Reprographics 101

Currently suffering from a serious case of jet-lag on my current trip to Europe, I’m up at 2:30 a.m. in the morning, and, with nothing better to do (until I get tired enough to get back to sleep), I thought I’d spend a few minutes time exploring information posted on various “Architecture Industry” related sites (both in the U.S. and in Europe.) While doing this, I came across three interesting articles on the AIA (US) web-site. So, in the spirit of “know thy customer”, here are the “summaries” of those three articles:

CONSENSUS CONSTRUCTION FORECAST 

Steep Downturns in Nonresidential Construction Projected Through 2010 
Greatest downturn in commercial and industrial sector; institutional, more modest
by Kermit Baker, PhD, Hon. AIA
Chief Economist, DATE: JULY 10, 2009
Summary: A weak economy and continued difficulties with construction financing have slowed investment in nonresidential buildings by U.S. businesses, nonprofit institutions, and government agencies. Construction of buildings, which began to slow in the second half of last year, moved into a downward spiral toward the end of the year. This industry will see no relief this year, but the decline will moderate somewhat as we move through 2010. The AIA Consensus Construction Forecast Panel projects a 16 percent decline in nonresidential construction activity this year, and an additional drop of almost 12 percent in 2010.

The full article – and it is a long one – can be found at this Internet address:
http://info.aia.org/aiarchitect/thisweek09/0710/0710b_consensus.cfm

WORK-ON-THE-BOARDS
Architecture Firm Billings Remain Relatively Weak
Project Backlogs at Firms Shrink to 3.9 Months

by Jennifer Riskus
AIA Economics Research Manager, DATE: OCTOBER 23, 2009

Summary: Despite recording the highest inquiries score in two years, the Architecture Billings Index remains mired in the low 40s, with a score of 43.1 reported in September. Architecture firm billings have been in this vicinity for six of the last seven months, and have not yet shown any clear signs of approaching 50, and an increase in billings. Business conditions remain quite poor for many firms, with increasing numbers indicating nonexistent project backlogs and insufficient billable hours for current staff. Inquiries scores are still rising, but this continues to be triggered by the increased competition for projects, rather than actual increases in project activity.

The full article – and it is a long one – can be found at this Internet address:
http://info.aia.org/aiarchitect/thisweek09/1023/1023b_otb.cfm

Overview of the 2009 AIA Firm Survey
Date of post on info.aia.org site was October 9, 2009

Comprehensive data on firm business trends just released
Summary: The AIA published The Business of Architecture: An AIA Survey Report on Firm Characteristics on October 5. Based on an analysis of 2,699 AIA-member firm responses collected between January and March 2009, the report is available on-line from the AIA Bookstore. To provide a comprehensive sense of the information covered in the survey, we offer here a reprint of the survey overview.

The full article can be found at this Internet address:
http://info.aia.org/aiarchitect/thisweek09/1009/1009b_firmsurvey.cfm
You will also notice that you can buy the full survey by accessing the AIA on-line bookstore

Consider donating to CREST, a very worthy cause! And, get the word out about CREST!

I know that many of you (with the exception of my International visitors) are aware of THE CREST FOUNDATION. But, since some of my blog-site readers are not IRGA members, it is likely that some of you may not be aware of what CREST is and what CREST does.

CREST is all about ……….
…… Funding College Opportunities For Our Children!
The mission of the CREST Foundation is to fund and award scholarships to children – of reprographics industry employees – who wish to pursue a better education, but who lack the financial means to do so. This foundation provides opportunities for the reprographics industry to unite for the benefit of the children of our long-term employees who provide so much value to the industry.

An industry friend (who, himself, is involved in CREST’s efforts) gave me a very recent update about CREST’s activities. He said:

“Recently, we were able award $125,000 to 21 deserving kids of repro industry employees from across the country.

While we are proud to have made the awards, our concern is that the number of students applying for the grants each year has been small.

We’ve heard repeatedly that reprographics company employees (especially at the production floor level) are simply not aware of the scholarship program, despite promotional efforts through the IRgA, vendor forums, newsletters and public relations activities.

As a result, kids who need the kind of financial assistance that CREST can provide are missing opportunities to fund their college costs.”

So, I ask my industry friends to support CREST, and to do that in two ways:

1) DONATE to CREST!

