Private Client Risk & Resilience
Private Client Risk & Resilience
Planning and Executing High-end Home Renovations in the High-Net-Worth space with Zack Secilmis of Reis Contracting
Personal Risk Advisor at Ericson Insurance Advisors and CEO of RiskRevu, Kurt Thoennessen, CAPI and Director of Project Development, Zack Secilmis of Reis Contracting have an in-depth discussion about high-end home/apartment renovations in New York City, the Hamptons and Los Angeles. They discuss the changes the construction industry is battling after Covid-19, technologies role in construction, integrating risk management into the construction process, the ever increasing cost of construction materials and the shortages for specialized labor. Join them for this amazing conversation and learn more about the unique process that high-net-worth and ultra high-net-worth individuals and families experience when taking on a major renovation or construction projects.
Links:
Reis Contracting
NYU Schack Institute of Real Estate
Fordham University School of Professional Studies
There are more wealthy people today than ever before in the history of the world. The risks they are exposed to through the assets they acquire and their unique lifestyles are significant. The bigger the asset, the bigger the potential loss. The bigger the potential loss, the more complicated the mechanisms for protecting those assets becomes. This show seeks to uncover the risks that successful people face. So we can provide some guidance towards minimizing, mitigating and transferring them. From Coverage contracts and carriers to client experience, technology and claims, we will cover it all. Whether you're an agent looking to hone your skills, or someone with significant wealth to protect, I hope this show becomes a valuable resource you can come to rely on to help you protect yourself, your family, and your clients. Welcome to the private client risk and resilience podcast. My name is Kurt Thoennessen. And in addition to being the host of this amazing show, I am also a personal risk advisor at Erickson insurance advisors, where I advise high net worth and ultra high net worth clients on their property and casualty or personal insurance, I help them design their program and place the coverage for them. Also, I am the CEO of risk review, which is an online platform that provides digital smart forms that agents can use with their clients to help them gather information from clients and prospects online, using technology to make things easier, basically. So welcome to the show. I'm extremely glad that you tuned in today for this show. And today's show is really exciting for me, because it deals with a topic and a subject matter that is one of my favorite subject matters. And one of my favorite types of insurance to speak about with clients. And that is renovation or builder's risk or construction insurance. And I was thinking about this before the call today. And the reason one of the reasons why this is one of my favorite areas of insurance is because it's really a place where I as an advisor can provide significant advice and provide significant knowledge and education to a client. Because very often, there's a lot of things they they don't know. And they have a lot of questions because they're just about to undertake this massive project or big project. And there's a lot of money on the line. And there's a passion on line, which is their, their their home, and they want to protect it. And so, you know, there's a lot of moving parts and renovation and construction insurance. And there's a lot of nuance to it. And so one of my favorite things to do, and super excited for today's conversation because we have an expert from the other side of the fence from the side of the fence that actually does the work. The project management, the construction, the estimating, the pricing all of that, and his name is Zach specialness. And am I pronouncing that right, Zack? Absolutely. Okay, excellent. Well, Zach works at Rhys construct, contracting out of New York, they have offices in LA, and I'll let him get more into detail on this. But Zack and I met at the private Risk Management Association a couple months back in 2022. And I sat in on a session where Zach was on the panel with several other industry executives and experts in the construction area. And it was a fascinating panel, I really enjoyed it. And so afterwards, got a chance to meet him and just got to chatting. I told him about the podcast and throughout the idea about doing this and, you know, thankfully, he was amenable to it. And here we are, and, you know, three months later now 2023 and kicking off the year with an exciting conversation. So just a formal. Thank you and welcome to the show. Zack, great to have you here. Great to be here. Thank you so much for having me. I think there's so many wonderful conversations happened at the private Risk Management Association conference. It was a great powder that I was on. And the the focus, as you know, was the industry trends. Of course, that happened during this last year with the inflation, Consumer Price Index and all the insanity that's been happening in the in the in the construction industry and of the insurance industry as well and how the cost of change, but a lot of great people and it was a great path to be on. Yeah, yeah. No, I know. It's a very interesting time that we're in right now. And, you know, I've been talking about the inflation and the cost of construction with clients for for the last, you know, for my entire career, but the last couple years have definitely been different in terms of the conversation. So, you know, that information was extremely helpful. And you know, one of
Zack Secilmis:The things that I learned as we were just getting to know each other to is that you've been involved with the priors man Management Association for a lot longer than I thought. You've gone back maybe five, six years, or maybe even into the beginning, with your contacts, you know, knowing Lisa Lindsay, and, you know, attending other summits. So, you know, how did you originally get involved with prma. So let's see the long story short, you know, I do a lot of building consultant work for a few of them, or notable carriers char, pure AIG, Cincinnati, etc, etc. And I'd say, as you said, six, seven years ago, give or take, I somehow crossed paths with Lisa Lindsay. And we kind of talked a few times back and forth. And there was a couple of purely conferences that I attended. And there was one in particular, where she asked me to be on a panel as well. And that was in Arizona, I think, was in Tempe, Arizona, this is going back top of my head about four or five years ago, and I was on that I was on a panel there and capacitor stuck with organization. And it's so crazy how the industry's really do combine and collide on so many different levels. And not only was I on the panels, kind of, you know, sharing some of the expertise of some of the things I know, it was great, because I attended a few panels to just to kind of get more insight information on things that I don't know about, how about the insurance industry? And how many different ways the we cross connect? Right? Yeah. And that's really a great point. And something that I've I've always kind of had in my mind is that I as an insurance advisor of the insurance industry, we connect with so many different specialties, so many different practices. And it's important for us to coordinate with them and collaborate with them. Because very often, we will need to do that and of course of business. And something I work on with the private Risk Management Association chapter in New York, where we will hold hold different events throughout the year. And we will invite other disciplines to our events, people from trusts and estates, people from the construction industry, people from risk mitigation, and clean up services, so so that we can all bring this ecosystem together make the connections a little bit tighter. So yeah, I'm really glad that we're on the same page with that.
