The 1st article is how the 3 year old, $37,000,000 Gale Centre quad pad ice rink needs $400,000 in "immediate repairs" that will require its shut down for 4-6 weeks.
The 2nd article on the same front page is how the District School Board of Niagara, after declaring it had 34 surplus buildings a few years ago and recently admitting it is losing 1100 students a year voted "unanimously" to build a new High School for Fort Erie and Ridgeway/Crystal Beach.
My reflections - could be particularly salient to "people" or "mission" focused organizations like charities and governments but also true at some level to "Return-On-Investment" organizations like your average family, sole proprietor or share-capital corporation - are not new or particularly insightful. They are just mine. For example, most Canadian Banks - considered the most profitable and stable in the world at this time - have been shedding their "building businesses" for years due to the risk that they determined those structures posed to their core business of lending and investing money.
Why should you read my reflections about this topic? Good question.
Not because i am an expert.
Not because i am theoretician.
But because i am an experienced, "end user" of a large 108,000 sq foot building and 10 acres land that was purchased by a congregation which felt its main "constriction" to growth was a lack of facility space. So after a multi-year search it commissioned a study that recommended it build 25,000 sq feet to replace their 12,000 sq foot, land-locked, parking-constricted church facility.
Question #1. Do you see our building as the new business unit it is?
When you build/buy a building as an owner you are adding at least one whole entirely different AND usually unfamiliar business unit to your enterprise... it is called The building. It becomes an asset and liability to you. This may seem like an awfully simplistic observation but given all the board, town hall and Elder's meetings i have sat in that talked about facilities, i have rarely - if ever - heard this issue discussed at "the philosophical level". Do we WANT to get into the building business - in addition to the insurance or church or government services or whatever business - as well? For example: If you have a trucking company and have trucks, a freight tracking system and a driver training, monitoring and pay system... do you really need to add another business unit called The Building to all that? Ask yourself - in every meeting if needed - the olde timey Peter Drucker Consulting Questions:
What business are you in?
and
How's business?
Application #1 - If your answer to the question "What business are you in?" does not on a prima facie basis include the need for a building then QUICKLY ask yourself the question: Is there a way to deliver your program, services, products without taking the risk/enjoying the reward inherent in the ownership of those spaces? Invariably the answer to this 2nd question for nearly every business, charity and non-profit organization i have ever been apart of or consulted with is YES YES A THOUSAND TIMES YES. There are companies and non-profits in "the building running and maintaining business". Contract with one of them and stick to what your "business" is... usually the delivery of a set of programs, services or the production of a set items that have very little to do with owning, maintaining, upgrading, securing, heating, lighting, powering, cleaning and financing of a steel, concrete or wooden structure.
Question #2 - Does your service-oriented organization have "building business" expertise on hand?
Unless you are Menkes or Bentall or CBRE you didn't get into the "building" business. You were in the t-shirt business or the aggregate business or the poverty mitigation business. You build or made or delivered some product... often out of your garage or your basement or your shed. You used surplus time and space in your private dwelling or someone else's to store, manufacture and deliver your goods and services. You didn't give the "building" part of your business much thought at all. But you did become - because your business grew large enough to require its own dedicated space - an expert at producing or delivering whatever it was you were producing or delivering. Once you take the plunge into your own facility - particularly if you buy it - you not only have to keep on the growing edge of your own industry and maintain the competitive advantages you developed in your start up phase... you have almost instantly become an "expert" at at least the following 25 different aspects of facility ownership and management just so that the building you have purchased or leased doesn't become a life-threatening threat to the business you thought you needed that building in the first place for. The 25 different disciplines you need to immediately either learn or hire the expertise to deal with are:
- Municipal Building Use Zoning Bylaws
- Municipal Signage Rules
- Municipal Business Use of Water Regulations
- Municipal Fence Regulations (eg. has your neighbor fenced in a 10' by 150' strip of your land?)
