Justin interviewed Scott Jolly, of Site Consulting Specialists. They spoke about how he helps industrial investors with asphalt, roofing, and HVAC capital expenditure projects across the country.
Key Takeaways:
- Large e-commerce tenants are asking for new 30-year TPO roofs as part of their TI packages to prevent long term cap expenditure liability
- Scale starts at two! Once you have more than one property, leveler your cap-ex projects by having contractors bid on both.
- Match your capital expenditure strategy with your asset strategy. Think about your loan maturity, your hold period, and your lease term when making these decisions.
- Know what the No Dollar Limit warranty costs for your roof when you are pricing it out. You might find out it is less than you think.
- No Dollar Limit roof warranties can increase asset value upon resale
- Rarely are full pavement replacement necessary as you can often mill and inlay or overlap
- Asphalt technology has improved over the years. Think Kevlar fibers underneath.
Here is a 2-minute clip from Industrial Insights Podcast with guest Scott Jolly.
Listen to the full episode below and subscribe to the podcast on Apple.
Highlights
- His industrial experience – 1:25
- His background – 2:40
- Becoming more programmatic – 6:09
- Paying for the materials – 13:46
- His experience as an owner and as a tenant – 15:29
- Data and equipments – 19:10
- Removing or replacing your asphalt – 21:27
- Warehouse automations – 30:27
- Gaining information and making recommendations – 35:27
- Project management and construction management – 39:49
- Protect your assets – 40:51
Episode Resources
- Scott Jolly LinkedIn
- Connect with Justin Smith
- https://smithcre.com/
- https://www.lee-associates.com/
- JBSmith@LeeIrvine.com
- https://www.linkedin.com/in/justinbsmith
- Connect with Scott Jolly
- https://siteconsultingspecialists.com/
- scott@siteconsulingspecialists.com
Justin Smith
So we got a Scott Jolly and Grant Labounty. Scott, I got like three pages of notes from us when we did an intro call. I know from the stuff you put out there that you know what you’re doing, and you like sharing and helping educate people on that. What I was surprised about was how much industrial experience you’ve had and how many projects you’ve worked on. I was happy to learn about all of that. I found it’s even more valuable and helpful than I was expecting. So, it’s pretty cool to hear about some of your experiences.
Scott Jolly
It was interesting. I was on a call last week with a major logistics company that one of our owners is the landlord for. They get their big national real estate guy on the phone and he’s trying to explain to him how the traffic and logistics centers and what they have to do is like, I don’t mean to cut you off, man, I’m not trying to be rude, but it’s like my 100th one. We are going help you guys out. We know what we are doing.
Justin Smith
I appreciate the background, but I’m up to speed.
Scott Jolly
We know what we’re doing here. It was good. He actually really appreciated it. He’s like,“Awesome, I don’t have to explain it to you.” You know what I mean?
Justin Smith
It’s like kindred spirits. It’s nice when you can just connect and start making progress together.
Scott Jolly
Exactly.
Justin Smith
So maybe you haven’t met Grant yet. For people listening, it’s a great opportunity for you to introduce yourself and just the types of projects that you work on and some of your experience.
Scott Jolly
A little bit of my background, I grew up in construction since a little kid. My grandfather was a bricklayer who poured cement first foundations in high school. I started working for a paving company. Right after the last recession, when I closed my first business, 2008 kind of beat me up a little bit. I went back to work for someone else who worked in the pavement industry, saw a real gap in the marketplace for just larger capital expenditure projects in the industry. They’re referred to as the big three: roofing, paving, and HVC. The big three large landowner capital expenditure projects, that a regular right every 10, 15, 20 years, they’re going to have to spend this money. I started my company a little over five years ago; we started with paving. About a year and a half ago, we brought on a 35-year roofing consultant to the team. We added that source for us. We’re not getting into HVC, yet we’d like to, but eventually. We brought on a solar consultant, primarily because a lot of our clients when they replace the roof, it’s a good time to do solar, if they’re thinking about it. So those two seem to go hand in hand. We do a lot of ADA accessibility upgrades to the exterior as well. This last year, we started doing some of our first TI work on an Amazon project in Simi Valley. We helped out with one in Washington last year. We are getting more in the larger retrofits and things like that as well.
