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May 12, 2020 at 9:44 am · · Comments Off on Construction Businesses: Navigating State and Federal COVID-19 Workplace Safety Requirements

Construction Businesses: Navigating State and Federal COVID-19 Workplace Safety Requirements

On April 28, Governor Mills released Restarting Maine’s Economy, which lays out a plan for re-opening non-essential businesses. Businesses that were previously deemed essential, including construction businesses, may continue operations – the Governor’s new plan does not impact them.

However, as the pandemic evolves, the State is shifting its attention to COVID-19 prevention and workplace safety. In light of this, this is a good time for construction businesses to review their workplace safety protocols to ensure compliance with the latest state and federal guidance on COVID-19 prevention.

Below are the compliance checklists and guidance documents that construction businesses need to follow as they continue operations and begin the summer construction season.

Maine

  • Department of Labor: Guidance for Construction Employers in Maine for Addressing COVID-19. This Department of Labor (DOL) guidance document provides recommendations and suggestions for construction businesses to implement COVID-19 prevention measures, including those in the DECD checklist. This DOL guidance includes, and overlaps with, much of the federal Occupational Safety and Health Administration (OSHA) recommendations for COVID-19, discussed below.

Federal

  • OSHA General Guidance: Preparing the Workplace for COVID-19. This comprehensive general guidance document covers OSHA recommendations for COVID-19 prevention for all business types.
  • This document classifies all job types for risk of COVID-19 infection. Most construction workers will fall under the low-risk category. OSHA has provided a useful one-page reference guide to understand worker classifications.  Construction businesses are expected to review the classifications and implement risk-appropriate controls and prevention measures.
  • OSHA Construction Business Guidance: COVID-19 Guidance for the Construction Workforce. This one-page guidance document provides an overview of the prevention controls and measures that all construction businesses need to implement based on the general guidance above.

To ensure full compliance, construction businesses are advised to refer to all four sets of guidance.  While there are overlaps among them, each one of them contains information that pertains to reducing workers’ risks of contracting COVID-19 on the worksite.

May 5, 2020 at 7:02 am · · Comments Off on Legislative Update from Maine Real Estate & Development Association (MEREDA)

Legislative Update from Maine Real Estate & Development Association (MEREDA)

While much has changed in the world in the past months, the MEREDA Public Policy Committee has continued to stay engaged on critical matters impacting our members. From ensuring a last-minute enactment of an extension to the Maine Historic Rehabilitation Tax Credit (MHRTC), to advocacy before the Governor’s office on state action related to COVID-19, the past few weeks have been active.

Before COVID-19 upended our lives, the Second Regular Session of the 129th Legislature was set to adjourn on April 15, 2020. However, as confirmed US cases began to rise in early March, the Legislature moved to adjourn on March 17, 2020. The early adjournment forced the Legislature to carry-over hundreds of bills to a future special session. Fortunately, working diligently with the Governor’s Office and Maine Revenue Services, MEREDA and the MHRTC Coalition were able to ensure passage of a two-year extension of the MHRTC. The extension also ensures that projects can continue construction and claim the credit past the sunset date, so long as they’ve been certified. The MHRTC extension was enacted in LD 2047, which became Public Law 2019, Chapter 659 on March 18, 2020. It will take effect on June 16, 2020.

Though there has been no legislation action since adjournment, the Governor’s Office and her administration have issued a number of orders related to COVID-19 that have significantly impacted Maine businesses, including MEREDA. To represent its members’ interests in some of these crucial policy decisions, MEREDA engaged directly with the Governor’s administration on ensuring the role of commercial real estate as an essential business, the need for flexibility in notarization requirements, and limitations on evictions during the COVID-19 pandemic.

More specifically on rent and evictions, on April 14, 2020, MEREDA sent a letter to Governor Mills regarding her decision to impose limitations on eviction actions on both residential and commercial landlords. MEREDA encouraged the Governor not to take overbroad action, and emphasized that most commercial real estate landlords in Maine are small businesses who must also maintain a positive cash flow to meet financial obligations. Ultimately, the Governor placed a moratorium on evictions arising solely from failure to pay rent while continuing to allow evictions in cases of tenant misuse or misbehavior. MEREDA recently hosted a webinar on real estate issues during COVID-19, including discussion of the Governor’s order on eviction limitations. We will continue to stay engaged on this issue as it evolves and affects commercial real estate landlords, and will continue to responsibly advocate for our members as other issues arise in this rapidly changing environment.

