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Law Firm Gets Busy With Surge in California Construction Contracts

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Rendering courtesy Pelli Clarke Pelli
The 1,070-ft-tall Transbay Tower will be the tallest building in San Francisco upon its completion in 2017.
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As construction activity picks up in California, so does contract work for Los Angeles-based real estate law firm Allen Matkins.

 

"The market is on fire," says attorney Delmar Nehrenberg, chairman of construction and development practice for Allen Matkins. "I've never seen anything like it."

 

Nehrenberg, who is working on contracts for projects worth about $1.5 billion across the state says San Francisco and Hollywood are two of the hottest current areas he is seeing. He says the Bay Area boom is being driven by tech companies taking huge spaces, with lots of build-to-suit; and Hollywood is "crazy" with mixed-use projects.

 

In the San Francisco area, he is working on 333 Brannan, a $190-million, 175,000-sq-ft project developed by Kilroy Realty; 335 Mission, a $90-million, 445,000-sq-ft property leased to Salesforce.com and also being developed by Kilroy; and the $500-million Transbay Tower, which is being developed by Boston Properties.

 

Standing 1,070 ft and covering 1.4 million sq ft, Transbay Tower will be the tallest building in San Francisco when complete in 2017. The mixed-use office building is being designed by Pelli Clarke Pelli, New Haven, Conn., which was awarded the commission after winning an international competition in 2007 to design the tower and the multimodal transit center at its base, the Transbay Transit Center, which is currently under construction.

 

In the Los Angeles region,  Nehrenberg is working on Playa Vista Runway, a $150-million retail center by Lincoln Properties; Blvd6200, a $170-million, retail / luxury apartment project with 1,300 units developed by DLJ Real Estate and Clarrett West; and Columbia Square, a $250-million project by Kilroy Realty.

 

Featuring two residential towers, with an office building and retail, Columbia Square is located on the studio sight where television shows such as I Love Lucy and Big Brother were filmed.

 

With all the new work coming into Allen Matkins, Nehrenberg says he is seeing a new trend in the way contractors are handling subcontractor insurance in their contracts. He says many of them are using Subguard by Zurich, a risk management solution that helps contractors manage the risk of subcontractor or supplier default.

 

"Subguard provides comprehensive, consistent coverage for all enrolled subcontractors while enabling general contractors to regain control of their projects if a subcontractor defaults," says the Zurich website.

 

Nehrenberg, whose clients are mainly project owners, says Subguard is an alternative to a bond. He says bonds typically cost between .8 and 1.2 % of the total construction cost of each contract and Subguard is competitive with that, "but a lot of contractors have moved toward Subguard because at the end of the year, if there are not a lot of claims, they get a rebate or refund, which you don't get from a bond."

 

Besides deciding upon what type of insurance to go with in the contract, Nehrenberg says it can be challenging to get contractors to commit to pricing up front. He says because of the competitive market, they are eager to get under contract and sign anything put in front of them. "But what you have to do in these contracts when representing the owners is get your pricing up front," he says. And if you can't do this, he says you have to have really strict requirements on how the contractors get to their pricing.

 

“You have to show us that your pricing is competitive with everybody else, so even though you are going to do [the work], you have to give us three other bids to show your price is the best," Nehrenberg says.

 

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