Grant
What kind of TI work would that look like?
Scott Jolly
We’re doing a few right now like helping out smaller retail centers. We’ve done a couple of those and that’s mostly what these are. We’re doing some TIs for larger logistics company building out some office space at their warehouse, helping out with some more infrastructure type stuff that was just this company where they’re bringing in. They’re trying to build new pads and we’re helping them bring some of that infrastructure in. My business partner, John, he has his general engineering license. Infrastructure work, if they are bringing in water, gas, electricity; Those are things that are in our wheelhouse too.
Grant
Interesting.
Justin Smith
I can already think of a deal that I’m working on where we’re negotiating with a big, private company. I’m on the landlord’s side. It’s a family that so well to do, but we’re struggling with dealing with the condition of the roof, the air conditioners, and the yard, and who needs to do what with the old tenant with the landlord, and with the new tenants. I could imagine that I’m one guy and that’s one deal. You could imagine how many owners there are out there, and I feel like most don’t know that there’s someone like you that knows this that can help them. I was also surprised to learn more about the work you were telling me about for larger institutional groups, working on their portfolios, and looking at that at scale. I feel like that’s a great project that isn’t just one deal. It goes to show how programmatic it can be, or how you can help people become more programmatic if they’re not already.
Scott Jolly
I think it’s one of the biggest missed opportunities for people to have even just a few properties in a given region. When we’re working with some of our clients that have maybe just four or five assets in a region, say, Phoenix, Denver, Seattle, maybe a bunch in Southern California, I tell people, the economies of scale on these projects. I don’t know a single contractor that wouldn’t give you a 5 or 10% discount to do two projects together. We’re bidding out three right now in Tustin and Anaheim, we’re going to package them together. We’re going to get a better price and that helps save money for the owners or the tenants in that case. I think it’s interesting. I recently just posted on LinkedIn about this, where, the Prologis of the world, they all do this. I see some of our clients even that have a few 100 assets, maybe 100 in Southern California. We have one client has over 300 in Southern California, if they would just be able to get their teams all on the same page to talk about what products they’re going to have, they don’t all have to go at the same time. I know the billing is important sometimes to where they have their capital placed in the calendar year, but if you award it all at once you complete it throughout the year, a contractor that’s going walk into half a million dollars worth of work, they’re going to be like that’s guaranteed work. The other thing is people don’t get ahead of it. Right now, it’s late February it is the best time to get numbers because not a lot of roofing work is getting out. They haven’t started those big projects yet but as they get booked up the price goes up, because they don’t need it anymore. I think if owners could get ahead of it, plan their year and be hitting the ground in January with getting bids, or even have bids ready at the end of the year, whatever their calendar is, our companies do the June to July thing, right, so a little bit different. Wherever their calendar year ends, if you can be bidding stuff out in Q1, you’re going win right there.
Justin Smith
From a bunch of different perspectives. When you worked on this 170 asset project, I think you have some lessons learned there. It seemed like that was a pretty big project to work on. I could only imagine, once you start getting a pace going with that and once you start figuring out how to prioritize and execute the work, and how does a project like that go down?
Scott Jolly
The first project we ever did was 19. That took a lot of work, especially in a short period of time. This last one where we helped out it’s a little bit easier because we’ve been working with the client for the last five years. For a lot of those properties, we already had a lot of the information. I think that’s something else that a lot of owners could look at is having information, how thick is their asphalt, what type of roof do they have, knowing what kind of work or scope they’re going to be working on ahead of time. We had a lot of that information. we know knew, all they had to do was give us budgets and what their plan was. Knowing that they’re going into a dispo or a recap or getting ready for a financial event like that helps us know what are we trying to do here. This particular owner they stay on so it’s just a recap. They’re not actually selling the assets so they want to make them look good. It’s not lipstick on a pig, though, thankfully, a lot of these done the right work over the last three to five years since we’ve been working with them. So, it’s actually made it a lot easier.
