Owner's Rep in Real Estate Development: Instrumental in Project Success

Steve Bentley is a high net-worth individual living in Los Angeles, CA. He identifies a parcel of vacant land near his home that he believes would be ideal to build a multi-family project on. Without really looking at any other properties or running any detailed financial projections on the development, he acquires the property.

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Owner's Rep in Real Estate Development - Instrumental in Project Success

Steve Bentley is a high net-worth individual living in Los Angeles, CA. He has been making a good living for years running the family business that he inherited from his parents. Although, Steve considers himself to be a savvy investor, putting his earnings away in stocks, bonds, mutual funds, and the like, he feels that he needs to diversify his portfolio a little bit more. When the market went south in 2008, Steve's returns on his investments did as well. After researching alternative investments, he has decided to get his feet wet in real estate. He knows a couple of people in the business and is aware of the potential returns of a successful development. He identified a parcel of vacant land near his home that he believes would be ideal to build a multi-family project on. Without really looking at any other properties or running any detailed financial projections on the development, he acquires the property.

Once the property acquisition is complete, Steve hires an Architect to design his vision. You see, Steve is under the impression that all he needs to complete this undertaking is an Architect and a General Contractor. The Architect is quick to alert him that there is much more needed for a project of this magnitude. Not only will he need his Architectural Services to design this 42-unit stick-frame condo structure over podium parking, but he will also need a Planning Consultant to get the project entitled through the governmental authorities; a Structural Engineer to design and engineer the structure; a Civil Engineer to design all of the site utilities and earthwork since his parking has to run subterranean; a Geotechnical Engineer to perform tests on the soil which the building foundation will sit; an MEP Engineer to design and engineer the mechanical, electrical, and plumbing systems; an Interior Designer to design the finishes of the residential units and common areas so they are saleable; a Landscape Architect to design the outdoor hardscape and landscape; an Acoustical Consultant to make sure the sound transmissions coming into the condominiums are code compliant; a Waterproofing/Roofing Consultant to make sure the building design does not allow any water infiltration that could potentially lead to future lawsuits; an Elevator Consultant to design the elevator system; a Building Insurance Inspection Consultant because the insurance provider requires them for condominium work; and since this project is in a neighborhood that is trying to lobby for lower density, he even needs a Political / Community Outreach Consultant to deal with opposition of the local Not in My Backyard ("NIMBY") contingent.

Steve knows that he is not certified to do any of this work on his own and does not want to get sued for a construction defect in 10 years. As such he decides to hire all of these entities but doesn't know how he can possibly manage all of them. Steve has no experience in construction, let alone design and engineering. Additionally, he has blown through his budget for soft costs, which were essentially busted to begin with. As such, he decides to try and manage all of them on his own. Several months into hiring all of the consultants, as well as a General Contractor, things start to fall apart. The consultants are not producing their deliverables by the deadlines promised, the drawings reflect conflicting information, and Steve cannot even manage to get an appointment to submit the drawings into plan check with the city. The contractor forgot to submit his insurance certificate before mobilizing onsite and one of their workers was injured when performing structural excavation, city inspectors have already written several correction notices due to unsafe conditions, the contractor's hard costs are getting carried away, not to mention they are submitting numerous change orders because there were so many holes in Steve's contract with them. Everything is a huge mess and Steve needs help fast. It is now apparent that he needs an outside consultant to rectify these issues and manage the project on his behalf. In hindsight, he should have brought someone on board, possibly even before he submitted his offer on the property.

Introducing the Owner's Rep

Herein lies the need for the Owner's Representative in the real estate / construction industry. The Owner's Representative, also referred to as the Owner's Rep, OR, or simply Project Manager, is sometimes an overlooked asset that can be included in any project undertaking. The Owner's Rep bridges the gap between ownership and all other entities involved with the project. They control the design and construction process, making sure that every decision is made in the Owner's best interest. A true Owner's Rep is well versed in development as well, managing the entire development process and not just design and construction. More often than not, an Owner's Rep has a background in development themselves, so they know what it takes to pull off a successful development project and maximize their client's Internal Rate of Return ("IRR"). In turn, the Owner's Rep can use their ownership experiences to solve problems and offer creative solutions that directly affect the bottom line.