Kurt Thoennessen:Yeah, and then I remember the Tempe summit that was, I think it was five years ago, definitely one of my favorite places to go is was Arizona, it was my first time going there. And before the show started, I was able to go for a run outside, and there's a mountain there, I forget the name of it. But it was an amazing hike, you know, basic, you know, basically, you're going, I don't know, it's, it's not quite vertical, but it's close to it, and going up up the hill with probably 150 other people to this gorgeous overlook. It's just such a such a great place to visit. So highly recommend it. So I thought we'd start off by just getting a little bit of your background. Because I mean, I can read it right off the website, but I'll tell it a little bit better. Because it is it is quite impressive. So why don't you just tell us a little bit about your background?
Zack Secilmis:Sure. You know, I wish I had some great, amazing story of how I got involved in the construction industry, but really kind of it started out very modest. I was fresh out of high school. And, you know, I was waiting for to start college and I got a summer job and in the construction industry working in the field as a laborer, you know, naturally just pushing a broom and kind of working my way through learning some of the trades little by little. And over the course of time I became you know, not a bad carpenter by circular a couple of skills here and there. And it's slowly gravitated to where I was going to school at night. And I was working during the day on the construction sites and learning everything I could little by little, eventually, you know, I made my way to the office working as an assistant estimator Assistant Project Manager that was going to school at night at that time. NYU had a program in construction management, which I signed up for, and I was taking the program at night and working during the day. And then little by little I just kind of elevated myself until I became you know where I am now. And what's when I see it in so many levels by my life and my career really come full circle where now I teach at NYU in their programs as well as at Fordham and in I teach estimating, scheduling, Korn shell, everything that I've kind of learned over the years, it's really kind of come full circle because now I believe in passing that knowledge back down exactly to those look for those, you know, the students that I have today and they remind me of myself in so many ways up and coming, eager, ambitious, really go take the world by storm and it's refreshing to see but that's kind of right now Rhys contracting. Well, I am their director of project development is a nationwide company. We have offices, our main offices here in New York City. We have a shop or Which fabricates all of our millwork, in Mineola and Long Island, we also have offices in, you know, in California, but we do work all over the country. You know, it's kind of like if it's pays for us to be there, it pays for us to get involved, we have no issue in in addressing any of the any projects. Then another flip side of that, as I mentioned earlier, I still do a lot of consulting work for some of the major carriers. Primarily, it seems like it's mostly New York City centric, but not I should going out to the Hamptons for any carriers that have a building consultant issue or clinic that wants to take a look at. Wow.
Kurt Thoennessen:So you cover a lot of bases there. And I really, I mean, such a great story where you start with sweeping the broom and move your way through the industry. And you get such a great perspective on everything, just going through every every level of of, of an industry. And it's very similar to the way I started in insurance and just, you know, similarly fell into it. Where you know, you start just picking up the phone, answering questions, researching questions that you don't know the answer to, and then finding out the answers and helping the client however you can. But thank you for that. That's that's and and you're teaching at Fordham and NYU, this shack Institute for real estate. Right. And so these are specialty areas of these universities that really focus on contracting and real estate development. Correct.
Zack Secilmis:So I'm sorry, yeah, please. Yeah. So
Kurt Thoennessen:people, people that go to these classes, they're looking they are they want to be in real estate, they want to be in construction?
Zack Secilmis:They absolutely do. You know, that's kind of they they are focused on that part of their career. Some of them you so there's there's a few different programs that both Florida and NYU offer some of the, let's say the base programs they had is a certificate. And what do you think you'd do is apply for a certificate program, which they have a battery of classes, you have to take in estimating, scheduling, core and shell and project management, blueprint reading, and you take about a year's worth of different various classes, and you walk with the certificate at the end. And on the flip side of that, if you depending on who the student is and where they see their career going. There's also a master's program as well that both NYU and Fordham both offer Master's in construction management. And I teach and I was actually I was part of the, for the the the board that kind of put the program together over a forum, where it's a it's a master's degree in construction management. It's fully accredited, and you have to have so many credits and it's a great program for those are for the more advanced students that really want entrench themselves in the industry and have something to show for it. And it works out really great. So far, so good. The Fordham one has been around for about four or five years. NYU is around for No, as I said before, probably part of my career is that they've they're kind of like the the the groundbreaker there. And they actually still find people don't know this, but they have a yearly event. And it's Larry Silverstein have Silverstein properties is the is one of the hosts and, and people don't know this, but he's actually the founder of the shack Institute. And it's so great to see that such a big popular name and really does actually give back to the industry as well. You know, he put a program together he was he's still appears every year at some of the events.
