Curb construction project costs through value management

Improvements in the construction process as well as the function of a building can be achieved through a highly underrated process called value management.

The value management process is ideal to improve a project’s function, streamline the construction process, highlight potential future problems and reduce capital costs as well as operational expenses in all spheres of construction: civil, industrial, mining, and energy projects, to name a few.

“Value management is a broader view of the better-known term value engineering,” explains Chris de Wet, value management advisor at the Association of Quantity Surveyors of South Africa (ASAQS).“It is a process that can determine whether a different way of designing, constructing, procuring and thinking is needed.”

The process includes a complete value analysis of all components as well as the consideration of alternative material and process selection. It should ultimately result in savings and operational efficiency that ensures the client derives the most financial value from a project.

Although it is not their exclusive domain, experienced and registered professional quantity surveyors are ideally suited to facilitate the value management process.

“During the facilitation process each professional team member should be given an opportunity to present their project objectives, design ideas, and assumptions,” says De Wet. “Active participation from all attendees – team members, stakeholders, outside specialists, and the client – is crucial to the success of the process.”

The person in the facilitating role should encourage collaboration by giving everyone time to question the objectives and assumptions that have been proposed, as well as to investigate the purpose and function of various building elements and alternatives.

Each proposal can be prioritised and then evaluated based on a number of variables, such as its performance enhancing capabilities, operational efficiency, material and labour costs, and so forth, without compromising on the performance or integrity of the building.

Value management principles are not being applied as often as they should due to tight deadlines and fast-tracked construction schedules, among others. A value management approach requires that a professionals commit extra time for the strategy and integrated analysis.

“When professionals in a project team can join forces, flesh out assumptions, propose alternatives and evaluate options based on different areas of expertise, the results can be very rewarding for the entire project and ultimately the client,” says De Wet.

“When implemented effectively, value management can not only save time and money, but also identify and resolve potential future problems before they arise. It also has the ability to create closer team work, better communication, co-ordination and delivery amongst the professional team.”

Hilton launches Africa growth initiative

Hilton has committed a total of $50 million over the next five years towards the Hilton Africa Growth Initiative to support the continued expansion of its sub-Saharan African portfolio.

These funds are intended to support the conversion of around 100 hotels (roughly 20 000 rooms) in multiple African markets into Hilton branded properties, namely into its flagship Hilton Hotels & Resorts brand, the upscale DoubleTree by Hilton and the recently launched Curio Collection by Hilton.

Patrick Fitzgibbon, senior vice president, development, Europe, Middle East and Africa, Hilton said: “Hilton remains committed to growth in Africa having been present on the continent for more than 50 years. The model of converting existing hotels into Hilton branded properties has proved highly successful in a variety of markets and we expect to see great opportunities to convert hotels to Hilton brands through this initiative.

“It enables us to rapidly grow our portfolio and delivers returns for owners by increasing exposure of their business to more international, inter-regional and domestic travellers, and specifically to our 65 million-plus Hilton Honors members, who look to stay with us in our suite of industry leading brands. We see huge potential here in key cities and airports, as well as allowing us to develop our offering in resorts and safari lodges.”

These hotels will receive all the benefits associated with Hilton’s industry-leading brand proposition and world-class commercial platforms. Guests will also be able to take advantage of Hilton’s innovative technology platforms such as online check-in and the ability to choose individual rooms when booking via the Hilton Honors App.

Fitzgibbon added: “The range of brands we have at our disposal allows owners the flexibility to pick the right fit for their property. We have already deployed this initiative in the signing of two hotels: our first DoubleTree by Hilton property in Kenya, and our first hotel in Rwanda, and expect to be able to announce further additions before the end of this year.”

DoubleTree by Hilton Nairobi Hurlingham

The first hotel to benefit from this initiative is the 109 guest room Amber Hotel on Nairobi’s Ngong Road, which will relaunch under the upscale DoubleTree by Hilton brand. The hotel, which opened in 2016, is currently undergoing a series of renovations and will join the brand by the end of the year. Following the refurbishment, the hotel will be known as DoubleTree by Hilton Nairobi Hurlingham and will continue to be operated by the owner under a franchise agreement through the leadership of its current general manager, Elisha Katam.

DoubleTree by Hilton Kigali City Centre
The 153 room Ubumwe Grande Hotel in the Kigali central business district will trade under the upscale DoubleTree by Hilton brand when it fully converts in 2018. This franchised property – with 134 guest rooms and 19 apartments – opened in September 2016. The hotel will undergo some changes in order to rebrand and will be Hilton’s first property in Rwanda. Once rebranded, the hotel will trade as the DoubleTree by Hilton Kigali City Centre.