As one can see from the litany of tasks mentioned earlier in Steve's case, there are a myriad of moving parts to a development project, many of which may be a daunting undertaking for most small property owners to handle on their own. If the Owner chooses, the Owner's Rep can manage every aspect of the project, ranging from approvals to lease-up, something that individual Contractors or Consultants don't have experience handling either. Hiring an Owner's Rep is crucial and will allow the Owner to focus their time and resources on more important issues.

Acquisition

A very experienced Owner's Rep can even be brought on before the acquisition of the property, to help the Owner with things like property selection, acquisition analysis, economic studies and due diligence. They may also provide financial support, assisting in the identification of various forms of traditional and non-traditional financing sources and then help evaluate and analyze each of the options. The compilation of feasibility reports may also be necessary for decision making and reporting to various partners such as equity, banks, and appraisers, which include market research, detailed financial analysis, entitlement summaries, and justification for "go/no go" decisions. The Owner's Rep may also put together and update the project pro forma and even lead the project through the typically complex entitlement process, providing coordination with the city officials, land-use attorneys, and Architects involved.

Design

When it comes time to start the design process, the Owner's Rep will assist in selecting the design team, typically at a minimum consisting of all of the players mentioned in Steve's project above. They may create and issue a formal Request for Proposal ("RFP") to go out to several different firms, or they may rely on past relationships to select a firm that best suits the particular project. Once the project team is formed, the Owner's Rep can lead the effective collaboration towards a common goal. Again, the Owner's Rep is typically involved in every aspect of the process and spearheads the flow of information among Architects, Designers, Engineers, Planners, Consultants, Contractors, Vendors, Property Managers, Sales Staff, Lenders, Governmental Authorities and of course, the client. Due to the number of players involved in the process, the Owner's Rep should have a commanding influence to lead this synchronized effort to crystallize the design concept so that it can be built in the field. This point in the project is the ideal time to start exploring/visiting the value engineering possibilities. Value engineering is a technique in which the value of a system's outputs is optimized by crafting a mix of performance and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby reducing the cost. The Owner's Rep should work with the consultants to remove these unnecessary costs and put the money in places where it should be spent.

This may also be an opportune time to perform a LEED analysis if the client wishes to go in that direction. The Leadership in Energy and Environmental Design ("LEED") Green Building Rating System, developed by the U.S. Green Building Council ("USGBC"), provides a suite of standards for the environmentally sustainable design, construction and operation of buildings and neighborhoods. Several Owner's Representation firms have LEED Accredited Professionals ("LEED AP") on staff, which have the capability of analyzing a design and driving it to LEED certification.

Procurement

The Owner's Rep may prepare and maintain a Master Cost Report if the client so chooses, which includes the hard and other related development costs, such as acquisition, design & engineering, permits & fees, legal, FF&E & OS&E, administrative, sales, and marketing costs. This budget should include allowances for any anticipated cost exposures.

Prior to construction, the Owner's Rep can interact with the proper authorities who have jurisdiction to secure the necessary project approvals and permits. Having the design team do this alone may prolong the process as they do not exhibit the same urgency due to their lack of ownership in the project. Many times an Owner's Rep is needed to facilitate this coordination effort in a timely manner. They will also orchestrate all of the contractor bidding and trade buyouts. Whether the plan is to use a General Contractor, several prime Contractors, many direct Subcontractors, or any combination thereof, formal RFP's should be issued and sent to at least three different contractors for each trade to ensure sufficient coverage through competitive bidding. All returned bids should then be thoroughly vetted and a comprehensive bid comparison presented to the client prior to awarding any contract. After this "apples-to-apples" bid comparison has been compiled for a particular trade, negotiations will commence to establish a complete scope of work that is cost effective.

Many times, in order to save costs, materials and equipment may be bought directly through a purchase order to the client. Similar to the trade work above, pricing should be obtained from at least three vendors to ensure sufficient coverage through competition.

