Miami Beach, Fla.—After months of delays, expensive changes to construction plans, and an acrimonious lawsuit against the general contractor on its Regatta condominium development here, G&D Developers vowed not to repeat its mistakes.
The 52 condominiums in Regatta’s first phase were finished this February at a total development cost of $33 million. That includes $25 million in hard construction costs. At $180 per square foot, the hard cost was $40 per square foot more than G&D had expected to pay.
Although sales made up for the extra costs, bringing in an average $100 per square foot more than the developer’s pro forma estimate of $350, the company resolved to keep construction costs under control in Regatta’s second phase by giving its next general contractor a stake in the development.
This time around, G&D chose a general contractor with whom the developer has successfully worked with before: Avi Weintraub, founder of the Weintraub Cos. G&D made Weintraub a co-developer, a role that came with an equity stake in the development and a powerful incentive to maximize profits.
Weintraub found ways to trim millions from the construction costs for Regatta’s second phase, which will create 115 condominiums in a new sevenstory building next door to phase one.
For example, the co-developers saved $1 million by using a slab foundation instead of driving concrete pilings into the wet ground beneath the waterfront project. They saved $600,000 on the $3 million cost of the building’s floor-to-ceiling windows by including vertical partitions that will allow the glass pane to be thinner and still support itself. Costs dropped another $400,000 after the developers figured out that condominiums with north-facing windows could get away with smaller air conditioning units and still stay cool in the summer.
The changes will save the project money without sacrificing the value that the building will offer to its residents, according to Fernando Levy Hara, new projects and marketing manager for G&D. Levy Hara contrasts this kind of “value engineering” with simply downgrading finishes: “Changing marble to Italian tile? This is not value engineering,” he said. “The buyer will pay less.”
In some cases, the co-developers decided to spend more to add the right kind of value to the project. For example, it cost an extra $1 million to incorporate the façade of a historic building on the site, the Queen Elizabeth Apartment Hotel, into the design of Regatta’s second phase.
The work of preparing the site has begun. In October, the developers closed a $35 million construction loan from Ohio Savings Bank to help pay for the $57 million project. Developer equity will provide the remaining project cost.
Regatta 2 won’t be finished until March 2010, giving the co-developers more than two years to sell the condos at prices now starting at $270,000 for a 651-square-foot studio and rising to $1.6 million for a penthouse suite.