Setting: The year is 2013. Claire Clever is a young lady who graduated from George Mason University's Business School just four years ago with an MBA degree and secured a position with a large marketing company. Initially, she liked her job very much, but it began to bore her. She was unhappy with her boss, who was always refusing to listen to her creative ideas. While sitting at her desk one day, Claire daydreamed about a new, more interesting career Two weeks later Claire's mother called to say that her Uncle Larry Lewker, from Mount Hope, West Virginia, had passed away and that Claire had inherited most of his money. Claire couldn't believe that she was going to receive part of Lewker's inheritance. She barely knew her uncle However, the inheritance came with a condition -that she would have to use the money in order to invest in a project that would help the people of Mount Hope. Then, all the profits from the project would be Claire's. If she did not accept the conditions of the inheritance, she would not receive any of the money. She decided to accept the terms, in honor of her uncle's last wishes Following her uncle's funeral, held in Mount Hope, Claire decided to stay in town and determine what would be a beneficial project In order to do so, Claire organized a public hearing in the town library to gather suggestions As a result, Claire could clearly see that the vast majority of the citizens of Mount Hope desperately wanted a new shopping center. The town was lacking a modern facility that had ample parking and reflected the character of the town Her head full of thoughts, Claire drove back to D C. in order to quit her job After emptying her apartment, she moved to Mount Hope to get started on her project. The idea of a medium-scale shopping mall with sumicient parking seemed to be very promising. The relevant question was Would it also be a good investment? Claire needed expenenced input about this project as she lacked the necessary knowiedge of the eeded a demand of the area and the economics behind the land development process It was clear she n consultant Claire remembered Heather an oid triend trom nigh school, who was mamed to a land developer. She decided he was the right person to talk to. Bob Builder's land development company, "Big Builders, was not tar away from Mount Hope. After having made an appointment with Bob on the phone, their conversation went like this: Bob: Now, Claire, tell me more about your plans for that mall Claire: Since your office is just an hour away from Mount Hope I was wondering if you ever heard about the demand for a shopping facility in that town CEIE-370 Construction Systems Spring 2018 Page 2 of 6 CEIE-370 Construction Systems Spring 2018 Assignment 1 Bob: Let me tell you Claire, if I weren't so wrapped up with projects here in town, I might have started a project like you have in mind Yes indeed, there is a demand for a mall in or around Mount Hope. So Claire, what can I do for you? Claire Well, I do understand that you are very busy, but do you think you could be a consuitant to me about this mall? See, I have experience in managing and marketing, but, to be honest, I don't know much about land development and construction My first advice to you is hat you follow the three basic rules of land development first, location second, location, and third, location Bob: Clairei got Bob: Good, good Well, since I have developed a few shopping centers, I actually can be of some help to you Bob agreed to take over this consulting job after negotiating his fee. The new business partners set another appointment to talk about the project in further detail. This conversation went as follows Bob: Since our last meeting. I dug out some old documentation on previous malls I developed It is always important to produce good documentation. It can be very handy, when doing a similar project, as is the case now. It helps me to formulate a preliminary estimate and the estimate itself will assist us in the determination of the project's feasibility But don't you need some more information to compare the new with the old projects? That is why you are here. I need to know from you what kind of mall you had in mind and what your financial situation looks like. Claire Bob: Claire Iwould like the shopping mall to be comprised of smaller retailers A customer should have the impression that he or she is strolling down a town street with small and medium sized shops, of course all under one roof. It is also important that this place provides sufficient parking without offering the customer an unsightly view of a big parking lot. I want to provide attractive architecture and landscaping rather than just constructing a big ugty cubicie It seems that you really trying to preserve the town's character. That is good In terms of square feet, what size of floor space are we looking at? Claire On, I haven't really thought about tnat How much will t be it let's say, we have thirty smaller and fifteen bigger stores? (making some calculations on the comer of his newspaper) I would say we are looking at about 150.000 SF area Bob: That is a nice number to work with and shouldn't be too far outside the "downtown Claire. Yes, and I have already looked around town for a piece of property Well, i certain spot in mind, but I just don t know it we can build there Imagine you work in the office of "Big Builders" and Bob asks you to work on the Mount Hope Project. Prepare a professional memo for him stating the costs for the items listed below as well as the total project cost for the shopping facility in Mount Hope in the correct year. Use the information provided in the text you have read before and the additional information given below You know that Big Builders has developed an essentially similar shopping facility in Splash Springs in 2003. You obtained the company's records from Bob and found that the actual costs for this shopping center were 1 Land 2 Site development 3 Utilities (Water and Sewer) 4 Electrical reticulation 5 Shopping facility (69,500 SF) 6 Parking lot (300 spaces) 7 Landscaping 8 Various Fees Total project cost s 2,652,000 $1,080,000 $ 321,000 $ 68,000 3,929 000 $ 489.000 $ 70,000 s 1.119.000 $ 9,728,000 The following construction cost indices were researched and will help determine the aqustment in price due to the difference in time and location of the two projects Year Splash Springs Mount Hope 2003 2013 0.95 184 0.83 1.69 . Claire recelved an estimate for site development, which stated: The site work should cost $2,135,000 at 2013 prices. You need to add an inflation allowance of 3.1% peryear to this estimate If construction is to take place later than 2013 For an annual inflation rate, assume a rate of 3.1% per year The item "various fees" will be 20% of the construction cost . . . Your memo should include: A table of the itemized costs The Mt. Hope project total . Any additional assumptions A paragraph that answers the following questions How accurate do you think your cost estimate is likely to be? What additional information do you need to improve the accuracy of your estimate? What information do you need if you are to give Claire an indication as to the feasibility of the venture from a technical and financial point of view? o o o Attached to your memo: Calculations of the itemized costs