Your land project has enough threats of failure without a pandemic. This information will help you determine what threats COVID-19 presents to your project so that you you can navigate those threats and make your land project a reality.
Depending on your method of financing, the pandemic could cause a financial problem.
Private investors may be uninterested right now or changing their mind as the pandemic unfolds. If you’ve set up private investing, be communicating with the investors routinely to make sure they are still committed. And remember, never do business with a private investor without the terms in writing and signed. This isn’t because you don’t trust each other, but because none of us know what the future brings.
Banks are still in business. Interest rates have never been lower. If you’ve already signed papers with a bank, no worries. Banks are highly regulated and well protected. Your deal with them should be safe.
2. Regulatory Delays
Main-Land is projecting delays in the regulatory process.
Environmental permitting is an essential occupation in Maine, so Maine DEP is at work processing permits from home. Pre-application, pre-submission, and public informational meetings are all allowed by teleconference. DEP is taking applications at their office, but on-line submission is in the works. That said, DEP had extended review times for most projects due to the high volume of solar projects prior to the pandemic. We anticipate review times to further increase.
Town planning boards are experiencing delays. Many towns have started to meet via video conferencing, but public input vital to the legal process remains difficult to manage. Expect delays while the State and Municipalities work this out.
With planning and adjustment, a project schedule can often absorb some delay.
3. Oil Price Fluctuations
Land project construction costs are dependent on many factors.
A dramatic factor in pricing is how busy contractors are. If they’re busy, prices will climb dramatically. There are only so many contractors that work in Maine. Another big price factor is the price of oil. Site equipment, like excavators, rock trucks, bulldozers, and loaders – basically, anything that looks like a scaled-up Tonka truck – it all runs on diesel. Diesel prices fluctuates with oil prices.
Right now, the cost of oil is extremely low. This is great if you want to build something soon. Have at it!
The problem is when the price comes back up. Pay attention to escalator clauses in your contract, tied to the price of oil. This will affect earthwork costs and paving costs. If your contractor has a diesel escalator, or a bitumen (tar) escalator for pavement, that’s a good thing. You don’t want to pay the higher price if you don’t have to. But leave room in your construction budget for when, not if, the price of oil goes back up.
4. Interest Rates
Interest rates have gone lower than a professional limbo dancer. If you’re financing a project, that’s a sweet deal you ought to harness.
But please do watch the terms of your loan. A variable rate loan, which may be all you can get right now, has an interest rate that will follow prime rates. Prime can pretty much only increase from here. That will happen, and maybe not that far distant.
So be prepared and make sure your project budget has an interest rate increase line item for the length of the loan. Carrying costs won’t stay so low.
5. Construction Labor
Some businesses have been forced to downsize or shut their doors. If that’s you, we’re sorry and encourage you to check out our pdf: 7 Things to Do if Your Small Business Closes for COVID-19. Get it free at www.main-landdci.com.
Contractors are an essential service, so they’re still going. Plus, site contractors in particular seem like a low transmission risk occupation.
Eventually, lots of people may get sick. If we can “flatten the curve”, perhaps contractors will be able to continue right through on a reduced workforce, maybe similar to a bad flu season. Ask your site contractor what they’re doing to protect their employees during the pandemic so they can continue digging.
Ain’t technology great? If this pandemic had happened only ten years ago, the impact to our nation and state would have been far worse. Twenty years ago and we might as well retreat upta camp.
Today, we can continue working from home and Main-Land has embraced the strategy to reduce risk to staff.
We do this on the back of technology. We use computer software to do almost everything these days, including site design, permit applications, scheduling, task tracking, project management, and communication. The interwebs make much of this available remotely.
We’re all starting to get used to video conferencing. Seeing people on a video conference is superior to a phone call, with less miscommunications. We can even show drawings, markups, and share cursor control to point. Main-Land has these technologies in house and can share them with our clients, easily and free. But it will never take the place of sitting knee to knee over a drawing. That’s my point.To overcome this communication setback and avoid miscommunication, ask to talk with your project manager more often. If you’re not talking with your PM at least weekly, then there’s a problem. Call them or ask that they call you. Rehash decisions. Follow up conversations with an email outlining the outcomes. That’s how expensive miscommunications are avoided.
7. The Market
What will the market do?
Clearly, no one can know. The stock market is volatile. I’ve taken to keeping a stock market display on my computer as I work. I’m a little addicted to it right now. It’s been up lately, making up some lost ground, but it’s not back up to pre-covid heights. No one knows when it will be.
Here’s one thing I do know. If it’s a short dip caused by an outside influence, then those who continue with their project, getting it designed, permitted, and ready to build during this time, will be the winners on the rebound.
Are you concerned your project is particularly sensitive to any one or more of these corona threats? Then call your project manager right now. Every Main-Land project manager is available by email, cellphone, or text during regular working hours. Or call us at 207-897-6752 right now. We’ll get you in touch.
Bob Berry is owner and CEO of Main-Land Development Consultants, a land use consulting company in Livermore Falls, Maine. He is a board member for Franklin Savings Bank and an author striving to help small business owners. See www.main-landdci.com and www.bobberryauthor.com for more information.