Justin Smith
It’s like a continued investment in the asset, would you say as opposed to the cosmetic fix.
Scott Jolly
Exactly. One thing we talked about that was very interesting was that matching the scope or the materials with the asset strategy, or even with beliefs, is something that I don’t think is often considered. We’re working now on a big one up in Northern California in San Leandro, and it doesn’t have to be perfect but let’s get them a solution that’s going to last through their next 10 to 15-year lease. They’re going to want to do it again, they’re going have money for it and then you can hand the asset to the tenant, and say, Hey, this is what the expectation is in 10 or 15 years, if you guys decide to leave. You have a standard set and it really relinquishes a lot of questioning at the end of who’s responsible for what.
Justin Smith
We know what we gave you; it’s very obvious and easy to document and in what condition you bring, or you restore, or you give back possession and matching that up with the lease. That’s not just for asphalt, I think roofing that’s another part where that’s relevant.
Scott Jolly
I think Amazon in the thinking of the asset strategy, and what their business model is, Amazon is bringing something, they have a different mindset that I think would be useful there. They’re putting the new TPO which is a single-ply roof, in their specifications for all of their tenant improvements. I think that signifies a thought process that might be different. That would be that this TPO roof could literally last like 30 to 50 years. We’ve seen some they’re not gonna last that long. It just shows you they want to build that into the TI one because they know the owners are paying for the TI. So they’re like, well, let’s mitigate our long-term maintenance costs. While we’re the tenant, I think that’s the process anyway. That’s kind of what I make up about it. I just think it a different way to look at things.
Justin Smith
Right, because how often are people negotiating that as part of their TIs, not very often, and they have the leverage to be able to do that? They do.
Scott Jolly
If you’re going sign a big lease like that, and with options, it could take them into 20 years, it kind of shows what they’re thinking.
Justin Smith
I could see that it’s good for the landlord too if they think there’s a disposition at any point in time having a new roof. That goes into all of that; it’s only going to help with the disposition.
Scott Jolly
Yes, I do agree with that. One of my theories, and this might be a crazy theory; you guys tell me but I think Wall Street’s thirst for real estate is just growing. You got a lot of big money with the cap rate compression that we’re seeing in the marketplace, the requirement for minimally maintenance assets for the next 10 to 20 years is going to become more and more important. We’re starting to see people go to market looking for assets with a 20 year NDL roof warranty as part of the requirement.
Justin Smith
Tell us for people that don’t know NDL roof. What do you mean when you say that?
Scott Jolly
A 20-year NDL, NDL stands for no dollar limit. Essentially, the manufacturer is saying we’re paying for the roof for the next 20 years. We guarantee no leaks. If there is any problem, we’re paying for not only the material, but we’re paying for the labor to fix it as well. So most warranty, when you get into asphalt, there’s really not a lot of warranties, a year, two years that pretty much it. On a roof though, this is a way that manufacturers sell their products, and they guarantee it, and they’re saying we’ll give you an NDL, and they range. I find most owners when they’re getting work done, they don’t pay attention to a lot to this and they’re getting like the 10-year minimum manufacturer warranty with 10 years with a two-year labor warranty. Usually no cost increase for that, maybe a 10 year no dollar limit or even a 20 year no dollar limit, it’s typically like 1 to 3% of an additional charge maybe a little bit like 5% of charge in total, because they will require more work, more detail around these penetrate your detail on the edges 80 to 90% of all your roof links are going to come from edges and penetrations. That may require a little bit more material or more Craftsman, more labor. To get that 20-year NDL and with these single-ply roofs we’re seeing; it’s not uncommon to get a 20-year NDL. You’re going to 30, maybe even longer for your roof, we have some that are over 30 years and still performing really well.
