Clerk's Office Le islative Trackin :
M. Alexandra Rolandelli
AGENDA ITEM
DATE
R7T
7 ~ 2 't-oC{
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
www,miamibeachfl,gov
To:
From:
Subject:
COMMISSION MEMORANDUM
Mayor David Dermer and Date: July 28, 2004
Members of the City Commission
Jorge M. Gonzalez ~ ~
City Manager 0
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, APPROPRIATING FUNDS, IN THE
AMOUNT OF $1,450,578, FROM THE FOLLOWING FUNDING SOURCES:
$777,004 FROM THE GENERAL FUND CAPITAL REPLACEMENT FLEET
FUNDS FOR FIRE DEPARTMENT VEHICLES THAT HAVE BEEN OR
WILL BE ACQUIRED FROM OTHER FUNDING SOURCES; $226,972
FROM THE 2% RESORT TAX FUNDS; $443,512 FROM THE 1999
GENERAL OBLIGATION BOND FOR SHORELINES AND SEAWALLS;
AND $3,090 FROM THE STORMWATER BOND FUND SERIES 2000, TO
PROVIDE SUFFICIENT FUNDING TO COMMENCE CONSTRUCTION OF
THE NEW FIRE STATION NO.4 PROJECT AND THE ADJACENT
SEAWALL REPAIRS AND RESTORATION SCOPE.
ADMINISTRATION RECOMMENDATION:
Adopt the Resolution.
Fundina
Funds in the amount of $1,450,578 are available from the following sources for this
appropriation:
Fire Station No.4:
General Fund Capital Replacement Fleet Fund For Fire Department
(Vehicles have been or will be acquired from other funding sources)
2% Resort Tax Funds
Sub-Total Fire Station:
$777,004
$226,972
$ 1,003,976
Seawall:
1999 GO Bond for the Shorelines and Seawall Project
Stormwater Bond Fund Series 2000
Sub-Total Seawall:
Total Project:
$443,512
$3,090
$ 446,602
$ 1,450,578
Commission Memorandum
Fire Station No, 4 - Appropriation for Construction Scope
July 28, 2004
Page 2 of 5
For the Fire Station No.4 project, the CIP Office is continuing to negotiate the price with
the Contractor. The Resort Tax portion noted above is currently needed based on the
Contractor's current price. However, if we are successful in getting this amount reduced,
then the funding from Resort Tax would be eliminated and if a lesser need still exists, we
would look to fund the amount needed with a Fiscal Year 2004/2005 North Beach
Development Corporation Quality of Life allocation. This funding allocation would be
consistent with the previous use of Middle Beach Quality of Life funds to fund a portion of
the shortfall in the Fire Station NO.2 project. We would look to fund FF&E requirements for
this station in Fiscal Year 2005/2006.
ANALYSIS:
On March 20, 2002, the Fire Station No.4 was designated as a historic site by the Mayor
and City Commission and is classified as a contributing building in the City's Historic
Properties Data Base. Due to site constraints, the proposed improvements were to be
conducted in two phases: relocation of the contributing structure to a southwesterly position
on the site and design and construction of a new state-of-the-art, three bay apparatus
building.
On July 2, 2003, the Mayor and City Commission directed the Administration to pursue
demolition of the existing structure based on the fact that the cost for the relocation was
significantly higher than initially estimated. Pursuant to City Code, Section 118-563,
Certificates of Appropriateness for Demolition of such structures are granted or denied in
accordance with the procedures set forth therein, including the requirement that the
Historic Preservation Board (HPB) hold a public hearing and transmit the recommendation
to the City Commission, and if appropriate, that the City Commission then hold a public
hearing and vote on the request. On September 9, 2003 the HPB held a public hearing to
consider the request and then voted 4-3 to recommend granting the request. As part of the
review, some requirements were added with regard to landscaping, breeze block, location
of a commemorative monument, and shade trees along Indian Creek Drive.
The HPB's recommendation was submitted to the City Commission and, on September 10,
2003, Resolution No. 2003-25336 was adopted, setting a public hearing. On October 15,
2003, Resolution No. 2003-25378 was adopted by the City Commission, granting a
Certificate of Appropriateness for Demolition for the existing Fire Station No.4 structure.
