NZIA White Associates

Winners!

Congratulations to the many amazing projects that have won prominent awards recently. The recent NZIA Auckland Architecture Awards honoured the best new architecture in the region. The many successful projects included four we’re proud to be involved with:

And then, at the Property Industry Awards, the B:Hive won an Excellence Award in the RCP Commercial Office Property Award Category, and the Admin Building at Auckland Zoo – nominated for Holmes Tourism & Leisure Property Award!

White Associates NZ Living

Creating a successful KiwiBuild formula

At a time when the Government’s KiwiBuild housing programme has come under sharp public criticism, and has even seen the reshuffle of the minister leading it, one Auckland developer is defying the critics with the delivery of quality homes on a budget through the initiative.

NZ Living has already built and sold 10 KiwiBuild homes to buyers as part of its Mason Apartment Development in Otahuhu (pictured above), with more in the pipeline in Onehunga and Northcote.

With prices for KiwiBuild homes in Auckland capped at $500,000 for 1 bedroom, $600,000 for 2 bedrooms and $650,000 for 3 bedrooms, the onus is on developers to think outside the box to generate returns.

NZ Living, which is led by Waiheke Island-based couple Shane and Anna Brealey, has shown it can be profitable thanks to a successful business model built on effective people management and a lean system of delivery, inspired by the Japanese Kaizen approach to continuous improvement.

Shane Brealey says as both builder and funder, with one architect and one engineer on the team, NZ Living doesn’t tender or negotiate work. Instead the company takes a partnership model, which has seen it retain 90% of the team from one project to the next.

“We don’t deal with retentions and argue nickel and dimes with our contractors and subbies, but we do expect them to buy into the continuous improvement idea. This allows us to capture learnings and constantly refine our designs and building methodologies to the point we use half the amount of architectural drawings now from when we first started. It’s not about sacrificing on quality of materials or design, it’s just about a more efficient way of working.”

Graham White says that this meant that White Associates did a cost plan that was much more than a budget, and enabled NZ Living to go to the subcontractor market to validate the costs.

“When all the subbie pricing was in,” says Graham, “we reviewed the prices to ensure they stacked up. This is a great approach: not only did it save time, but Shane and Anna got the team they wanted, which is a huge advantage.”

With this streamlined, production-line approach to development, NZ Living has been able to significantly reduce costs, by Brealey’s estimate, of 50% less per square metre to build compared to a standard apartment per square metre cost. To highlight this on its last project, the development not only came in on budget but there was no need to tap into the contingency either.

Brealey says White Associates has played an important supporting role in this approach.

“Konrad and Graham were involved at the very start of our journey in validating our early designs and cost estimates, which led to ongoing support in the form of monthly reviews of our financials. What’s also been very beneficial is the fact White Associates also acts as the QS with our banks. The resulting levels of cooperation built on high levels of trust and transparency, results in an extremely efficient drawdown process for us.”

Graham White says that White Associates has enjoyed working with NZ Living over the last two years. “We went through and did a cost plan for NZ Living, reviewed the feasibility, represented the bank funding the development, and then reviewed all subcontract pricing. They are an impressive outfit – very lean and hands-on: a partnership that delivers.”

With a proven delivery formula and a supportive financing model, Brealey says he is looking forward to growing NZ Living’s scale, and building more homes as part of the KiwiBuild Programme in the future. “All we need now is for the Government to up its game with communication to the development market and relax its screening process so we can get more players helping to deliver the thousands of homes needed.”

White adds that in his view, now there has been a Cabinet reshuffle, it is pretty likely that KiwiBuild as a brand will disappear, but even under some other brand the initiative will still continue. “We still need housing at this price point,” he says. “The Government needs to support the initiative and can even do more to make more land available for development. In short, we think that the Government can do more to assist developers, and KiwiBuild – or whatever it becomes – has a role to play in helping to underwrite purchasers, free up the supply of land, and enable the intensification we need. “After all, the huge advantage of KiwiBuild to the development sector is the speed with which you can start construction, not needing to have pre-sold such a high percentage of unit. Essentially it takes the sales period down from eight months to eight hours.”

White Associates Quantity Surveyor Keystone Trust

Supporting the future of our industry with Keystone

At a time of constant pressure on property and construction project deliverability, it is exciting for us to get involved in supporting the future of our industry by signing up to become a sponsor of the Keystone Trust.