Justin Smith
It would appear to be a no-brainer that one, two, maybe to 5% for that, and the difference of that the experience you would have as an owner and as a tenant, it you’d be hard-pressed to think of why you would not want to do that.
Scott Jolly
That’s what we think. It really depends on the asset strategy. If you’re selling every seven to 10 years, maybe you don’t want that you can still get that NDL on a coating. I do not think that coating is going to last 20 plus or 30 years like that like we see the single plies last.
Justin Smith
Then to your point about Wall Street and predictability, there is going to be continued interest. I don’t even think it’s just Wall Street. I would imagine private-public institutions, endowments, all sorts of investors that would have different motivations, but ultimately would look for that, and would value at more.
Scott Jolly
Well, even like Amazon, right? They obviously see the value in it. That’s why they are requiring it.
Justin Smith
Yeah.
Scott Jolly
I mean, logistics they’re trying to minimize long-term maintenance costs or mitigate any chance user, these are the things I don’t think these are conversations I don’t think they’re having all the time.
Justin Smith
So maybe that will trickle down from the bigger users and we’ll see how far that it trickles down.
Scott Jolly
It’s interesting when you get a big behemoth that sets a new standard.
Justin Smith
This is how we do it now.
Scott Jolly
Yeah.
Justin Smith
Well, you were saying about the majority of leaks coming from penetrations from the edges and how you’re getting more involved with solar and penetrations leaking. How do those all relate to each other so that it’s a good outcome for everybody?
Scott Jolly
It depends on the ballasts system you use depends on the solar, I’ll be 100% honest to you, I have a roofing consultant, I’m not the most versed in the solar, I can give you the basics. There’s lots of different types of ballasts systems they use, some are mounted, not mounted. The idea here is that we have a lot of these buildings that are at that point in their life expectancy where they need a new roof. I really think the new administration is probably going to we’ve had in the past, the administration is going to push solar going to push renewables. I think there’s going to be a lot of money in the market to get the solar installed, if you can combine those two projects together, then you can mitigate a lot of these penetrations. You can kind of take care of those all at the same time. If not, then you just have to make sure that when you mount the solar that, here’s what we see a lot. The solar companies are not a roofing company, they’re going to do the bare minimum to put the solar in place. I think it’s a good idea to have maybe that roofing person involved. What is their responsibility to leave the roof in a waterproof light condition, especially on these flat roofs in industrial where you’ve got no slope, quarter inch, half inch per 12 inches? Does that answer your question?
Justin Smith
It’s a bigger question than maybe I would anticipate asking, because there’s a lot of detail in there. But I find a few people have the answer to that. I would also think that as it relates to the warranty, right, as you talk about bringing your roofer in, that’s all got to be part of a greater strategy. Which I think is what a lot of your help is for people as putting all those pieces together into the greater strategy.
Scott Jolly
We’re working on our small data center right now in Ontario, and they’ve got this electrical lighting because they’ve got $20 million of data equipment inside there. We got this anti-lightning electrical thing on top. We’re putting a new roof and moving some HVC equipment. We were just reviewing the specs in the spring, the data center, they’re gonna invest like $15 million into this building, they want to make sure that it’s gonna be locked solid tight. We were able to provide some feedback to the contractor design build, how are we going to leave this roof to make sure it is watertight?
Justin Smith
For data centers, I would imagine that. That’s a big investment and that’s a big important issue for them. You were mentioning something about what’s the material in the asphalt that you’re hauling away now? What’s that issue all about when you’re looking at asphalt?