The review by the Building and Planning Departments of the new Fire Station NO.4
construction documents was completed on June 14, 2004 and a demolition permit was
issued on July 9,2004. Carivon Construction, Inc. (Carivon) was selected through the Job
Order Contracting (JOC) Program to demolish the existing building. Demolition of the
existing structure is expected to be complete by the end of July 2004.
The seawall restoration at the Fire Station NO.4 site was also added to the Project Scope
due to its proximity to the new Fire Station foundation. The seawall repairs will be more
economical and efficient if performed prior to the construction of the fire station. The
designer, Coastal Planning Engineers, has prepared the construction drawings for the
Commission Memorandum
Fire Station No. 4 - Appropriation for Construction Scope
July 28, 2004
Page 3 of 5
seawall restoration and completed the permitting process through both Miami-Dade County
DERM and the City's Building Department. The permit is ready to be issued. The seawall
portion of the project is fully funded by the GO Bond allocation for Shorelines and
Seawalls.
Although staff has made every effort to maintain the Project within the funding allocation,
this has ultimately not been possible given the programmatic needs of the facility and
requirements imposed by different regulatory entities that were not originally anticipated.
For the past few months, staff has been reporting that these elements, together, were
expected top lace the project a bout $ 500,000 0 ver budget. Attachment 1 details the
overages that were previously identified by the staff and the Architect. Included in this
listing are: an increase of the square footage of the new building; upgrading of the venting
system to m ore efficiently eliminate the fumes created by running engines; regulatory
requirements for landscaping, exterior parapet wall, and utility connection locations; and the
need for a construction contingency. The plans have been revised to include a site master
plan, 0 f which 0 nly the landscaping portion contained within the property lines will be
implemented at this point. Other requirements include the re-striping of the parking lot and
corresponding pedestrian connector to the seawall promenade to meet ADA regulations.
The CIP Office submitted to Carivon the construction documents for the Project with a
Request for Proposal under the JOC program. Carivon submitted a proposal for the new
building on July 13, 2004. The analysis of it indicates the following:
New Building Construction Hard Cost:
General Requirements
Site Work / Drainage / Landscaping /Irrigation
Concrete / Masonry
Metals / Wood / Plastics / Thermal Protection
Doors / Windows / Finishes
Specialties / Equipment / Life Safety
Mechanical/Electrical
Total Construction Cost
$ 449
456,820
613,205
257,403
472,184
120,763
627,577
$ 2,548,401
The Total Site Area is 21,623 sq. ft. and the Total Building Area is 9,140 sq. ft. This cost
estimate translates to $21.12/sq.ft. of Site Area for Site Work and $228.83/sq.ft. of the
Building Area for Construction Cost. By comparison, Fire Station No.2, priced in December
2003, has a per square foot cost of $224. The Miami Beach Golf Club Clubhouse, priced in
December 2002, has a per square foot cost of $205. While both of these buildings are
different from Fire Station NO.4 in terms of building height for Fire Station No.2 and finishes
for the Clubhouse, they are of similar building materials and construction. Given the
adjustments due to the increased costs of building materials noted below, staff recommends
this price as a fair representation of a market price.
The current proposed cost for the Fire Station exceeds current funding by $1,003,976. In
addition to the already identified project increases of $426,486, it appears that recent
Commission Memorandum
Fire Station No. 4 - Appropriation for Construction Scope
July 28, 2004
Page 4 of 5
increases for construction materials, such as concrete and steel, are also significantly
contributing to the Project's funding shortfall. In the past six (6) months, the cost for steel
has increased by at least fifty percent (50%) and the cost for concrete has increased by at
least thirty percent (30%). Costs for other common building materials, such as gypsum,
have increased by similar margins. Attachment 2 includes several industry articles that
document these increases.
Material costs, on average, account for approximately fifty percent (50%) of a project's cost.
Given the recent, abnormally large, spikes in building materials, staff believes that this
accounts for the additional twenty-five percent (25%) cost increase over and above the
originally projected shortfall. Together, the two identified Project cost increases are totaling
the $1 million additional funding request. Although the option exists to put the Project out for
a traditional bid process, staff has indicated that due to the existing market conditions, the
City is not likely to get a substantially better price to build the Project. A regular bid process
is likely to take six (6) months, which would place construction commencement around
February 2005. Alternatively, through the JOC process, construction can begin by the end of
August 2004.
Carivon has also provided a Proposal for the seawall scope in the amountof$419,470. This
proposal includes the restoration of the existing rip rap, construction of new capping, and
repairs to the wood dock decking.
