2019 Annual Real Estate Forecast Conference & Member Showcase

Each January, over 900 of the state’s leading real estate experts attend MEREDA’s  TD Bank Sponsored Signature Event, the Annual Forecast Conference & Member Showcase.  Scheduled to be held on January 17, 2019 at the Holiday Inn by the Bay in Portland, this unique conference brings together the largest gathering of commercial real estate professionals in Maine, and is specifically geared toward developers, brokers, architects, bankers, attorneys, accountants, and other industry professionals. Each year, MEREDA assembles some of Maine’s top real estate leaders to provide an economic overview and outlook on the profession’s key economic indicators, along with the popular market overview by property type, focusing on both commercial and residential real estate forecasts.

This course is approved for 4 Hours of Broker, Legal and Appraiser Continuing Education Credits. Approval for Architect credits is pending.  

This event is well-known as an annual “must attend” for anyone involved in, or touched by, the real estate industry. You should attend if:

  • You want to network with Maine’s top industry professionals.
  • You could benefit from a sneak peek into Maine’s real estate industry – and would like to learn about key trends and transactions in regions and market segments (i.e. Southern Maine vs. Bangor region etc., and multi-family vs. retail transactions, etc.)
  • You desire a front row seat for forecasts from leading insiders about industry and the economic recovery.
  • You are in need of continuing education credits.
  • You believe that Maine’s real estate sector is an important economic driver and want to support the future of the industry. 

Supplementing the conference each year is MEREDA’s popular Member Showcase with MEREDA members exhibiting their products and services. The exhibition has become an integral part of our annual event providing a unique opportunity to network with MEREDA members.

Click here for more information and to register now. 

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The Right Equation for Responsible Development: Spotlight on 65 Munjoy Street Condominiums

In multi-part series, exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation.  MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

Please join with us in celebrating 65 Munjoy Street Condominiums.

MEREDA:  Describe the building and project.

65 Munjoy Street Condominiums:  65 Munjoy is a partnership between local Portland developers Peter Bass of Random Orbit and Ethan Boxer-Macomber of Anew Development.

65 Munjoy Street is a three-story, walk-up building offering 8 high-quality and amenity rich condominium units in a range of 1, 2 and 3-bedrooms. 65 Munjoy presents the best of modern design and materials while respecting the traditional architectural forms, organization and massing that characterize Munjoy Hill.

Most importantly, 65 Munjoy is a unique and innovative response to Portland’s call for quality and efficient ownership housing created to be affordable to middle-income buyers. While the housing units at 65 Munjoy would appeal to buyers in any segment of the market, they were designed and developed to be sold at reduced price points and made available exclusively to buyers with maximum household incomes at or below 120% of the Portland area median income. 

MEREDA:  What was the impetus for this project?

65 Munjoy Street Condominiums:  As Portland has grown in recent years it has actively produced hundreds of new workforce housing units for low-income residents as well as scores of new houses and condominium units for people of higher than average means. However, in that same period, the typical moderate-income resident experienced a concerning decline in affordable housing options.

Being Portland residents themselves, Bass (Peter) and Boxer-Macomber (Ethan) had each participated over the years in an ongoing community dialogue about the problem of suppling new housing opportunities for middle-income residents. While this problem had been the topic of much study, discussion, and debate- Peter and Ethan had seen few tangible solutions had come out of the development community.

They decided it was time to apply their housing skills and experience toward creating a tangible housing project that would seek to address the problem and perhaps provide a model that could be replicated.

MEREDA:  That sounds like quite a process.  How long were you in the planning stages before construction started?

65 Munjoy Street Condominiums:  Before ever starting the project, the developers had spent years contemplating and sketching potential ways to viably create affordable middle-income housing, but it wasn’t until 2014 that a feasible and tangible opportunity presented itself.

In that year, The City of Portland released a Request for Proposals (RFP) for the sale and reuse of an 80’ x 85’ vacant parcel of land it owned at 65 Munjoy Street. The City’s RFP was crafted in such a way that it required the creation of affordable housing generally, but was wisely left flexible and non-prescriptive in terms of affordability strategy; e.g. apartments vs. condos, level of income targeting, design of units, legal framework for income restrictions, etc. The City’s RFP also offered ways that the City could potentially assist in the creation of affordable housing through both the terms of sale and with various potential forms of soft secondary financing.