2) MAKE SURE THAT ALL OF YOUR TEAM MEMBERS ARE AWARE OF CREST, AS THIS WILL INCREASE THE NUMBER OF KIDS WHO APPLY FOR CREST SCHOLARSHIPS!

For further information about CREST, please visit this web-site address:

http://www.crestfoundation.org/

Season’s Greetings to all of you!

Joel

Well, the previous post was “not good news”, so, to be fair, I thought I’d go ahead and post this article, one that appeared recently at ENR.com …. and one that appears to be “good news.”

The internet address of this article is:

http://enr.construction.com/business_management/finance/2009/1016-HousingRebound.asp

Housing Could Spark A Rebound in 2010
10/16/2009
By Bruce Buckley

Following three years of precipitous decline, the construction market may have finally hit bottom and be in the early phase of a rebound with housing leading the way.

McGraw-Hill Construction is forecasting that total construction starts will climb 11% to $466.2 billion in 2010, following an estimated 25% decline in 2009. The forecast was announced at the 2010 Construction Outlook conference in Washington, D.C.

After a 39% drop in construction between 2006 and 2009, an improving residential market and signs of strength in some public sector markets could spark a turnaround in 2010, says Robert Murray, vice president of economic affairs for McGraw-Hill Construction.

“This is not a booming market; it is just inching upward,” he says.

Given the volatile economic conditions of the current recession, Murray notes that the industry may not realize a significant rebound in 2010 even if the worst is over. “At the very least, we’re stabilizing after years of steep declines,” he says.

Despite a continued slump in the commercial and manufacturing sectors, improvements in single-family and multifamily housing will help buoy total construction spending next year, Murray says. Single-family housing may have hit bottom in 2009 with an estimated 430,000 units started. Construction could rise 30% next year to 560,000 starts, returning to levels on par with 2008 when 549,000 units were started.

Murray notes that even with the rebound, levels remain 65% below the mid-decade peak of the housing boom. His residential forecast hinges on continued low mortgage rates and the extension of first-time homebuyer tax credits.

Multifamily housing will also begin to regain traction, rising from 140,000 units started in 2009 to 160,000 units in 2010—a 14% rise. Murray credits some of the improvements to stimulus funds and community-level block grants provided through the U.S. Dept. of Housing and Urban Development. Although the sector could rebound, activity remains only about one-third as high as 2007 levels when 452,000 units were started.

Non-residential building sectors have yet to bottom out, according to McGraw-Hill Construction forecasts. The commercial and manufacturing sectors could continue to struggle next year with an estimated 6% drop in combined contract value of starts to $55.5 billion. In 2007, those sectors accounted for $113 billion in new starts. Manufacturing could take the biggest hit, dropping 14% to $9.4 billion as capacity issues continue to hamper the sector.

Among commercial buildings, hotels could see the largest drop, declining by 9% to $4.5 billion. Office buildings starts will ease back another 3% to $19.7 billion, as employment remains weak and businesses curtail expansions. Stores have seen the most dramatic retreat, dropping from an all-time high of 314 million square feet of space to a predicted 95 million square feet in 2010—the lowest level in nearly 50 years.

Funding from the American Recovery and Reinvestment Act bolstered highway construction starts in 2009—a trend that is expected to continue to fuel work going into 2010. Total contracts by value for highways and bridges rose nearly $4.4 billion in 2009 to $57.3 billion. In the absence of a new federal highway bill, Murray expects appropriations to remain flat for highways and bridges in 2010; however, the last batch of stimulus projects could spark a 13% rise to $64.7 billion in total starts.

Mass transit, which saw $3.8 billion in new starts in 2007, is primed for a jump in funding thanks to the start of several megaprojects, including the $1.6 billion Dulles Corridor Metrorail project in suburban Washington, D.C. and a new $8.7 billion Trans-Hudson rail tunnel connecting New Jersey to Manhattan. The prospect of billion of dollars for high-speed rail projects could also fuel added work in the coming years, Murray says.

Institutional building construction should begin to stabilize in 2010, thanks in part to stimulus funds. After a 23% drop in square footage this year, McGraw-Hill Construction forecasts that the sector will flatten out with a drop of 2%.

Public buildings got a big boost from the ARRA in 2009 and will reap many of the benefits in 2010, as starts in the sector are expected to rise 8% to 51 million square feet—on par with the 2007 peak.

Healthcare projects took a big hit in 2009 in light of the tight credit market. The sector dropped 36% in 2009 to an estimated 70 million square feet of new space. That sector is expected to see 72 million square feet of new starts in 2010.