It is important to note that while the above referenced price proposals are being used to
estimate the total budget of the Project, the Administration is still conducting price review
sessions with Carivon, the Architect-of-Record, and the City's Program Manager with the
expectation to achieve reductions for the hard cost of the Project.
The total estimated budget for this Project is as follows:
Fire Station No.4: Total Already To Be
Appropriated Appropriated
Hard Costs:
Demolition of existina structure 104,806
New Buildina Construction 2,548,401
Continaencv 254,840
50ft Costs:
JOC Coordination Fee (Demolition) 4,584
JOC Coordination Fee 38,226
Soeciallnsoector Fee 23,800
ArchitectlEnQineer Fee 394,633
CIP Office Proiect Manaaement Fee 85,073
Art-in-Public Places 25,138
ProQram Manaaement Fee 224,438
Total $3,703,939 $2,699,963 $1,003,976
Commission Memorandum
Fire Station No. 4 - Appropriation for Construction Scope
July 28, 2004
Page 5 of 5
Seawall Scope: Total Already To Be
Appropriated Aoorooriated
Hard Costs:
Construction 419,470
Continqency 41,947
Soft Costs:
JOC Coordination Fee 6,292
Architect/Enqineer Fee 21,384
CIP Office Proiect Manaqement Fee 11 ,487
Proqram Manaqement Fee 21,668
Total $522,248 $75,646 $446,602
In order to continue with the Project's construction schedule and to execute the contract with
Carivon Construction, the total identified amount of $1 ,450,578 needs to be appropriated to
complete construction of the new building and seawall project scopes.
The Project has been included in the Miami-Dade County General Obligation Bond List for
Referendum to be considered in November 2004 in the amount of $1 million.
Consequently, if the County Bond is passed by the voters, funds may become available to
reimburse the additional funding being sought at this time.
CONCLUSION:
The Administration recommends that the Mayor and City Commission appropriate funds, in
the amount of $1,450,578, for the construction scope of the new Fire Station NO.4 building
and the Seawall repair and restoration scope.
JMG/RCMITH/JEC/ar
T:\AGENDA\2004UuI2804\Regular\FS4 Construction Appropriation Memo 072804.doc
Miami Beach Fire Station #4
Construction Cost Impact Summary
July 20, 2004
Attachment 1
MCHarry Associates
2780 SW Douglas Road
305 445 3765
$1,800,00
$3,500.00
$5,600.00
$17,500,00
$1,000.00
$1,000,00
$1,500.00
$10,500,00
$33,000.00
$1.750.00
$77,150.00
$20,831,00
Fire fighters
The Station was expanded by approximately 600 Sf. to the South: Cost per Sf.
from 75% $262/sf
Add~ion of the vehicle exhaust extraction system
Add~ion of partial height wall to provide individual bunk rooms
Also needed more skylights because of additional Dorm space
Inclusion of fbuilt in cabinetry, storage and TV stand
Sub-total
General Conditions + Overhead and profit
ITotal for additional firefighters Requirements
HPB Issues
Glass blocks were added on the West elevation at the South end
Wall with "Breeze Block" type openings was added as the generator screen wall
at the West
Exterior walks and paving was revised to include colored concrete in lieu of a
typical sidewalk construction,
A paved area in front of the Apparatus bay was added at this point
Change walks to brick pavers in lieu of typical walks
Landscape screening material was added and the backflow preventor,
Addition of plantings add Irrigation
Additional plantings and curbs added along 69 Sl. and within the site
Shade trees were added along the bay, Relocated trees were also re-
oriented to front the bay area.
Addition of plantings add Irrigation
Palm and Gumbo Limbo trees were added along the street in accordance
with CMB design requirements
Revisions to site plan layout
Retaining wall to separate "back yard" and future promanade
Relocate backflow preventor to a less conspicuous location
Sub-total
General Conditions + Overhead and profit 27%
ITotal for additional HPB Requirements
$97,981.00 I
$157,200.00
$29,800.00
$7,000.00
$4,000.00
$9.000,00
$207,000,00
27% $55,890,00
$262,890.00 I
$3,500.00
$1,000.00
$1,500,00
$2,000.00
$2.000,00
$10,000,00
27% $2,700,00
$12,700.00 I
$373,571.00 I
$1,708.00
$21,926,00
$2,417,00
$4,864,00
$24.000,00
$54,915.00 I
$428,486.00 I
CMB plan reviewer requirements.