It was the City’s flexible, non-prescriptive approach to the RFP, combined with flexible finance opportunities that made it possible for the developers to see a feasible path forward towards creating middle-income condominiums.

The developers planned and prepared their response in late 2014 and submitted a response to the RFP in January of 2015.  The developer’s response was reviewed through a series of public meetings and accepted by the City Council later that year. Through late 2015 and into late 2016, the developers negotiated project costs, financing, and City and State land use and environmental permitting.

Construction of 65 Munjoy started in the summer of 2016, was completed in the spring of 2017. The final unit was sold in the summer of 2018.

From first consideration to the sale of the final unit, the project took almost exactly 4 years.

MEREDA:  Tell us about the most challenging aspect of getting this project completed.

65 Munjoy Street Condominiums:  Over the 4 years that the developers planned and implemented the project, they experienced numerous challenges such as environmental mitigation, legal and financial terms negotiation with strategic partners, a frivolous NIMBY law suite, escalating material and labor costs, and all of the delay and expense associated with each.

While each of these challenges was significant, they were all potential risks that the developers understood and had prepared for. In the end, it was the challenge least expected that turned out to be the greatest….

*See “Something unexpected” below.

MEREDA:  Something unexpected you learned along the way was….

65 Munjoy Street Condominiums:  When the developers managed to devise a plan that would create hi-quality, highly desirable new units in the heart of Munjoy Hill priced aggressively below market value, the assumption was that all 8 units would probably be under contract before construction ended. In the end, however, only one unit went under contract during construction and it took a full 14-months for the market to absorb the remaining seven.

The slow absorption at 65 Munjoy was by no means for lack of excitement in the market. Each passing month the sales team fielded a steady stream of would-be buyers that enthusiastically inquired about the property, scheduled showings, and floated offers.

The problem was that the very large majority of inquires hit dead ends with the would-be buyers earning either too little or too much to qualify. Several of the buyers assumed that they would be 120% AMI income eligible but came to find that they were just slightly over income. Others had income soundly below 120% AMI but then struggled to pull together the down payment and loan approvals needed to satisfy their lender.

The window of Portland area buyers who who’s earnings were modest enough to meet the income restrictions but high enough to secure financing turned out to be far more narrow than expected.

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable? 

65 Munjoy Street Condominiums:  The developers are extremely pleased and proud to have contributed positively to the current urban renaissance of Munjoy Hill following over 60 years of disinvestment, deferred maintenance, and population loss. The 65 Munjoy project addressed pre-existing environmental concerns, added to the social and economic vitality of the neighborhood and created and sustained local jobs while also adding new revenue to the City’s tax rolls.

However, despite all of these successes, 65 Munjoy’s most notable feature is clearly the way that it provides precious, one-of-a-kind opportunity for middle-income residents to own a quality new condominium unit on Munjoy Hill at price point they can afford.

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Are you in for a (price) shock?

Strategic considerations in allocating risks of Tariffs, price escalation and supply chain disruptions in construction contracting

By:  Robert Ruesch, Esq., Verrill Dana, LLP

Compared to where we were ten years ago, the real estate and construction segments of our economy are booming.  The uptick in development in hotels, condominiums, apartments and commercial facilities, particularly in southern Maine, has been well documented.  Beyond Maine, metropolitan Boston, southern New Hampshire and indeed many parts of the United States are enjoying record growth.  This positive news is tempered somewhat by the reality that increased demand for construction materials, equipment and skilled labor has pushed up prices and increased building costs in Maine and across the U.S.  Added to this price dynamic is the U.S. government’s recent threatened and actual tariffs which have further disrupted markets resulting in increased prices for lumber, steel, aluminum and other key construction materials.

In response to these price fluctuations, private developers, owners, public procurement officials, design professionals, contractors and construction managers (CMs) are having frank conversations about how to handle the risks of price increases.  All project participants agree that limiting and allocating exposure to price escalation is paramount.  One of the common steps that the parties opt for is to accelerate delivery of the entire project or procurement of those items that might be subject to price escalation due to tariffs or other factors, particularly structural steel.  Efforts to fast track purchases of steel or other items earlier than anticipated may make sense, but creates potential for risks down the road that may flow from expedited design, hasty review of submittals, changes in the owner’s program or handling and storage costs.  Often these considerations are not given a second thought in the contract process.  That is probably a mistake.