While much has occurred in the past weeks, there is even more to be done as Maine considers reopening the economy. On April 28, 2020, Governor Mills released a four-phase plan to slowly restart the economy, with the first phase starting on May 1 and enabling some businesses to reopen. The Department of Economic and Community Development (DECD) will be posting checklist for businesses to follow in determining steps to secure their workplace for COVID-19 safety – check the DECD website for more news soon. The Governor’s complete plan for reopening the economy can be found here. In short, decisions about re-opening the economy in the phased plan will be based on the following four principles:

  • Protecting Public Health;
  • Maintaining Health Care Readiness;
  • Building Reliable and Accessible Testing; and
  • Prioritizing Public-Public Collaboration.

Even as businesses start to reopen under the phased plan, the state government must turn to facing the realities of the economic downfall on the state budget – which are likely to be dramatic and far-reaching. To help lawmakers understand just how much the budget is likely to be affected, Governor Mills has called upon the State’s economic forecasting officials to meet in July and August (instead of November and December), to examine the economic ramifications of the pandemic on Maine’s revenues. The Governor is likely to call legislators for a special session to address the anticipated budget shortfalls, but she may wait until after the July economic forecast to enable decision-making based on the new information about the state’s fiscal health.

MEREDA will continue to remain diligent in protecting its members’ interests as the state looks to reopen and the legislature looks for ways to address the anticipated revenue shortfall caused by this current pause in our state’s economic activity. Our members represent a critical pillar of the state economy, and we will continue to advocate for policies that are fair, practical, and predictable even as we navigate a new, post COVID-19 environment.

April 28, 2020 at 6:18 am · · Comments Off on Real Estate as an Essential Business – DECD Guidance and City of Portland Restrictions on Real Estate Activities 

Real Estate as an Essential Business – DECD Guidance and City of Portland Restrictions on Real Estate Activities 

On April 15, 2020 the Maine Department of Economic and Community Development (DECD) released new guidance related to the operations of real estate as an essential business during the COVID-19 pandemic. DECD has considered real estate to be an essential business since the Governor’s announcement of a stay-at-home order limiting business activities, but had provided no guidance or clarity around what real estate activities were permissible or how they might be conducted in light of social distancing requirements. The guidance released on Wednesday speaks substantially to residential real estate, but it is vague on commercial real estate.

Additionally, on April 14, 2020, the Portland City Council voted to extend its own stay-at-home order and modify it to include a prohibition on real estate activities for certain multi-unit residential properties. Portland also issued further guidance for construction activities in the City.

Below is an overview of the DECD guidance as well as the City of Portland’s new restrictions on real estate and construction activities.

DECD Guidance on Real Estate as an Essential Business

The DECD guidance includes new restrictions and requirements for buyers and sellers of real estate, including commercial multi-unit properties of more than four units and all residential real estate. The guidance does not address buying and selling activities for other types of commercial real estate properties. Regardless, we recommend that transaction activities for those properties be conducted using social distancing guidelines and in-person contact should be limited to the maximum extent possible. The DECD guidance can be viewed here.

Per the state executive order, for real estate activities involving commercial multi-unit properties of more than four units, the following requirements are imposed:

  • Showings must be conducted virtually by the listing agent.
  • The listing agent must wear a cloth face covering, foot coverings, and gloves when entering a property.
  • Inspections must be completed by the building inspector only. Building inspectors must wear a cloth face covering, foot coverings, and gloves when entering a property.

For all residential real estate activities, the following requirements are imposed:

  • Agents and buyers must narrow down houses to “a few” to view.
  • An agent must “live stream” the viewing to the potential buyer from the property-the potential buyer may not be present. The agent must wear a cloth face covering and foot coverings (not gloves?) when entering a property.
  • A potential buyer may select one house for a walk through, with the approval of the seller.  Both the potential buyer and the agent must wear cloth face coverings, foot coverings, and gloves during the walk-through.
  • The purchase and sale agreement must be executed electronically.
  • Inspections must be completed by the building inspector only. Building inspectors must wear a cloth face covering, foot coverings, and gloves when entering properties.
  • Appraisers must use all efforts to avoid entering a property. If it is necessary to enter, the appraiser must wear a cloth face covering, foot coverings, and gloves.
  • Closing must take place using as many social distancing practices as possible.