Educational buildings dropped 23% to 172 million square feet in 2009, as state and local governments pulled back projects and private institutions saw big drops in endowments. The sector is expected to continue its downward path in 2010 with 158 million square feet of new starts.

An industry friend pointed me, this morning, to this Business Week “cover story” article.

After reading this article, I don’t know what else to say but, “ugh”, this is not good news for the reprographics industry. In order for a recovery to get going, capital (lending) markets have to begin flowing again. Here’s the article:

BUSINESS WEEK MAGAZINE – COVER STORY – November 5, 2009, 5:00PM EST

Why This Real Estate Bust Is Different …..

….. Unrealistic assumptions, layers of investors, sky-high prices, and possible fraud will make it hard to clean up the mess in commercial real estate

By Mara Der Hovanesian and Dean Foust (With John Cady in New York
)

When Goldman Sachs (GS) sold complex bonds backed by the Arizona Grand Resort and other commercial properties in 2006, it suggested the returns would be strong. The 164-acre luxury Arizona Grand, set against the Sonoran Desert in Phoenix, boasted an award-winning golf course, deluxe spa, and several swank restaurants. The on-site water park was named one of the best in the country by the Travel Channel. With the resort’s new owners planning to refurbish hotel rooms and common areas, Goldman told investors that the renovations would help boost cash flow.

As was so often the case during the real estate boom, the lofty projections didn’t pan out. When the economy softened and business travel slumped, Arizona Grand’s bookings slipped to 67%, from 80%. The resort defaulted on the $190 million underlying loan in 2009—a hit that alone could largely wipe out investors who bought the riskier pieces of the Goldman mortgage-backed securities deal.

“It’s one of the largest losses we have forecasted for an individual loan,” says Steve Kuritz, a senior vice-president at Realpoint, an independent credit-rating agency. The property, once valued at $246 million, is now worth just $93 million. A spokesman for Goldman says the pricing on the bonds was in line with market levels at the time and not above what investors could get on similar securities. Grossman Co. Properties, which owns Arizona Grand, didn’t return calls for comment.

It would be easy to write off this blowup as just another casualty in the regular boom-and-bust cycle of the $6.4 trillion commercial real estate market. But the Goldman deal, with its unrealistic assumptions, multiple layers of investors, and stratospheric prices, helps illustrate why this downturn is more complicated than previous ones—and will turn out to be far costlier. Already, prices have plunged 41% from the peak in 2007, according to Moody’s/REAL Commercial Property Price Index—worse than the 30.5% fall in the housing market from its 2006 apex. “We’ve never seen this extreme a correction as far back as the data go, which is the late 1960s,” says Neal Elkin, president of Real Estate Analytics, the research firm that created the index. Adds billionaire investor Wilbur Ross: “Commercial real estate has gone from being highly liquid at sky-high prices to being extremely illiquid at distressed prices.”

To appreciate why this bust is like no other, first consider the typical commercial real estate downturns that used to crop up every 5 or 10 years. The pattern was predictable: When prices for apartment complexes, office buildings, shopping malls, and other properties began to rise, developers sped up their projects to cash in on the bull market. Eventually, some of those developers, unable to fill all the new space, began to default on their loans, and lenders were stuck with the buildings they’d financed. The slump lasted no longer than the time it took for the property glut to be worked down.

TURNING A BLIND EYE
But overbuilding isn’t the culprit in this bust. An oversupply of money is what pushed commercial real estate over the edge.
It turns out the same excesses that drove the housing market’s crazy rise and fall were present in commercial real estate, too—but they have largely gone unnoticed until now. Bankers, in their haste to make more and bigger loans, blindly accepted borrowers’ wildest growth assumptions and readily overlooked other shortcomings on loan applications. They did so in part because they could easily sell their dubious loans to investors in the form of commercial mortgage-backed securities. As the market overheated, it became a breeding ground for fraud: A flurry of new court cases reveals the disturbing extent to which commercial mortgage borrowers may have doctored loan documents.

While the housing crisis seems to be easing, the commercial storm is still gathering strength. Between now and 2012, more than $1.4 trillion worth of commercial real estate loans will come due, according to real estate investment firm ING Clarion Partners. Analysts at Deutsche Bank (DB) estimate that borrowers will have trouble rolling over as many as three-quarters of the loans they took out in 2007, the most toxic vintage.

