Commercial Space

So far I've covered the use of containers as residential structures. In this post I want to discuss a project idea that was brought to me by a local commercial property developer. I think maybe, first, a little background material that will help illustrate my point. The commercial property market in the United States, as a whole, looks pretty bleak right now. Nationally we have huge amounts of vacant commercial space. So much so that the underlying equity value of commercial property is open to question. Projects that were financed and constructed during our recent boom times are still carried on the books at the value they were projected to be worth during the boom. The truth is that the current actual value of commercial properties is much, much lower than book value. It will take years for this difference to equalize, if it ever does. The market recognizes this but it's not in anybodies interest to rock the boat. During the good times you could use the equity value of a preforming property to finance the construction of your next deal. And so now most commercial property is leveraged sky high and the underlying values that supported all this expansion have vastly depreciated. Nobody wants to be caught holding an empty bag so commercial property financing has dried up. If you can't build equity in commercial property at the moment then the next best thing you can do is create cash flow.

There are several parts of Portland that continue to thrive in spite of the national trends. As in almost every major city in the country there are areas that continue to gentrify. These old neighborhoods are undervalued to begin with and so draw the kind of people that always are looking for cheap rent, the creative community. Young families soon move in to these new enclaves and the property values rise. Eventually more traditional property developers begin to recognize whats happening and support the new community with commercial growth. The Alberta Arts District, here in Portland, is my local example. Most of the larger commercial buildings along Alberta Street have already been redeveloped into cute retail spaces, restaurants and the ubiquitous coffee bar. There are, however, several vacant undeveloped lots along Alberta Street. These are being rapidly filled with Portland's latest craze, food carts. The city of Portland to encourage entrepreneurial enterprise made it legal to operate restaurants kitchens inside mobile trailers. The quality and diverse selection of food this delivered very quickly caught on. There are now, in almost every neighborhood, previously empty lots packed with as many food carts as will fit. The property owner simply had to provide a network of power supplies and a shared water source, creating instant cash flow. Inevitably there will be a shake out as the weaker businesses fail and the large number of the locations contracts to right size themselves to the market. What I find most interesting in all this is that the people that owned these vacant unproductive lots have found a way to turn a small initial investment into a cash machine.

The same week that the Bethel Island project dissolved I was contacted by a local commercial property developer. He has several vacant lots on Alberta Street and is farsighted enough to see the eventual contraction in the food cart market and so doesn't want to over invest in that kind of improvement. Rather, he is open to the idea of creating an arcade of small retail spaces by using a combination of 20 and 40' containers on a 10,000 square foot L shaped lot in the heart of the Alberta Arts District. Really this whole concept was his idea, its brilliant. The financial thinking is that you invest just enough to create cash flow and forget about expensive equity building improvements. The rents while individually lower are collectively as high as you'd expect for a strip mall per square foot and he won't have a huge mortgage to service. It's exciting, sure there will be a bunch of turn over but by pricing each 20' unit at around $400 he won't have a shortage of people waiting for a chance to try their hand in a retail space on a good street. If it pans out this concept could spread to newly gentrified neighborhoods all over the country.

And this is how it ends

I got a call last Monday from the client. He let me go. The project had gotten too expensive. This wasn't really a shock, I'd sensed for some time that he was getting frustrated. It was a decision he took based on the most simple economic model. Other comparable houses on Bethel Island have been losing equity value over the past couple of years due to the effects of the burst housing bubble. Our current estimate of costs, which were driven at least partly because of county requirements (more on that later), had risen past the recent sales prices of these other comparable homes. To put it simply you should never build the most expensive house in the neighborhood. The average home on the levee at Bethel Island that was built high enough to overlook the water currently sells for about $350.000. The client paid about $100,000 for the lot. You'd think that building with containers you could construct a home overlooking the water for $250,000, well, not quite.

The first big hit came when we found out that the soil we wanted to build on was composed of peat moss. The soils engineers' recommendation was that we sink a number of piles at least thirty feet into the ground. He specified 14" square pre-stressed concrete piles. I checked around and the best price I could find was $3300 each. When I asked the structural engineer how many we would need he told me about twenty. When you add the grade beams that had to be formed, rebar added and poured the cost of the foundation could easily have risen to over $80,000. I talked the engineers into letting us use 12 round wood piles instead but the final costs still would have run about $50.000.

