As mentioned in the previous report on our construction financing, we needed a positive appraisal to get our loan approved. Unfortunately we were not immune to the recent drop in real estate values, and the valuation came in below the number the bank required. According to the report, the current value of our property has declined 20% from a year ago.
This did not come as a complete surprise, so we have been working on ideas to overcome this setback. We have been pouring over the plans, looking for ways to reduce the construction budget without affecting the overall design. Specifically we have been looking at reducing costs in three main areas:
a) paying for some of the site work in advance to get it out of the construction budget
b) identifying fixtures and equipment that can be added at a later date and removing them from the budget
c) changing finishes to get more value and reduce the overall cost of the project
So far all of these decisions have been relatively easy to make. Many of them were deliberated during the design phase. Take the interior windows (offices, classrooms, etc.) as an example. We went back and forth between clear glass and glass block, and each had its benefits. We ended up choosing the block. Had we known at the time that it was five times as expensive, I’m sure we would have gone in the other direction.
The next few weeks will be spent tweaking the numbers and seeing if we can come up with budget that works within our bank’s parameters. If that fails we will start shopping around to see if we can find a bank that’s willing to be a little more flexible. We are still confident that we will be able to bring this project to fruition, it’s just taking infinitely more time than we ever could have imagined.