Project owners, designers and contractors should pay closer attention to how price escalation and risks of fast track procurement are handled in their contracts.  In addition to the risks of accelerated procurement, owners often assume that once the contractor commits to a lump sum price or a guaranteed maximum price (GMP), there is no further need to worry about price increases regardless of what happens in the marketplace. That is not always the case and will depend on the nature of the price escalation and the specific contract terms. Like it or not, contracts may allow for the possibility of price adjustment relief in the face of cost escalation under certain circumstances.   In addition, in the current marketplace contractors faced with price instability will likely hedge against the risk of price escalation by increasing lump sum and GMP quotes to the owner’s detriment.

Here are some of the contract provisions that may allow for price adjustments:

Unit Prices:  Some contracts, including those that incorporate state or federal procurement provisions may allow for unit price adjustments due to cost escalation outside of certain pre-defined parameters (say, beyond 10%).

Force Majeure:  More common place are contracts containing force majeure provisions which allow for relief from contract obligations for a range of events that are generally considered to be outside the contractor’s control.  Are tariffs and supply chain disruptions covered by that clause?

Taxes/Fees:  Some contracts provide that the owner is responsible for taxes or government fees that take effect after the contract is signed.  Do tariffs fall within the scope of that type of clause?

Allowances:  Still more common in GMP and lump sum contracts are allowance provisions that cap contractor costs to budgeted line items.  Costs beyond the budgeted allowances flow to the owner.

Contingency:  Depending on who controls the contract contingency, what, if any, latitude does the contract provide to use the contingency for price increases?

Regardless of the type of contract, owners and contractors should review even the most familiar contract forms to evaluate price escalation risks.  Most of the time there are ways to deal with the risk of price escalation in a transparent fashion in which the true cost of the risk is identified, quantified and allocated up front.  This provides some predictability for the contractor that it will not suffer losses outside its control due to commodity price changes.  In addition, the owner will have the benefit of knowing that the bid prices are not being irrationally adjusted to hedge against the risk of price escalation that may not actually occur.  As always, open communication and a fair allocation of risk produces a preferred result.  The alternative is to just sign the contract and hope for the best.

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MEREDA’s “Morning Menu” Breakfast Event Opportunity Zones: What you Need to Know to Take Advantage of this Opportunity in Real Estate and Beyond

The 2017 Tax Cuts and Jobs Act created a bi-partisan tax incentive program based on economically distressed Opportunity Zones.  Investors in Qualified Opportunity Zone businesses now have the ability to defer, and to some extent eliminate, recent capital gain income, by properly investing their gain proceeds.  Gov. LePage has designated 32 Opportunity Zones in Maine ranging from Saco to Madawaska, including parts of Downtown Portland, which opens the door for real estate developers pursuing projects in these designated areas to tap into a whole new group of tax savvy investors.

Join the Maine Real Estate & Development Association for breakfast on December 6 from 7:30 AM – 9 AM at the Portland Regency Hotel to learn more about these complicated new rules.  Panelists Andy Smith and Nelson Toner will offer insights about how the legislation will impact the real estate industry and the tax advantages available to investors in Opportunity Zone projects.

About the Event:

December 6, 2018 – 7:30AM to 9:00AM

Portland Regency Hotel
20 Milk Street
Portland, ME 04101

Breakfast: 7:30 AM Program: 8:00 – 9:00 AM

About the Panel:

For more than 30 years, Nelson Toner has practiced law at Bernstein Shur providing tax planning, estate planning and business succession planning to individual and business clients.  Prior to working at Bernstein Shur, Nelson worked in the tax department at the Boston office of Grant Thornton, an international accounting firm during the halcyon days of pre-1986 real estate syndications.  Nelson gives many local and state seminars, including a regular presentation at the Maine Tax Forum each autumn, and for many years taught Estate and Gift Tax at the Maine Law School.  He also writes the S Corporation column for the Journal of Passthrough Entities, a national tax publication.

Nelson earned a bachelor’s degree in mathematics from Trinity College (Hartford), a JD  degree from Case Western Reserve University, and an LLC in taxation from Boston University.