Kurt Thoennessen:Wow, that's amazing. Yeah, that's great that that is that that involves now in these courses, and in these degree programs, do they talk about insurance? Do they talk about risk management?
Zack Secilmis:So in all honesty, I'm probably the only person that does because they don't see the correlation in the connection, and how important it is with risk management and the construction industry and how it's so funny how it's so tied hand in hand, and not everyone really gets to see that see it that way until you open their eyes and say, Oh, by the way, have you looked at ABC? Have you looked at risk management? You know, there's so many different avenues that really come up and in those courses at Fordham NYU I honestly they don't. And even in the greater industry, unless someone such as myself on our study, Ashley Avenue really kind of brings it to everyone's attention. It's not the primary focus, you know, and it's a shame because it really is. There's so many areas where you can kind of really develop it. You know, there was one which was the risk prevention loss on a home where there's things like such as water bugs, where you want to last minute water loss mitigation and making your home a smart home, not lose sense of electronics or anything else like that. But looking at it from the point of your design where you don't want to have your sprinklers go off or you don't want to have your pipes freeze in the wintertime. What can you do to make your home better, more efficient, not in terms of you know, the architectural viewpoint but in terms of loss mitigation viewpoint, what can you do what can be done to make it loss prevent with some loss prevention ideas and you know, something along that line, and I cut I've had a few different conversations with a few members in the insurance industry that some ideas going back and forth. But it really hasn't gained steam, you'll see things like, you know, lead, which is great, don't get me wrong, which is the leadership energy and design, those who got a lot of momentum. But other things along that line of risk and loss from that risk and loss management, I think there's definitely a case can be made for programs, such as that to be take some gain some momentum and be part of the industry, and part of the design that architects and designers put into their plans.
Kurt Thoennessen:I agree, I agree, I think there's a lot of opportunity there to bring that education into the classroom. And, you know, just from talking with clients, and from their conversations with their contractors, the insurance aspect of it, the risk management aspect of it is, is very small, it's it's basically at the end, you know, once they sign the contract, and there are, they're close to it, and there's financing involved, you're like, oh, we gotta get insurance, or, you know, oh, I should tell my insurance company, I'm gonna destroy the house and rebuild it. Or, you know, one of my favorites was, you know, clients doing a gut renovation on a New York City condo, and gonna move to the next floor down in the same building. And he called in just to say, you know, I need liability for the new apartment that I'm gonna be living in not to talk about construction insurance. And so we can. So through that conversation, I uncovered that they're doing this major renovation, and I just kind of went off the cuff on the renovation, insurance is like, wait, wait, wait, I just want liability insurance. Like, oh, well, let's talk about this, too. So I think there's a great opportunity there to bring that education. to that to that table. That's a great point. So I mean, one of the things I wanted to start off this conversation was, and just kind of to, I guess, level set and give our audience kind of a sense for the types of projects that we're talking about. And I've worked on several large projects, a $20 million home renovation and LA, large, New York City renovations ground up construction, and, and they're all the old, they're all different. But I wanted to ask you, because you have a different perspective, and have also worked on some pretty incredible projects. What were some of the favorite projects of your career, you know, that you really enjoyed working on?
Zack Secilmis:Sure. So there's so many and what's great with what you just said, trickeries? No, this is all ultra high net worth space clients. So they've all got their unique little qualities. And that's set each other so that set them apart, you know, so if I could just kind of say, Let's go geographically, just as a for example, like the house you would build in the Hamptons would be very different than a house or a building Laguna Beach just as a, an what you would do in an apartment in New York City would be very different than what you would do a townhouse. For example, in New York City. One of my favorites in New York City is a townhouse was one that was you know, only a couple of years ago, ultra high net worth space client rather. And what they did was they put a full 75 yard lap pool Olympic sized lap pool in their in their cellar. So that was really challenging. And, and what's what's great about it was it was a stainless steel pool, which is also kind of a little bit of a more unique thing that they're doing these days. So that was great, because what was unique about it was we were doing structural steel up on the top floors, excavating for the pool down below. And it was just insane. But it was such a great project to be a part of. And this was a townhouse. This is a townhouse, a double wide townhouse on the Upper East Side. So and it's great. I mean, usually when I do pools in a cellar in New York City in a townhouse, they're usually not a full 75 yard lap pool, they're usually, you know, much more modest, you know, 50 feet, 60 feet, whatever the case may be. But this was a full lap pool. And what was also kind of interesting and challenging was making sure that the width was wide enough and not it wasn't going to interfere with any of the structural components because we were sitting about a foot away from other columns. And we have to find a way to make it so that we can get the full width of the pool in place and not interfere with any structural components either. So that was also really great challenging job to be a part of
Kurt Thoennessen:the stainless steel pool. I've never heard of a stainless steel pool. Then you you indicate you indicated it's kind of like a it's a new thing that they're doing stainless steel pools. What can you tell us a little bit about that?