- Municipal Waste Water Regulations
- Municipal Garbage Collection Rules
- Municipal Landscaping Rules (can you spray the weeds on your own property? most likely not)
- Municipal Parking Regulations
- Municipal Lighting Regulations
- Municipal BIA rules (re: holiday openings, mandatory hours, signage, etc,etc)
- Provincial Accessibility Legislation
- Provincial Commercial Tenants Act Legislation
- Federal Hazardous Waste Storage and Removal Regulations (can anyone say asbestos?)
- Federal Workplace Safety Legislation
- Security Systems
- Fire Detection and Suppression Systems Testing (eg. Ontario requires public buildings to have a fire drill 1/month... yes it does. check the Ontario Fire Code.)
- Fire Detection and Suppression Systems Maintenance (eg. its costs $65 to have an extinguisher recharged after kids play with it in the stairwell)
- Keys (oh the humanity... stay tuned for a post about Keys)
- Opening procedures
- Closing procedures
- Commercial Mortgage Financing (if you can get one)
- Custodial Services and Schedules
- Building Preventative Maintenance Program
- Preventative Maintenance Long Term Financing (eg. flat roofs cost $11/sq foot to replace every 25 years)
- Hydro, Sewage and Transportation right of ways (eg. does all sewage from the north end of town flow under your building so that if you demolish part of it, you could never get permission to rebuild it now?)
- HVAC Operation
- HVAC Preventative Maintenance
Question #3 - Do you realize adding a building multiplies not adds complexity?
I think you probably see that already.
Question #4 - Have you made a ruthless estimate of your real building "needs"?
How much space does it really take to deliver a discipleship and outreach program to the youth of your town? I sat on the District Executive Committee of my denomination when a largish, growing church brought plans to use for a $2.6 million dollar 5,000 sq foot "warehouse style" addition to their building to "reach the youth of their city with cutting edge programs". It came complete with fast-food restaurant style booths, a multilevel stage, lights, a sound booth, a large media saavy office for the Youth Pastor and a disco ball. Their church was located on the edge of town, on a bus route thankfully and was now across the street from 2 or 3 large strip plazas behind which were clustered the 10-15 apartment buildings full of youth they wanted to reach.
It had been "the church in the field" at one point, but the city had grown up around it.
Unless they took the bus, to get to the church however the kids had to be dropped off out front by cars or cross 5 lanes of very busy traffic on foot. Not likely. They couldn't bike there as the road was WAY too busy and dangerous for most parents to allow.
My suggestion to them at the time was... rent a vacant, empty unfinished store across the street in one of the strip malls at $10/sq foot per year net, net. Do $100,000 in upgrades to your storefront putting in booths, lights, etc,etc. Then your remaining $2,500,000 would provide for 50 years of rent of a facility just like the one they wanted to build.... an empty store is a warehouse... metal ceiling, exposed piping, spartan surroundings.
It would also have not required crossing the dangerous street and would have been much closer to all the apartment buildings where the youth were that are clustered in behind the strip malls.
Additionally it would have been more "incarnational" than "attractional". It would have taken the ministry to where the youth were rather than asking them to come to where the church is.
It would also have given the church the flexibility to cut that long term capital financing, maintenance and replacement cost, if the church finances or ministry vision changed.
It also would have addressed this question of "right-sizing". Going into the store front... even for 3 years... would have allowed the church to "experiment" with this model of ministry in order to see just what exactly they could do out it and what was and was not important.
For example... our church has a warehouse style youth room. We have found that that lighting and staging of much more importance than the restaurant style booths (that were donated to us). So running out and spending a bunch of money on booths because a designer or youth pastor thought it would "be cool" doesn't actually help "right-size" the facility for the programs you want to deliver.
Question #5 - Are you ready for cost overruns?
At least 10% more on new builds and between 12-15% more on renovations.
loving your recent posts Jake...I'm hearing what you are saying.
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