Scott Jolly
A few decades ago, a paving product was introduced called its paving fabric petromax, the name of the game asphalt is mitigating reflective cracking. I think there’s been a misconception in the market for a long time that if it’s allocated, then you have to remove it. That’s just not the case anymore. There’s a lot of products out there, one of them is this fiber-reinforced asphalt. It’s been used a lot on the East Coast, and actually, for a while, there’s a company called Florida fibers. They originally started, I think of concrete fibers and started introducing Kevlar fabric, shred it up in plastic into the asphalt. And it’s been around for about 15 years now. That does two things, it increases the resistance value. So it essentially adds strength. What would normally be a four-inch section, where you can now pave it three inches and get the same resistance. So, it reduces; actually. I think a better one would be it’s about a 25% Superpave in five inches, you go down to four, three down to two, and three and a half maybe. You’re able to pave less and gain the same resistance, and you’re able to overlay. With our company, if it’s not sinking, if there aren’t potholes, you don’t necessarily need to remove and replace your asphalt. I think that’s a common misconception. The petromax paving fabric is very interesting because it’s non-recyclable now, in California. It’s really hard for the asphalt plants to pull that fabric out of the asphalt. We recycle a lot of asphalt. When we’re doing work, if you’re removing, replacing milling, whatever you’re doing, you can usually take it back to the asphalt plant, and they’re going grind it up and throw it back into the asphalt. It’s called rock, recycled asphalt products. There’s a certain percentage depending on what state you’re in, that’s kind of the standard, you can add up to 15% in California is kind of the standard for rap for a standard hot mix asphalt product. The fabric is really expensive. Now we’re getting bids, we’re actually adding it as an alternate on all of our bids because so many sites have it. The design was great. It adds 10 to 15 years of life, and I’m working on one in Northern California. It has fabric and most of the site, and I was able you can actually go through a little tip here. You can go through Google Earth. There’s a time feature if you go through the history. I guess people use that I can see when the paving project was completed last so I can see. Okay, this was done in 2006 and this is what it looks like after 15 years. Now we have this fiber reinforced asphalt we see so I work very closely with the manufacturer in the West Coast distributor of this product. There are only two on it in the country right now that have patents on it, one is Florida and one is Ace. Essentially, it mitigates reflective cracking, and it’s recyclable. So Walmart is going to 40 more projects with this year. And then again, this comes back to asset strategy. They’re paying a lot of their parking lots, six inches to eight inches thick. Now, why are they doing that? In the future, their maintenance strategy is going to be probably 100% to 80 million. That is really the future of asphalt maintenance, I believe. That’s when you start to see the Walmarts, the Home Depot’s has switched to this method. It’s because it’s cheaper now and in the future, I could do a two-inch inlay every 10 to 15 years, and it would still be cheaper than removing replacing and every 20 to 30 years. Especially as they get more and more recycled. We’re starting to see incredible improvements in cold asphalt. Actually, milling off all the asphalt, stockpiling it, and then bringing in a small batch plant, mixing it all up cold, and repaving it. It looks like in my last 20 years, when we get into that kind of stuff, it’s really going to change it and make things a lot less expensive for folks.
Justin Smith
Mixing it cold? That’s not what you would expect to hear.
Scott Jolly
It’s called cold in place, which is what they refer to it as.
Justin Smith
Then how about when you should do concrete instead of asphalt? Trucking, logistics, older buildings versus newer buildings. I would imagine a new is a concrete and old is asphalt. There are 40 years of middle ground, and some people will try and think through when is the right opportunity to do that. Do you think that’s purely users? Is there a time and place for that? Do you see that at all? Or not so much?
Scott Jolly
Great question. We see it somewhat user related. We also see it in a user related scenario, where we’ve got truck legs, at the dock doors, were one of the ones now we’re actually going to recommend they extend that concrete 15 feet. So that because right now all the potholes are five feet from the concrete. They’ve got the draining list. Those catch basins, just beyond that pretty typical industrial facility design. You’re going to get these potholes every five years because of the weight of these trucks. So those are the times we really recommend if you’ve got big flatbed trucks, or these container trucks with the legs concrete, especially if you’re going be storing the containers, I recommend concrete anywhere, we’ve got trucks that are just moving and passing. That’s good for asphalt, really long term. It’s going to be one of those things where it will cost less now it will cost less in the future, it’s less than 10. When it comes time to remove replace concrete, it is more expensive. It does and can last a lot longer. We also see a regionally if you’re going see a lot more concrete in the south in Texas and these places where concrete is isn’t as expensive as asphalt is.