Zack Secilmis:Sure. It's so it's stainless steel sheet metal with a thicker high quality gauge that they bring in components which are a fire I remember correctly. It's either six or eight feet long. The pre made in factory cast to the shape of the pool, and you bring them in step by skill piece at a time. And then once you're on site, If you welded on site, and you weld and grind them all on site, which is by itself, it's very challenging. And again, it's I always say it's new, but it's one of the newer kind of architectural, interesting things that they've been coming up with. There's other types of pools that are more common, such as a Ghanaian finish. And you know, if you're in the Hamptons, something along that line, but this was a different, very different animal.
Kurt Thoennessen:Interesting, and why did they choose stainless over gun? I
Zack Secilmis:know, I couldn't tell you, I think it was just one of those architectural features that they were looking for, to make it a little bit more unique, make this property a little more unique than some of the other ones. And as you know, some of the architects that we that we deal with and homeowners that we deal with, it's, they are, you know, avant garde, they they want to have something that sets their project apart. And this was one of those, this was one of those instances where it really did set the project apart.
Kurt Thoennessen:Yeah, that's very interesting. You know, it just makes me think I was, I was thinking, maybe this is one of those new technologies that, you know, the construction industry is looking to adopt, and, and clients are asking for, you know, but that's not the case. Yeah, there's, I'm sure, there's other examples of, you know, new technologies that are coming into the construction industry that you and your team have to be aware of, you know, someone asked for a stainless steel pool, you gotta be, you gotta know how to do that, you know, someone asked for solar panels on the top of their house, you got to know how to do that. What are some other technologies that people are asking for these days that are new, that you have to be aware of.
Zack Secilmis:So a lot of it is, you know, we're at least we're very technology oriented company. So we have this entire wheel, entire BIM modeling program that we are very much involved with, we should building image modeling. So what we do is, all the plans are digitized, we take Matterport scans, which I'm sure you've probably seen Matterport scans, we do like a real estate tour. So and with that process, we also then have, it improves our accuracy and our efficiency on projects. And that's really what it comes down to with the tech stuff, we have a full VDC department that really kind of gets into the entire technology aspect of it. But one of the things that I see, on the flip side of that, not just so much on the computer end, but the technology in terms of how is construction different today versus what it was 20 years ago, or 30 years ago, there's always something new that's kind of being reinvented and put forward. And that's what really makes things challenging. I tell people all the time that, you know, when I first came into the industry, we had blueprint machines, which were ammonia fed. And to make blueprints, you have to actually have to feed it through these blueprint machines. And we ammonia and you walk out of the room with your head kind of foot in the air, because it was Omonia. So nowadays, I get the question where my classes and this is not trying to communicate. But I've been asked the question, what are they call them blueprints? And it sounds like a silly question. Because you sit with them to me, it's automatically they used to be blue, when you print it off because of the ammonia. Now they're because it's all CAD, and it's all digitize, they're no longer blue. They are you know, they are, they're not even prints, people don't even print them out anymore. It's all digital files that are people are looking for on the computer screen. So the industry has really changed a lot in terms of technology. And in that line, product wise, it's building means and methods haven't really evolved all that much. We're still building very similar now to what we did 2030 years ago. There's some things that we finessed. And we've kind of tweaked here and there, but you know, in terms of building code building means and methods, it's still pretty much the same things are going on little tweaks here and there. You know, just like the stainless steel pool versus goodnight. There's what is the new model that everyone's looking at these days? And, you know, where's that new? A, what stone has kind of worn in fashion, what type of wood is more being used in their kitchens and bathrooms. So that stuff is always evolving and changing? That's more of a decorated aspect. In terms of the architectural components. That's pretty much you know, I don't want to say hasn't changed at all, but it hasn't changed as much as you would think we're still doing we're still building the same exact way.
Kurt Thoennessen:Well, it sounds very similar to our industry, the insurance industry, which, you know, it's an old industry, and there's a lot of things that are still very similar to the way they were 20 years ago. And we're constantly trying to improve translate constantly trying to find new ways to do things more efficiently to write new risks. And to build build new mousetraps to help people protect things. So it's a I think they're very similar industries in that respect, old industries that are are still using a lot of the old stuff but are trying to adopt the new stuff. So you know, in talking about this, the New York townhouse, I mean, you know, your position as a project manager, director of Project Management, you know, I think, I would think in that role, you're gonna see a lot of things, you're gonna see the project at all levels of it. So I was wondering, can you walk us through kind of the stages of a, of a construction project in New York City renovation, for example, like you did, you know, so that, you know, for me, as an advisor working on the insurance, I can handle the insurance aspect of it. But I think having that perspective from you will really help us as advisors, you know, have some more empathy for a client, as they're going through the process better understand what they're going through, when they're building a, you know, a$28 million home or a $10 million renovation in New York.
