Friday, September 5, 2014

Atlantic Yards Squabble Could Stunt Commercial Modular Growth

When commercial developers begin a project, whether it is a man camp in North Dakota, a hotel in Atlanta or the 32 story Atlantic Yards B2 project, they care about design and aesthetics, health and safety issues and even LEED certification but the Number One thing they are concerned about is Return on Investment (ROI).

The factories that have been building commercial projects may not have a big advantage in price over site building or time from concept to moving dirt but where they shine is in time to completion. Every single day the developer can save over traditional site building means money in their pockets. Saving a month on a small project could add a couple hundred thousand dollars to their income. Saving six months on a project like Atlantic Yards B2 could mean $ millions and when that apple is dangled in front of the developer it looks damn good.

But what happens when what should be the pinnacle of commercial modular construction craps out midway to completion? Not only will it be front page material on every news and media site, it gives commercial site built contractors a huge foothold into stopping modular's rising star.

What developer, after hearing all the problems that have surfaced this past month in Brooklyn, will look at modular construction the same way they did 6 months ago as it appears that the $ millions added to ROI will now have to be spent on lawyers and court dates and the project could be set back a year or more. In that time it could have been completed using older site building techniques.

All the gains commercial modular factories have made with developers over the years could be tarnished by this single project.

Now in the latest "PR Stunt" as it is being called, both sides are beginning to dig in for a long battle while developers that were considering modular as a possibility are now looking at it again and wondering if it might be time to wait and see what will happen in Brooklyn as there could be a legal precedent set for all future big modular projects.

Here is the latest news from Crain's New York Business coming out of the Atlantic Yards B2 project.

Skanska blasts Forest City's offer as PR stunt
Forest City Ratner wants to assume control of producing the modular units for the now-stalled work on the apartment tower at Pacific Park next to the Barclays Center.
A Forest City Ratner Cos. executive offered Thursday to take over and restart production at a jointly-run modular housing production facility in the Brooklyn Navy Yard. The move comes after a dispute with the contractor resulted in work on a modular tower at Pacific Park, formerly Atlantic Yards, grinding to a complete halt in the last week. The contractor, Skanska USA Building, subsequently blasted the letter as a hollow publicity stunt.
 MaryAnne Gilmartin, chief executive at Forest City, sent a letter Thursday morning to Skanska USA Building, the subsidiary of the Sweden-based construction firm and contractor at B2, the 363-apartment modular building slowly rising in fits and starts next to Barclays Center on the edge of downtown Brooklyn.
 In the letter, Ms. Gilmartin offers to take control of the factory, FCS Modular, which was jointly created by Skanska and Forest City to produce the modular pieces that will make up the building. The facility was shut down after Skanska stopped work on the project last week, citing problems with the modular plans. Forest City countered that Skanska did not adhere to previously agreed-upon timetables and budgets. This week, the two parties sued each other in state Supreme Court, each claiming the other had violated their contract.
 “We strongly believe, as a joint venture, we have an obligation to the 157 workers who have lost their jobs because of the unauthorized, forced furlough that you, as managing member, have imposed on them,” she wrote, indicating that a subsidiary of Forest City has been denied access to the factory.
 But Richard Kennedy, co-chief operating officer for Skanska USA, fired back that the letter was little more than a publicity stunt, since it was sent to media outlets before Skanska.
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Tom Hardiman said...


I am well aware of the dispute between the developer and contractor, but I'm really surprised by your blog on this. Are you suggesting that these problems are BECAUSE the project is modular? I do not see it that way.

Cost overruns, disputes, and execution problems happen every day in conventional construction. I'd suggest the same is true here - despite what method was chosen, the developer and contractor were not on the same page.

While the media has been focused on this ONE singular project that has again stopped, dozens if not hundreds of other modular projects have been successfully completed, including a seven story housing project in NY.

So to answer the question you posed - who would look at modular the same way now? I'd suggest its people like the ones who recently completed projects with experienced modular manufacturers and contractors,cut months off of their construction schedule, saved money, and provided a safer work environment as well.

By the way, as it sits now at 11 stories, its the tallest modular building constructed in North America in the last 40 years! If they put a roof on it now and told folks originally it was going to be 11 stories, we'd be singing their praises!

Coach said...

No Tom, I'm not implying that problems are because it's modular, I'm saying this particular 32 story project is the reason every media outlet has been focused on it hitting a snag because it is modular and unique.

The fact that it is a modular project is what's making news, not the fact that another big project has shut down. A site built 32 story project wouldn't get this much coverage.

With the stringent codes and inspections needed to build this project, there can be no question that going modular is the best way to build. It's just too bad that what could have been a shining star for the commercial modular industry is being presented so badly in the media.

The media can spin things so that even good news is bad.