Justin Smith
Got it. I’ve dealt with it a handful of times on industrial buildings. But where I learned, it was for a small triplex I own that was an apartment. In the city 75% of these projects all share a back alley, so 75% of them the alley was owned by the city, the city maintains it. Little did I know I owned one that was not owned by the city. So you had 18 different owners who had to maintain a commonality. So nobody did anything. So I find myself learning this lesson. So when the city does all of theirs, we get the people doing the work to come over and look at ours and inevitably, 18 people don’t want to go and redo it. There’s a band of brothers that develops of the people who do and the people who don’t and then they end up saying we’ll do concrete for the price of asphalt because we’re doing 75 of these, and 76 is no big deal. In one little alley in one little city not too far from here, you’ll see concrete go halfway. And then old-school asphalt rocks are strewn all over the place for the second half of the alley. And that that’s where I was like, Okay, I think we’re going be seeing this on a big scale and dealing with like, be more cognizant of it. So it’s a pretty funny introduction to how that can go wrong, or you know, like how you have to decide between the two and when to make that decision and what is the cost of one versus the other?
Scott Jolly
With anything with what we do, I call this kind of crazy algorithm, where does asset strategy use, life expectancy, and budget kind of all come together? That’s a great example. I think you’re getting a great deal on the concrete and it’s going last forever. You probably won’t have to do it ever again. Welcome the HOA life. We do some work in that market as well. You got a fresh experience, it sounds like, and what it’s like to negotiate with your neighbors.
Justin Smith
We sold it four years after the fact and turned it into an industrial property in Dallas that has all concrete in the parking lot, even though it’s a smaller project where you wouldn’t see that in Southern California at all. So, when I saw that fresh off of that experience that I said, Yes, this is going to be helpful. This is great. It’s different than what I would ordinarily see or be exposed to.
Scott Jolly
I think something that people could maybe start thinking about in regard to concrete, asphalt, what are you going to do? I’m thinking, how is the the move to autonomous trucks going to impact the need for smoother, more reliable surfaces for these vehicles to drive on? You’ve probably been to a few loss that look pretty bad. I just don’t know the impact that lifted, concrete, potholes, things like that, that are going have on these vehicles and the need for these vehicles to have a more consistent driving surface.
Justin Smith
That’s an Elon Musk question. I would imagine Tesla’s do fine on the road. So, Tesla is driving through the yard okay. But it is interesting, as you see, warehouse automation ends up being a smaller version of that in the warehouse, and floor smoothness and flatness is an issue, but primarily for racking and going taller. I gotta imagine, that’s a small factor, but important for all those warehouse automation systems. If that’s any indication, I would think it becomes part of the conversation as time goes by. Well, I was gonna change topics. So for you acquiring property for yourself, I imagine you’re a pretty tough, tough judge on property. And when you’re underwriting and looking at, gosh, I’m gonna buy this thing ,what’s, what’s the shape of everything? What are we going to do here?
Scott Jolly
It’s funny that you mention it, we’re supposed to close on our first mobile home park in the next weeks, actually. It’s got no asphalt, it’s all rock base, it’s dirt and gravel. I haven’t gotten too far in the commercial realm to be completely honest. This will be one of our larger transactions. We are a harsh judge. It’s interesting question, we get a lot of due diligence work, right and we’re helping people in the due diligence. I think, you know, if you look at some of the companies out there that put the pieces together, and really we are working diligently towards having a PCA offering for our clients
Justin Smith
A property condition assessment.