For the banks and investors whose money fuels the economy, this presents major problems. Their losses will likely cast a shadow over lending—and, by extension, the overall economy—for years. The market won’t fully recover until 2020, says Kenneth P. Riggs Jr., CEO of Real Estate Research, and in cases where “values were over the top…maybe never.”

In the short term, toxic securities are creating a new problem weighing on the market: a tangle of interconnected investors fighting over the remains of the properties they own. In the past the damage was limited to a handful of lenders who invested directly in any given project. Now there can be dozens of groups of investors, each with its own agenda. The April bankruptcy of shopping mall owner General Growth, one of the largest real-estate-related bankruptcies ever, affected hundreds of parties—an unprecedented slicing and dicing of assets. These investors won’t soon forget the bust and aren’t likely to dive back into the market as aggressively as they once did.

And yet the securities are only a secondary problem. The main driver of the commercial real estate bust is the underlying loans. How frothy did the market get? In one notable example, New York investment fund Sterling American Property and real estate company Hines paid $281 million in 2007 for the 42-floor office building at 333 Bush St. in San Francisco. That worked out to $518 a square foot, far higher than today’s price, according to Real Capital Analytics, a research firm. Less than two years later, the building’s primary tenant, law firm Heller Ehrman, filed for bankruptcy and stopped making rent payments. According to Real Capital Analytics, the building’s owners did not make a recent loan payment, and the lender is expected to begin foreclosure proceedings. Says a spokesman for Sterling and Hines: “[We] continue to own and operate the property.”

What’s striking is how quickly some big commercial deals have gone south. In April 2007, Charney FPG, a New York real estate partnership, paid about $180 million to buy a 22-story office building in Manhattan’s Times Square district. It borrowed $202 million to pay for the purchase, renovations, and incidentals—111% financing. Because the rental income didn’t cover the debt payments, Comfort’s lenders, Wachovia and RBS Greenwich Capital, required the firm to set aside $10 million in reserves to keep the project afloat until it got more paying tenants. Those occupants never materialized, and by July the owners had exhausted 95% of their reserves. The building is now in jeopardy of being seized by the bankers, says Real Capital Analytics’ head of research, Dan Fasulo. “Everyone knows Judgment Day is coming.” Says a Charney spokesman: “The owners are in the midst of restructuring the debt.” Wachovia and RBS declined to comment.

Commercial lending mirrored mortgage lending in another way: Loans were made based on an unshakable belief that the market would never go down. An analysis by research firm REIS of mortgage securities created between 2005 and 2008 found that income projections for properties exceeded their historical performances by an average of 15%. “It was all based on assumption of cash flow,” says Howard S. Landsberg of New York-based consultant Weiser Realty Advisors. “If you couldn’t afford to pay the bank back now, in three years you could count on another $20 a square foot” in rent. When the numbers didn’t add up, some lenders got imaginative. Says a banker at a large Wall Street firm: “If the cash flow wasn’t there, you had to ignore it or find ways to create it.

THIS IS NOT THE END OF THE ARTICLE ….

YOU CAN READ THE REST OF THE ARTICLE BY PURCHASING BUSINESS WEEK MAGAZINE OR BY VISITING THIS INTERNET ADDRESS: http://www.businessweek.com/magazine/content/09_46/b4155042792563.htm

Okay, here are Briefing.com’s “brief” comments about ARC’s Q3 results:

Market Report — In Play (ARP)
November 5, 2009 4:21 PM ET

Stocks mentioned in this article
American Reprographics Co (ARP)

All Briefing.com news:
American Reprographics beats by $0.05, beats on revs; reaffirms FY09 EPS guidance Reports Q3 (Sep) earnings of $0.06 per share, excluding non-recurring items, $0.05 better than the First Call consensus of $0.01; revenues fell 31.6% year/year to $119.4 mln vs the $116 mln consensus, with gross margins at 36.5%. Co reaffirms guidance for FY09, sees EPS of $0.27-0.33 vs. $0.28 consensus.

JOEL’S COMMENTS:

Well, I’m going to say it, of course! My EPS estimate* at $.06 was “spot on”.

[* I did say that my estimate(s) excluded one-time charges.] My sales revenue estimate, at $118 mil was only $1.4 mil less than the actual number.

and, JOEL’S QUESTION:

When the stock opens tomorrow morning (Nov 6th), will it be “up” or will it be “down” from the $5.70 closing price on Nov 5th?