Andrew Smith is a principal at Baker Newman Noyes, specializing in assisting his clients with practical advice and creative solutions to their most challenging business issues, including tax efficient structures for business transactions; fixed asset analysis; succession planning; and tax deferral and reduction strategies. He also works with real estate clients of all sizes on cost segregation studies, like-kind exchanges, and historic rehabilitation credits. In addition to serving clients, Andy is also actively  involved in the firm’s college recruiting initiatives, having begun his career at the firm in 1997 as an intern and leads the tax department’s Multi-Generational Business group.

He earned a bachelor’s degree in business administration, with concentrations in accounting and finance, from the University of Maine, Orono.

Registering for this Event:

MEREDA Member: $45 each  | Non – Member: $55 each

Register After November 29:  Member: $55 each  |  Non-Member $65 each

Your RSVP is requested by November 29, 2018. Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after November 29, 2018.

This MEREDA Morning Menu Breakfast Event is Sponsored by Norway Savings Bank,  Baker Newman Noyes, Bernstein Shur and the City of Augusta

Visit www.mereda.org  for more information and to register.

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The Right Equation for Responsible Development: Spotlight on Hodgkins School Apartments

In multi-part series, exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation.  MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

Please join with us in celebrating Hodgkins School Apartments.

MEREDA:  Describe the building and project.

Hodgkins School Apartments:  The Ella R. Hodgkins Intermediate School was constructed in 1958 as part of a comprehensive school building campaign in Augusta, Maine to improve the quality of education for students of the city. The school is on the National Register of Historic Places. The school is significant architecturally as an intact example of a modern, mid-century school building following the most recent trends in design and construction. Original architectural drawings indicate the building retains much of its integrity encompassing a total footprint of approximately 30,575 square feet.  As the second intermediate school constructed in the city, the Hodgkins School represents the conclusion of an effort to create modern elementary school buildings. Basement areas of the school are located beneath the north and south wings of the building which were used as a bomb shelter in the 1960’s. The central portion of the building is constructed on a slab-on-grade concrete foundation. The exterior walls are brick, with masonry and plaster interior walls. This historically significant school has been renovated into 47 apartment units for low income elderly.

The Augusta Housing Authority (AHA) partnered with Developers Collaborative (DC) to take on a major redevelopment project that ended up with the highest score in the MaineHousing annual 9% round.  DC has redeveloped many historic schools, and is one of the most prolific affordable housing developers in the state. The combination of DC’s experience and AHA’s position as a leader in the community proved to be especially productive in this instance.  This project focused on hiring local businesses whenever possible. The Hodgkins School Apartments project employed 233 men and women from around the area.

MEREDA:  What was the impetus for this project?

Hodgkins School Apartments:  The Hodgkins School building had been siting vacant since the end of the 2009 school year prior to Augusta Housing Authority and Developers Collaborative’s successful redevelopment plan. The City had begun discussions of setting aside several hundred thousand dollars with which to remediate and tear down the building despite its prime neighborhood location and relatively recent use as a school. Anything of intrinsic value was removed as soon as the building was no longer occupied. Unfortunately the back of the building is hidden from neighboring residences. The renovated building grounds now contain numerous landscaping additions that improve the esthetics and the livability of the area.  Raised beds were added for the residents to grow flowers and vegetables.  While a meditative stone and grass labyrinth is set next to the apartment building. It is one of only a handful of permanent labyrinths in the State.

MEREDA:  That sounds like quite a process.  How long were you in the planning stages before construction started?

Hodgkins School Apartments:  We began planning in early 2014 and began construction in September 2015.

MEREDA:  Tell us about the most challenging aspect of getting this project completed

Hodgkins School Apartments:  There were many challenges during the renovation project. The hallways were made of cream colored glossy glazed tile.  After removing various school noticeboards from the hallways hundreds of holes in the tiles were evident and visually unsightly. As a solution, color matched tiles were created through a special glaze firing.  Each damaged tile was carefully removed from the wall and replaced. This process was precise and labor intensive work. The doors from the hallway into the units created another problem.  Unknown until the wall interiors were revealed, some of the original structural members were too close to the classroom/unit doorways to accommodate wheelchair standards. To bring the building into ADA compliance seven pillars and footings needed to be moved in the building. The strong team of contractors, developers and owners resolved any challenges quickly keeping the project on budget and on schedule.

