LOS ANGELES-Michael Rovner is the president and founder of Mike Rovner Construction Inc., a Los Angeles-based general contractor with a special focus on major renovations. Rovner is joining Jeff Bunker, president of Wermers Construction, and moderator Greg Sadick, VP of Residential at Snyder Langston, on the “How to Manage Construction Costs” panel at the upcoming 2013 Real Share Apartments conference on October 24. GlobeSt.com sat down with Rover to get his take on Los Angeles development trends and his method for managing costs.
GlobeSt.com: What are some of the major development trends that you are noticing in Los Angeles?
Michael Rovner: We're seeing a lot of transactions, a lot of buildings being sold. There is a lot of anxious money chasing fewer deals, so people are paying a premium. We're seeing almost as much activity as we were seeing pre-crash. A few years ago, the major players were focusing mainly on the coastal areas; now, things are happing all over the place and in the secondary markets.
GlobeSt.com: Why are people beginning to pay to-dollar for premium properties?
Rovner: The reason why is because people feel safer with multifamily than any other investment. Even though the cap rates have been squeezed significantly, people still feel safer buying multifamily and putting their money into multifamily. If you connect that with the fact that the interest rates are at all-time lows, multifamily is really attractive, especially in the top markets.
GlobeSt.com: How do you manage development costs?
Rovner: My area of expertise and my company's specialization is in major renovations. We spend a lot more time in preconstruction process than most contractors and most owners. You really control the cost by doing good preconstruction, putting together a good team of consultants, having a good set of construction documents and managing the process of execution. On the best major renovation projects, we work up to a year in preconstruction, getting ready for the job.
GlobeSt.com: The market, especially downtown, appears to have a significant number of multifamily developments coming online. What does that mean for the development market?
Rovner: Nothing happened from 2008 to 2012, so there was a large wall in any new units being brought online. That meant that there was a huge need. The market now seems like its being flooded with new units coming online, but really it is just naturally what would have happened in 2008 through 2012. So, now we are seeing a lot come online, and that is basically because there was such a lull. Because there is so much construction going on, there is a lack of talented construction management. The market is becoming fierce to find good construction management individuals because there is so much work out there.
GlobeSt.com: Do you see a solution to this new drought in quality construction management?
Rovner: One of the solutions is that people need to make sure that their top people are tied into the company. Any time there is this much work, people will start making offers to workers who are already employed. The solution is that major development companies need to have their people locked in.
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Kelsi Maree Borland