Hilton currently operates 19 hotels in the sub-Saharan Africa region with a further 29 in its pipeline. It has held a presence on the African continent for over 50 years. Visit newsroom.hilton.com for more information.

Rural shopping malls still proving their value

Shopping centres based outside of large city centres are bringing convenience, choice and in many instances, community upliftment to the rural areas in which they are situated. Typically tenanted by supermarkets, clothing, banking and furniture retailers, these South African developments are also providing excellent returns for investors who care about social impact.

Rural shopping developments can provide much-needed impetus for transport infrastructure as well as municipal infrastructure for essential services such as electricity, water and sewerage. They too can spur social responsibility initiatives that provide youth and skills development programmes that seek to help the surrounding communities that need it the most.

For Futuregrowth’s Community Property Fund (CPF), which currently owns and manages 18 centres in seven provinces, its strategy of acquiring and developing shopping centres in underserviced communities throughout South Africa certainly appears to have paid off.

Portfolio manager, Smital Rambhai, says the detailed and focused management by Futuregrowth and their property asset management team, Capital Land, has benefited the portfolio with improved metrics across all key areas such as vacancies, leases, quality of tenants and cost to income ratios.

Having just won Best Performing Specialist Fund over 3 Years at the MSCI South Africa Real Estate Investment Conference 2017 held recently, Futuregrowth’s CPF was recognised for its three year annualised performance of 16,75% for the period ending December 2016. MSCI measures the best performer based on direct property total return on capital employed on an annualised basis. The methodology excludes the effect of gearing and allows the MSCI to compare property funds on a like for like basis in both the listed and unlisted property sector.

Anton Raubenheimer, from Capital Land, notes that the implementation of community engagement initiatives, focused on education, community upliftment and access to basic healthcare, has further strengthened the relationship between the shopping centres and the local communities.

Shopping centres in the portfolio include Kanyamazane Centre in Mpumalamga, Maxwell Centre in KwaZulu-Natal, Diepsloot Mall in Gauteng, Setsing IV Centre in Free State, Unity Centre in Mitchells Plain and Motherwell Centre in Eastern Cape

While the award specifically recognises performance, the Community Property Fund is also mandated to provide benefits to communities such as job creation, access to goods and services and reducing transport costs.

Ensuring the shortest possible payback period for commercial solar

The payback period on commercial solar photovoltaic (PV) systems has decreased substantially and many companies can now expect solar panel installations to pay for themselves within five years or less. However, reducing the time it takes for a new system to pay for itself depends largely on the property owner.

This according to Charl du Plessis, head of project development at EP Solar, a division of Energy Partners and part of the PSG group of companies, who says that PV installations that have been optimised for their specific application are yielding increasingly shorter payback periods.

“In light of electricity tariff increases alone, companies that install new PV systems tend to see better returns on investment year-on-year already. There are also a number of things that a business can do to make sure that they get the best possible payback,” he says.

Du Plessis says that the most important factors to take into account regarding the payback period of a newly installed system are the operation and maintenance costs, the degradation of the panels, electricity tariffs and tax incentives.

“When we calculate a client’s payback period, we usually include a conservative annual electricity tariff increase of around 6%. It is also important to understand that solar panels also lose their efficiency over time. After 20 years, they generally only generate about 80% of their installed capacity. This also forms part of the payback calculation, and it is important to make sure that the system’s efficiency does not fall below that. That is also why it is vital to ensure that the system has a 25 year warranty that stipulates exactly that.”

Du Plessis adds that the cost of electricity for the specific property needs to be factored in. “Companies with a portfolio of properties need to prioritise the sites that cost the most to power. It is also worth noting that the cost of PV systems can be deducted from the company’s tax for the first one to three years after installation, depending on the installed generation capacity.”

According to Du Plessis, the operation and maintenance of a system may be one of the most important factors in ensuring a good return on investment. “This starts with the quality of the installation. We always motivate to use our in-house installation services, since it allows us to maintain control of the level of quality. We have also found that installations are more cost-effective when we do them in-house.”

Du Plessis also recommends that clients make use of a monitoring system that provides them with real-time data on the efficiency of the system, as well as identifying issues with the systems so that repairs can be made as early as possible.

“Properly planning the maintenance schedule of a system also helps to get the most out of an installation. Knowing which days and times to shut down sections of a system for maintenance helps to ensure that the system still takes full advantage of the available sunlight,” he adds.

“The business case for commercial PV systems is already becoming stronger each year. Implementing the right measures will just bring so many more cost benefits to companies,” Du Plessis concludes.