Monday, January 16, 2012

Related's new contractor shakes up construction industry

Hiring an outsider to build up Hudson Yards increases competition, which drives down costs.

By Daniel Massey

Deeply dissatisfied with the two dozen agreements negotiated over the summer between unions and contractors, and desperate to bring down the costs of its massive Hudson Yards project, the Related Cos. has made a move certain to shake the foundation of the city's construction industry.

The powerhouse developer last week brought construction giant Tutor Perini Corp. in from California to be the contractor on its $4 billion, 15-year Hudson Yards undertaking, Crain's has learned.

The key to Related's decision: Tutor Perini owns various subcontractors and can do a wide array of construction work—including excavation, concrete forming and placement, steel erection, electrical and mechanical services and plumbing—on its own. By bringing a new player into a notoriously closed-off market, Related increases competition, which should lower prices.

The main construction managers in the New York market—Lend Lease, Plaza, Tishman Construction and Turner—lack the ability to self-perform work, and the subcontractors they hire often operate without transparency and competition.

Developers have grown frustrated by what they contend is a tightly controlled insiders' game that limits their ability to control prices. The Tutor Perini hiring is an attempt to change the rules.

“I think it's an aggressive move,” said Steven Spinola, president of the Real Estate Board of New York. “Bringing another significant company like this into the city is positive for competition.”

Work on Hudson Yards is scheduled to start later this year, beginning with the 1.7 million-square-foot Coach tower that is expected to be completed by 2015. The entire project will transform the far West Side with three office buildings, nine residential towers with 5,000 units, a 750,000-square-foot glass-encased mall, a school, a cultural center and 12 acres of open space.

Tutor Perini will also be the contractor on Related's residential tower at West 30th Street and 10th Avenue, on the outskirts of Hudson Yards. Construction on that project, being developed with Abington Properties, is also expected to commence this year.

The deal brings in a construction company whose work in the city has mostly been on infrastructure, including the widening of one of the nation's busiest runways at John F. Kennedy International Airport and the construction of the AirTrain's Jamaica Station terminal. Tutor Perini also has experience building gambling venues and was tapped by Genting Malaysia Berhad to build Resorts World Casino, the new development at Aqueduct Racetrack.

“It's time-honored that the companies that work here are the companies that work here, and that's the end of it,” said former New York City Buildings Commissioner Patricia Lancaster, a professor of construction management at the NYU Schack Institute of Real Estate. “For Related to change the paradigm is pretty striking.”

Related declined to comment. Tutor Perini did not return a call seeking comment.

Louis Coletti, president of the Building Trades Employers' Association, which represents the city's unionized contractors, declined to comment. Calls to several contractors were not returned.

Related and Tutor Perini became acquainted in 2008 when Deutsche Bank hired the developer to finish the Cosmopolitan of Las Vegas, a $3.9 billion hotel and casino whose owner had defaulted on a $760 million loan. The move to reunite at Hudson Yards is a blow to the city's major construction players, who no doubt had their hearts set on Hudson Yards. Tishman will play a role in the development, though a lesser one than if Tutor Perini were not involved.

Related officials have been single-minded about finding a way to reduce costs for several years now, especially with Hudson Yards looming. Their efforts intensified when Sam Zell's Chicago-based Equity Residential swooped in two years ago to construct a building in the heart of Manhattan using nonunion labor. They worry that other developers will follow Mr. Zell's example, tilting the field against union-only builders.

Related was outspoken during the summer contract talks, which developers felt only nibbled around the edges of needed work-rule changes. Company executives worked tirelessly to reduce costs on their 1.2 million-square-foot mixed-use project on West 42nd Street when the economy tanked.

Related had poured the foundation when the recession put the project on hold. During the lull, executives looked for ways to realign costs with the new fiscal reality, talking extensively with general contractors, but also interviewing all the subcontractors on the job in an effort to understand their costs. Segments of the project were bid out to streamline costs.

The Tutor Perini hiring is a nod to an argument made last summer by labor leaders that paying union workers less isn't the only way to reduce the city's spiraling construction costs. But it's just a piece of Related's effort to lower costs on the West Side.

The developer is in talks with unions on project-labor agreements for Hudson Yards, hoping for changes to work rules and discounts on salaries and benefits to help propel the project forward.

“We're working to address labor cost issues, but we can't do this alone,” said Paul Fernandes, chief of staff at the Building and Construction Trades Council. “Cost increases are not only on the labor side. In fact, if you look at the numbers, they're more heavily on the contractor side.”