Formally the Keystone New Zealand Property Education Trust, it is a tremendous initiative that was set up twenty five years ago to give students a hand-up into property related tertiary studies.

We were attracted to the trust not just by the fantastic work that Keystone does and the stellar range of organisations it has attracted, but more importantly by the opportunity to get involved with supporting the future of our industry.

“As we cover so many aspects of the development and construction worlds, and interact with so many aspects of them before, during and after construction, for us it was a no-brainer to want to get involved in Keystone so we can learn more about, support and provide opportunities for the young people who will contribute to our shared future.”

                                                   – Graham White, White Associates Director

It was a pleasure to meet students Jay Jay and Asalemo and are really excited to meet more of the students and other organisations involved in the life of this vibrant organisation.

White Associates Keystone Trust

White Associates Quantity Surveyors Introducing Jesse-Paul Conradie - Contract, Dispute & Commercial Specialist

Introducing Jesse-Paul Conradie – Contract, Dispute & Commercial Specialist

White Associates’ Bank Funding Team has been significantly strengthened with the appointment of Jesse-Paul Conradie, who brings a powerful combination of expertise to us across a number of highly relevant disciplines that include risk management, dispute avoidance and dispute resolution.

“Jesse brings a powerful combination of expertise across risk management, dispute avoidance and dispute resolution”.

Jesse joined White Associates in January this year after moving to New Zealand from his native South Africa. He is already adding significant value to our team.

As Commercial Manager for one of the largest privately owned multi-disciplinary construction groups in South Africa, Jesse implemented commercial strategies to overcome challenges and achieve organisational goals and expectations. From negotiating contract terms to overseeing daily business operations, he has an incisive ability to lead project and commercial teams in propelling financial performance whilst observing and managing contractual obligations.

With a QS background and a talent for seeing things from the banking perspective, Jesse has already achieved a lot in his career. As QS he was part of the team constructing the 2010 World Cup Soccer Stadium in Durban. Progressing rapidly to Senior QS, he gained experience in the production side of construction, and then focussed his attention towards the legal side, studying to become an arbitrator – and duly became a Fellow of The Association of Arbitrators in Southern Africa.

After being promoted to Commercial Manager and furthering studies in project management in 2016, he obtained his professional project management certification and moved back to Liviero Group (Pty) Limited‘s head office. There, he managed a Quantity Surveying Department and looked after commercial and contracts law aspects of a business unit.

He says he is enjoying implementing solid project management principles at White Associates, which will assist with the avoidance of disputes, promote project delivery and ensure stakeholder satisfaction, but we believe he will add much more than that…

White Associates Quantity Surveyors Historic facade the centerpiece of Christchurch redevelopment

Historic facade the centerpiece of Christchurch redevelopment

In a city that has lost so much building heritage since the earthquakes, an innovative central Christchurch project is refurbishing a historic 120-year-old façade while creating a thoroughly modern and multi-purpose structure behind and around it.

A new three-level building proposed at 199-201 High Street in Christchurch consists of retail and commercial premises on the ground floor and offices on the upper floors. The $6 million project will provide new life in the city, with a cafe and shops at street level, and offices upstairs.

Shaun Stockman, Managing Director of the company behind the redevelopment, Stockman Group – which has previously featured in White Associates newsletters thanks to its excellent work on the nearby Billens Building – says that the existing heritage face at 201 High Street is being strengthened and retained as part of the northern elevation of the new building.

“The double-storey brick facade was built in the Victorian Free Style, with two bays at first-floor level, and arched windows flanked by pilasters adorned with relief work. Work to restore the facade, which is tied to the new structure, has involved renovating the facade’s bricks and stonework, and all leadlight windows repaired.”

White Associates again provided Stockman Group with bank funding representation and an initial due diligence review. Darin Bayer says that a key factor in the project’s success has been early contractor involvement.

“Things that have really made a difference on this project’s potential really have been early contractor engagement and the strong relationship between the borrower and contractor. Superb up-front planning from main contractor Canform Structures Limited, as well as the construction team’s attention to detail and uncompromising pursuit of quality, will lead to an exceptional outcome here, even as some of the challenges have been mighty, with 49-tonne beams cast on site and craned into place.”

“Superb up-front planning from the contractor, as well as their attention to detail and uncompromising pursuit of quality, will lead to an exceptional outcome here.”