Additon of 2 smoke doors in the hailway
Both include panic hardware
Provision of special detectable warnings on curbramps
Add~ion of a concrete walk to the West, egress to street
Additon of walkway at South parking lot, acces to promenade area from this lot
Add site walkway lights at exterior walks for egress
Sub-total
General Conditions + Overhead and profit
ITotal for additional CMB Requirements
ITotal Construction
AE Additional Services as authorized
Permit Expiditing
Special Inspector
CMB landscape changes
Paver and walkway changes
Building expansion
I Total AE Additional Services
IGrand Total (added construction costs and AE fees)
Attachment 2
Industry Articles Referring to Recent Changes in Prices of Construction Materials:
Miami Today News - Week of May 20, 2004:
"Homebuilders getting slammed by cost increases"
by Samantha Joseph and Sherri C. Ranta
The Business Journal- March 19,2004:
"Testing builders' mettle: price hikes buff costs"
by Darcie Lunsford and Ed Duggan
Multi-Housing News - July 1, 2004:
"Through the Roof'
by Keat Foong, Executive Director
The Construction Legislative Week in Review - March 4,2004:
"House Committee to Look at Steel Prices - AGC Submits Testimony"
by Brian Deery
Nes-Press.com - May 6, 2004:
"Shortage to be felt in pocketbooks: Contractors seeking ways to cope with disruption"
by Dick Hogan
(,:~ [VIIAI'II TODA)'
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Homebuilders getting slammed by
cost increases
By Samantha .Toseph and Sherri C. Ranta
Concrete prices are likely to rise 30% in the next six months,
driven by a statewide shortage of cement, which is used to create
the fundamental building material.
Also, rising gasoline and diesel prices are expected to lead to a
50% increase in a fuel surcharge for every load of concrete
hauled to building sites, said Adonel Concrete president Luis
Garcia.
Three price increases by January will add at least $20 to the
cost of a cubic yard of concrete, suppliers say. Each unit now
sells for about $55 but could reach $60 after a July 1 hike.
The increases would translate to a $15,000 hike ofthe cost for
the foundation on a 3,OOO-square-foot home.
And builders warn that other rises may be in store for
homebuyers.
Adonel and other suppliers implemented a $5 fuel surcharge in
July for every load of building material delivered. Within weeks,
the surcharge could reach $7.50.
The growing costs have led to skepticism among some
potential homebuyers who have put off purchases, Mr. Garcia
said,
"Things are slowing down," he said, "It's already happening,
and what developers might end up doing is building smaller, more
affordable housing."
Continental Concrete and Supermix collaborated this month to
produce 3,000 cubic yards of concrete in a project that would be
too large for them to handle individually.
At Adonel, the shortage means nixing plans to hire 40 truck
drivers this summer. It also means closing shop two days a week
to prevent layoffs.
"We're not making money," Mr. Garcia said. "We're just
breaking even."
Rapid inflation in wholesale prices of building materials during
the past 18 months could catch builders off guard, said one local
developer.
Annual cost increases of 3% to 5% are projected in the
construction industry, said Tibor Hollo, Florida East Coast Realty
president and chairman, But costs of some materials are much
higher now than many area developers and builders would
expect, he said,
In a review by his company, Mr. Hollo said, it found that steel
costs have increased 50% in the past seven months. Costs are
up for other core materials such as wire strand, cement, gypsum,
steel studs and plywood, Concrete costs are up 31% and gypsum
costs 33%.
"While the tremendous growth in China and the rest of
Southeast Asia is seen as the primary catalyst," he said this
week, "there are many additional factors such as the weak dollar,
rising energy prices, insufficient shipping resources and
reluctance on the part of foreign manufacturers to play ball with
the US given the protectionist posture ofthe Bush administration.
"Add this to the above-average demand for materials," Mr. Hollo
said, "and you might call it the perfect storm in terms of all these
factors rising all at once to create these extraordinary spikes in
prices as well as shortages in supply,"
Knowing about and anticipating increases can prepare
developers for cost adjustments, but many units that are pre-sold
may force developers to take a loss, he said.