Okay, this is my first time playing financial analyst. I guess if “they” can come up with estimates, so can I. As to the financial analysts that follow ARC, what do they know that I don’t know, and, what do I know that they don’t know?

Okay, when Suri (ARC’s CEO) made a downward revision to ARC’s full year 2009 EPS, he also, when they were talking about the loan restructuring transaction, said that the costs of that loan restructuring transaction would be about $.05 – $.07 per share. He also said, if I’m remembering this correctly, that ARC would earn between $.27 and $.33 (EPS) for the full year 2009, “excluding” the costs of the loan restructuring transaction.

Okay, ARC’s going to announce its Q3 2009 earnings this week, and here are my predictions of ARC’s Q3 and Q4 2009 results:

Q3 2009 Sales – $118 million
Q3 2009 EPS – $.06 per share (prior to any one-time charge for the loan restructuring transaction.)
If the loan restructuring transaction is booked in Q3, then ARC’s EPS, after deducting $.06 per share for the costs of the loan restructuring transaction, will be $.00 (EPS).

Q4 2009 Sales – $110.9 million
Q4 2009 EPS – $.00 per share (prior to any one-time charge for the loan restructuring transaction.)
If the loan restructuring transaction is booked in Q4, then ARC’s EPS, after deducting $.06 per share for the costs of the loan restructuring transaction, will be -$.06 (EPS).

As to my 2009 “full year” estimates:
ARC reported EPS of $.14 in Q1 2009
ARC reported EPS of $.17 in Q2 2009
My predictions are that ARC’s combined EPS for Q3 and Q4 2009 will be $.06 (regular EPS, excluding the one-time charge for loan restructuring costs).
Okay, that means “regular” EPS of $.37 for 2009
And, if the restructuring costs are $.06 EPS, that will net ARC’s EPS to $.31, including loan restructuring costs.

My EPS estimates are slightly higher than the revised EPS estimates that Suri and Jonathan (ARC’s CFO) gave.

These predictions DO NOT INCLUDE any provision ARC may take for goodwill impairment!

Anybody got a crystal ball that works? If so, I’d like your crystal ball.

On November 3rd, trading action in ARC stock was very, very high; over 800,000 shares traded – almost twice ARC’s average daily trading volume. Investors getting in ahead of a “positive” earnings “surprise”? Or, investors getting out ahead of a “negative” earnings “surprise”? I certainly don’t know. I guess it was a positive sign for the stock that in spite of all that buying and selling, the stock closed at the same price it opened, $5.75 per share.

DISCLOSURE: I own stock in ARC (albeit a very miniscule percentage of ARC’s total O/S shares).

On September 22, 2009, ISQFT announced that it had acquired “certain assets” of Plan Express.

The full text of that release can be found at this internet address:

http://www.isqft.com/home/newsdocuments/Plan_Express_09-09.pdf

My comments about this deal:

During the summer, I heard that ISQFT was “looking at” Plan Express. Rumors were abound that Plan Express had been hit very hard by the recession the design/development/construction industry has been experiencing and that Plan Express’ printing business was well off where it had been prior to the recession.

Personally, I have no clue as to what the “certain assets” were that ISQFT acquired. Prior to the deal, Plan Express was not only a provider of document management services and logistics (distribution) services, it was also heavily involved in PRINTING plans and specs. Prior to the acquisition of Plan Express, it is my understanding that ISQFT was not in the printing business, at least not directly, but that ISQFT was heavily involved in providing document management services, primarily to the GC community. As to printing, it is my understanding of ISQFT’s business model that printing, when required, was pushed out to independent reprographers who are part of ISQFT’s print-partner network.

In reading the press release, it “sounds to me like” ISQFT did not acquire Plan Express’ “printing” assets. But, I really don’t know whether that is the case, or is not the case. If one of you do know, please e-mail me at joel.salus@mac.com, since I would like to know if ISQFT’s decision to acquire Plan Express was made, in part, because ISQFT decided to add printing services (via the former Plan Express printing operations) to its arsenal of direct services.

On October 13th, 2009, ARC announced a new acquisition.

“American Reprographics Company, a provider of document management services, has acquired certain assets of RCMS Group, LLC, a technology services provider in the building information modeling (BIM) market.”

This time, ARC’s acquisition was NOT a reprographics company. This acquisition (and, certainly, this is simply my own personal opinion) firmly puts into motion ARC’s “BIM Strategy.” ARC is the first reprographics company, that I know of, to position its business to benefit from “BIM.”