Zack Secilmis:Absolutely. So, you know, the process is really well laid out. But I have to tell you, it's changed a lot in the last year. So what we always advise our clients to do is to get involved with your contractor, architect, engineer, everyone, sooner rather than later, especially your contractor, there used to be in this going back 30 years ago, a very traditional train of thought, which was hire your architect hire, you know, get your property up online, have the drones made out, and then hire a contractor last, that's really changed a lot because it, the old model doesn't really fit. And so what we do now is I say, Now, this going, you know, 20 years, whatever the case may be, is get engaged with your contractor earlier, sign your contractor up for pre construction, which is all the planning, the budgeting, the scheduling, all those components do it sooner rather than later. This way, when all your drawings are finalized, your contractor is in place. And they can get started right away hit the ground running versus figuring out all the details as they go along. What's that, that $20 million job, just, you know, hypothetically, that's easily a two year project. So if you spend an extra six months on the front end, just getting a procurement down, getting your permits, getting all these components up and up in place and getting everything signed up, it's really going to stop this field and help the job from any delays. And anything that happens once you're on site. So that's what I really propose is to really kind of advocate to any client is sign your contractor up sooner engaged in pre construction than when the job is ready to go. You don't have the delays, change orders, or the secondary issues that could delay project down the road. Now what's happened with COVID is an advocating even that even more, so now that not COVID Sorry, supply chain issues, I'm advocating that even more so than anything else, just because of the entire you know, 2020 issues. Supply chain is really kind of hurt the industry in a lot of ways. Some of our staples, such as you know, Sub Zero appliances, whereas that used to be, you know, hey, get on the phone, sub zero, your appliance vendor you have in a month or two. Now it's you know, because of supply chain, it's a year, okay, as a waiting time so that that thing is insane. So what you want to do is hire a contractor haven't ordered all your lonely times ahead of time versus waiting till the last minute. Another thing is really kind of purchases, as well as, and I wish I could say just a blanket statement. Any construction components made assembled in a factory millwork, appliances, equipment, HVAC equipment, that is really assembled in a factory is taking longer now with the supply chain issues than it ever has before. We're going overseas from mill workers on a lot of workshops and a lot of cases because the ones that were used to go into here are have got backlog. So what that's do now is if you have backlog, your onsite construction is now also getting delayed. That's why again, I advocate that you hire contractor, do all your procurement way ahead, wait, well in advance this way. Once you get started, there's no waiting your appliances. Yes, it was going to take you a year. But if you ordered it, you know, proactively six months ago, we timed it should get there just in time, we're doing the same thing with HVAC work. I have a client now who has a Park Avenue apartment where they're looking to replace older HVAC equipment. And the first thing I said was, well, okay, here's what we're going to do. We're not going to let you move out of your apartment until all the HVAC equipment is in hand and in storage. Why? Because once it's been handed in storage, now I feel comfortable to say Okay, move out temporarily. We'll replace all the equipment. And then once we're done, here's your schedule, come back and four months, it will be already installed, it will be ready for you to go. Great, no problem. So those are some of the things that I would definitely advocate, spend a lot of time on the front end, getting everything ready before you go and really dive into it headfirst and just say, Oh, how come we're late? Why is the job delayed? What do you mean the millwork is six months behind or whatever the case may be? Right if you're really
Kurt Thoennessen:really interesting that this is a supply chain issue and it's and it's a new issue. It's two years old. And before this, it was go to your architect first get the plans and then go to the contract. You're so excuse me that that change, that's a, that's a pretty significant change. And how has that impacted the contractor industry versus the architect industry is, is that it hasn't been a big change for, for the construction industry.
Zack Secilmis:It all depends on the level of sophistication of the contractor. So for instance, a contract was a little lines of recently ultra high in our space, it's kind of our modus operandi, that's how we've always kind of operated and it's what will always advocate. So let's just say the, you know, contractors that are, you know, not as well versed in that method of operation and who are now I have to say, change their way of going about things. It's a learning curve for the naturally, architects along that same line as well, some of your higher end architects, your your Peter Marino's, you're operating in terms of just one, very well versed in this methodology of doing things. Again, some of the lower tier, I don't say lower tier, but you know, some of the architects that aren't as well versed in it that do lower scale work, may not be as comfortable in that realm. But again, they really should advocate to getting the contractor started sooner rather than later. And what happens very often is what I always tell the top two architects is, there's a development of process in their plans, design, development, construction documents, they do have set categories and milestones in when their drawings are, are ready to be released, I always have to keep it, they should get their drawings released to a contractor in the design development stage, which is, you know, 30% 40%, all your details aren't ready, you haven't picked out all your materials, you haven't picked everything else out yet. But get the contractor on board and see where you go from there, get your budget lined up, get your schedule lined up, get all your procurement done. And this way, it just creates a much better environment once the process gets started.
