"We figured 50% was enough money that somebody would have to think really hard before they'd ever default on that contract," Allen says, adding that debt and equity markets "have taken to it."
Moreover, Related doesn't start construction until a project is 80% sold out. But judging from the firm's activity, that isn't taking too long.
Managing the Frenzy
Overseeing the construction of so many projects at one time requires a sizable management system.
"They're extremely sophisticated," says Joe Harris, executive vice president with Moss & Associates, the Fort Lauderdale-based construction manager. "They're not naive about the budget, because they pretty much know what it is when we walk in the door."
The developer is largely able to do that via its own in-house construction expertise, which includes staffing each job with its own project managers.
"Related knows exactly what they want [and] designs a program specifically to that vision and makes minimal changes, if any, during construction," adds Coastal's Murphy. "Their approach results in a much quicker construction process, less paperwork and the ability to complete their projects and close them out on a timely basis."
That efficient process often results in construction starting in about six months after the firm has hired its construction manager, says Harris, with Moss & Associates. Similar projects for other developers may require 12 to 18 months of preconstruction work before construction work starts, which increases costs.
Although Related has a specific vision for each project, it also emphasizes collaboration. "Related views their contractors and consultants as team members with close collaboration and have created a true partnering structure," says Brad Meltzer, president with Plaza Construction, Miami. Plaza Construction is currently building Related's $187-million One Ocean and $88-million Marea condominiums, both in Miami's South Beach area.
The firm enters into exclusive contracts with select trades and suppliers. This is necessary in order to combat the tightening supply of workers and firms, adds James Werbelow, senior vice president of construction. "We're trying to secure some of those subcontractors for future work by doing bulk deals with them to leverage our buying power," he says, adding that cranes and concrete also are in increasingly short supply.
These partnering arrangements are extensive and reflect Related's market clout. With ThyssenKrupp, for instance, the arrangement covers the elevator supplier's work on 20 projects, for an estimated value of $125 million. The developer has another deal, valued at almost $135 million, with glazing contractor GM&P Consulting and Glazing Contractors and a $75-million arrangement with Maxim Cranes that locks in monthly rates for cranes and operators.
Related puts many of these "partners" to work well ahead of normal schedules—often before it has hired a general contractor.
