2023 Summer Issue of Urban Land - 102

SOLUTION FILE
During the initial design
phase, eVolve did not pencil
out financially with two
towers largely because of the
U-shaped rather than block
footprint, Christensen says.
Then, Ubuntu heard about
top-down construction and
the major cost savings it
generates, recognizing that it
represented " a paradigm shift
for construction that saves
so much material, " and the
partners knew they had to use
it. Six months into the design
phase, they changed from traditional
to top-down construction,
slashed eVolve's cost, and
only then did eVolve pencil
out with both towers.
" We came in about 25
percent less expensive than
a high-rise, cast-in-place, flatplate
concrete project, " Thornton
says of eVolve.
Thornton and Esparza say
that, like their firm's Bangalore
top-down buildings, the design
and structural engineering of
both eVolve towers feature
cores that support cantilevered
floors.
" We've got our vertical
supply chain involved with the
project, " Esparza says. Delivery
of everything ranging from
the curtain wall to mechanical,
electric, and plumbing systems
will be done using TGE
Top Down's manufacturing
process-enabled supply chain.
" The eVolve project has been
in the making for three years.
Right now, we're in the site
development plan amendment
phase, together with an early
design development concurrent
path. "
TGE plans to break ground
for eVolve by the third quarter
102
of 2023, depending on the
firm's ability to pull permits.
Given that Ubuntu is a merchant
builder, eVolve's buyer,
Evolve Development Holdings
LLC, just secured senior
debt financing for eVolve that
includes a bond issuance and
covered most of the costs
associated with the project.
Mezzanine financing also
was used to bridge the gap
between the senior debt and
the equity. The equity financing
was a mix of developer
equity and property assessed
clean energy (PACE) equity
funding. Of importance, the
top-down building process did
not affect the financing structure
of the eVolve project.
Many would think that a
new technique like top down
would be more expensive to
insure than traditional construction,
but in part because
TGE is collaborating with
insurance giants Aon and
Arthur J. Gallagher & Co.,
insurance companies understand
that top down reduces
many risks and thus underwrite
top-down construction
insurance at lower rates than
traditional construction. Costs
of wrap-up/workers compensation/employer
liability, construction/builder's
risk, default,
general liability, defect, and
cost overrun/liquidated damages
insurance are all reduced.
Accelerating Top Down
In the current economic environment,
top-down construction
is a hedge against both
the high cost of construction
materials-since it reduces the
quantity of construction materials
needed and thus their
overall cost-and also the scarcity
of labor, since a top-down
project uses fewer construction
workers.
As detailed in the " Advantages "
sidebar, the benefits of
top down are significant and
even revolutionary.
By saving so much on
construction, top down makes
feasible those development
projects that would not have
penciled out using traditional
construction, as eVolve illustrates.
While the efficiency
of top down may reduce
the number of workers on a
given project, the cost savings
of top down will enable the
development of more projects,
which will increase the number
of construction workers.
Switching costs in shifting
construction methods from
traditional to top down seem
to be the main barrier to
implementing top-down construction
on an industrywide
basis. Given the scale of the
advantages of top down, the
payback period of amortizing
switching costs should be relatively
short.
Resistance to an unfamiliar
innovation is to be expected.
But as leading construction
executives fully learn about
the advantages of top down,
they are coming around, barriers
are being broken down,
and they frequently become
converts as Thornton did, with
top-down construction innovation
becoming more accepted
by all stakeholders. UL
CHUCK SCHILKE is a Washington, D.C.-based
real estate strategist, developer, financier, lawyer, and
real estate lecturer at Johns Hopkins University.
URBAN LAND
SUMMER 2023
2023 Summer Issue of Urban Land

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