Soft-story retrofits: financing the mandate Los Angeles created

What it is

In 2015 Los Angeles adopted Ordinance 183893, approved by the council on October 9 and in force from November 22, requiring the seismic retrofit of wood-frame buildings of two or more stories, built to codes before 1978, with parking or another open floor under the apartments above, the type that failed in the Northridge earthquake. Buildings of three units or fewer were left out. Each owner was put on a clock from the day the notice arrived: two years to file plans, three and a half to pull a permit, seven to finish.

The city's inventory ran to roughly 15,000 buildings. Most were held by small landlords with no capital budget for code work they had not chosen, and a retrofit adds no rent, so a bank has nothing to lend against. The mandate created demand without creating the ability to pay.

Soft-story retrofits were a service line of Tellus's own, launched from the top seat at Southern California's first green construction company, not a client engagement.

What Common Ground did

• Fowler read who owned the buildings on the inventory and moved the problem from the contractor's capacity to the owner's ability to pay.
• Tellus became a Ygrene-certified PACE contractor, so it could originate financing repaid through the property tax bill alongside the construction contract instead of sending owners away to find money.
• Tellus partnered with a structural engineer, so the report that sets a retrofit's scope sat inside the same relationship as the money and the construction.
• It was the third time Tellus had run the same play: around 2012 it brought plan expediting and then architecture in house, and around 2014 it moved from contractor to design-build. Each time the move was to find the errand a customer would otherwise run alone, bring it inside, and convert faster than whoever left it outside. In 2017 the errand was money.
• Intake was rebuilt to ask financing questions before scope questions: who holds the building, the parcel's value and lien position, whether taxes are current, what a conventional lender said, and who can sign.
• Lead channels were ranked by exclusivity: engineer referrals first, city compliance notices second, the PACE contractor directory last. Every lead ran through the same screen, and financing and scope went into one proposal.
• Tellus announced the engineer partnership in April 2017 and the Ygrene certification in October 2017.

Results

• Tellus launched the line with 100 percent PACE financing on offer and the engineer under the same roof.
• An owner who had faced three separate errands, an engineer, a lender and a contractor, dealt with one relationship, and the money question was answered at the first meeting.
• No proposal was drawn for a parcel that could not carry the assessment or for a person who could not sign for it.
• The volume the mandate promised did come to whoever removed the payment constraint: by 2023 a University of Colorado study put the city's retrofits at about 8,100 buildings and about $1.3 billion of owner spending.

External links

• Public data room: Soft-Story Retrofits data room

Public record

• PRWeb: Tellus Design + Build partners with local engineer for mandatory soft story retrofit program (April 2017)
• PRWeb: Tellus Design + Build becomes Ygrene certified contractor (October 2017)

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