Thursday, January 05, 2012

New report: for three months, arena has been (slightly) behind schedule; completion date for arena nudged back; site work could continue almost to Jay-Z concert date

Delays are taking their toll on Atlantic Yards construction, with new data from November indicating--for the first time--that the arena is now behind, and had been slightly behind for three months.

Apparently as a consequence, the substantial completion date of the arena has been pushed back a week to 8/30/12, and the substantial completion date of site work (landscaping, trees, sidewalks, bollards, etc.) pushed back a month to 9/25/12, just three days before Jay-Z is supposed to inaugurate the Barclays Center.

The information comes from the latest Site Observation Report, based on a visit of 11/22/11 and documents made available on 12/20/11, from Merritt & Harris, the real estate consultant to the arena PILOT Bond Trustee.

(The substantial completion date last April was nudged back two weeks from 8/12/12 to 8/27/12, but in October was nudged forward to 8/23/12.)

Cause for worry?

The report, dated 1/4/12, indicates that work seems to be proceeding appropriately. Confoundingly, it does not acknowledge in its text that the arena is behind, as a chart indicates.

Construction progress, based on cash flow, is behind 1.23%, a relatively small figure. However, given that the arena has long been ahead of schedule, that surely has provoked concern, as well as second shifts to get the work done.

Though the Barclays Center displays significant structural and exterior work, as of November, the arena was still only about half-finished, in terms of cash flow.

The Merritt & Harris report, dated 12/27/11, was completed before news surfaced of the shutdown of ASI Limited, the firm fabricating the custom panels for the arena exterior; the firm's owner left open the possibility of a reopening.

The report also acknowledges that the associated Transit Connection is a week late, though that project likely has much more leeway, given scheduled completion on 4/1/12.

And there are other indications of a slowdown. The Final Completion Date for the project, involving punch list work and subcontractor close-outs, was in the previous month's report indicated as 3/8/13; now, it could be extended nearly three months,  to 5/30/13.

Also, the latest report indicates the expectation of a GMP2 (Guaranteed Maximum Price 2), which both offers an early completion bonus (July 2012) and seemingly contemplates additional delays.
That report has apparently been issued but not made public.

Contradictory, confusing information

The Merritt & Harris report is contradictory and confusing in places. For example, the text of the document indicates that the arena is on schedule:

But that is contradicted by the chart and other data in the report. The highlighted part of the chart and the highlighted statistics (click to enlarge) indicate that actual cash flow has lagged estimated progress.

It's also the first time that Merritt & Harris has revealed any delays in arena construction (note the negative percentages on the bottom line).

The consultant did not explain in yesterday's report why delays had not been previously reported, but apparently there were errors in the chart accompanying the previous report (below), issued 12/2/11.

Note that both the chart and the statistics offered two separate notations for the month of September 2011 and that neither the September 2011 nor October 2011 statistics in the two charts match.

The Transit Connection

The Transit Connection has been behind for three months. The document at one point states:
The construction term of 20 months (August 2, 2010-April 1, 2012) is reasonable, but, due to early delays with approval of the test piles, had slipped by approximately 1 week.
At another point, it states:
The construction term of 20 months (August 2, 2010-April 1, 2012) is reasonable, but, due to early delays with approval of the test piles, had slipped by approximately 1 month.
Both are misleading, as I wrote two months ago: the "early delays with approval of the test piles" did not cause ongoing slippage in the Construction Schedule, since the project was able to return to schedule thanks to "excavation and demolition work."

After omitting the graphic regarding the Transit Connection last month, this month's report does contain such a graphic. It indicates that the Transit Connection is more than 78% done, in terms of cash flow, so it's in the home stretch. But it should be more than 85% done.


Finally checking on that Deficiency

In my 12/7/11 post, I noted that a section in the report headed Deficiency indicates, as in predecessor reports, that some concrete compression test results have been found to be deficient, but also leaves things murky, given that expected 56-day testing presumably was complete as of June 2011.

The latest report finally follows up, noting that a letter has been requested from the Structural Engineer.

ASI Limited

That chart below on subcontracts indicates that the contract with ASI Limited for the exterior facade, at $32.4 million, was considerably below the $39.2 million originally budgeted by the general contractor.

Did ASI Limited offer a low bid to get the work? If so, is that part of the firm's financial troubles? Both of those questions are speculative, as of now, but worth consideration.

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