"Lots of people, when they realize what's happened to their
.rti~'..IQ....'ij
.. Homebuilders getting sl,
cost increases
.. Mia m i Beach officia Is ha'
about Watson Island prc
.. Developers, conservatiol
over development boum
.. Miami Beach office marl<
signs of life
.. Aventura businesswoma
India-US chamber
.. Grand Prix promoters pc
Miami
.. Archaeologist working 01
reopen Miami Circle to p
costs and they are unable to adjust their pricing, they will not
proceed with construction," Mr. Hollo said. "As they do, supply will
be more plentiful."
Mr. Hollo said this week that he doesn't expect costs of
construction materials to go down much. People in the industry
will adjust and condominium prices will reflect the higher costs, he
said.
Developers and builders are feeling the material shortage, Mr.
Hollo said, Some builders have been waiting for foundations to be
poured for more than a month, Foundations, as thick as 9 feet,
require a continuous pour and about 2,000 yards of concrete, he
said,
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From the March 19, 2004 print edition
Testing builders' mettle: price
hikes buff costs
NEW!
>> C.Qmpjll]i!1~llLtM_news
Darcie Lunsford and Ed Duggan
Steep hikes in steel prices nationwide - on some products as much as
200 percent - are straining South Florida contractors and pushing up
the cost of construction projects.
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In the past six months, Long said, the cost of rebar - steel frame and
metal conduit to hold wiring - has jumped by more than half in South
Florida.
These spikes continue to make bidding projects difficult, he said.
Contractors must build in wiggle room to accommodate the rising
prices, Long added, because post-bid adjustments anger clients.
Building 'bones' rising in price
"In 24 years I've never seen anything like this," said Gary Shear,
president of Miami-based Shear Design & Construction. "Wire mesh,
rebar, steel studs - the prices have just exploded. Everything to do
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with the 'bones' of a building is going up."
The increases are not confined to steel.
"Plywood has doubled in price from $13 to $26 a sheet over the last
six months," Shear said. "Drywall is up 20 percent in three months.
Concrete went up 1 0 percent on Dec. 31 - and my roofing
subcontractor just called and wants to renegotiate his contract because
his prices have all risen."
Some buildings may actually have to be redesigned to compensate for
huge price swings, which can amount to several hundred thousand
dollars on major condo and commercial high-rises, said Centex
Rooney's Long.
Members of Associated General Contractors or-America (AGC), a
construction trade organization, report steel price increases ranging
from 20 percent to 196 percent, depending on the product, in the last
two months. AGC also reports delays in securing certain steel
products, regardless of price.
Steel woes could tum profits to losses
"The steel industry is truly spinning on top of its head right now," said
Mike Benge, president of Denver-based ABC Coating, a large,
national producer of reinforcing steel.
Contractors and builders often bid jobs with narrow profit margins.
The rapidly rising price of steel could turn those narrow margins into
growing losses.
"For residential projects where many ofthe units have been pre-sold
based upon old prices, there may be problems ahead," Shear said.
E-mail Real Estate Editor Darcie Lunsford at
dlunsford@biz}ournals.com. E-mail residential real estate writer Ed
Duggan at eduggan@biz}ournals.com. Erin Johansen, a reporter with
The Denver Business Journal, contributed to this report.
@ 2004 American City Business Journals Inc,
". Web reprint information
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. ?0041;<:lit()ric:llc:;alerl<:l13r
. 2004 Multi-Housing
News Media Kit
The Market
l;<:litQri13J
Qalendar
Circulation
Resources
360 Marketing
Rates
Through the Roof
Skyrocketing Bldg.-Material Costs Cut Profits, Could
Curtail Apartment Development
By Keat Foong, Executive Editor
JULY 01, 2004 -- Orlando, Fla,-In just the past
three months, prices for building materials have risen
sharply across the country, and the effects of this
inflation on multi-housing developers have been
severe, cutting painfully into the profit margins of
many.
IllIZI
Developers said that if the inflationary trend
continues much longer, they expect the number of
new development deals getting done will decrease
substantially: The skyrocketing prices "simply make
multifamily rentals very hard to underwrite because
the margins are so very thin," said Steve Patterson,
CEO and president of Zom Cos., based here.
Agreed Andy Miller, senior vice president of the
Phoenix office of Picerne Real Estate Group: "[The
pricing increases) will make justifying new
construction increasingly difficult. Many apartment
developers, in justifying new construction, are having
to bet on future rent increases."