The next huge hit was due to the clients need to overlook the water. That is the big draw to living on the river but it came with a cost. In order to build the house high enough to get above the FEMA designated flood zone we had to put the habitable space above the second story. As you can see from the plans we had two habitable floors, a modest 2500 square foot home. However you cannot built a Type 5 residential structure higher than three stories or 40 feet.
The rules for building a Type 5 house are the ones that most people are familiar with, standard wood frame construction. It is also the least expensive form of residential construction. For our structure to qualify for the Type 3 designation we learned that to begin with all exterior walls had to have a two hour fire rating. As the walls of containers are made of non combustible steel you would assume that that wasn't going to be a problem. You'd be wrong. The fire rating of walls has to do with the combustibility of the whole wall system. And as we found out there is no UL rating for steel container wall assemblies. If you've really set your heart on this sort of thing you can hire UL to do this sort of testing but bring your wallet it's expensive. The alternative was to completely frame and sheet the structure with UL fire rated materials. I'm not sure which alternative would have cost more.

Lastly there was a water issue. This, however, didn't have anything to do with actually having water. All the houses on Taylor Road are served by a private water cooperative that run three different wells supplying 65 lbs of water pressure to each home. My initial inquiries about joining the co-op were well received. I was told there wasn't going to be any problems. But then something unexpected came up. Part of the county requirements were that we should have 8000 gallons of reserve fire fighting water on the property. This is not unusual when building in a rural area where there are no municipal water mains with fire hydrants to hook up to. What I didn't know was the communities history with the county's fire department. In order reduce their budget, because California is broke and they have to, they are planning on closing the fire house on Bethel Island. For decades the community had a volunteer fire brigade that was very effective. But a few years ago the county, because they thought it would be better, built their own fire house on Bethel Island and demanded that the volunteer fire brigade disband. This caused a lot of bad feeling in the community which only got worse. The new county fire department quickly got a reputation for letting houses burn to the ground rather than fight the fire. I'm sure they had excellent reasons for just controlling the possible spread to other homes but that didn't make the person whose house caught fire any happier. Really, how may of us have enough insurance to pay for a complete rebuild. To say that the residents I talked to about this were bitter is a vast understatement. When word got out that we were going to comply with the reserve water request all hell broke loose. The current residence which control the water co-op see this as the thin end of the wedge, a prelude to making them all install fire fighting tanks. The result, I gather, was that we would be drilling our own well (200+ feet to get to clean water). Wells aren't cheap and it's hard to get a permit besides. What makes this particularly bizarre is that we were building next to a river.

I'd like to build a house for somebody in the Bay Area. I've got the use of a factory to fabricate in. I've got great guy's that I trust to work with down there. But this is the second time that I've looked at a project there and until the state of California gets it's act together I doubt I'll be interested in investing my time or energy further there.

This Is How It Starts

This week I'm going to order a survey. I'll have a drawing done for a retaining wall and hire a crew of guy's to build it. When it's ready we need to start back filling soil onto the site. You can get free dirt dropped on a piece of land but it doesn't all arrive at once. Each time a dump truck shows up you need to have a guy with a tractor push it around. That's the real cost, the guy with the tractor. Fortunately Bob Aiken's lives three doors down. Bob's one of them guy's that never retires. He runs the tiny water company that feeds the houses on our part of Taylor Road. Three separate wells are connected together and provide pretty good water pressure. When I called on him to talk about hooking up our water I found a well maintained tractor in his yard. He works on an hourly basis that's very fair and he knows the local guy's with dump trucks. It can't get more automatic. The average dump truck holds about twelve cubic yards of dirt. On the back of a napkin I figured we will need 180 yards of dirt just under the building envelope, let alone bringing the entire property up to grade. This all takes time. I figure that if I start calling for dirt within two weeks that it will take the entire summer to get enough on site to do the job. If you try and rush this it will consume vast quantities of money. Patience is called for here, not something I have much of to begin with, but let's consider the alternative.

www.bbtandex.com

Check out this guy's website. He's a local Portland builder with with the right equipment and experience to do the job. Try to imagine how much he has to pay out every month to keep his doors open. I can assure you that he's not getting rich doing this kind of work. I don't begrudge him a penny of what he charges to do what he does. It's hard work even with the equipment. So you can imagine how lucky I feel that Mr. Aiken's lives three doors down.

The Client

I met the client for the first time last week, his name is Clark. I've quit estimating the number of emails that it's taken to get to this point. Before we found out about the delay due to the variance he had booked a flight back from his home in Panama. I drove down from Portland to meet him at the site Tuesday morning. I tried not to bring a lot of expectations of what the guy would be like. I was kind of surprised to find out he looks a LOT like me. Same age, hair line, frown lines, I could go on.