MEREDA:  Something unexpected you learned along the way was…

Hodgkins School Apartments:  The unique historic details in a midcentury building was something unexpected that we discovered. Through careful preservation and enhancement of key areas we were able to buff a diamond out from the rough.

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable?

Hodgkins School Apartments:  There are many features of this project that are notable. But as far as the structure is concerned the glass block is the most notable. While the building was vacant vandals broke skylights along with a considerable amount of the ridged glass block at the rear of the building. Fortunately matching glass block was sourced to replace the damaged ones. Hodgkins School was one of the first buildings of its kind to be evaluated by the National Park Service that contained a large amount of glass block in its facade. Making this building not only unique to Maine, but also to the entire U.S.A. The NPS approval process for the glass block details required setting a precedent for future historic renovations of this era throughout the U.S.A. and thus required more than typical dialog between SHPO, NPS, Owner, and MaineHousing.

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MEREDA’s Morning Menu Breakfast – Workforce Development: A Conversation with Labor Economist, John Dorrer, and Chief Executive Officer of Associated General Contractors of Maine, Matt Marks

Building the next generation of skilled workers is a national challenge. Maine can be a leader in its approach to building a trained workforce with your help!

Join MEREDA for Breakfast in Biddeford at Pepperell Mill Campus on November 29th for a conversation with Labor Economist John Dorrer and Matthew Marks, CEO of the Associated General Contractors of Maine.

Recruiting and training a highly skilled workforce are key to industry growth and profitability -we must meet the challenge.

Download the Event Brochure

About the Event:

November 29, 2018 – 7:30AM to 9:00AM

Pepperell Mill Campus
40 Main Street
Biddeford, ME

Buffet Breakfast: 7:30-8:00 am
Program: 8:00-9:00 am

About the Panelists:

John Dorrer is a labor economist and workforce analyst who has been tracking Maine workforce and labor market issues for over 40 years.  Dorrer has worked at the local, state and national level in a variety of leadership, executive and technical roles, including Chief Workforce Strategist, Maine Community College System, Senior Advisor at Georgetown University, Center on Education and the Workforce, Director of Labor Market Research at Jobs for the Future in Boston, Acting Commissioner of the Maine Department of Labor, Director, Center for Workforce Research and Information at the Maine Department of Labor, Deputy Director, Workforce Development Programs at the National Center on Education and the Economy in Washington D.C.

John has held many appointments to multiple national and state panels, boards and study groups including Public Policy Advisory Committee, Boston Federal Reserve Bank, Consensus Economic Forecasting Commission and Maine Economic Growth Council, Trustee, Mid-Coast Regional Redevelopment Authority (MRRA) 2011-2015 and currently, serves as Board Member, Maine Center for Economic Policy, Coastal Enterprises Inc.(CEI), Research Committee, Maine Economic Focus Initiative and Alfond Leaders Advisory Committee.

Matthew Marks, a native of South Portland, Maine, was selected as the Chief Executive Officer of the Associated General Contractors of Maine in August 2012. In 2008 he joined AGC Maine as the Chief Operations Officer. As the COO he managed the regulatory issues for the Chapter. He is a graduate of University of Southern Maine’s Applied Technical Leadership Program. In 2013, he was selected as the University of Southern Maine’s Applied Sciences Alumnus of the Year. Matt served on various active committees including the Maine Dig Safe Advisory Board, AGC Maine Education Foundation, Aquatic Resources Management Strategy Steering Committee, and the Southern Maine Community College Building Division Advisory Board. Prior to joining AGC Maine he was employed by a diversified family business that included construction, fuel, transportation and property development.

Registering for the Event:

Your RSVP is requested by November 22, 2018. Payment is expected at the time of registration. No refunds will be granted  to anyone who registers, but fails to attend or who cancels after November 22, 2018.

Ticket Prices:

Members: $45 each | Non-Members: $55 ea
Prices increase by $10 after November 22

Visit www.mereda.org to register

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Maine Real Estate & Development Association Appoints Rick Flagg of Norway Savings Bank to Board of Directors

The Maine Real Estate & Development Association (MEREDA) has announced that Rick Flagg of Scarborough, Regional Vice President of Commercial Lending for Norway Savings Bank has been appointed to its Board of Directors.

Rick was born and raised in Eastport, Maine and attended Eastport Elementary School and Shead High School before receiving his degree in Economics from the University of Maine at Orono.