Construction

The Owner's Rep should prepare and maintain a Master Construction Schedule which incorporates all construction activities, procurement, material lead times, submittal lead times, approvals, permits, inspections, tenant relations, logistics, sales, marketing and turnover to the end-user. Weekly meetings should typically be held with the General Contractor and Subcontractors to review three-week or six-week look-ahead schedules.

The Owner's Rep should also maintain a working history set of all project documents in the field, including drawings, specifications, requests for information ("RFI's"), submittals, sketches ("SK's") and all relevant tracking logs. Every RFI response needs to be posted onto the drawings to ensure not only proper quality control in the field, but also a complete set of as-built drawings that can be turned over to the client at the end of the job. Additionally, the Owner's Rep should review and provide insight to every submittal, RFI and SK that comes through to make sure everything is warranted and properly clarified. In addition to document control, the Owner's Rep should also provide quality control in the field. In most cases a Superintendent should be part of the OR's staff, walking the job every day, from start to finish. This supervision is key to having a successful project that is built per plan and spec. It is also imperative to have a Superintendent to manage the field labor so that manpower stays at a consistent and productive level.

The Owner's Rep should make sure that each contract carries a complete scope of work in order to minimize the amount of change order requests coming in from the contractors. When they do arise, a thorough review and negotiation will take place to determine the validity of the request prior to approval.

The OR's superintendent should work with the Contractors as they prepare and go through the many inspections required by the authorities having jurisdiction during the construction process with the end goal being to receive final building certifications.

Accounting/Cost Control

As invoices, or monthly applications for payment, come in from the Contractors, the Owner's Rep should review prior to recommending payment to client. It is beneficial to work with each of the Contractor's in preparing their schedule of values during contract negotiations to maintain a proper breakdown and format that is consistent and comprehensive for the client during billing. During these billing periods, the OR should also request and gather all conditional and unconditional waiver and release of lien forms from all Contractors, Subcontractors, and Sub-Subcontractors for progress payments and final payments. If payments are made correctly, this will protect the client from having mechanic's liens recorded on their property.

Every month, as part of the Master Cost Report, a complete cash flow analysis and draw schedule should be updated and presented to the client, projecting costs on a month-to-month basis so that the client has a clear and realistic schedule of anticipated expenditures and bank draws. This service can range from general oversight and direction as to timing the cash with request, and move all the way to full control of the project's cash management in a fiduciary position.

Project Close-Out

As construction nears completion, the Owner's Rep should provide a punchlist of all completed work. A punchlist document will be generated listing those items of work which have been observed as incomplete or requiring correction. The contractor then finishes the items on this list before Final Completion may be declared and final payments authorized. Also, near the end of the project, the OR will gather and compile books of all applicable product manufacturer and workmanship warranties, along with all applicable operations & maintenance ("O&M") manuals for the end-user. In residential construction, these can be put together to be turned over to the individual homeowner, the homeowner's association and/or the property management firm.

For a residential project, one must be cognizant of the Department of Real Estate ("DRE") requirements. The Owner's Rep should be involved with all DRE Filings, creating an itemized checklist of all relevant requirements and then tracking each of these items to ensure that nothing slips through the cracks as a project approaches its various tract map and condo permitting processes.

Sales/Marketing

Some Owner's Representation firms may have the staff and experience to aid the client with sales, marketing, and/or lease-up, either directly or indirectly by providing oversight. They can help identify a competent and appropriate sales team and establish sales and marketing strategies to be used for the project. Particular importance should be placed upon helping the client devise a sales and marketing campaign which helps the project differentiate itself from the competition and attract the right type of customer to the sales team.

If there is a "for-lease" component to the project, an Owner's Rep may be able to source and procure various potential tenants for a client, as well as negotiate the terms of their lease. A savvy Owner's Rep can provide a detailed lease analysis, abstracting and reporting in-place or proposed lease documents, making sure to identify the major deal points and lease clauses which impact the financial results and flexibility of the project.

Conclusion

In broad terms, the Owner's Representative will be the direct representative of the client, spearheading all aspects of the job and recognizing and solving conflicts. When complex issues arise, they will explore all options available, distill the information, and provide the client with a concise set of options, clearly defined, along with a recommended course of action.

