Inside Third & Bond: Week 76

Time plays funny tricks during real estate development. To the outside world, nothing is happening while you’re working away inside on excavation, shoring, underpinning, foundation pours, etc. Then, the project begins to sprout like a weed, and the slowest contractor on earth all of a sudden seems hyper efficient. As you can see from the photo, our structural system has begun to rise from our slab foundation. However, if you read the comments from the past several weeks, our biggest critics want to let us know how incredibly slowly this project is going. Ethan, in particular, thinks we’re going so slowly, that we should simply quit. After all, the Empire State Building was built in a year, yadda yadda. But it does raise a fair question. Are we going slowly? Where, ideally, should we be in week 76?

When we approach a new development, our back-of-the-envelope thinking is that the time period from site control to the commencement of construction should take 1 year, and construction should take 18 months to 2 years depending on the type of project. Therefore, most projects should take 2 ½ – 3 years from start to finish, minimum. (This is a common rule of thumb in the industry. Those who go a lot faster are probably doing simpler or shlockier projects, or maybe both. Or, they took just as long but you didn’t know it.) We’re hoping to complete Third + Bond closer to the 2 ½ year part of the range, which translates into approximately 125 weeks. So no apologies here about where we are in week 76.

No doubt Third + Bond has had its share of delays and challenges, but there is a mentality amongst us that everything should happen lickity split. After all, President Obama, when is the economy going to get rolling again, you’ve been in office almost 2 months? Ethan, The What, haven’t you guys ever renovated a bathroom? We know of some kitchen renovations which took 1 ½ years. The fact is that the foundation and sub-surface work are the most susceptible to delays, and at some point, even slow jobs hit their stride and seem to spring up.

Then there are other considerations, like where the market is now and where it’ll be when we want to sell. We have another job that, when we started, we hoped would finish this past November. It’s now going to be complete in late spring, and we are way not disappointed that this job didn’t finish on time.

Another consideration is interest rates. When we made financing assumptions for Third + Bond, we assumed LIBOR would average 4.52%. Where is LIBOR now? Try 0.56%, almost 4% less than our pro forma. Our all-in rate is less than half what we projected. That interest savings helps us add many months to our schedule—not just to accommodate longer construction but to help us patiently prepare for the right time to hit the market.

There’s a certain irony with the other batch of comments we receive on a weekly basis: you guys are going to lose your shirts. If we put all the comments together, the shared vision would be: Hudson, hurry up and finish so that you can lose your shirts. So in fact, there’s an advantage to our disappointing Ethan.

Onwards and upwards…

Inside Third & Bond: Weeks 1-75 [Brownstoner]

From our lawyers: This is not an offering. No offering can be made until an offering plan is filed with the Department of Law of the State of New York.”