After college he moved to Southern Maine to begin a career in the banking industry.  After a brief stint with Fleet Bank, he worked a number of years for Maine Bank and Trust before becoming a commercial lender with Norway Savings Bank.  He’s been with Norway Savings Bank for 17 years and is currently a Regional Vice President of Commercial Lending.

Rick has served on a number of boards over the years including Maine Center for Entrepreneurial Development (MCED) and Risk Management Association (RMA) where he is a past president.

“Norway Savings Bank has been a longtime supporter of MEREDA and we are pleased that Rick has decided to join us on the board, as well as participate on MEREDA’s Membership & Marketing Committee.  We look forward to his active participation as we work to further MEREDA’s mission throughout the State”, commented Shelly R. Clark, Vice President of Operations for MEREDA.

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801 for visit www.mereda.org.

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Change is Necessary to Propel Housing Forward

Investment in off-site building is the first step toward addressing the country’s shortages of labor and housing.

By George Casey, Stockbridge Associates

In November 2016, I put forth the thesis that the home building industry was reaching the point of severe labor constraint and that new thinking and business models were needed. The constraint was occurring at a level of production equivalent to only two-thirds of the average production level of housing achieved regularly from 1950 to 2010. If we were going to produce enough housing to alleviate the growing housing shortage and affordability crisis, we were going to have to figure out how to create more housing than the current industry was doing.

In the past, the solution to such an issue would be to open the immigration gates to fill the need. It is what America has done to fill labor needs for nearly two centuries. But these are different times, and the so-called immigration relief valve now has a “closed” sign on it.

The next logical solution is to evolve to automation in the production of homes, building all or pieces of homes in factories using new technologies. It is what Europe has done over the past couple of decades as it faced a similar labor problem.

The industry has done this before. After World War II and up until the early 1970s, there was a vibrant factory-built housing business in the U.S. as defense plants, tooling, and skills rotated from building tanks, planes, and munitions to building homes. Companies such as National Homes built homes and communities that last to this day.

The recession of the early 1970s and the subsequent reorganization of the mortgage and construction financing businesses left us with an industry with over 93% of production performed stick-built from scratch on-site. There has been a price to remaining in this stick-built, on-site method, however.

Currently available data by industry since 1945 reported in February 2017 by the McKinsey Global Institute demonstrates that most other industries had achieved a 1500% improvement in productivity over that 70-year period. The construction industry showed a 0% improvement in the same period.

McKinsey notes a tremendous opportunity for productivity improvement through the creation of factory environments and the adoption of technologies and automation that all the other industries, save construction, had gravitated toward.

Move Toward Off-Site

In the past six to 12 months, we are now seeing movement in this direction—finally.

Prescient materials suppliers, such as LP and CertainTeed, have made investments in and with factory-built entities Entekra and Unity Homes, respectively. Both Entekra and Unity Homes focus on high collaboration and the adoption of BIM modeling up front so that all quantities, measurements, and tolerances are known, and value engineering is done prior to the creation of the house pieces and parts.

California-based Katerra has taken this model further with the sourcing of supplies in its own supply chain, and other fully integrated modular manufacturers such as Kasita, BluHomes, Blokable, Blueprint Robotics, Plant Prefab, and Proto have received varying levels of institutional interest and/or financing recently.

Japanese industrial giants involved with factory-built housing solutions, such as Daiwa House and Sekisui House, have purchased U.S. home builders in the past two years. Although they have yet to bring their factory-built expertise to bear yet, most analysts believe this is the inevitable direction.

Manufactured housing behemoth Clayton Homes (owned by Berkshire Hathaway and owning a 50% market share of the U.S. manufactured housing market) has purchased several site-built builders over the past two years, including Oakwood Homes in Denver, which is known for building efficiently.

The foundation of the factory-built revolution has begun.

Interestingly, most of the public builders are still on the sidelines in this game. Only Toll Brothers and NVR have factory-built component capabilities in-house; both for several decades. This may start to change, however.

The labor shortage that’s limiting housing production appears to be in the early innings of a potential solution, and that solution has initial outlines of the way housing is successfully produced overseas.

As Gerry McCaughey, the CEO of Entekra, has noted, we don’t have a labor problem, we have a process problem. By solving the process problem, we can get more out of the labor that is there.