Bayer says that the project is pushing along well, with the concrete floor and foundations complete, and ground floor precast panels installed. The project is due for on-target completion in early 2020.

White Associates Quantity Surveyors Creating a major community housing asset at Puhinui Park

Creating a major community housing asset at Puhinui Park

Civil works are nearing completion on an inspirational new community housing project at Puhinui Park, off Barrowcliffe Place and Wiri Station Road in Manukau.

On a previously empty site, the project involves the establishment of a connected neighbourhood, creating a high quality, medium density residential community of some 300 affordable houses and apartments in the heart of Auckland’s south.  The whole development will be known as Kotuitui Place, and is a major step forward in the overall Transform Manukau plan for the wider community in Manukau.

Now one year into development, the project is being developed over five years by the Puhinui Park Limited Partnership (PPLP), whose partners also delivered the hugely successful Waimahia Inlet development.  The whole development has been planned in collaboration with Panuku as the previous land owner and with mana whenua Te Akitai Waihoua, who will build and manage 30% of the site (after the initial civil and earthworks stage by PPLP) through the Kotuitui Limited Partnership.

White Associates is providing bank funding representation to this experienced PPLP development team through the Bank of New Zealand, which comprises charitable entities Housing Foundation, CORT Community Housing, and Te Tumu Kainga (the Maori Trustee).

Darin Bayer says that this development team is a little different to the norm. “This PPLP team has a charitable intent, which means their focus is on delivering quality new homes that are affordable and attainable for working families. They are exclusively committed to supporting first home buyers, so they don’t sell to investors, with an aim that residents will live in a community of families who are committed to staying.

“Puhinui Park will be a real asset to the wider Manukau community, providing a wide range of housing types and tenures for the Housing Foundation programmes and other community housing providers, with a number of homes also available for private sale.”

Many of the dwellings will be three-bedroom terrace houses, but also on offer are some one-and two-bedroom apartments, and four-bedroom terraces. The range of purchase models include rent-to-buy and shared equity to help ensure affordability, with the Crown providing some significant funding also to add to the capital needed to provide this housing assistance.

The project is progressing well says Bayer, with civils works and infrastructure nearing completion to create the lots for housing construction to begin later this year. Overall, the project is due to be completed towards the end of 2022.

“Key factors behind the success of the project so far has been team continuity”, says Bayer. “The Housing Foundation development management team, with on-site construction works led by Frank Rientjes Project Management, are using HEB Construction straight from the Waimahia project to good effect.

“A key factor behind the success of the project so far has been team continuity. The project is progressing so well because the right team of people has been in place consistently over time.”

“Additionally, we applaud the team’s great planning, with realistic budgets and timeframes, and sufficient allowances for market escalation. The biggest challenge so far has been pushing ahead with work on site hand-in-hand with some design and approval processes still ongoing, but able to accelerate the work programme and delivery timelines while ensuring that the funding is all in place when needed.

“I often say that when you get a great team together – with the collective participation of all parties involved –  the client, its partners and funders, project manager, design consultants, quantity surveyor and the contractor – you’ll have a great job: if you have them in place, the right people generate the right outcome.”

White Associates Quantity Surveyors Funders' opportunities and challenges

Funders’ opportunities and challenges

2019 has got off to a positive start, with an exciting mix of projects coming through the doors at White Associates.

The market is still showing its appetite to proceed with projects that have strong fundamentals, and we’re seeing a high concentration of residential projects within this number.

As you’d have seen from all the cranes around the Auckland in particular, the activity and momentum of last year is continuing, although we expect that residential activity may well ease in the final quarter of this year, due to where we are in the market cycle.

Challenges remain

One thing we know for sure is that the myriad of challenges that have plagued the construction sector over the last few years remains. Cost escalation, labour constraints, challenges with construction personnel capability and subcontractor capacity, design and consenting delays are all leading to increased development durations and costs. As the market is still reasonably heated, with strong demands on all resources with the larger projects and especially in Auckland, this in turn means that the challenges that affect the funding of projects also remain.

Difficulties in obtaining project pre-sales, project feasibilities, and the continued potential for construction company failures are just some of the landmines that lurk, ready to explode in the face of the unprepared.

Borrowers and funders will need to come up with innovative ways to fund projects with strong fundamentals, in order to enable them to proceed without the current level of presales required.