Kurt Thoennessen:And it's interesting, because, you know, when we talk to clients about a renovation projects that they're doing, we have a form that ended up several questions that we want to ask and get information. One of them is have you hired a contractor yet? And a lot of times the answer is no, because, you know, they're buying a new home, and they're going to do the renovation after that. So they haven't gotten to that stage yet. But, you know, the, you know, potentially the the advice there is to say, you know, you really need to get on the contractor, you know, question and look into hiring that as soon as as soon as possible. The one thing you said there was that sometimes you have to go overseas for millwork. And especially, and and correct me if I'm wrong, but is millwork the same as specialist labor, specialty labor, or craftsman that type of thing? Is that what yours is? Is that the same? And if so is that? You know, it's been said that there's a shortage of this in the US, and maybe globally? How are you dealing with that issue today? A shortage of specialty labor?
Zack Secilmis:So absolutely. That's a great question. So the short answer is yes, it is definitely a specialty labor labor force that does that millwork. And it even gets the marching gets even narrower because of mill workers as a whole. There's there's built workers, and then there's the mill workers that can only work in the ultra high net worth space, which once you get to that level, there's only select the workers that we would go to. And at the playing field, here in New York was probably top of my head 10 to 20 of them that we kind of feel comfortable with. And each one we have to be very selective on which project because not all of them have got that same career. Some of them are, you know, once everybody's in a plus, but not everyone has an A plus, there's some that's a plus or some that's a there's someone's a minus, and they're all fantastic, but you want to make sure that you get the right millworker for for the right project. Now, what's happened here is because as I mentioned, you know, there has been a lot of, you know, issues in terms of supply chain, we've had to go overseas. And I'm sure that that's where you go so that we do through the same vetting process for the overseas millworkers that we do here in New York. And it's not just New York, but we'll go through other states as well. There's a few more workers we do with that we work with the other parts of the country, they're also severely backward. And that's kind of what our issue is, has been. We have a new workshop of our own in Mineola, as I mentioned, and our backlog is two years right now. So and which is a great thing when you think about it. But then by that same token, you're saying, Well, you know, the reason why you have the backlog is because you can't just simply hire more skilled personnel, you've got a factory that you are contained inside of, you can only have 40 people inside the inside the factory or 60 people, whatever, whatever the limitation is, are you only have so much equipment that you can use. So you have an output limitation. And you can't just say, Oh, well work weekends, that doesn't. That's a short term gain. That doesn't really solve anything long term. So yes, we definitely need to go overseas, and we're, you know, a lot of them have Local Area installers, which really helps the cause, but it seems to be when can we vet them? 100% we go make trips overseas when we need to see how that how the processes are developing. And so far, we're making our work. Excellent.
Kurt Thoennessen:Yeah, I mean, because one of the things that's been a repeating theme in what we're talking about is delays, construction delays. And in today's world post COVID-19, supply chain delays, this is a big issue, right for for you, as a project manager for your clients with the jobs. And I remember you were telling me a story about a client, who, you know, they had a specific timeframe that they wanted to get the job done. And it was extremely important that that be done. So can you just tell us a little bit about your role as a project manager, and how that can correlate into the timing of a project, and how important that timing is, for clients and, and scheduling and logistics and all of this?
Zack Secilmis:Absolutely. And so there's a couple of different things that touch on here as well. So that so on timing, so there's four things that I say that every client looks for, and you know, it's price, quality, schedule, relationship. And schedule is one of my key things with as a project manager. And to me, I, as I mentioned, I also teach scheduling. At the university level, our client base is not only price conscious, and price sensitive, but schedule sensitive, because depending on where they are in their career, and in their life, I've had more than one instance where schedule was more important than cost. And they were later on in years, they their position was well listen, and you know, I have the money, it's not an issue about money, you're giving me a fair price. But what I really need to know is I'm 80 years old, or whatever the case may be is I know, there's a realistic factor here, which is, I don't want to spend the next two, three years in construction and see delays, guarantee me that you'll be done in a year to two years. This way I can move in when I need to move in, I still have my whole life ahead of me. So that's kind of the driving factor is scheduled very often in our in our client base. And you know, what also kind of happens is as a as a now that I've kind of flipped this to the insurance industry, where are those very large claim that I was part of with Chubbuck but four or five years ago, give or take, and it was a flood for a high net worth client in a very prestigious building. And the the adjuster came to me, I gave them my my estimate. And I gave him a schedule, it was just throw some numbers that kind of vaguely recall, it was about $8 million of a loss. And I gave him a schedule of, you know, of one year, approximately 12 months from beginning to end, it was a very large claim on very prestigious building. The finishes were incredible, just top tier across the board. So as going back and forth via gestural quite up quite a bit. And he said, Zack, can you do anything to bring the schedule down? And I said, well, listen, you know, that's a really interesting point. What would you like me, I've got a couple of ideas. I could go back and forth, I can go to more than one no worker, I can put in overtime, I could go there's a bunch of ideas, as Sue says, do me a favor, do your best. Let us know what you can do to bring the schedule down and what the upcharge cost will be. So I said, Okay, great. Okay, so I gave them I said, Look, I can bring it down from 12, down to nine, I was able to chew off three months worth to scheduled but it's also going to cost you an extra 2 million, I'm sorry, about an extra million