My belief is that we are going to need both for a while: better processes and more labor. During the transition, as the factory-built business spools up, we will still need more labor, both in factories and on the jobsite, using the current model for production.

Composition Change

However, there is another issue that the industry has ignored for too long when it comes to labor availability. When a trade labor shortage has been discussed, we have actually meant a male trade labor shortage. The facts indicate that the industry has artificially limited the number of available workers to build homes: female participation in construction, particularly at the trade level, is not even discussed as a potential source or solution.

Here are some relevant facts:
· 47% of the active U.S. labor force is women. After climbing for the past four decades, this has leveled off or slightly declined
· 29% of manufacturing jobs are filled by women
· 4% of construction and trade labor is filled by women (ranging from 1% for masons and bricklayers to 5.7% for painters)

With current site-built construction techniques, brute force labor is still the norm, and we tolerate a sex exclusion culture on the jobsite, just as the military did until recently, even when brute force is not required for all of the work to be done.

It is not easy to change cultural norms. At least in the military, there is a command structure that can set policy and enforce it. However, builders do not fully control their subcontractor and supply chains.

Factory-built solutions offer a new and more inclusive opportunity for the industry and is not without precedent. During World War II, women assembled tanks, ships, planes, guns and munitions in factories when necessary, and the result was highly successful.

Go to manufacturing environments today, and women on the shop floor and in production management are not rare.

I was on a panel recently at ULI with Margaret Whelan of Whelan Advisory. She noted that Buddy Raney of RCI Construction in Orlando, Fla., employs more women than she’s ever seen on a factory floor, as they deliver their Vertically Integrated Total Solution (VITS) to the national builders in their markets. Raney estimates that VITS reduces the typical framing cycle by 10 days; allowing for their builder customers to close 10% more homes as a result.

If more of housing production is able to move to factory environments, that data seems to indicate that there is about a seven-times-higher probability of attracting female labor into the industry than currently exists. That could swell the number of people available to build homes and, most likely, the total number of homes produced.

How many homes per year might that mean? What would it mean in terms of new thinking, new management, and new blood into a stale industry?

By changing the methods that we use to create housing and the gender composition of those doing the creation, might we get better results than we do currently?

It is time that we all recognize how women have been excluded from the construction labor force for too long and that a change is needed. The shift toward factory-built houses and housing components offers a tipping-point opportunity to begin the correction of this situation for the benefit of many.

Originally published in Builder Online on May 14, 2018 and can be found at https://www.builderonline.com/building/change-is-necessary-to-propel-housing-forward_o?utm_source=newsletter&utm_content=Article&utm_medium=email&utm_campaign=BBU_051818A%20(1)%20A&he=acb26dfc22037f8627bb26d072d9871f0bba5969 

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Maine Real Estate & Development Association Recognizes Retiring Board Member

The Maine Real Estate & Development Association (MEREDA) has announced that Noel Graydon of Kennebunkport, Regional Vice President for Norway Savings Bank has retired from MEREDA’s Board of Directors after 9 years of service. During this time, Noel served on MEREDA’s Membership & Marketing Committee bringing many ideas to the table over the years, and was recognized with MEREDA’s Volunteer of the Year Award in 2011.

“MEREDA has been able to thrive and grow through the active participation from individuals like Noel.  We thank him for his many years of service to the organization and the real estate industry,” commented Shelly R. Clark, Vice President of Operations for MEREDA.

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801 for visit www.mereda.org.

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The Right Equation for Responsible Development: Spotlight on Saco Mill #4

In multi-part series, exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation.  MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

Please join with us in celebrating Saco Mill #4.

MEREDA:  Describe the building and project.

Jen Chinburg, VP of Marketing, Chinburg Properties:   Saco Mill #4 is a mill redevelopment project that created 150 market rate apartments and 30,000 square feet of leasable commercial space. The project was an adaptive re-use of a long vacant mill building situated on Saco Island in the Biddeford-Saco Mills Historic District. The development team restored the mill to National Park Service standards.

The building is about a quarter of a mile long with four floors. It commands a strong gateway presence atop the hill on Factory Island.

The 4-story, 240,000 square foot 19th century mill was acquired by an affiliate of Chinburg Properties in December 2014. Construction began in September 2015. The apartments were completed in two phases, with the first 93 apartments completed on April 1, 2017 and the remaining 57 apartments completed on June 1, 2017. The project is noteworthy due to its sheer size, its recognition of the strong demand for downtown living outside of Portland, and the joint efforts of the developer, the City, and the developer’s financing team led by Maine-based Camden National Bank and Coastal Enterprises, Inc. to make the project a reality.