Scott Jolly
Yes, a full property condition assessment for clients ready, hopefully this year we want to launch it. The ones that we’ve seen is their engineers, nothing against engineers, I know a lot of them but they are then there, they don’t do the work. They’re not there, they don’t actually have a lot of good pricing for projects, I see pricing kind of all over the place. I know a lot of our clients are taking that and still paying consultants to go out and and kind of look at these other things. There’s just not a lot of accuracy there. I think that that’s one thing that we bring to the table and reviewing due diligence projects and even in when we look at projects now that we’re taking on, we’re starting to offer to for small investors is we were looking to partner and maybe bring that capex piece to the table where we can oversee the capital expenditures, and even maybe pay for some of them with some of our partners to gain equity positions and assets. We’re being creative in that way for our guards because we’re I bought and sold apartment buildings. I’ve been sold smaller up to 32 units. I’ve done a little bit of investment like that. We’re trying to figure out how can we bring more value to the marketplace, right?
Justin Smith
Where is their money in investing is in value add projects, and if you’re going add value, you’re going to be doing the parking lot you’re probably going to be painting, landscaping some TI work and wouldn’t be too surprised if there’s a roof in there. At some point in time, so I could see why that would fit pretty well. Right in the mix. Then I think last is just how does someone go about hiring Scott? So they hear this, or we introduce you to someone, and they’re dealing with something underwriting or due diligence, or they own something and all the building systems are in terrible shape. They have got a new tenant that wants to sign up and they’re figuring this stuff out; what’s the engagement look like? How do they sign up with you? How does that come together with a client?
Scott Jolly
Thanks for asking, I appreciate that. We have a process. We really worked the last two or three years on developing, hopefully, what we believe is a really streamlined process where the initial engagement. This is for so we have one, I won’t talk about due diligence this little bit separate. We find out possibly different that’s really just us going out doing a visual inspection primarily because most people don’t allow us to punch holes in their roof in their asphalt until they actually own the building. People are not too fond of that, usually. We’re doing a visual inspection in that regard. Now, once you own the building, and you’ve got a big project, the initial engagement, just the evaluation, we’re going to get out there and take our core samples, we’re going to cut holes in your roof. Probably not if it’s a single ply, unless we have a real concern, because we really don’t want to penetrate a single bar. If you have a built-up roof, we’re going to want to see what that deck looks like. See if there are multiple layers; you can only have two roof systems on because of the weight and structural load. We’re trying to figure out; we’re just trying to gain information. That’s the first step, how much information can we gain so that we can evaluate and make recommendations. That’s where the process where we’re engaging. What’s the asset strategy? What kind of life expectancy are you looking to get out of this room? What’s your budget? How much do you want to allocate towards this? That’s really what I consider the first step that’s game planning. It’s really quite the opposite from how I see most operators look now. They go, and they call the contractors, and they get bids, and they let the contractor tell them what to do. I really believe we’re trying to give owners back some of that power and say, Okay, let’s look at it, let’s see what we need, let’s put a plan in place. The next step is they want to make a choice. They want to proceed with work. We develop the bid specifications, our bid specifications, we go out to bid. We have contractors, we have developed a pretty good vetting process so we can find contractors all over the country, make a few phone calls, make sure that we review work they’ve done before, make sure that they’re doing the work in-house. It’s a very different single-ply roofer is very different than coating roofers and be not all of them have the same tools, not all of them have, are used to the same material. Same with asphalt. Smaller companies, under probably 5 million, are doing a lot of patch repairs to construct. They don’t own the equipment to do a 100,000 square foot inlay project, right. So making sure matching contractors, that’s really the second part of our process. Then we negotiate, we always do encourage owners to do it, I will go to the lowest bidder. We try to negotiate our fee every time. Our average fee ranges from five to $20,000, from beginning to end. We also have in-house design capabilities. So, we’re doing a big ad project, which works well with this as well byt that includes a little bit more planned development submitted to the city, things like that. TIs, those kinds of products have to go through the city process just adds that extra layer, as I’m sure you guys are pretty familiar with. The third part is execution. So our bid specifications then get attached usually to their AIA contract or whatever in-house contract they have as an exhibit. And then we schedule, we try to meet with the tenants ahead of time so we can dictate the schedule to the contractor versus the other way around the congregation. Well, I bid it for two days; we’re doing a big Logistics Center in Santa Fe Springs, we’re taking 300,000 square feet. We met with the national team, and the local team gets this is their FAs number, right for these hours of the day and how can when are the best time to do. We’re starting on Friday night at 10 pm. They can start milling and working, and they got to be done and striped with that section by Sunday morning. We had that conversation with the tenant and the owner before we went out to bid. So when we go and bid we could say here’s the job and here’s the schedule. You can do it. I’m sorry, this you can’t do the job. Great.
