Vancouver Business Journal

Sun04202014

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Trust, Park Service fail to reach agreement on Pearson Air Museum

Trust, Park Service fail to reach agreement on Pearson Air Museum

Several months after having entered into formal mediation talks to discuss issue...

Riverview Community Bank celebrates regulatory decision

Riverview Community Bank celebrates regulatory decision

Officials at Riverview Community Bank are moving forward with confidence knowing...

Commercial development: Building for tomorrow

Commercial development: Building for tomorrow

If commercial developers feel like circus performers walking a tightrope, there ...

 Business Growth Award finalists announced

Business Growth Award finalists announced

14 businesses have been named finalists for the Vancouver Business Journal's 201...

Is Food Processing part of Port “Comprehensive Scheme”?

Is Food Processing part of Port “Comprehensive Scheme”?

The leaders of a Clark County food processing company will bring their efforts t...

Developers cautious but developing

Developers cautious but developing

Although the Great Recession is behind us, many businesses and individuals are s...

Design & Construction

Commercial development: Building for tomorrow

Commercial development: Building for tomorrow

If commercial developers feel like circus performers walking a tightrope, there is good reason.

Limited financing, escalating regulatory and raw material costs, and still-low property valuations make penciling out a project difficult. And yet, workforce trends and emerging technologies demand designs that look to the future.

Build to the budget

According to Ron Frederiksen, president of RSV Bui...

Innovation & Manufacturing

Southwest Washington keeps its focus on manufacturing

Southwest Washington keeps its focus on manufacturing

Southwest Washington boasts a number of regional factors that are beneficial to the local economy. Among them are access to clean water, affordable power and a skilled workforce. These factors have continued to drive the local manufacturing industry in 2014 – an industry that was one of the first to convincingly move forward out of the recession.

“Advanced manufacturing aligns with both our Orego...

News Briefs

CREDC seeks health care startups to participate in “Shark Tank”

The Columbia River Economic Development Council (CREDC) is accepting applications from startups related to the health care sector interested in participating in Clark County PubTalk’s annual business pitch competition on Tuesday, June 17.

Spotlight

Audio Fox: A sound solution

Audio Fox: A sound solution

Like a lot of small businesses, Vancouver-based Sound Product Solutions started with a problem. Several years into retirement, Rex Clark was experiencing hearing loss – and he wasn’t the only one affected by that change.

“We had some disagreements, me and my wife, about where the volume should be on the TV,” said Rex. He remembered similar struggles between his own parents, but the best solution ...

Tapped out

 By John H. Baker, Jordan Schrader Ramis

What happens when a development project runs out of money before the work is done? Today’s tight credit and uncertain market prospects cast a shadow of risk on once-promising projects.

Each party – a tapped-out developer, undersecured lender, or unpaid contractor or consultant – has a stake in the project. Each party can protect its stake by cooperating with the others to maximize the property’s value and minimize dispute costs.

 By John H. Baker, Jordan Schrader Ramis

What happens when a development project runs out of money before the work is done? Today’s tight credit and uncertain market prospects cast a shadow of risk on once-promising projects.

Each party – a tapped-out developer, undersecured lender, or unpaid contractor or consultant – has a stake in the project. Each party can protect its stake by cooperating with the others to maximize the property’s value and minimize dispute costs.

To achieve the best outcome possible:

Determine the total value actually at risk

The typical project under review in this situation is unfinished, late and will require more money to finish than anybody expected to contribute. Given those factors, the parties need to realistically determine the value of the unfinished versus the finished project.

Whether or not the projected finished value is equal to the original pro forma appraisal isn’t the issue - the critical consideration is what its completion will contribute to the value.

Analyze options

The lender may face the burden of injecting more funds into the project than its authorized loan-to-value ratios. The owner or developer may have to liquidate other assets. Contractors may have to discount work or extend payment terms.

These analyses must consider the cost of further delay and litigation. The parties’ contractual rights to recover delay costs, attorney fees, appraisal costs and other expenses may not outweigh the cost of losing tenants or buyers because the project did not make it to market.

Parties must determine their bottom-line position

Each party may find itself unable to participate in a solution on a true pro rata or proportional basis. The owner or developer may have no other assets to liquidate or contribute. The contractor may face unpaid tax claims or other liens that threaten its ability to remain in operation.

But within the range of financial contributions that each party can accommodate, a workable solution can often be found.

How it might work: a recent case history

The project in question was 90 percent complete but the expected cost to finish would substantially exceed the original budgets. The owner’s resources were depleted, credit limits were maxed out and the contractor was owed a substantial sum.

The lender suspended funding, work stopped and the contractor filed its lien. But the contractor chose not to immediately exercise its right to terminate the contract and foreclose its lien, leaving room for all parties to maneuver.

After multiparty discussions, a contract change order ultimately led to completion. The contractor received more than 90 percent of its lien claim but agreed to an absolute maximum fixed cost to finish the work. The lender agreed to fund the final work, given the limit and received an additional supplemental guarantee for payment from the investors and the owner.

A short-term completion schedule was agreed to by all parties. Every party gave up something, but no party was forced to bear the total burden or expense of the problem. Finishing is obviously the ultimate goal of any construction project and should remain the goal even when problems develop.

 

Douglas P. Cushing is a member of Jordan Schrader Ramis’s business practice group. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. . John H. Baker, AIA, LEED AP, is a member of Jordan Schrader Ramis’s Dirt Law practice group. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. .

Opinion

Focus Column

Innovating innovation

Innovating innovation

If you want to attract innovation, you need to be innovative. The Clark County Economic Development plan, which guides t...

You can thrive without reinventing the wheel

You can thrive without reinventing the wheel

Every day the media bombards us with headlines of doomsday for American manufacturers. We read how competition is stiff,...

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