We met with the engineers. We decided to go with the local guy's that were recommended by a construction company on the island. The companies name is Advanced Engineering and the principle engineer is named Gabe Del Porto. Clark wanted to check that the bid was based on a complete scope of work to finish the project. I got the feeling that he was making sure I was doing my job correctly. I didn't mind that, after all, he's got a lot riding on me. We went to the county offices to do basically the same thing We also got a person to talk to at their public works offices. That person is in charge of collecting about twenty one thousand dollars of the permit fee's that we were quoted.

On my previous trip down I had to get the plans stamped by both Bethel Island Municipal Improvement District and the Iron House Sanitary District. These approvals are required before you can apply to the county for a permit. When I spoke with the woman at Iron House she told me that they already carried that address on their books. I asked her to research their history and she told me that there was a house on the site up until 2003. It had apparently been demolished sometime after that. The upshot was that they gave me a waiver from the eighty eight hundred dollar fee that they charge for new construction. With the client standing next to me at the Contra Costa County public works counter I used that information to get a waiver for the twenty one thousand dollar fee they were charging for new "raw" land construction. That made a good impression on the client.

We went to Oakland that afternoon to see American Steel. It's an old steel warehouse that my friend Dan Das Mann has taken over and turned into a three quarter of a million square foot studio specializing in art metal fabrication. It's equipped with a 10 ton trolley crane in each bay. Our steel fabricator, Steve Valdez, has his shop set up there. If you start out with a complete set of building plans with everything detailed you can get any competent guy with a tool belt to build for you. When your doing a design/build you need the kind of creative thinking that an artisan brings to the table.
Clark was deeply impressed by both the scope and scale of activity that happens at American Steel. Just before he left to catch a flight home he told me "I'll be back in October, have a house ready for me." That kind of faith made a good impression on me.

Planning and Zoning

This is where it fell apart in Santa Cruz. The couple I was building for were blindsided by the cost of the building permits. Santa Cruz wanted upwards of fifty thousand dollars for their permit. This last week Contra Costa county handed me an estimate of thirty-seven thousand five hundred and told me that I'd need to apply for a variance to the height restrictions and limit of floors in a residential structure. They added that it would take three to six months to process. This isn't the type of news you want to take back to your client. Sixty-five hundred of that is to go to the school district. Twenty thousand is supposed to go for road construction. That's about twelve percent of the entire construction budget. I was so pissed off that I almost attended a tea party. The client, like any sane man, said that he'd have to consider his options. I spent my last night in the Bay Area drinking, unhappily. The next morning I found an email from the client asking how soon we could apply for the variance.
The variance was indicated because we'd designed the house to both comply with the flood plane regulations and bring the living floors up above the top of the levee. The majority of the homes on Taylor Road are constructed this way. I'd assumed that the county had realized that grade, being 13 feet below sea level, was going to effect what kind of houses were going to be built on Bethel Island. I can understand that you don't want your neighbor building a four story house next to your two or at the most three story tract home. But nobody builds tract homes 13ft below sea level. I looked into what variances were granted on the twenty homes closest to our building site. Twelve of those houses have had to get a variance. You are no longer varying from the norm when the majority of the houses have the same variance. That seems clear enough doesn't it? And if they processed these things in a timely manner I don't think I'd be so upset, but three to six months? Is this what scars the hell out of people when they visualize a future of government run health care.



This link will take you to the document set that we submitted to Contra Costa county.

http://www.becausewecan.org/files/container_house/041610_1472Taylor.pdf

The plans are beautiful. I know it's a cliche to remark on how computers have changed everything but these are the state of the art in Building Information Modeling or BIM. The topography is so well detailed that you really get a feeling for how the structure works in it's surroundings. The program, Autodesk Revit, lets you take the basic design even further by allowing you to convert the planning documents into actual detailed building plans that incorporate everything from engineering detail to lighting plans. So cool.