Related seeks savings on both fronts and is turning Hudson Yards into a testing ground that could reverberate throughout the industry.

11 comments:

  1. DROP DEAD UNITY TEAM !

    ReplyDelete
  2. Dirty Doug and Tutor Perini. Lock up your children and hide the cookie jar Richard Blum and Perrini are coming to town.
    Dear Mr Walsh. You choose to ignore the UBC International and McCarrons complicity in the NYC corruption but do us a favor and have a look at PB Capitals payments into Doug McCarrons pension. Now that Perrini is in NYC and about to become a big part of the future on NYC Carpenters how about if you use your mighty "All Writs" powers have a look at heir connection to dirty Doug. Since you claim to be able to use your magic powers to keep corruption of out of the NYC Carpenters what action will you take when a new construction power comes into the picture called Tutor Perinni.
    You wont have to "hope for" corruption as you did with Amalgamated or will you have to look very hard if you look at all..

    Here are some easy questions. Who is PB Capital and why was Doug made a director. Why did he instruct PB Capital to pay his compensation into his Pension fund. If they made McCarron a director in return for him using his position in the UBC to buy shares of their stock is this not an illegal act. President of the Southern California Conference of Carpenters (a bargaining agent for all Southern California Carpenters local unions), since 1982. He has also been
    General President of the United Brotherhood of Carpenters and Joiners of America
    (a labor union) since November 1995 and a Member of the Executive Council of the
    AFL-CIO since 1995.
    "Mr. McCarron is a director of ULLICO, Inc. which is the
    parent company of The Union Labor Life Insurance Company which through its
    Separate Account P is expected to purchase a significant number of shares of
    Series B Preferred Stock.""Mr. McCarron has been the Chairman since 1986, and a Trustee since
    1987, of the United Brotherhood of Carpenters Pension Fund for Officers and
    Directors ("United Brotherhood Pension Fund"). The United Brotherhood Pension
    Fund is expected to be a significant investor in PB Capital."

    Will you look a Dirty Dougs relationship with Perinni and determine Perrinis ability to do business with the New York UBC based on allegations against them??

    ReplyDelete
  3. PB Capital Partners, L.P

    This Schedule 13D Amendment is filed by and on behalf of PB
    Capital, Richard C. Blum & Associates, L.P., a California limited partnership
    ("RCBA L.P."); Richard C. Blum & Associates, Inc., a California corporation
    ("RCBA Inc."); and Richard C. Blum, the Chairman and a substantial shareholder
    of RCBA Inc. (collectively the "Reporting Persons").

    PB Capital is a limited partnership whose principal business
    is investing in securities and whose principal office is located at 909
    Montgomery St., Suite 400, San Francisco, California 94133. RCBA L.P. is the
    sole general partner of PB Capital.

    RCBA L.P. is a California limited partnership whose principal
    business is acting as general partner for investment partnerships and providing
    investment advisory and financial consulting services. RCBA L.P. is a
    registered investment adviser with the Securities and Exchange Commission and
    with the State of California. The sole general partner of RCBA L.P. is RCBA
    Inc. The principal business office address of RCBA L.P. and RCBA Inc. is 909
    Montgomery Street, Suite 400, San Francisco, California 94133. The names of
    the executive officers and directors of RCBA Inc., their addresses, citizenship
    and principal occupations are as follows:


    Read the rest of the SEC filing for Tutor Perinnis part of PB Capital and Richard Blum

    Directors' Compensation
    -----------------------

    Fees for outside Directors of the Company currently consist of an annual
    retainer fee of $16,000, plus $900 per Board meeting attended, as well as $900
    per Committee meeting attended by members of the Audit, Compensation and
    Nominating Committees, $4,000 per meeting attended by members of the Executive
    Committee and $2,500 per meeting attended by members of the Special Committee.
    Mr. Ronald N. Tutor, Chairman of the Company since July 1, 1999, has opted to
    receive no Director fees since he is party to a Management Agreement described
    in "Certain Transactions" below. During 1999, the Directors received payment of
    their annual retainer fee of $16,000 in shares of the Company's Common Stock on
    January 4, 1999. The number of shares was based on a price equivalent to the
    fair market value, as defined, of prices prevailing on the American Stock
    Exchange on the date issued and aggregated 3,121 shares of Common Stock for each
    Director, except for Mr. Tutor and Mr.McCarron,"the latter of which requested
    that his fees be paid directly to the United Brotherhood of Carpenters Pension
    Fund, a pension fund of which he is a Trustee."