City of Portland Extended Stay-at-Home Order and Further Restrictions on Real Estate Activities, Construction

In addition to the requirements contained in the DECD guidance, the Portland City Council voted on April 14, 2020 to extend its own stay-at-home order. In doing so, the city decreed that real estate agency activities shall not be allowed with regard to any occupied residential multifamily properties of more than four units, or with regard to an occupied residential multifamily property of four units or fewer in which the property owner is not a resident. The city’s order notes that all other real estate activities must comply with the DECD guidance outlined above.

The City also issued guidance on construction activities, which provides that only those construction activities and/or projects which were approved by the City on or before March 25, 2020 may continue their activities. Additionally, all persons on those projects must remain six feet apart on the construction site, to the maximum extent possible.

A copy of the April 14 City Council order is here.

 

April 21, 2020 at 6:45 am · · Comments Off on Pandemic Leaves Landlords in a Difficult Position

Pandemic Leaves Landlords in a Difficult Position

by: Gary D. Vogel, Attorney, Drummond Woodsum, MEREDA President

The coronavirus pandemic is affecting everyone.  Many businesses are shut down, or are minimally operating.  The CARES Act recently adopted by Congress with over two trillion dollars of emergency funding will provide a lifeline for many businesses.   Especially important is the SBA Payroll Protection Program (PPP) loans that provide forgivable loans for an amount of up to 8 weeks payroll for qualifying businesses.   The program has proven so popular that as of April 16th, applications for the entire $349 Billion of PPP funding have been made and the SBA announced that it would not accept any more applications, unless Congress approves additional funding.    While the PPP loan program is enabling many business to survive, and to pay their staff, for many companies the PPP isn’t a good fit, because their business is too big, may not have enough payroll, compared to other essential expenses or may need more than 8 weeks of payroll covered in order for them to survive.

Left out of the discussion at Congress is the impact the shutdown is having on landlords.   MEREDA members include many residential and commercial landlords, and MEREDA has both heard from and reached out to members to be able to understand what is happening to landlords in this pandemic.    Property owners are businesses that are frankly essential to our economy, providing the real estate for businesses to operate.  Most property owners will not qualify for PPP loans, since they tend to not have employees, or if they do, the payroll cost is a very small percentage of their operating expense, when compared to taxes, mortgage payments, utility charges, insurance and the like.   The impact of the PPP loans and the ability of businesses receiving those loans to keep employees paid, as well as the impact of enhanced unemployment benefits for unemployed workers has enabled most residential tenants to pay their rent, and residential landlords in Maine in an informal survey report receiving 80 to 90% of April rent.   Commercial landlords report lesser amounts of April rent payments.   In addition, on April 16, Governor Mills issued an executive order prohibiting or limiting evictions for a period extending until 30 days after the expiration of the Covid-19 State of Emergency.     While few if any landlords will want to be evicting tenants who cannot pay rent due to disruptions caused by the coronavirus, many landlords are concerned that the prohibition on evictions may be viewed by tenants as a basis for not paying rent.    While the Governor’s executive order makes it clear that the order does not relieve tenants of their obligation to pay rent while the tenant continues to occupy the real estate, it does not address what constitutes “occupation of the real estate” in this circumstance and leaves several questions unanswered.

What should landlords be doing when faced with nonpayment of rent by tenants?  