The Engineering Bid

Perhaps the most important aspect of building with containers are the modifications of the boxes themselves. I assume that if your reading this blog that you are already familiar with the characteristics of conex boxes. Forty foot hi-cube conex boxes are capacity rated to carry over 80,000 lbs. They stack full containers aboard ship at least five high, so they have both solid floors and virtually crush proof corners. Both sides and top are really just curtain walls, however, they provide enough shear wall strength to keep the whole from racking and the floor from sagging.
Every engineer that I've spoken to about using containers always refers to them as box girders. Their calculations concerning the removal of sections of the curtain wall, whole lengths of wall as well as windows and doorways, come down to proving that modifications do not violate the integrity of the box girder.
This is a section drawing of an interior container wall in one of the pylons of the house on Bethel Island. Where the curtain wall was removed a steel square tube 2x4" header on 2x2" square tube posts re-supports all the loads. These were the engineered modifications used on the Portland project when joining two containers side by side with open walls. Since we are modifying standardized structures we can design using standard pre-engineered modifications. The steel 2x5 1/2 square tube at the bottom of the container has yet to be engineered. It has welded clips attached to receive glue laminate beams that will carry the center span between the container pylons. They are supported underneath by 4x4" steel posts to carry the point loads down to the foundation.

Our preliminary report from the soils engineers is that their foundation recommendation will be for the use of grade beams set on driven piles. When I have built previously with containers the foundations consisted of grade beams that spanned only the ends of the containers but included footings to support the point load of the posts. I expect that will be how the structural engineer will handle this project. I have never worked with driven piles before so it's inappropriate for me to present a foundation sketch. As you can see these sketches could easily have been done on cocktail napkins. I've hired a real draftsman to put this idea across to the engineers that are about to receive my Request For Proposal.

I've collected other appropriate modifications, such as welding the corners together and how to design embed points in the foundation footings to weld a project to the ground. These will come in handy, too. The better you can explain what you want to do to an engineer the more helpful and efficient they are going to be. You are going to want to make sure that they are looking at the type of containers you are building with. I once hired an engineer that used as his model containers that did not have a square tube top rail. The modification that he designed used custom steel headers that would have cost five times as much as off the shelf steel. I ended up paying for the redesign, it was not cheap either.

Professionals

You can only go so far with Google Sketch Up. In order to build the kind of documents that you need to pull permits you need to go to the professionals. While you aren't legally bound to use an architect to design a residence when you get ready to summit your design to the planning authorities clear understandable drawings are a major asset. It's also going to help when you hire structural engineers. Clear drawings are going to save you money with these guy's, they charge by the hour, the quicker they understand where your going the better.
Last week we hired Jeffrey McGrew as project draftsman to produce planning sheets. Jeffrey is an old friend of mine that works out of Oakland, California. He wrote his masters thesis on the use of cargo containers as modular building components about eight years ago. Other friends of mine had been using containers for art studios in San Francisco by that point but Jeffery gave it that academic gloss that got me to take them seriously. We've hired him to produce regular two dimensional drawings and electronic files that will transfer easily for use by the structural engineers.
He'll initially produce the elevation and plot plan drawings needed to apply for permits from the Contra Costa County Planning Department. They will check that the zoning is in order and that the building conforms to the restrictions applicable to building on Bethel Island. These restrictions include all the requirements for building in a flood zone. We will have to get a civil engineer to confirm grade height before construction begins and recheck afterward that the habitable space is above flood level, After we receive plannings permission we will develop the detailed construction plans.
We hired soils engineers this week. Before you can build a house you have to build a foundation. Before you can build a foundation you need to know what the ground is like beneath the surface. We are particularly challenged by this building site. Bethel Island owes it's existence to a levee that was first built around the island by the US Army Corps of Engineers. Without the levee the island would now be 12 feet under the waters of the Sacramento River. Before the Corps decided to control and channel the flow of the river Bethel Island was already very soggy marsh land. Repeating over the centuries the plants on the island died and were pushed down by new growth. All that plant matter turned itself over time into what's known as peat moss. Peat has the consistency of a really old kitchen sponge. This peat bog is on average about 34 feet deep on Bethel Island. Everybody knows this, the county building department, the municipal district and the old guy that lives next door to the site that used to be a soils engineer before he retired. The thing is in order to plan the foundation you need to have an up to date soils report. We went out to bid with two different companies and selected the company that used the least intrusive test bores. The losing bidder wanted to use a very expensive drill rig that he didn't own. It's cost was in addition to his fee for the report. His proposal estimated total cost ranging from $7000 to $11,000 depending on the number of holes drilled. Berlogar Geotechnical Consultants of Pleasanton, California was selected based on a total price of $6800. They use a drill method called CPT and they own their equipment. As the soil conditions in the area were already well documented I wonder what the first guy thought he was going to find in the extra bore holes.
All that we have done to this point is called the site work. If we had needed to cut a road or seriously graded the site that would have added additional expense not just in actual work but in the production of professional reports that cover everything from protection of riparian habitat (bird nests) to water runoff control. Depending on where you want to build you can easily go through many tens of thousands of dollars completing your site work. It's pretty laid back on Bethel Island. I think they have figured out that if you really want to build a house on a peat bog you've already got enough problems.