    ReplyDelete
  4. PB Capital and its Permitted Transferees, if any,
    shall collectively be entitled to nominate one (1) person for election to
    the Board of Directors of the Company; the parties hereto agree and
    acknowledge that Douglas McCarron ("McCarron") shall be deemed the
    designee of PB Capital as of the date of this Agreement; McCarron or such
    other person as may be designated by PB Capital shall be submitted for
    election by shareholders as part of the management slate each time
    members of such Class stand for election thereafter subject to the terms
    hereof; the right to designate a director pursuant to this Section
    7.01(a)(iv) shall terminate at such time as PB Capital and its Permitted
    Transferees collectively cease to hold at least 5% of the outstanding
    shares of Common Stock of the Company; and

    Douglas J. McCarron: Mr. McCarron is 46 years old. Mr.
    McCarron has been President of the Carpenters Local Union No. 1506 (a labor
    union) and President of the Southern California Conference of Carpenters (a bargaining agent for all
    Southern California Carpenters local unions), since 1982. He has also been
    General President of the United Brotherhood of Carpenters and Joiners of America
    (a labor union) since November 1995 and a Member of the Executive Council of the
    AFL-CIO since 1995. Mr. McCarron is a director of ULLICO, Inc. which is the
    parent company of The Union Labor Life Insurance Company which through its
    Separate Account P is expected to purchase a significant number of shares of
    Series B Preferred Stock. From 1992 through 1995, Mr. McCarron was General
    Second Vice President of the United Brotherhood of Carpenters and Joiners of
    America (a labor union). Mr. McCarron also served as Secretary-Treasurer of the
    Southern California District Council of Carpenters (a labor union) from 1987
    through 1995. Mr. McCarron has been the Chairman since 1986, and a Trustee since
    1987, of the United Brotherhood of Carpenters Pension Fund for Officers and
    Directors ("United Brotherhood Pension Fund"). The United Brotherhood Pension
    Fund is expected to be a significant investor in PB Capital.


    "Union Labor Life Insurance Company which through its
    Separate Account P is expected to purchase a significant number of shares of
    Series B Preferred Stock""a Trustee since
    1987, of the United Brotherhood of Carpenters Pension Fund for Officers and
    Directors ("United Brotherhood Pension Fund"). The United Brotherhood Pension
    Fund is expected to be a significant investor in PB Capital."

    ReplyDelete
  5. Silk Road Research is an independent market research firm focused on providing on-the-ground business intelligence in Emerging Asia.

    ReplyDelete
  6. The developer is in talks with unions on project-labor agreements for Hudson Yards, hoping for changes to work rules and discounts on salaries and benefits to help propel the project forward.

    splendid group review

    ReplyDelete
  7. Deeply dissatisfied with the two dozen agreements negotiated over the summer between unions and contractors, and desperate to bring down the costs of its massive Hudson Yards project, the Related Cos. has made a move certain to shake the foundation of the city's construction industry.


    splendid group review

    ReplyDelete
  8. The Tutor Perini hiring is a nod to an argument made last summer by labor leaders that paying union workers less isn't the only way to reduce the city's spiraling construction costs. But it's just a piece of Related's effort to lower costs on the West Side.

    splendid group review

    ReplyDelete
  9. We're working to address labor cost issues, but we can't do this alone,” said Paul Fernandes, chief of staff at the Building and Construction Trades Council. “Cost increases are not only on the labor side. In fact, if you look at the numbers, they're more heavily on the contractor side.

    splendid group review

    ReplyDelete
  10. The powerhouse developer last week brought construction giant Tutor Perini Corp. in from California to be the contractor on its $4 billion, 15-year Hudson Yards undertaking, Crain's has learned.

    Htc Service Center in Bangalore

    ReplyDelete
  11. We understood you blog say some active thing about the moto. Kindly update Boom lift for releated content is more effective to reach the people.

    ReplyDelete

I would ask that if you would like to leave a comment that you think of Local 157 Blogspot as your online meeting hall and that you wouldn’t say anything on this site that you wouldn’t, say at a union meeting. Constructive criticism is welcome, as we all benefit from such advice. Obnoxious comments are not welcome.