RCMS Group was founded by KP Reddy. For those of you who follow my blog posts, I wrote about KP Reddy and RCMS Group shortly after I attended the IRGA Convention in late April / early May.

In the blog post I did in early May, I said this…….. KP Reddy (of RCMS Group) gave a thoroughly thought provoking presentation about BIM. In my opinion, KP’s presentation was “worth the price of admission” to this year’s IRgA convention. KP’s presentation was given at 4:00 pm on Friday, last day of the convention and last educational breakout session of the convention – in other words, not a great “time slot” for a presentation – and, because of that, there were probably only 20 or 25 attendees in the room. Given what KP talked about, EVERY REPROGRAPHER IN THE COUNTRY SHOULD HAVE ATTENDED THIS SESSION. The fact that only 20 or 25 people heard what KP said, when everyone at the convention should have heard what KP said, is, in itself, quite interesting to me. Do we in the reprographics business really know what the effects of BIM will be on the reprographics business and industry down the road? Do we not care? Or, is this simply a matter of, “if we don’t want to hear what’s coming down the pike, let’s bury our head in the sand so we don’t have to hear it?”

After the IRGA Convention, I made it a point to follow-up with KP. We had several phone discussion and e-mail exchanges over the course of May and June. In June, I met with KP in Tampa for dinner and talks, having invited him to Tampa to meet the CEO of a large engineering firm and to meet and get to know Martha Korman. (Martha was the primary shareholder of NGI, the company that I worked for prior to ARC buying it, and it was mainly she who I worked with in the trenches.)

After that dinner meeting in Tampa, KP and I continued to have discussions about his business and about “BIM”. Getting to know KP was thoroughly delightful – he is a very nice guy, has a great personality and is extremely smart. Now, having completed a deal to move his business under ARC’s umbrella, he is the VP of BIM Services for ARC. I’ve already congratulated KP on his deal with ARC. I wish KP continued success in everything he does; like I said, he is a very nice guy.

Question for my non-ARC reprographer friends. Have you been educating yourself about BIM and how it may affect our industry and your business in the future? Have you begun to research what your “BIM Strategy” should be? And, if not, what are you waiting for?

This article appeared on Reuters the other day. Since in one my recent posts I talk about Non-Res Real Estate Developers and their inability to finance projects and how the availability of financing impacts the R.E. development industry – – and, thusly, reprographers – – I thought this article would be appropriate to post on my blog-site:

“Commercial property execs expect more bad news”
Wed Aug 5, 2009 4:03pm EDT

* 93 pct say real estate values are lower than last year
* 82 percent say values will continue to deteriorate

By Ilaina Jonas
NEW YORK, Aug 5 (Reuters) – An overwhelming majority of U.S. commercial real estate executives believe their industry is suffering and expect it get worse, according to a survey by the Real Estate Roundtable released on Wednesday.
Some 93 percent of the 120 chief executives, chairmen, presidents, board members and others polled said commercial real estate prices are lower than they were a year ago, according to the Roundtable, which represents commercial real estate owners, developers, lenders and managers.

Eighty-two percent expect values to remain roughly the same or erode further in the next 12 months, the survey said.
Hotels, office buildings, shopping centers, warehouses and apartment building owners and lenders have been grappling with declining rents and rising vacancies. Meanwhile, prices for these assets have sunk has the credit crisis has dried up sources to finance sales or refinance maturing loans.

Colin Dyer, chief executive officer of Jones Lange LaSalle, one of the world’s largest real estate services companies, on Wednesday said that prices for U.S. assets have fallen by as much as 50 percent.

“Over the last year or so the commercial real estate industry has been stuck between a rock and a hard place,” Jeffrey DeBoer, Roundtable chief executive said. “The rock that we see is the fundamentals, which continue to create problems for the industry. The hard place is continuing to not move and that is the frozen credit markets, in terms of getting the ability to finance or refinance debt.”

So it’s no surprise that the new overall sentiment index reading of 49 is well below the ideal of 100. The index questions about how responders feel about their business today in terms of values, and access to credit and capital, and how they believe their situation will be in a year.

“We’re still in a very, very stressful situation,” DeBoer said. “We continue to have a lot of problems in commercial real estate.”
The Roundtable is pushing four proposals that could help get the lending market rolling. The Roundtable wants the federal government to establish a loan guarantee program to insure loans to make securities sold against those loans in the secondary market more attractive to investors. That would encourage lenders to continue to make loans.