dollars, whatever it is, because I'm paying overtime, I'm paying there's something there's a whole battery of costs. So the adjuster turned around, said Zack, fantastic, that's what I want you to do. I kind of scratched my head for a minute. And he says you understand the client that we're dealing with their living costs outside of because they will be put up in a hotel for the for the duration of the project at a very prestigious hotel. The living costs are exceed your, your your your additional construction costs for the schedule. So great. Okay, now that makes sense to me. You know, so win win. Yeah, it's a win win. Exactly, exactly. So it really does make sense and schedule really is a factor and, you know, as a project manager to me, you know, I there's different programs that are using, you know, Microsoft Project is my primary one. Every day when I'm running a project. It's the first thing I look at, because once you're once you go beyond your anticipated schedule, that's when people start getting annoyed. Well, okay, I get a good cause we change this, we change that. But why is my project taking longer than it should be? And if you're the professional, you should be adhering to doesn't have to be exactly on target. Yes, it's very fluid, but we shouldn't be experiencing delays of more than 10% Whatever the case may be,
Kurt Thoennessen:right now, that's, that's very interesting. And I had a claim years ago, where the client was in New York City Townhome. And it was a significant loss. And they had to be in a certain area, because it was walkable to the schools for their children. And the the insurance company ended up having to pay about $40,000 a month rent for that Alternative Living. So, I mean, I think the point you're making about, you know, scheduling and your job as a project manager and scheduling how important that is, and the different dynamics that it plays in the grand scheme. You know, because the insurance company says, Well, you know, that's better than us paying $40,000 a month, or whatever it is, you know, for to put this family up for that time period. So very interesting. And so, you know, in today's world, and obviously, that the panel you were on at the prma, we were talking about the costs of construction going up. And I think I remember some of the staff, he said during that conversation, it was you're the you were another panel member, but they're saying the cost per square foot in New York has gone from like $1,000 a square foot, of course, it depends on the property, but you're seeing upwards of $2,000 a square foot for some of these properties. How has the estimating changed since COVID? In your opinion?
Zack Secilmis:So it's a great question. So you know, years ago, we $1,000 a square foot was buying you ultra ultra high quality Ultra finishes across the board. Now, you know, the high net worth space. 1000 square foot is good, not great. It. For example, just we're looking at a couple of townhouses now, and to me, that's like the low end, we feel very low, if we did the range, arranged budget. And the range budget says, well, we we understand that your drawings are not that far along. But here's where we think you're trending. It's between x and y. And we can tell the client base that is between you know, in the past, we'd say 800 to 1200, square foot, whatever the case may be, and their middle ground be 1000. Now, I'm townhouses just as a, for example, where there's a structural component to the renovation, you're looking at minimum 1500 to 2000. Just that's just out of the gate, and assuming which architects in which type of finishes you're looking for. That's kind of what's happened right now, with the way that inflation has kind of hit the universe that the last year or so, construction costs have skyrocketed. The cost of steel, cost of concrete, it's all really catapulted across the board. And that's really affected everything we've we as a company that also our have looked at our employees and said, Okay, we understand Coastal Living has gone up. And as you mentioned before, you've got specialty employees that you don't want to lose, you know, because of a while my I haven't gotten a raise in two years, and cost of living has gone up. So now we've got to do what we have to do to make sure that we don't there's a retention issue too. So getting back to your point with contractor selection costs per square foot, they've absolutely gone up depending on what type of work you're looking for. And depending on what type of contractor architecture you hire, that's really kind of the driving factor but you know, your your apartment renovation Park Avenue for that you whatever the case may be, you're looking at 1000 square foot coming out of the gate, no question. And upwards. We've We've done projects now, three to 4000 square foot also, but those are the ones that have got a real serious, strong construction component to them. What's also kind of hit us too is getting contractor and if there's a sale down a bit put up to a quick story. We were doing a robot to start a home up in Woodstock, New York, which is, you know, two, three hours upstate, and it's kind of a new territory for us. And one of the things I did was I want to vet my structural steel contractor, because it's somebody that we haven't worked with before and his structural steel cost was about a million dollars, give or take just one point to where the case may be. I went to a shop here nice shop in New Paltz was great. Plenty of stock had all the equipment that I was looking for great guy. And as I'm walking out, I said, you know, this is I say this was like towards the end of summer, early fall, as I'm walking out the door, ask them well, let me just ask you. Well, how long is your estimate good for the the I was expecting the comment of oh, 30 days, 60 days, it was called like an off the cuff cover that I asked me to rent and we said one week and my jaw dropped to the ground. One week, we have another one week, as you probably know Cepheus look, I'm not trying to be difficult with you. I want to do the job. I want to work with you. But the volatility of steel right now. I really can't even guarantee my prices for that long because it could skyrocket on me because look at what I'm going to need pulled out some data charts from you take a look at and I understood where he was coming from. So those costs are really as for the that we talked about that conference costs are really good skyrocket in 2022. I still think they're gonna go up because of We know inflation. Consumer Price Index is when the reports I'm hearing. But you know, at the very least what I think has happened is, as a contractor, we're getting used to it. And we're adapting to that inflation right now, hopefully starts coming down. And I do notice that my cost of the pump has gone down significantly in the last couple of weeks and months. But
Kurt Thoennessen:that was my next question is, do you think it's coming down ever?
