It was a great pleasure seeing everyone at the Mid-Market Summit
These were our Q&A's from the Summit
Can you tell us a little bit about your experience in the real estate industry, and how 3F Construction fits into the industry?
The 3F Team is made up of experienced real estate developers and builders with decades of experience and having completed thousands of units. We foster a culture of trust and accountability. We empower our team members to think creatively, solve complex problems and recommend solutions that maximize value for our clients. More importantly, we understand how execution and costs impact the finished product, which is why we spend so much time focussing on material procurement. We think like developers and apply that knowledge base to our construction projects.
What are some of the biggest challenges facing the construction industry right now, and how is 3F Construction adapting to those challenges?
Costs continue to be the single largest obstacle we face today. Historically, 3F Construction set itself apart from its competitors by finding ways to reduce costs through material procurement and direct labor. We continue to employ those strategies and constantly seek out ways to improve. That being said, material cost and subcontractor labor increases accelerated in 2022. In some cases, we saw trades such as HVAC increase by over 50% year over year. Inflationary pressures like these have forced us to identify more cost effective solutions that may be typical in other markets but not as commonly used in Chicago. These include package heating and cooling systems such as HPAC. Pricing is beginning to show signs of cooling in the last 30-45 days.
What are some of the most common mistakes that investors make when it comes to selecting a builder or contractor, and how can they avoid those mistakes?
We tend to see investors and developers engaging contractors too late in the process and after key decisions have been made about a project. Our most successful projects have started with our clients engaging us during design and due diligence. By allowing us to participate early, our team can provide constructive feedback, value-engineering solutions, and potentially identify issues before our clients commit to a deal. Conversely, we have seen several projects where developers/investors have either closed or committed to closing without engaging a qualified contractor for feedback. Budgets on these projects have been as much as 75% low when compared to what is actually needed to meet the desired specifications.
What are some of the key trends that you're seeing in the real estate industry right now, and how is 3F Construction keeping up with those trends?
Smaller, more efficient units continue to be popular. With costs rising, developers are removing unnecessary space in an effort to keep the “chunk” rents as low as possible.
Can you share some examples of successful projects that 3F Construction has completed, and what made those projects stand out?
In 2021, 3F Construction completed Century Tower with client Golub & Company. 3F was brought into the project in 2019 after a failed attempt to perform the renovation plan by another general contractor. Our client engaged us to perform a comprehensive review of the plans and specifications and provide value-engineering recommendations that saved money and time but without sacrificing quality. The project was completed on budget and on schedule despite numerous obstacles introduced during the pandemic.
In 2019, The Wolcott Group engaged 3F Construction to assist with design and budgeting diligence for River City Apartments, a 448-unit mixed-use project in Chicago’s South Loop. Our team collaborated with management, the design and leasing teams over a 6 month period to develop unit layouts, a finish specification and overall program for the project. During that period, our team identified several areas of cost savings and applied them to the project. For example, by allowing 3F to customize cabinet layouts with a local fabricator, we were able to make changes that improved countertop efficiencies by 85%. We essentially designed kitchens in a way that utilized entire slabs of quartz with no waste. The result was a large cost savings to our clientilm. Additionally, our team worked with officials at the Department of Buildings to secure permits to add laundry to every unit including ones that were occupied. This was a phenomenal feat and required collaboration with management, building maintenance, our team and city inspectors to implement and document during the course of unit renovations.