Written John Phair, President & CEO
Over the last two weeks or so, we have opened a brand new hotel, broke ground on a large apartment complex and a large industrial building and another hotel, and dealt with very difficult entitlement (zoning, platting etc.) issues in two different states. Each of these new developments represent hundreds of small decisions along the way. All were in different municipalities, three different states - and each has their own set of rules that must be followed.
With all zoning boards, city councils and similar bodies, we need approvals. Hardly any have a clear set of rules or a road map to get us to permits or construction completion. And then we need final certificates of occupancy, operating permits, health department inspections, etc. and, only then, are we able to start collecting rent.
It is a process loaded with many man-made obstacles. It always assumes you are wrong, or worse, cheating or lying. At Holladay, we don't do that. But we get thrown in the same category as others who don't follow the rules.
Why write about this stuff? Most of us understand the development business and all the pitfalls that come with it.
But just a few weeks ago, one of our very best project managers was giving me an update on a long, drawn out entitlement process from a particularly prickly building department who, after a long effort, repeated filings and meetings, still was not ready to issue permits for construction.
To date, the demanded changes to a set of plans built over 200 times, had resulted in a quarter million construction cost increase - and we weren't yet permitted or able to start construction. During the discussion, he said to me, 'you know I could have put $50,000 in an envelope slipped it to the city official, and we would probably already be under construction and saved $200,000!'
That is a LOT of money.
I am embarrassed to say I hesitated answering just long enough that he probably wondered what my answer would be. I shouldn't have. Our culture does not ever condone this behavior. We are here for the long run. We want to be able to sleep at night. We all know right from wrong by 5 years old. We do the right thing.
Yet, we all make many business decisions - big and small - every day. We know the right way to do it and, thankfully, are not faced with $200,000 choices very often.
Thanks to all my colleagues for helping me sleep at night.