“Only 8% of real estate projects are delivered on time, on budget, and deliver their promised benefits.”
Bent Flyvbjerg
You have to know what you are doing.
No amount of B.S. and delusional thinking will make your project deliver on time, on budget, and with the intended results.
Our current business environment compels us to think and act fast. But with CRE projects, we have seen that there is a surprisingly low ceiling of complexity that every experienced project manager will affirm: There is always something that bites you at execution or delivery.
We often remind our clients of the wisdom of “Think slowly and act fast.” We do this with our Prepared to Win-Win Negotiation Worksheet™, The Impact Filter™, and The Due Diligence 360™.
Because if you don’t nail the planning, then the expensive part of the project (execution and delivery) will be racked with expensive mistakes.
We have been reading Bent Flyvbjerg’s book, “How Big Things Get Done,” a fascinating read by the man KPMG called “The World’s Leading Megaproject Expert.”
He has much to say about real estate projects, everything from the much-maligned California High-Speed Rail Project to simple home additions. And the first question Bent says you have to ask yourself is: What is your downside?
It is human nature to think about the upside opportunity and give little thought to the downside. When considering a project, the downside is where you should put your focus first and foremost.
There was a time when Robert Moses, one of the greatest developers in America, could mow down an entire neighborhood in NYC for public good projects such as the Triborough Bridge, the Brooklyn-Queens Expressway, Battery Park, and the Lincoln Center.
Why this may never happen again in America:
There are many reasons. But our tangled web of Federal, State, and Local regulation encourages the “forces of NO” far more than it encourages us to build great things. Just ask your local solar energy project developer. Solar is safe, simple, silent, and usually only visible from space or a plane. The benefits almost always outweigh their negative impacts. And yet it’s very difficult to launch a successful solar project.
Today, development is much more challenging. And it is a trend that is not going to end anytime soon. That is why we’re so happy to see Charlotte Douglas Airport moving forward with the new runway. If they do not build it now, they may never be able to expand. Which begs the question…
How much do you think it costs to build a runway at CLT?
- $100,000,000?
- $356,000,000?
- $500,000,000?
- None of the above?
We asked over a dozen people this question recently, and their responses were always surprisingly low. Not one response was over $500,000,000. Heck, we even asked a former CLT Assistant Aviation Director, and he also guessed too low! (He guessed #2 above)
The answer is a startling $1.1B. What’s remarkable is the amount of red tape baked into this number. They already own the land, the site is cleared and flat and all support infrastructure is in place.
Jerry Orr, the master planner of the airport, and the leaders that have followed him, knew that once The River District and the inevitable hundreds of other development projects fill in around the airport, CLT will suffer the same fate as RDU and GBO and be unable to grow. Why? Because they are hemmed in by NIMBYs who hate airplane noise and keep those airports from adding new runways, routes with large long-haul (noisy) planes, and night-time cargo operations like FedEx.
If you want to be over budget, late, and underdeliver, go bespoke. If you want to be successful – use a proven process.
— Bent Flyvbjerg
What sets Cardinal apart from other firms is that we think first about human nature, processes and project strategy and how those apply to your real estate project. No wonder we have been called the “real estate therapists of commercial real estate.” We know that with stakeholders, you must “make friends and keep them friendly.”
So we like to ask many open-ended questions, like “What has to happen for you to feel good?” or “What keeps you up at night?” We believe successful real estate projects require as much understanding of human psychology as they do of engineering, architecture, construction, or finance. Ignore human behavior and you will find it hard to learn from your mistakes, which is how projects get delivered on time, on budget, and with the promised benefits.
We also like to assess every project we complete by asking questions like:
- What went well?
- What didn’t?
- Knowing what we know now, what would we do differently?
- What steps can I put in place now to ensure a more effective outcome in the future?
What are the lessons that we have learned from past projects? Three come to mind:
- The 80/20 Rule to Project Success. 80% of the project schedule should go to planning, stakeholder management, and expert participation, and 20% to execution.
- Set a Realistic Business Case. We learned a long time ago that the formula Ambition X Optimism = Lots of BS, so we ensure a sound business case with a realistic budget and clearly defined benefits.
- Experience Matters. Put together an experienced team that knows what they are doing, is willing to learn from others, and, most importantly, from their past mistakes.
Now, you may say, “But Cardinal, you guys are known for taking on the unusual and bespoke in the CRE world. You sold a coliseum, landfill, and coal mine.”
That’s true. But here’s the thing: When selling an asset, no matter the size, we always use the same process. It is called The Comprehensive Asset Sale™, so the product type doesn’t matter. We are not claiming to be experts on coliseums, landfills, coal mines, churches, etc. We are experts at using a powerful process we created that is the best in the industry. We avoid bespoke because we have the procedural building blocks for any complex real estate sale, acquisition, or lease.
Join the Conversation, Lead the Change. In the spirit of Robert Moses’ transformative projects, we are looking for partners ready to reshape the real estate landscape. If you have a vision hampered by regulations or just want to explore what’s possible within today’s framework, reach out. Let’s begin a dialogue that turns into action.