To reiterate, the Owner's Representative is a critical team member to any successful real estate development project. As noted earlier in Steve Bentley's case, poor decisions can easily be made by property owners simply because they do not fully understand the issues at hand and have experience with the processes. Sound advice to any property owner or prospective property owner looking into any type of development venture is to consider including an Owner's Rep on the project team. More times than not, the client will discover that the time, money and hardship saved by having an Owner's Representative involved will more than pay for the OR's fee.

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Alan Parsons Project - Sirius Eye in the Sky (Live 1995)

After showing early promise as a musician - learning piano, guitar and flute as a child, Alan started to take on the role of listener rather than the player. Although still working as a musician in the late sixties he turned his attention to a career at the famous Abbey Road Studios in London, where he was fortunate enough to have participated in the last works of The Beatles. He was assistant engineer on "Let It Be" and the brilliant "Abbey Road" album. A long association followed; both with the studio and Paul McCartney. When the Beatles split up, Alan went on to engineer such classics as Wings "Red Rose Speedway" album and the singles "Hi Hi HI" and "C Moon". He had a similar association with The Hollies on many hits including "He Ain't Heavy He's My Brother", and "The Air That I Breathe". This was only the beginning however; As the engineering mastermind behind Pink Floyd's "Dark Side of the Moon" album, Alan became highly sought after as one of the new breed of creative engineers. His decision to enter into production resulted in immediate success. He clocked up several hits with Pilot, Steve Harley and Cockney Rebel, John Miles, and Al Stewart. With all this success, Alan found a very real need for management and business guidance. It was then that Eric Woolfson, with whom he had worked at Abbey Road, became actively involved in steering Alan towards becoming an artist in his own right. Although they started with a business venture, Eric was to use his songwriting ...

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Contingent Project Management - A Definition

In an IT systems context, contingent project management ("CPM") is the ability to select an appropriate methodology to apply to and successfully deliver a project, tuning the method as the project proceeds. 'Contingent Leadership Style' is analogous. Wikipedia (Fiedler) provides an explanation of contingent leadership.

Yes, a project manager can have a contingent leadership style, but may not have a contingent project management approach.

Let us look at a range of project management framework processes:

Waterfall (gather requirements, design, build, test, deliver, train) - the 'traditional' way of building systems. This worked well for systems where the rate of business and technology change was low, having grown out of engineering and construction. It still works well in a construction (civil engineering) context, where generally, the rate of technology change is low. Requirements of a building may change during construction, but the rate of scope creep is still low as compared with many IT projects. In the right circumstances, it can still work well with IT projects.

Agile methods (gather and prioritise requirements, design a prototype, test, deliver, re-cycle - design, build, test, deliver, train and go live). On the scale of low risk/low complexity to high risk/high complexity some of the methodologies would be: XP, Scrum, DSDM ®, RUP ®. Note that risk and complexity do not always equate - some low complexity systems can have profound organisational risk associated with them.

Prince ® could be used in either of these contexts for governance of the project on a wider organisational scale, or locally on a smaller scale. Indeed, the advent of Prince2 moved the methodology into a wider non-IT specific context.

Agile methodologies are most appropriate for example where requirements are unclear at the outset, and/or the technology is new or being stretched, and/or a new business model is being adopted (to name just a few reasons). The range of Agile methods also relate to scale of project and team size.

Sophisticated organisations may have their own 'pet' methodology, maybe having invested heavily (financially, managerially and politically) in developing their way of doing things, even 'branding' the methodology. After all this investment, they will want to 'sweat this asset'. Projects will have to fit into the corset they impose - this can cause strangulation at the extreme, building a high probability of failure into a project, even before it is initiated.

After all, Prince ® was developed in the UK Public Sector (and the UK Government still has massive problems delivering projects). At the top end of projects, Prince is often seen as excessivley bureaucratic, but it shouldn't be like that. CPM should ensure that the appropriate processes are selected for a project and that they are applied judiciously so that the project is not strangled by administration and red-tape.