Preliminary Design

Our design consists of two pylons of four forty foot long hi-cube cargo containers with a span section separating them by sixteen feet.
The lower levels provide parking and storage. It also raises the habitable spaces above the flood plane, a requirement for building on Bethel Island.
The third level contains the living area, kitchen and a half bathroom. It is entered by way of an interior stairwell . There are decks both fore and aft between the pylons. The rear deck connects by footbridge to the top of the levee and the boat dock.




The forth floor has three bedrooms. The master bedroom has its own separate bathroom with the two remaining bedrooms sharing a bathroom.
The center span connecting the pylon sections will be built as a steel framework supporting glue laminated beams and decking. The span walls will use as much glass as is practical to provide stunning views of both the island and the delta as well as interior day lighting.
As the design progresses we will add windows to the exterior container walls to provide both cross ventilation and lighting. The roof is flat across the whole structure with a slight slope to manage runoff. It's currently planned to pour a light weight concrete roof topped with a waterproof membrane.

From The Ground Up

I have a client. Since looking at the property in Santa Cruz last year things had been slow. But I've been seeing sure signs of economic life coming into bloom. People aren't as shell shocked about life as they seemed last year. All the fear that was poured into society didn't poison the well. The most common response to all the dire predictions that I saw, and I traveled a lot last year, was the planting of gardens. Everywhere I went I saw people building raised beds and turning compost into the soil. I thought "What a marvelous response. I'm glad I live among a people of such grace". As Voltaire wrote "We must all tend our gardens."

This blog, by the way, has been very effective at getting information to people who are interested in actually building. My new client is a guy that retired from the petroleum processing business and lives for at least part of the year in Panama. He owns a piece of land in a community called Bethel Island on the Sacramento River delta in northern California. He and I are into about a 250 email relationship at the moment. We exchange drawings using Google Sketch Up and have produced a design that's ready to develop.


This is the building site, the view is looking back at the island from the top of the levee. The lot is 50 feet wide and about 200 ft long from the levee to the road. There's a drop of about 5 feet from the road to the lowest spot on the property. From the road height to the top of the levee is 16ft. The design that we are working on is three stories tall. We are using two stacks of three containers with a span of 16 feet between them. The span connecting the stacks is built of structural steel and glue laminated beams. The first level contains the garage and will lift the habitable parts of the building above the flood level. Most other houses on the island are built on top of pilings to raise them up, we are going to use hi cube cargo containers that sit on grade beams which are in turn set on helical piles.

When I visited the site for the first time I met with Steve from the Bethel Island Municipal Improvement District. He is in charge of maintaining the levee and is the first authority that must approve building plans. I asked him about the soil conditions and he said "So you don't know already?". This is always a very bad sign. He explained that below the topsoil was a layer of peat moss that was on average 32 feet deep. Peat has the consistency of a wet sponge and is so unstable it cannot be built on. Below that, however, was a bed of compressed gray sand that would support piles. Pile driving, as you might imagine, is very expensive in itself. But when you add the associated costs of civil, soils and structural engineering just to get you to a workable design the costs really add up. Steve did say that it was legal to build on a concrete slab directly on the ground but then pointed to a neighbors garage that had been built a couple of years before. The garage was nose diving about 5 degrees already. He added that the soils subsides about an inch and a half a year.



And so it's time to start the site work. The house is designed so that the habitable space starts close to the level of the top of the levee. The whole point of building here is the proximity to the river. Almost every house on Bethel Island is built along the levee, each with it's own dock. The building code dictates that no building can be higher than 35 feet from grade. Say the gray sand layer is currently 34 feet down. You start this process by hiring a soils engineer to bore test holes in the ground to determine the depth of the bed that you can build on. As every house on the island has had to do this you would think that this depth was a known quantity. The short answer is no, the process has to be repeated with each job. I've asked for proposals from two firms that have some experience of the island and am waiting for the bids. They will show up with a quote for the report plus whatever it costs to bore the holes. There are several methods to do the drilling and each has its own draw backs and features and they are all expensive. In the next installment I'll be discussing what we find. I'm willing to bet you right now that the learning curve is going to be sharp and expensive.