The Roundtable also wants the federal government to set up public/private funds to buy new as opposed to legacy loans.
Additionally, the group is asking the government to modify the Real Estate Mortgage Investment Conduit (REMIC) rules that allow loans that have been securitized into commercial mortgage-backed securities (CMBS) to be extended and modified without risking the tax exempt status of the securitized trust.

Finally, the industry anticipates that hundreds of billions of dollars will be needed to fill the gap between mortgages that are maturing and new lower mortgages that would be provided if the lending market does return. The Roundtable is urging Congress to revamp the Foreign Investment in Real Property Tax Act of 1980 to attract more foreign equity to U.S. commercial real estate. (Reporting by Ilaina Jonas, editing by Leslie Gevirtz)

What you’ll read below (if, in fact, you take the time to read it)….. comes from a blog I came across this morning. That blog is located at http://www.constructonomics.com/

The author (a construction professional) wrote this as part of an article he posted on July 30, 2009. Since I’ve written posts about BIM in the recent past, I thought I’d post this guy’s comments:

Can anyone say 3-D?

The capabilities of three dimensional CAD programs, otherwise known as building information modeling (BIM), are just beginning to become known and explored. There are of course the obvious benefits of conflict resolution with everything from a door swing to MEP and steel coordination, but the benefits reach much further.

I’ve seen millions of dollars thrown in the street due to lack of drawing coordination and conflict resolution in the field is extremely expensive. Often times the conflict will be partially fixed or not fixed at all which detracts from the quality of the project.

Beyond conflict resolution, the entire job can be estimated and viewed in three dimensions prior to lifting a shovel. The construction process can even be modeled in 3-D to look for conflict of equipment. I recently worked on a casino where concrete cranes and steel cranes were working in very close proximity. We didn’t use BIM but it would have helped significantly to avoid delays caused by cranes being too close. The steel contractor submitted a $200,000 change order for delays caused by the concrete cranes.

I just found another article about BIM that he posted on his site (on March 25, 2009), so here goes…..

BIMing our way to better building

If the construction industry was the auto industry, then the advent of Building Information Modeling would be the equivalent of the invention of the assembly line. And if the construction industry was the textile industry, then BIM would be the equivalent of (dare I say) the cotton gin.

But since this is reality, and the construction industry could arguably be more similar to the entertainment industry than manufacturing or textiles, BIM is in the very least a technology that could produce great advancement in construction practice.

While BIM is in fact an underground rock band from Bangladesh, for our purposes, BIM is a method of modeling a building in three dimensions that integrates design and construction. This means that not only is every item in the building its own independent object, but the construction schedule can be modeled as well, producing a virtual construction illustration prior to breaking out a shovel. If you add an accounting element to this, BIM becomes 5 dimensions of valuable information in one model.

I attending a BIM conference and panel discussion in Philadelphia last week put on by Stephen Jones with McGraw-Hill Construction. Also giving presentations were representatives of contractors, architects and even law firms. The benefits of BIM were not difficult for this panel of professionals to illustrate, there was even talk from the legal side of making three dimensional models legal contract documents. However, the biggest problem presented was the reluctance of members of the AEC world to adopt this technology and feel comfortable with using it.

The construction industry has historically been very resistant to change and a new technology is often perceived as risky and when something has perceived risk, contractors treat it as a deadly tsunami of uncertainty.

Stephen talked about the glut of baby boomers at the management level in companies that are perhaps stalling the advent of new technology in hopes of it surfacing after their departure and hefty retirement payout. But as a baby boomer himself, Stephen is a strong proponent of BIM and suggested its use to be pushed rather than stalled. The benefits in coordination of design consultants and subcontractors as well as conflict prevention lead to undeniable cost saving to the owner, and far fewer headaches for designers and builders.

After working for nearly three years on the Arrabelle Hotel construction in Vail, CO, I saw literally millions of dollars thrown away from lack of coordination between the MEP trades with structural, architectural, and interior design work. BIM would not only have saved the cost of this conflict resolution but perhaps could have reduced impact to a project that was woefully behind schedule.

We need to embrace this change rather than shun it. It is obviously the direction in which our business is moving and the more time we spend stalling, the more time we spend in the two dimensional world of mediocre building and stagnant business practice.