This choking of projects by heavy methods was observed by the author in an investment bank. The project managers running a large number of smaller projects were unable to meet the centralised project reporting requirements imposed on them, leading to frustration in the managers, frustration in the programme office, and frustration in and with the 'methodology police'. The recommended solution was to

- Prioritise the projects according to risk (measured on several dimensions), report project status on an 'exceptions' basis, and tune reporting frequency to project risk.

This levelled the project managers' workload, and the centralised need for control of risk and comfort.

So, what of contingent project management?

It is clear that a significant degree of experience is necessary to be able to select the appropriate methodology for a project, and the programme board is not always best placed to decide for reasons mentioned earlier - investment and political capital for example.

An effective project manager will have

- the wisdom and experience to select the correct tool for the job based on his or her perception of the risk profile; the ability to persuade the programme board or sponsor of the relevance of the methodology and the basis of selection; worked with a number of methodologies experience enabling the 'heavy' or 'light' touch application of a methodology; an innate sense of the risks and their relative salience, meaning that a focus is developed and maintained on the things that matter; finally, the ability to dynamically tune the methodology to circumstances without loss of control (finance, timeline and quality), as the 'things that matter' change

Dynamic tuning means applying the tool judiciously - some projects may require very high levels of stakeholder communication, others will have to be highly focused on technology/ performance and proof of concept, others may have political governance issues, new or immature business models, and so on. Some projects, of course, will exhibit all of these risks and more beyond. This list and balance of risks will change significantly during the lifecycle of the project. In addition to ongoing Risk review, CPM requires ongoing process review and change.

How is it that more than 30% of projects fail? It is because failing projects continue in the same old vein, without contingent project management being deployed and the management not responding appropriately to changes in risks.

Contingent Project Management is really straightfoward in principle: adapt and survive - that is, Darwinism. To apply it successfully requires a great deal of experience and flexibility.

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Dealing With Multiple Activities in Civil Engineering Project Management

Project engineers have to deal with multiple tasks at once. It may seem overwhelming at times, especially when you may have 10 to 20 active projects under your control.

It is imperative that project managers understand the status of each project, their urgency and deliverables. It also seems the better you are as a project manager, the more projects you have to handle at once.

When you manage multiple projects it is vitally important that you understand the final time deadline (the delivery date) and the overall budget.

Ultimately, the client is interested in two things, when can I have it, and how much will it cost. If you can satisfy time and budget constraints, milestones (as per the client's expectations), you will be 'held in high esteem' by your client.

In order to manage and juggle this many projects, it is vitally important that you understand 5 things ...

The final deadline and budget (
The importance and priority of the project
The overall tasks - High Payoff Activities, and Low Payoff activities.
Activities that can be delegated or outsourced.
Your role as a project Engineer / manager.

1. In order to effectively manage multiple projects, you need to understand your total workload , and compare the projects deliverables. This is usually done using a project planner, or project management tools such as Microsoft Project. Once all projects are considered, hopefully not all deadlines and deliverables are NOT due at the same time. The Tip is to find out the REAL deliverable date. Often when a client is asked when they need to project completed, they have a buffer built in so they can 'sit on it' for a short while. If you establish the real activities that will follow the 'deadline', you may be able to safely extend the final date with the client - with no detriment. If this is not the case, at the least you will find out the importance of the final date.

2. Not all projects are as important as each other. Some projects have other consequences, and tasks that cannot be achieved without the delivery of the initial project. Without sounding callus, you definitely want to look after your most important clients who have constant work flow and pay well and on time. In most cases, it is these most valued clients that should be looked after as priority number 1, as they are your 'bread and butter'. . Keep them happy and your business should continue to motor along. At the same time you need to take good care of new clients who may have millions of dollars in future work for you depending on your performance. They will usually not display all of their cards to you, so the best thing is to make sure you look after them and meet your deadlines. Ultimately you don't want to spend 100 hours on a project that is only worth 50 hours payment. It is fine balance between current and potential future work. The trick is to recognise project importance early , and their future work potential.