  1. First and foremost, landlords should talk to their tenants to find out what tenants can do and what relief tenants need so that the landlord can understand what rent payments they can expect during this period.  Every situation is somewhat different, and there is typically no “one size fits all” solution.   Tenants need to understand that the rent obligation doesn’t go away just because they are unable to operate, unless the lease so provides, and that is highly unusual.   Tenants also need to understand that the rent obligation doesn’t go away during the period of time that evictions are limited.     Landlords have fixed expenses that don’t stop just because a business is temporarily closed.   If a tenant says that they are giving up and going out of business that is very different from a tenant who is just trying to weather the storm and to reopen when they are able.   If a tenant is going to close up for good, the Landlord should get the tenant to surrender the space back to the landlord, so that the landlord does not need to evict the tenant to be able to have the space available to rent to others.  This is especially important while the courts are closed to evictions.
  1. Landlords should find out what federal resources the tenants have been able to obtain, and whether the tenants plan on using some of those funds to pay rent.   Under the PPP, businesses can use 25% of the funds to pay rent, utilities, debt service payments and some other expenses while still having 100% of the loan remain forgivable.   For tenants that have not applied for PPP loans, the tenants should be alerted to do so if and when more funding is available.
  1. Once the Landlord understands the shortfalls in rent payments that the tenant anticipates, the landlord should talk to its lenders and explain the situation that the landlord is in.   Some landlords may have enough tenants who are paying rent to enable them to pay their mortgages; others may not.   Lenders understand what is happening and will work with borrowers.    Lenders will Lenders need current information in order to help.  That is part of the reason why getting good information from tenants is important.
  1. If necessary, Landlords can also apply for Loans using the SBA or FAME loan programs.    These loans are not forgivable, and landlords will not want to take on additional debt to provide support to their tenants, but for some there may be no other options.
  1. If Landlords know that Tenants will be unable to pay rent for the duration of a shutdown, the landlord may want to enter into a lease amendment with the tenant to provide when the unpaid rent will be due, which may have the unpaid rent payable over a period of months together with the rent due for those months.  For example, the deferred rent could be repayable 1/12 each month for a period of 12 Months once the shutdown ends, or 30 days after the shutdown ends, with the current rent for that month.  It is better to have an enforceable agreement that everyone can live with, rather than just leaving unpaid rent with a tenant in default.  This is better for the landlord, and it is also better for the tenant, so that the tenant can have an arrangement that is workable from a cash flow perspective.

In summary, landlords are placed in a difficult situation as a result of the impact of the coronavirus.   While more PPP funding may be available to tenants who may be able to use those funds to pay rent, the ability and willingness of tenants to use these funds for rent payments may vary widely, and landlords may not see a great deal of relief, directly or indirectly, from the CARES Act or from future federal relief.    Landlords need to work proactively with tenants and lenders to make sure that they can weather the storm.  If the coronavirus causes the real estate market to suffer greatly, that will only make recovery more difficult for everyone, including property owners.

Join MEREDA for a Virtual Event focusing on this topic on Friday, April 24, 2020 beginning at 9:00 AM.  The event is FREE of Charge, but registration is required.  For more information visit our Events Page at www.mereda.org. 

April 14, 2020 at 6:11 am · · Comments Off on Maine Home Prices – Where do we go from here?

Maine Home Prices – Where do we go from here?

by: Dava Davin, Principal, Portside Real Estate Group

When I presented at the 2020 MEREDA Real Estate Forecast Conference in January, I was full of good news and positivity in the residential market. I shared that 2019 represented the eighth straight year of rising home prices in Maine resulting in a record-breaking year with the median price for a single-family home topping out at $225,000. In 2019 prices rose 5.4% in Southern Maine. The highest home prices in Maine’s history!

I predicted that prices would continue to rise in 2020 at a rate of 3%-5%. I also forecasted that this spring we would see buyers battling for homes and houses selling for over the list price as a result of multiple offers. The low inventory would make home buying for first time home buyers and folks looking in the median home price range (around $300,000 and below in Southern Maine) very competitive. I spoke about the election having little effect on Maine’s real estate market. I thought we might see more price reductions this year as sellers attempt to test the market, and that overall, 2020 was poised to be another great year for sellers as well as buyers with low mortgage rates giving buyers more buying power!

And then…the world was flipped upside down in what felt like an instant as Covid-19 crept into every aspect of our lives. The Southern Maine real estate market has been, and will continue to be, adversely affected for the near future. My forecast has changed but this time I don’t have data and trends to back up the shift caused by something of this nature and magnitude.

Here is my take…

As of today, April 8th, for the most part we are seeing a real estate “pause’’. We will experience a temporary slowdown as people practice social distancing protocol and wait to see if their job situation changes over the next few weeks. This will most likely create pent up demand for when the crisis ends. People may wait now, but the need won’t go away. People will take action when things return to normal. What will help Maine’s real estate market is the trend of stock market volatility leading people to invest in real estate as they diversify their portfolios. We will also see new reasons for Mainers to list their homes and search for new ones as feelings toward their home may change (weeks of sheltering in place) and desires for home offices, home gyms, and more or less space. We are also expecting to see in-migration to Maine from more densely populated areas.