Justin Smith
I have learned that one recently about the schedule and how often that is overlooked with the tenant and their operations and making sure everybody is going to be happy with that.
Scott Jolly
Then we execute the project all the way till if we need the, you know, city sign off or until the project completed, including punch list items, I will tell you we have with our paving and roofing, it’s harder to do this with TIs. Within our paving roofing, co-Ada projects, we have a no-change order guarantee. So if you get into this result of something that we missed that we should have known about, not something tenant-related, not an unknown, but if it’s something that we should have missed that we should have known about what to pay for, or will up to our fee, and we’ll just not charge our fee to help compensate for those changes. We’ve been lucky over the last five years we’ve only had. I feel bad I had one client that had two and we’ve had four or five, like in the history of our company. One of them we weren’t there to do the CM. It doesn’t have to be us. I go for a day and walk them into things, occasionally looking for
Justin Smith
Oh, just for Gant, CM is construction management.
Scott Jolly
Sorry, project management, PM construction management, my apologies. Even if we don’t do it, if it’s our scope, we really like to make sure that you know, the collecting wait tickets, it’s pretty easy to know how much adds is simple calculations, square foot, times thickness times .006 give you a rough asphalt tonnage for a job shouldn’t be within 5%. That’s our standard within 5% of material. That’s how contracts, same with coatings, the coatings come in, in the quality of the bids we see come with gallons per square foot or gallons per square is how they put it, but it should be in thickness, finished oxidized thickness, and we’ll take roof slits and actually measure it with I think I have one of these little things, you look into it. You can actually measure the mils of the roof coating. That’s what’s going protect your asset, knowing that you got the material that you’ve paid for. I don’t think that’s what we’re. Therefore, we put together a complete follow-up package that says, this is how much tonnage was used, this is the punch list items, these are the pictures and all of that?
Justin Smith
Which you wouldn’t get from your contractor, 95% of the time.
Scott Jolly
You got to get those on conditionals, you can get an unconditional waiver upon final payment. They’ll send it over before they actually get paid. And as soon as they get that check, no lien releases are kind of a big deal. I think we’re starting to see a lot of work in this doesn’t maybe affect you as much in industrial centers but in retail centers. They want permits for seal coating, striping, they want a striping permit. I think that’s something else that we see a lot more of, especially in California, that adds costs that are unknown to a lot of owners.
Justin Smith
It’s interesting.
Scott Jolly
Does that explain the whole process, hopefully?
Justin Smith
I feel like the whole time we’ve spent there’s plenty of ways where anyone who owns any of these can resonate with a challenge that they’ve had, or with a building, they’ve looked at, or one that they’ve owned, and where there was room for improvement and how they had maintained it. As they underwrite new acquisitions for what they could do better. If they’re going to start with a new asset, and they’re going to think through their strategy, and they’re going to line up. How do all these things fit in for acquisitions? I could see that be immensely helpful. Well, Scott, I appreciate you taking the time. Grant and I thank you. I feel like that hit a lot of topics that are very relevant and we sure appreciate you making yourself available.
Scott Jolly
I would say people can find me on LinkedIn if they are looking for more information, that’s where I give it all out for free. Really just trying to make a difference in the industry. I think there’s room for improvement. These regional guys, I think if they could literally save millions of dollars if they just slowed down and maybe thought about the process a little bit more.
Justin Smith
Let’s add this into our planning into our quarterly or annual and develop a strategy around it.
Scott Jolly
I think so.
Justin Smith
Well, cool, Scott. Thank you. We appreciate it. We’ll catch you later.
Scott Jolly
See you.