So just how much have prices escalated and for what
_types of materials? The National Association of
Home Builders (NAHB) reports that lumber, steel,
oriented strand board (OSB) and plywood have all
seen steep price jumps, and cement shortages are
beginning to be experienced in Florida and could
soon affect other states,
Price increases are also beginning to be seen in
many other products such as drywall, insulation and
the products that use lumber or steel, such as
cabinetry, doors, wood trim and hardware.
Craig Green, vice president of development
operations at Taplin Development, based in Fort
Lauderdale, Fla., said that over the past six months
steel rebar has increased 40 percent, structural steel
by 50 percent and plywood has doubled to $23,99
per sheet today compared to $12.99 to $15.
"Costs have really skyrocketed. They have started
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going out of control," said Green.
Some builders, in fact, have reported increases of up
to 100 percent over the past year in the price of
rebar, according to NAHB.
Other frightening facts: In April, framing lumber
prices stood at $439 per 1,000 board feet-the
highest level since July 1999, according to Random
Lengths, a wood-products industry trade publication.
The wholesale price for a 4'x5' sheet of OSB rose
from about $6 at the beginning of April 2003 to more
than $26 a year later, NAHB reported,
Don Gause, senior vice president of Aliso Viejo,
Calif.-based Shea Properties, which has three multi-
housing projects totaling about 1,200 units under
construction; noted that overall hard costs for a 340-
unit apartment community under development in
Ventura County, Calif. have increased by 12 percent
since construction began.
Gause said the hard-cost increases are reducing
total cash-on-cash returns by as much as 30 percent.
"That, clearly, is substantial," he said.
Material World
What are developers doing to combat the effects of
these spiraling costs? One obvious solution is to
pass the cost on to the consumer.
Greene noted that to deal with the pricing spike, his
company raised proforma rents from $1.23 per
square foot to $1.45 at a 376-unit high-rise/garden-
style apartment in Fort Lauderdale, Fla. financed
under the FHA 221 (d)(4) program. Fortunately for
him, he said, the community is on the water and can
support the increased rents.
Many other developers, however, will not be so lucky
in terms of their ability to move rents aggressively.
But there are other steps developers can take to try
to ease the pricing pinch.
One approach, naturally, is to use less expensive
materials. For example, Tom Dolan, vice president of
the New York-based Sterling American Property Inc"
which has developed thousands of Class A units
across the country, said his company is looking for
cheaper substitute materials. The NAHB Research
Center is looking to help developers such as Dolan
by providing information about alternative, lower-cost
materials: non-structural sheathing, fiberboard and
cementitious boards, etc,
Still, that may not be a feasible solution for all
developers. Harvey Hernandez, president and CEO
of H&H Development Co. in Coral Gables, Fla.,
suggested that building codes in Dade and Broward
County, Fla, may not allow the use of those
materials,
.\",
Rather than using different types of materials, others
are looking to unconventional construction
processes. Bob Koch, founding partner of Fugleberg
& Koch Architects, explained that two projects he is
working on are testing the use of modules-
prefinished 60'x10'x15' boxes that are transported to
the site and assembled and stacked to create the
building, Built offsite in Canada, these modules
reduce the construction time and circumvent higher
building materials costs in the U.S.
And as a result of the steep rise in steel prices, many
developers are considering using post-tension
concrete reinforcement systems in high-rises rather
than mild steel systems, noted Daniel Marquardt,
principal at Thornton-Tomasett Engineers,
headquartered in New York.
Based on a highly stretched cable system, post
tensioning uses one-third less steel, said Marquardt.
"It looks like that's where [residential high-rise
construction] is going," he said,
Marquardt noted, however, that the downsides to
post-tensioning systems are that they use more
skilled labor; the thinner and less level concrete slab
floors may need a leveling agent; and there are
limitations on where plumbers and electricians can
drill holes in the building structure as inappropriate
drilling can pop the cable tensioning system.
Supplier-Side Economics
Another key strategy developers are pursuing is to
revise they way they deal with those who purchase
or provide building materials.
Shea Properties' Gause, for example, said he is
contacting suppliers and contractors to obtain their
predictions on pricing trends-for example, getting
their expert opinion on when a particular product will
be in peak demand and therefore at a peak price.
Shea then times its buys accordingly.