Sadly, we will also see temporary and permanent job loss or job shifts causing Mainers to list their homes. Maine has seen a tremendous amount of job losses very quickly and it could get worse, but once the crisis is over many jobs will be restored. Nationally, economists are projecting the unemployment rate to be 15% in the third quarter of 2020, flattening to single digits by the fourth quarter of this year, and then just over 6% percent by the fourth quarter of 2021. A quicker turnaround than we have seen with other financial crises.  This should benefit the housing market rebound.  We have had more buyers than sellers in Maine for several years, so this shift may create a balance in the market that has been overdue.

For cities like New York, new real estate transactions have come to a screeching halt.  In southern Maine, real estate professionals are placing all of their virtual strategies into extra high gear, in order to prevent that from happening. Real estate is deemed an essential business in Maine with most aspects able to be done virtually – negotiating, signing of contracts, video tours, etc. The showings, closings and inspections are being done with strict guidelines for safety. We have seen a significant slowdown but new properties are still hitting the market and some are still selling quickly and in multiple offers.

We are entering what is typically the busiest season for real estate, that usually lasts through the end of the summer. I am confident that the busy season will extend through the fall, and possibly through the winter.

Momentum is building: once the stay at home mandate is lifted and our world begins to shift back into normalcy, the demand will be strong. We are bracing for a tough Q2, with an improving Q3, and ending the year with a strong Q4.

April 7, 2020 at 7:19 am · · Comments Off on Message from MEREDA’s President

Message from MEREDA’s President

To our Members:

What a challenging time we find ourselves in!  First and foremost, I hope this email finds you, your family, loved ones and coworkers safe and healthy.   We hope that you are coping with all of the changes that have been thrust upon all of us.   We are all in this together!   Here at MEREDA, we are working remotely, taking things day by day, and hoping that things return to “normal” very soon!   I am trying to appreciate the benefits of learning to use technology better to be able to work remotely, and to transact business without putting our clients, employees and others at risk.   I am also cognizant of the tremendous hardships that the near shutdown has created for many Maine businesses and am also grateful for our healthcare workers who frankly don’t get nearly enough recognition or support for the work they do.

MEREDA has responded to the Coronavirus pandemic as most organizations have by postponing our events, at least through May.  Understanding that things could still change, in the event that the CDC lifts its restrictions by this time, we have established a new date for the 35th Anniversary Gala – June 25th, still at Ocean Gateway.  We are hopeful that we will be able to hold the 35th Anniversary Gala on June 25th, but we are prepared to push the event back again if the conditions require.  Same for our May events.  We have just rescheduled MEREDA’s May 7th Strikes for Scholars Bowl-a-Thon Fundraiser to September 16th, and MEREDA’s May 21st Annual Spring Conference, to September 3rd.

We’ve also cancelled our board and committee meetings, at least through April.  With the Maine Legislature shutting down early, our Public Policy Committee was able to wrap up its regular work.   The Legislature accelerated its session schedule and adjourned sine die on the evening of Tuesday, March 17.   Before adjourning, the Appropriations and Financial Affairs Committee, Leadership and the Governor’s office worked together to develop a supplemental budget and other emergency legislation to provide supports for individuals and businesses in the face of the challenges posed by the Coronavirus pandemic.  All legislation that did not reach final disposition has been carried over until a special session is convened.  No date for that session has been set. But we expect that it will be held in the fall.  Our Public Policy Committee will reconvene when the legislature schedules its special session but may conduct virtual meetings to address important current issues affecting our members if those matters are appropriate matters to address with lawmakers.

Behind the scenes, we are still doing advocacy, as needed or when called upon, and have participated in discussions for matters such as executive orders to establish ways to revise certain state laws to enable Mainers to transact business remotely and safely.

Lastly, as we do our best to carry on business as usual during this difficult time, MEREDA will continue to send out membership renewal packets as scheduled.  If your business has been adversely impacted by this pandemic, and you need additional time to make your payment, please contact Shelly R. Clark to discuss payment terms.  It’s helpful for us as we also plan and budget, and we are more than happy to work with you. We know that a MEREDA membership is valuable to your business, and we want to make sure that our members don’t have to give up their MEREDA membership over what we hope and expect will be a short term disruption.

We look forward to getting back to work with you in the near future!

Sincerely,
Gary D. Vogel, MEREDA President
Attorney at Drummond Woodsum

March 31, 2020 at 7:10 am · · Comments Off on Successful CEO’s Look Back to Prepare Forward

Successful CEO’s Look Back to Prepare Forward

by George E Casey Jr., Chief Executive Officer, Stockbridge Associates, LLC

General Patton said he hated paying for the same real estate twice.   You should feel the same about paying for the same business lessons again in the future.