Limiting potential risk exposure

High land values and construction pricing still exist, creating project feasibility conundrums. That said, we are seeing some developers exit land holdings at discounted rates in selected areas due to projects not stacking up. We expect this trend to continue this year as the cycle continues.

In turn, these factors are also leading to housing companies in Auckland pulling back on the level of spec builds they undertake, in order to limit their potential risk exposure and cashflow restraints by having too much stock on the market.

Housing shortage – or social housing shortage?

We note with interest the many mentions in the media of a housing shortage in New Zealand. It occurs to us that in reality what we are seeing is in fact a social housing shortage, and the supply of housing above this level has stock available. This is partly behind the reasons why purchasers are not under as much pressure to buy. They have time for more in-depth and time-consuming due diligence, and are generally moving away from buying off the plans in case the market falls further.

Need to innovate

So, as we look ahead, what we’re seeing is that borrowers and funders will need to come up with innovative ways to approach the funding of projects with strong fundamentals, in order to enable them to proceed without the current level of pre-sales required.

This is where quantity surveyors’ continued level of scrutiny during the pre-condition report and drawdown phase will help to read the signs if a contractor may be heading for trouble, and our increased scrutiny on contractor selection and due diligence will help project funders and deliverers both have more confidence.

From July this year, we are planning to run a seminar for project finance teams on the state of the market to give funders a heads-up on trends in commercial/residential construction space so you can gain insights as to where we see the market moving forward. Please contact us on (09) 362 0624 or email dbayer@whiteassociates.co.nz if you’d like us to come to your office to run a seminar.

White Associates Quantity Surveyors Disputes

Disputes: an ounce of prevention is better than a pound of cure

By Jesse-Paul Conradie

It is well known that New Zealand’s construction sector is buoyant and one of the top contributors to its GDP. That said, it is also no secret that the industry’s performance is currently strained by growing demand, lack of capacity across the supply chain and pricing and margin pressures.

The current environment is not sustainable. Invariably, over time, as the saying goes, ‘something’s gotta give’. And we’ve all seen it happen recently. Much to the industry’s dismay, several industry players have succumbed as a result of a number of contributing factors. When companies are stretched, their ability and capacity to absorb the adverse effects of risks withers.

As a consequence, it is no surprise that an adversarial culture burgeons, and disputes proliferate. And we have all seen disputes have devastating consequences, even for established companies – most recently shown by Arrow International placing themselves in voluntary administration after being on the losing end of a $4.2m contractual dispute.

Some common risks and causes of disputes include, but are not limited to:

  • Poor risk allocation
  • Incomplete design information and variations
  • Unforeseen ground conditions
  • Discrepancies and/or errors and omissions in contract documents
  • Contracting parties failing to understand and/or comply with their respective contractual obligations
  • Unsubstantiated or inadequately drafted claims

No one disagrees with the fact that disputes frequently cause damage to business relationships and reputations. Not only can they be expensive and protracted, but the implications on finances and resources can be immense when they need to be resolved by complex and cumbersome processes.

The situation begs for a paradigm shift

The focus should rather be directed into two areas. Firstly, towards conflict avoidance. Then, if disputes do arise, how early interventions can assist in effectively mitigating the adverse effects of dispute resolution.

Early interventions can assist in effectively mitigating the adverse effects of dispute resolution.

Active dispute avoidance initiatives could in essence be condensed into the following three core risk management principles:

  1. Engaging and involving all relevant stakeholders early including the designers, contractors, key suppliers/subcontractors, client, end users and funders during the initial phases of the project to ensure that expectations and deliverables are properly coordinated.
  2. Promoting a collaborative approach by involving relevant project stakeholders in processes of active risk identification, risk response planning and risk control and monitoring.
  3. Realistic and fair allocation of risks to the party best suited to manage/absorb the risk.

As with any relationship, open communication is key. At all project levels, the proactive management of risk allocation and behavioural attitudes is vital in order to address disagreements at project inception.

Every project is unique, and so are the associated risks. Incorrect allocation of risk can lead to inefficiency, delays, excessive costs and disputes. It is therefore imperative for parties to remain engaged in active risk management throughout the different phases of a project.

Once disagreements occur, the key is to identify the problems and quickly take appropriate action. Every reasonable effort should be afforded to settle disagreements expeditiously and to avoid arbitration/litigation.

In our view, more can be done to diverge from the adversarial approach which causes a significant financial drain on resources and damages relationships.