Shea is also is buying in bulk some materials that
can be stored-such as drywall, Sterling American,
too, is "locking into contracts where we are able to
take advantage of bulk purchasing," Dolan said
And speaking of bulk buying, Koch pointed out that
when choosing contractors, bigger may be, if not
better, then at least more cost effective. National
account contractors can usually negotiate better
prices (and are more able to get their hands on
material in short supply) than smaller contractors that
rely on a local lumber yard or cement plant.
Kamy Molavi, partner at the law firm of Seyfarth
Shaw LLP, advised developers to minimize any delay
between the time of the contractor's estimate and the
signing of the contract.
"Problems arise when prices go up before the
contractor can get a chance to purchase the steel,"
Molavi explained, adding that some state laws allow
suppliers to come back to contractors to ask for a
price adjustment even after the contract is signed.
"But if the general contractor is able to purchase all
the materials in a timely fashion, the owner would not
even hear about price increases [over the course of
the development]."
No Relief Before '05
Unfortunately, developers may have to deal with the
effects of rising prices for a while yet. According to
Michael Carliner, an NAHB economist, the high
prices for building materials are generally here to
stay through the end of this year.
Among the prices that are more likely to come back
down in 2005 are those for aSB and plywood-
materials whose increasing cost is due to lack of
production capacity, Carliner indicated. It will take a
while to build the additional capacity, but as it comes
online, the prices of those products should moderate.
The rising price of steel results in great part from
China's super-heated economy. As the economy in
China is likely to slow down next year, this should
take the pressure off steel prices, said Carliner. But
he warned that economies in other countries may
pick up to compensate for the slack. And the effect of
higher steel prices on other products, such as
household appliances, have yet to fully filter through
to developers, he said,
As for the cement shortage, much of which is due to
shortage of shipping lanes and ships, Carliner
indicated that the situation likely will get worse and
spread beyond Florida to other hot construction
markets before it gets better.
And NAHB maintains that the 27 percent duty
imposed on lumber imported from Canada (which
supplies more than a third of the lumber used by US
builders) is keeping lumber prices high; Canada is
currently appealing these duties.
Not as Bad as All That
While many developers see the current
pricing surge as a serious-if not
downright dire-impediment to profitable
development, the situation affects some
property types less negatively than others.
Condominium developers, for example,
have two advantages over their apartment
brethren.
First, profit margins, generally, are
substantially greater. And second, cost
increases in condominiums can be more
easily passed on to the buyers, said Steve
Patterson, CEO and president of Zom
Coso Indeed, Patterson said many
developers are writing provisions into
sales contracts allowing for adjustments in
pricing in the event of labor or materials
shortages.
And repositionings, which, of course,
require less material than a new build,
don't pack quite as nasty an inflationary
punch. Tom Dolan, vice president of
Sterling American Property Inc., said his
company's investors have not been overly
concerned at this point about the rising
prices for its rehab projects, which have
been moderate.
Finally, some industry observers believe
the price increases have been just mildly
damaging, not devastating. Michael
Rodgers, a partner in the Atlanta office of
the law firm of Seyfarth Shaw LLP,
pointed out that cost increases of building
materials still typically fall well within the 5
to 10 percent construction-cost
contingency required of most
developments by lenders.
Rodgers cited a 300-unit condo project in
Atlanta that saw its steel costs increase by
$600,000. This constituted roughly only 1
percent of the total cost-well-below its
construction contingency. "The cost
increases will affect margins, but it is
typically not crippling," said Rodgers.
tit.. Vlant to use thiS.llrticlc?.C1 ick .hcre. lor options!
Copyright 2004 Multi-Housing News
II!lD
II1II Email the Editor
II1II HomePaCie--~
II1II, Search back issyes
lilli, Forward to a Friend
II1II, SUQ~IiI;l~1!rn;JJ.~_cribJ'1
E'rinteLr=l'~nQIy
, " " ",,' @." "
,~0,L/lL6,'~' , "-' ,'Co '"" ';';'_le;;L<WWNb&:.B:1r"i rr
ti19hway
:a Ch91rman Young
, Neaotiating a $279 Billion
Reauthorization Bill
Steel Prices
a Hause Committee to LClok iilt
, SteeLPric:es,AGCSyl;lmits
Testimony
a AG,C"Ciillls Contriilc:torslQ
, 'SubmiLSteel Pricef),m1
Availabil1!yEroblems
Municipal & Utilities
a AGC,suPPQrts Elyoget
I;. Increase Initiative for State ill'!