Zack Secilmis:So I'd say a mixed bag. And I wish I still think 2023 is not going to be a good year in terms of inflation, I still think we're gonna go up. I just that's just think we're trending in that way. And I think we're still catching up to the cost right now. Unfortunately, you know, I think it's always get some work, you know, until inflation rates start to decrease, you know, I'm sorry, until we start to see some overall decrease, you know, in terms of consumer price index. Interest rates have gotta come down right now, interest rates are, I don't remember last week, we had another increase, but it was not so long ago, a couple of weeks ago, I put swarming out another increase, and suddenly start decreasing interest rates and start adjusting a few things here and there bring inflation. You know, I've heard the word soft landing within inflation. But I think that 2023 is still gonna be a little bit of a rough road, hope that puts should hopefully get better towards the second half of it.
Kurt Thoennessen:Yeah. And now, just a quick question, are these figures that you're talking about from the perspective of new construction or new renovation? Or is it post loss?
Zack Secilmis:So that would be for new renovation, you know, the 1000 1500, that'll be for a new renovation, post loss is a kind of a different mixed bag animal? You know, it all depends on how severe was it now, if it's let's, let's just take the worst case scenario is always fire. If it's a fire on at for a home in the Hamptons, this is a for example, then we're looking at the same thing you're looking at 1000 on up because, you know, what can you save on a fire project in the Hamptons, with the exception of the structural Foundation. And even in that case, that's not always salvageable. But let's just say for example, it is, you're looking at 1000 upwards, just for that home, as he calls for 1500, if not higher than that, for Hamptons house, New York City. Most of the losses that I get New York City are water damage claims, frozen pipes, things along that line. So there's a different kind of ballgame that you're looking at well, under 500, because it's more cosmetic. And you know, once the place gets aired out, change the wood floor paint, change some millwork here and there, whatever the case may be, there's a lot less, but those numbers obviously, just answer your question. Absolutely. That's more along the lines of new construction.
Kurt Thoennessen:Yeah, that's interesting, because, you know, I'm working on a case right now for a client built, just built a brand new home in the Hamptons.$5 million 5984 square foot is the purchase price, and we're working on the replacement cost. And in the back of my mind, I'm kind of thinking it might be more than 5 million, the replacement cost, you know, by the time we insure it in March, so, so something to think about just the dynamics of the moving numbers and great example with the steel mill, where the steel mill where they're saying, it's good for a week, you know, not 30 days? Well, this, this has been an amazing conversation. So educational and so interesting. And, and there's, it's clear to me that there are so many, so much more to learn about the construction industry, that can help us as advisors better understand, you know, what's going on when you're building a home when you're renovating a townhome that can really help us advise our clients and take them through that process. So as we finish up here, I just, you know, the last question, I'd say is, you know, is there any final words of wisdom or thoughts that you'd like to share with the private risk management or, you know, private client, advisor community, from a construction and estimating point of view?
Zack Secilmis:So maybe just circling back on one thing with that we kind of touched on a couple of times was building the smarter home and getting the insurance industry involved with the construction insurance, some capacity, where what is it that the insurance is when, and it's got to be monetarily feasible, also, what would affect a client's premium, if they do it now. And there, they put certain mitigating factors to their home, what would affect their premium, just as for example, I just say water pumps, which is a leak detection system, coming right out of the gate, what's not shown in the building department rules and regulations and permits and everything else, what in the what in the home could be done to mitigate and and or bring down the premium that's going to help the insurance and that will help the insurance industry? There'll be one thing I would want to take away from this conversation. Say, there's got to be a laundry list of ideas that the insurance industry could put forward and say, Hey, architects, if you put these things down, put them in front of very put them in front your client, it's going to help them in the long run. It's not going to fit your design. Why not have this laundry list in front of a client
Kurt Thoennessen:Absolutely, yeah. And especially putting in front of architects is a great idea. You know, because they're the ones at the beginning, you know, and so you say, put the water bugs in place in the design phase, or even, you know, some of these devices have artificial intelligence that's built in so that they understand the water usage and pipes, you know, 24/7 365. And so, you know, this seems like it'd be just a silver bullet, like, great idea, get it done. But it's, it takes time to to incorporate those things and to make those connections. But great, great thoughts. I appreciate that. Well, thank you again, Zack, this, this has been a great conversation. I really appreciate your time today, and sharing your knowledge and experience with the private client risk and resilience audience. I hope we have the chance to do it again soon and probably hopefully see at the the next prma summit. And thanks again to everyone who listened in to this episode today. I hope you got a lot out of it as I did, and I look forward to inviting you back to our next episode. Coming up coming soon. Thanks again, everybody. Have a great day.