Are funds not secured in advance in legally binding contracts so an investor can’t pull out mid-project? Shouldn’t all the funds be in a stable asset from the outset, as opposed to something that’s susceptible to valuation fluctuations that could cause their purchasing power to shrink mid-project? Wouldn’t costs (materials, labor, etc.) be contractually locked in before breaking ground?
It just seems like there must be a way of doing this that ensures $1B of work doesn’t just get abandoned.
In: Economics
A lot of times, contractors bail, cost rises, issues come up, project costs balloon, investors bail or go bankrupt, etc etc. It’s not easy to accurately forecast anything that’s a multibillion dollar project.
Sure there are steps to remediate if anyone breaks their contract but that costs more time and money. Let’s not ignore the sunk cost fallacy.
When you say 80% built, do you mean the steel and concrete, or do you mean it’s all enclosed in facade and they’re working on fitting it out?
I ask as the structure is a small part of the overall cost of these buildings. For example if it has an architectural facade then the glazing/stone/whatever could easily cost twice as much as the structure, the mechanical and electrical systems could also cost twice as much as the structure, if not more, and the interior finishes could easily come in in the same ballpark. The structure might only be 10-15% of the value of the project, so if they’re 80% of the way through building that and they’re running into financial issues it can still make sense to kill the project before outlaying all the other $$$
Latest Answers