Top Tips for dispute avoidance in construction projects:
In order to promote a collaborative dispute avoidance culture, and to resolve disagreements before they become disputes, parties could for instance feasibly:

  • Develop and include a process within their contract to resolve issues at project level.
  • Ensure parties are afforded equal opportunity to present their case.
  • As a precursor to a more formal procedure, escalate the disagreement to senior staff of the respective organisation with the aim of settling the matter at hand.
  • Employ the services of suitable facilitators, conciliators, and dispute avoidance boards to aid in resolving the issues.

Given the current strained market conditions, with people looking to enforce contracts in ways that will lead to more disputes, a concerted effort is required to reduce the incidence of formal disputes in order to ensure the sustainability of our industry.

Dispute avoidance is all about adding value. So let’s endeavour to change the current mindset and culture.

On the first day of Christmas, my QS said to me:

Written by Justin Maritz

As we approach Christmas, it is not only household budgets that are feeling the strain. The development and construction sectors have been under pressure for a while, and one of the key concerns expressed across both sectors is whether projects are stacking up financially: do they have the financial underpinnings to get to the finish line?

From our viewpoint at White Associates, the single biggest thing you can do to stop your project from grinding to an expensive halt along the way is to undertake proper, detailed feasibility of the concept at the earliest possible stage. If your feasibility is set up well, you will be able to make more informed decisions early on – and particularly key decisions about design deliverability.

More and more projects are coming to us with unrealistic budgets for proposed developments, which can be quite worrying.  We are seeing more proposed developments coming to us that already have Resource Consent with an unrealistic construction cost expectation.

Carrying out a robust feasibility estimate/masterplan is the best early decision-making tool you can have in your kit, as it helps you to answer the all-important question: ‘is our project the right one for this site?’ Essentially, this activity requires us to focus on the worst case, not the best case. We’re realistic, which means that if that early cost is too high, we can help you work to come up with good options and solutions.

The more detail you have, the more detailed the outcome will be. If you understand your feasibility, you’ll know if your project stacks up, from the start. There is nothing worse than setting a designer off blind. It’s much better to go to a designer with a realistic budget in place, then everything will work together better. You can then work through the process methodically in a planned and organised fashion, in a reasonable amount of time – and get a much better result in the end.

What does this involve? When you’re doing a feasibility study, you need to get as informed as you can early on to understand all potential issues on site such as geotech, the product you intend to sell, what specs you’re going for, and to get informed early of potential issues along the way.

Once a realistic budget feasibility is set, it should be managed accordingly to ensure risk allocations are managed well between all stakeholders to the benefit of the project and budget. It is prudent at this stage to make allowances for risk that may or may not occur in order to have a realistic level of headroom in your budget for unforeseen costs.

Good feasibility work will also help you to understand the outcome equation better. As highly experienced cost planners – across commercial, residential, prisons and educational sectors in particular – we use our experience to inform detailed outcomes. We know that our work is one side of the coin, but if you can see more clearly what a project is going to cost, you will be able to answer the all-important questions.

Commercial developers want to ask: “Am I certain that I can get my expected return?” and the public sector asks: “Am I certain that I can get value for money from this project?”

We know that experienced developers understand site constraints and project deliverables and go in with eyes open, get a feasibility to be realistic, understand then how the return and margin works, so they can then make good decisions. We work with developers to do a high-level cost estimate early on, so they can then make a decision as to whether to proceed on current path or not, as they know what expected return should be.

This approach then allows room to manoeuvre. Feasibility gives your project a range, bandwidth: an estimate of costs at $x, but realistically this can be plus or minus 10%. It’s the range you need to consider.

If you do this early enough, you can understand the margin you can work to achieve, and also understand for example if there is potential for an infrastructure upgrade. Then you can head down a targeted process, making informed decisions at each stage – not just land somewhere and go ‘oh’… We say, take the surprise factor out of the process.

So, if you’re planning to make a Christmas cake, we say make a Christmas cake: don’t make a mince pie. When you open your presents on Christmas Day, be happy because you got what you wanted.

3 TIPS:

 If you are building right now, or looking to do so, we recommend that you use a QS to:

1.       Undertake robust Cost Plan – giving you best- and worst-case scenarios that you can test

2.       Benchmark – against buildings that function and look like what you want to create

3.       Ensure your feasibility has headroom – don’t look at a perfect world, look at the real world to give you room to move.