Right now, things seem pretty ugly from a business and economy standpoint.   That’s what bothers me.  Three months ago, they looked great, but now the world looks like it will never get back to normal.

It is when things are going well that you should actually be thinking about what to do when they start to turn.

The next best thing is that when they do start to turn, you are forced to focus and quickly.

By looking at lessons from the past, both from your own experience and from the experiences of others, a good leader can think about what to do if the operating environment changes unexpectedly

Here are some of my lessons learned from the past that might help in the future.

  • Find reality and deal with it fast. Have a source of good and dependable numbers and act on them.   Spend time walking around and talking with everyone in your company.   Talk directly to your customers.   From all of this, develop a viewpoint of the reality that is facing your business.   Then, act quickly on that information.   Those who acted quickly tended to do better than those who just waited and wished for a return to normal.
  • You can’t cut too deep too quick. It is the hardest thing a leader has to do, but restructuring people and costs to deal with the reality at hand allows you to survive as an organization and have the opportunity to bring back valued team members as the market comes back.
  • Whether it is with employees, investors, lenders, customers, vendors, or friends.   Communicate truthfully and honestly.   In tough times people most value reality and what it means to them both short term and long term.
  • Cash is King. Businesses need cash just like humans need oxygen.   If you are not managing cash and projecting cash regularly in good times and bad, you can get in danger quickly.   Forget the GAAP stuff.   If you run out of cash, you die.   A 13 week rolling cashflow, updated and re-extended every 6 weeks is the must-have tool here.
  • No Sell, No Eat. Revenues from sales give you cash.   When it gets tough, you have to focus the organization on selling and bringing cash into the business.  There are always sales to be made, even in the worst of times.   Having weak (or no) salespeople and de-motivating them is just plain stupid and ignorant.
  • Don’t be afraid to change the organization. Organizations tend to do the things they are organized to do. What needs to be done in troubled times and is critical to do is different than in good times.   To think that the old organization can just shift to the new tasks without change flies in the face of Einstein’s observation that the definition of insanity is doing the same thing over and over and expecting to get a different result.   You need different results, so you need fundamental change to make it happen.
  • Multiple perspectives are better than one. As the leader, you do not have all of the answers.   Seeking out and considering the experiences of others and using those perspectives to come to better decisions is a key to navigating a downturn.   Building the network of trusted people to provide a variety of perspectives takes a long time.   Start when times are good.
  • The only thing you can truly control each day is your attitude. The attitude that you use to approach each day and its challenges and rewards is entirely within your control.  The positive people seem to have better organizations around them, and that edge can be the difference in both good and bad times.

General Patton said he hated paying for the same real estate twice.   You should feel the same about paying for the same business lessons again in the future.

It is a smart thing to do.

George E Casey Jr, Chief Executive Officer, Stockbridge Associates, LLC, https://myvistage.force.com/sites/s/chairs?username=george.casey

 

 

March 24, 2020 at 7:17 am · · Comments Off on Vital Ideas – The 1031 Dominoes

Vital Ideas – The 1031 Dominoes

by Brit Vitalius, Principal, Designated Broker, Vitalius Real Estate Group

In 2019, we saw 1031 exchanges used even more frequently than in past years. Interestingly, the variations in the transactions illustrate a number of different ways the 1031 exchange can be used to accommodate different investment transitions. The following is an example of a domino of 1031 exchanges we strung together for clients recently.

3 unit to 3 unit – A divorced couple decided to sell the jointly-held 3 unit. The husband wanted to stay invested in property, so he took his portion of the sale proceeds and purchased another 3 unit.

3 unit to 6 unit – The seller of the second 3 unit wanted to expand his portfolio and was willing to sell his 3 unit in order to do so. In addition, we helped negotiate his sale contract with an extended closing date in order to give him more runway to find a replacement. We eventually located an off-market 6 unit which he purchased.

6 unit to a new project – The seller of that 6 unit is now looking for a project. He had renovated the 6 unit, and there wasn’t much left to do other than hold it. Being a more active investor, he is looking for opportunities to find either a) something larger or b) a project that could be renovated, converted, etc. Incidentally, this property had been the 1031 exchange years ago so this investor will be highly motivated to find a replacement as he is 2 or 3 transactions deep in deferrals.