3. Within many projects there high payoff activities and low payoff activities. High payoff activities are those that will get the most benefit out of there completion, and low payoff activities don't generate too much benefit at their completion. The tip is to recognise which activities / tasks are high payoff activities right at the start of the project. It is these activities that should be given the priority and attention they deserve. Low payoff activities could be either tackled later, or delegated to others (it is important however to monitor the progress of low payoff activities otherwise they may be forgotten until the end - or at a critical time). Constant updates to the overall task schedule is a great way to stay on track and monitor your progress on each project.

4. You don't want to spend your valuable time on low payoff activities that can be done by others. Project management is also about delegating or outsourcing activities that are better completed by someone else. Sometimes it is better to outsource a 'time consuming complex design' to an expert in the field, while you manage the process and the overall project. The old saying "if you want something done right you have to do it yourself" is not always the case in engineering and project management. You need to recognise and do a cost analysis on your time and cost on their cost (and delivery time). While they are completing the task, you could be working on or managing another high payoff activity, which will ultimately allow an overall timely delivery of the project.

5. As a project manager, you should be generally 'managing' the project, and should not be 'in the trenches digging the holes'. That is the job for the 'soldiers' or workers under your control. It is however important that you understand their skills and what they should be delivering for you. By 'staying on top' of this element (periodic meetings and minor milestones), reduces the frustration of you having to 'check and change' their progress. It is your responsibility to deliver , so you should ensure all things are moving ahead in a timely manner, and communicate effectively and regularly with your team, and your client.

Utilising each of these 5 areas will help organise your 'juggling act'. Hopefully all of this makes sense, and you are able to apply it in your role. Even if you are not yet project managing, you can still apply some of these principles in your engineering career.

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What Are The Common Problems Encountered On Project Management Work-Civil And Structural Engineer?

Reading Level: Intermediate

One of the tasks of civil engineer is the project management. Wherever a project commence, it is starting of 'live' of project problem until it has been completed build. Below are some of common problems that civil engineer may faced:

1. Project commenced without acknowledgment of civil engineer. It is common especially for small scale of project; such as single unit of structure like bungalow. Engineer will only alert whenever problem is happened at site; and problem is unable to resolve it by contractor. Contractor will like to build it without interruption of engineer.

2. Even though civil engineer aware about the construction work, some of un- responsible contractor will try to do some work in the time that engineer is unable to present. As for example; contractor carry out the concreting work after office hour especially in the evening, nighttime and public holiday. Once concreted, engineer is unable to inspect it.

3. Whenever construction started, un-experience contractor will do work by referring to civil engineering drawings without read in-conjunction with other professional drawing such as architecture, mechanical and electrical drawings. As a result, there will be a number of hacking during or after completion of structural works. It incurred a number of arguments and costs.

4. Even though an inexperience contractor is read engineering drawings, somehow contractor is build to their own knowledge; especially from contractor previous project. If previously contractor had been built a number of pad footing foundation, contractor obtain a piling foundation project. The contractor will try to change it to pad footing foundation by his own knowledge. Or even in pad footing foundation, contractor will change pad footing to smaller size. It will end up with structural problem.

5. Some irresponsible contractor will ignore engineer instruction. Contractor will build to his own knowledge. Contractor will always persuade client that contractor is builder. Contractor tells client that he is more site experience than civil engineer. Engineer has not much site building experience. Most of the time, client will agree with contractor because contractor shown client with physical construction works and engineer without much of physical product. These will continue until problem happened and unable to resolve by contractor. Finally, they will seek for engineer advice.

6. Contractor perform cost cutting on project work. Now days, project cost is very competitive. In order to obtain a project by bidding, some contractor may lower down the bidding cost to below the cost. When project is awarded, contractor will perform unnecessary cost cutting. This will endanger client.

7. When client is contractor and contractor is client, civil engineer will be in difficult position on dealing with client and contractor. There will be always in conflict of interest.

These problems may faced by civil engineer. How to overcome them will mainly base on engineer experience. Junior engineer shall not advice to send them to resolve these matters. Anyway, junior engineer shall be in guidance of senior engineer whenever problems are being solved.

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