Revolving Funds
Human Resources & Labor
a Miiliority!,.eiilOerPled9l;!S
Action on Asllestos
l&gjslation
AGC PAC News
a AGC PAC ,Race
Federal & Heavy
Construction
a AGC Provides Solutions for
.. Federal Contractors with its
Nl;!wl;!st PYllliC:iiltiQnRl;!Il;!iilsl;!
'" ",,,,.,',' j: ,,;>:< \;j0' ~- "i~9<(:/;:'C
111 C.
IJ ._il_
: Ii
. House Committee to Look at Steel Prices- AGC Submits
Testimony
House Small Business Committee Chairman Don Manzullo (R-III.) announced this week
that he has scheduled a committee hearing for Wednesday, March 10, to investigate the
recent dramatic surge in prices for steel and other metals, and how those cost increases
are pummeling small manufacturers and threatening job creation in America.
The hearing announcement noted that according to one industry source, scrap steel
was selling for $100-$120 a ton at the end of 2003. In January, it spiked to $210 a ton
and is likely to increase another $50 to $60 by the end of February. The prices of nick!
copper and aluminum have recently experienced similar hikes. The hearing will probe
the reasons behind the rapid price surges, determine the damage those hikes are
causing to small manufacturers in America and consider solutions,AGC will submit
testimony pointing out the impact these spiking prices will have on construction
contractors with fixed price contracts and the difficulty that the uncertainty of future
prices and availability will have on the bidding process.
For more information contact Brian Deery at 703-837-5319 or e-mail
cleeryl)@f:lgc;.org.
Due to AGC's 85th Annual Convention in Orlando, Fla., there will be no CLWIR 0
Thursday, March 11. The CLWIR will resume,
in electronic format, on March 17.
AGC PAC REMINDS YOU THA T THERE ARE ONL Y 242 days until Election day,
November 2, 20041
Mark your calendars for AGC's 2004 Convention in Orlando, Florida,
March 10 - 13, 2004. For more information please click here.
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. Growth & Development - July 21, 2004
-=> E-mail Article ~ E-mail News
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Shortage to be felt in pocketbooks
Contractors seeking ways to cope with disruption
By DICK HOGAN, dhoaan@news-press.com
Published by neWS-Dress.com on May 6, 2004
Builders are looking-for ways to cope with an unexpected shortage of cement - but higher
prices for consumers and some disruptions in construction appear likely for at least the next
several months.
One builder estimated higher cement
prices - coupled with increases in
other building materials such as wood,
steel and asphalt - could drive up
construction costs for a new home by
as much as 5 percent.
Experts say contractors across Florida
are suffering from a perfect storm of
economic conditions: some cement
plants in the state are temporarily idle;
China is using a huge amount of
construction materials: and a
sustained boom in U.S. construction
this winter has strained domestic
supplies nationwide.
Richard Brown saws concrete slabs at Cement
Industries, Inc. on Tuesday. Cement, the vital
ingredient of concrete, is in short supply,
raising its prices internationally.
"It's a choke, not a hiccup,' Fort
Myers-based Cement Industries
president Gay Rebel Thompson said of the sudden lack of cement that struck Friday.
Thompson's suppliers are allocating her about 30 percent less than she could use for the
company's work as a major supplier of floors, roofs and other structural components of large
buildings.
"Hopefully everything will straighten out next week,' she said. "We're expecting literally the
ship to come in": a tanker full of portland cement is scheduled to arrive in-Miami to ease the
shortage.
Portland cement is the powder used along with rock and sand to manufacture concrete.
"I don't know how high it will go but the rumor I've heard is $10 a (cubic) yard" more than the
present price of about $70, said Mastercraft Home Builders President Paul Kaufmann. His
company builds middle-income homes in Southwest Florida.
A typical 2,000-square-foot house uses about 50 cubic yards of concrete so that's about
$500 that will start to be passed on to buyers beginning almost immediately, Along with
recent increases in building products including steel, asphalt and lumber, he said, "You're
probably looking at about 4 to 5 percent" more at most for the price of building a house. That
would be $10,000 more in building costs for a $200,000 house (at 5 percent),
But how long the cement shortage will continue to cause inflated prices isn't known, said
Michael Carliner, a Washington-based economist for the National Association of Home
Builders,
.
never
long dista
or
roaming a
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~~~~