Saco Mill #4 was the last remaining undeveloped mill building on Saco’s Factory Island. Redevelopment efforts stalled a number of times over the last 30 years. As a result, the building suffered from neglect and exposure to Maine’s harsh weather. As with many historic rehabilitation projects, the costs to restore Saco Mill #4 exceeded conventional economics. The team utilized federal and state historic preservation tax credits to close the financing gap. In addition, the City of Saco provided additional support through the designation of the development as a Tax Increment Financing District (“TIF”).

Recognizing the challenge of heating 19th century buildings in Maine, the developer worked with Unitil to bring natural gas to Saco Island. The developer installed new building systems to the restored building and many energy efficiency considerations.

This project has added approximately 250 residents who now live, work and play in the heart of downtown Saco and Biddeford. The mill is ideally situated between the two downtowns for exceptional walkability. It is also a stone’s throw away from the Saco Transportation Center for the Amtrak Downeaster and local bus routes for easy commuting and travelling by Saco Mill #4 residents.

MEREDA:  What was the impetus for this project?

Jen Chinburg, VP of Marketing, Chinburg Properties: We have a passion for renovating old mill properties (this is our 15th historic mill renovation is New England) and we understood that this would be an amazing opportunity to impact the city of Saco and to have a highly visible mixed-use community to replace a decaying and underutilized structure. We knew that with our experienced team we could successfully handle a project of this magnitude, and we couldn’t resist the challenge to develop it in a way that would breathe new energy and give new life to the building and its surrounding environment.

MEREDA:  That sounds like quite a process.  How long were you in the planning stages before construction started?

Jen Chinburg, VP of Marketing, Chinburg Properties:  The planning, financing and permitting process took about 12 months to successfully complete. Once we broke ground it took about 18 months to residential occupancy with all of the amenities in place.  The building was so large that on certain days the site supervisor walked up to 10 miles traversing the different floors and areas of the building.

MEREDA:  Tell us about the most challenging aspect of getting this project completed.

Jen Chinburg, VP of Marketing, Chinburg Properties:  The project is noteworthy due to its sheer size, its recognition of the strong demand for downtown living outside of Portland, and the joint efforts of the developer, the City, and the developer’s financing team led by Maine-based Camden National Bank and Coastal Enterprises, Inc. to make the project a reality.

Saco Mill #4 was the last remaining undeveloped mill building on Saco’s Factory Island. Redevelopment efforts stalled a number of times over the last 30 years. As a result, the building suffered from neglect and exposure to Maine’s harsh weather. As with many historic rehabilitation projects, the costs to restore Saco Mill #4 exceeded conventional economics. The team utilized federal and state historic preservation tax credits to close the financing gap. In addition, the City of Saco provided additional support through the designation of the development as a Tax Increment Financing District (“TIF”).

MEREDA:  Something unexpected you learned along the way was. . . 

Jen Chinburg, VP of Marketing, Chinburg Properties:  The enthusiasm of the Saco community was refreshing. From city officials, to business leaders to non-profits and chamber executives, we felt very welcomed to become key members of the local community. The property manager for the building is from Saco, and he has done an admirable job building and cultivating positive relationships with our residents, neighbors and the broader region.

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable? 

Jen Chinburg, VP of Marketing, Chinburg Properties:  The apartments feature exposed brick and timber ceilings, beams and columns, polished concrete floors with radiant heat, kitchens with granite countertops and stainless-steel appliances. The building also includes amenities such as a club room, roof-top deck, fitness center, dog wash & groom room, cyber lounge, café, and conference room. The commercial space at Saco Mill #4 includes Coldwell Banker Residential Brokerage and other locally owned small businesses.  There has been high demand for people to live at Saco Mill #4 and the apartments have been essentially full since the building opened. One of the favorite features for residents is that it is a dog friendly building. There are about 70 dogs peacefully and playfully living in the building. We recently completed a fenced in dog play park where pups can play off leash and residents can socialize and build their community. We celebrated with a “Hot” dogs and beer party to kick-off the opening of this unique and fun addition to the project.

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