Setting: The year is 2013. Claire Clever is a young lady who graduated from George Mason University's Business School just four years ago with an MBA degree and secured a position with a large marketing company. Initially, she liked her job very much, but it began to bore her. She was unhappy with her boss, who was always refusing to listen to her creative ideas. While sitting at her desk one day, Claire daydreamed about a new, more interesting career Two weeks later Claire's mother called to say that her Uncle Larry Lewker, from Mount Hope, West Virginia, had passed away and that Claire had inherited most of his money. Claire couldn't believe that she was going to receive part of Lewker's inheritance. She barely knew her uncle However, the inheritance came with a condition -that she would have to use the money in order to invest in a project that would help the people of Mount Hope. Then, all the profits from the project would be Claire's. If she did not accept the conditions of the inheritance, she would not receive any of the money. She decided to accept the terms, in honor of her uncle's last wishes Following her uncle's funeral, held in Mount Hope, Claire decided to stay in town and determine what would be a beneficial project In order to do so, Claire organized a public hearing in the town library to gather suggestions As a result, Claire could clearly see that the vast majority of the citizens of Mount Hope desperately wanted a new shopping center. The town was lacking a modern facility that had ample parking and reflected the character of the town Her head full of thoughts, Claire drove back to D C. in order to quit her job After emptying her apartment, she moved to Mount Hope to get started on her project. The idea of a medium-scale shopping mall with sumicient parking seemed to be very promising. The relevant question was Would it also be a good investment? Claire needed expenenced input about this project as she lacked the necessary knowiedge of the eeded a demand of the area and the economics behind the land development process It was clear she n consultant Claire remembered Heather an oid triend trom nigh school, who was mamed to a land developer. She decided he was the right person to talk to. Bob Builder's land development company, "Big Builders, was not tar away from Mount Hope. After having made an appointment with Bob on the phone, their conversation went like this: Bob: Now, Claire, tell me more about your plans for that mall Claire: Since your office is just an hour away from Mount Hope I was wondering if you ever heard about the demand for a shopping facility in that town CEIE-370 Construction Systems Spring 2018 Page 2 of 6 CEIE-370 Construction Systems Spring 2018 Assignment 1 Bob: Let me tell you Claire, if I weren't so wrapped up with projects here in town, I might have started a project like you have in mind Yes indeed, there is a demand for a mall in or around Mount Hope. So Claire, what can I do for you? Claire Well, I do understand that you are very busy, but do you think you could be a consuitant to me about this mall? See, I have experience in managing and marketing, but, to be honest, I don't know much about land development and construction My first advice to you is hat you follow the three basic rules of land development first, location second, location, and third, location Bob: Clairei got Bob: Good, good Well, since I have developed a few shopping centers, I actually can be of some help to you Bob agreed to take over this consulting job after negotiating his fee. The new business partners set another appointment to talk about the project in further detail. This conversation went as follows Bob: Since our last meeting. I dug out some old documentation on previous malls I developed It is always important to produce good documentation. It can be very handy, when doing a similar project, as is the case now. It helps me to formulate a preliminary estimate and the estimate itself will assist us in the determination of the project's feasibility But don't you need some more information to compare the new with the old projects? That is why you are here. I need to know from you what kind of mall you had in mind and what your financial situation looks like. Claire Bob: Claire Iwould like the shopping mall to be comprised of smaller retailers A customer should have the impression that he or she is strolling down a town street with small and medium sized shops, of course all under one roof. It is also important that this place provides sufficient parking without offering the customer an unsightly view of a big parking lot. I want to provide attractive architecture and landscaping rather than just constructing a big ugty cubicie It seems that you really trying to preserve the town's character. That is good In terms of square feet, what size of floor space are we looking at? Claire On, I haven't really thought about tnat How much will t be it let's say, we have thirty smaller and fifteen bigger stores? (making some calculations on the comer of his newspaper) I would say we are looking at about 150.000 SF area Bob: That is a nice number to work with and shouldn't be too far outside the "downtown Claire. Yes, and I have already looked around town for a piece of property Well, i certain spot in mind, but I just don t know it we can build there Imagine you work in the office of "Big Builders" and Bob asks you to work on the Mount Hope Project. Prepare a professional memo for him stating the costs for the items listed below as well as the total project cost for the shopping facility in Mount Hope in the correct year. Use the information provided in the text you have read before and the additional information given below You know that Big Builders has developed an essentially similar shopping facility in Splash Springs in 2003. You obtained the company's records from Bob and found that the actual costs for this shopping center were 1 Land 2 Site development 3 Utilities (Water and Sewer) 4 Electrical reticulation 5 Shopping facility (69,500 SF) 6 Parking lot (300 spaces) 7 Landscaping 8 Various Fees Total project cost s 2,652,000 $1,080,000 $ 321,000 $ 68,000 3,929 000 $ 489.000 $ 70,000 s 1.119.000 $ 9,728,000 The following construction cost indices were researched and will help determine the aqustment in price due to the difference in time and location of the two projects Year Splash Springs Mount Hope 2003 2013 0.95 184 0.83 1.69 . Claire recelved an estimate for site development, which stated: The site work should cost $2,135,000 at 2013 prices. You need to add an inflation allowance of 3.1% peryear to this estimate If construction is to take place later than 2013 For an annual inflation rate, assume a rate of 3.1% per year The item "various fees" will be 20% of the construction cost . . . Your memo should include: A table of the itemized costs The Mt. Hope project total . Any additional assumptions A paragraph that answers the following questions How accurate do you think your cost estimate is likely to be? What additional information do you need to improve the accuracy of your estimate? What information do you need if you are to give Claire an indication as to the feasibility of the venture from a technical and financial point of view? o o o Attached to your memo: Calculations of the itemized costs