Remember, a 1031 exchange is a powerful tool, but it is only a deferral of the taxes owed. Consult with an experienced real estate broker and a Qualified Intermediary (QI) before performing one. Make sure you set up the exchange with the QI BEFORE the sale of your property. Once the transaction closes, it is too late.

March 17, 2020 at 7:00 am · · Comments Off on What’s Up in the Hotel Business?

What’s Up in the Hotel Business?

by Sean Riley, President & CEO, Maine Course Hospitality Group

Great Ride for Hotels

I recall speaking at the MEREDA conference back in 2009. It was a tough year to begin my motivational speaking career.  But what a remarkable recovery this industry has had. Looking back, Occupancy was 54.6%. This past year was the tenth consecutive year of growth, up to 66.2% (a record).  Average Daily Rate (ADR) saw impressive gains as well from the $97 range in 2009 to $133 (a record) in 2019. RevPAR went from $54 to over $86, and is considered the true test of strength for hotels.  To sum it up, it was a great 10 years to be in the hotel business!

Roller Coaster Ride

For those who enjoy roller coasters, the exhilaration of climbing higher and higher is incredible.  But the fear of what happens when we reach the top of the roller coaster is scary.  Yes, we have enjoyed unprecedented growth and yes, we are a bit apprehensive of the ride back down.  But wait, the forecasters are saying it may just be a leveling off and coasting for a while. A summary of the many forecasting gurus, brands and hoteliers, suggest that 2020 and 2021 will see little, if any, growth. It’s tough to fathom this, given our ten years of growth, but its predictable and expected.  The good news is, most predict things to start climbing again in 2022 and 2023.  Hold on to your seats!

Construction Signs on the Roller Coaster

New construction has been exciting but can contribute to the dips in Occupancies and ADRs across the country. Hotel growth has increased YOY by 2 plus percent for years. One 2% increase isn’t bad, but the accumulative increase can cause some motion sickness on this roller coaster. Supply is still predicted to increase in the 2% range through 2021.  If demand decreases, as it is expected to do, and supply increases, it adds to the scariness of the ride.

The Maine Ride

Maine has also enjoyed the roller coaster, experiencing record highs. In 2019, occupancy was 58.9% with an ADR of $143.58.  But the growth slowed this year and is predicted to slow even more.  The supply growth slowed this past year, but not in the Portland area. Although downtown Portland has been on a great ride, the fear of over development is in the air. Although strong, Portland might fall the way of many great development stories like NYC, Orlando and Houston.  Not disastrous at this point, but a point of caution.

Ride Rules

Before entering the roller coaster ride, read the rules:

  1. Take care of your people
  2. Do your homework
  3. Develop relationships with local and regional banks
  4. Don’t over leverage
  5. Take care of your asset
  6. Stay Current with technology
  7. Stay current with industry trends
  8. Did I say take care of your people?
  9. Follow these rules and it will be a safe and enjoyable ride

March 3, 2020 at 6:41 am · · Comments Off on Construction Trends in 2020

Construction Trends in 2020

by Asha Echeverria, Shareholder, Bernstein Shur

Welcome to the new decade! Though we can expect trends from 2019 to continue, the focus on the new decade and the bull construction environment will force many trends to advance by leaps and bounds. Many of these trends will create opportunities for those in the construction industry, but also legal challenges related to privacy, risk allocation, and project control.  An ounce of prevention is worth a pound of cure – we hope we can be of assistance as you move into this brave new decade.

Automated and Digital Technologies: Though we may still be waiting for flying cars, advanced technologies are entering the construction site in several functions.

  • Drones continue to play an expanding role on project sites, from completing inspections in areas dangerous to workers to surveying and mapping sites.
  • Automation of highly repetitive tasks, like bricklaying and tying rebar, can improve productivity, increase safety and respond to the industry’s labor shortage.
  • Cloud technology connects job sites to make information instantaneously available to all members of a project team anywhere in the world.
  • Remote site monitoring, personnel location tracking, and wearable sensors allow contractors to track workforce and increase safety, which can support efficiency and productively while reducing costs related to liability and insurance.

Infrastructure Opportunities: With the 2020 federal budget allocating $200 billion for infrastructure priorities, this year will likely see the start of many overdue infrastructure revitalization and upgrade projects. These projects will have a significant effect on the construction industry – driving revenues and job creation. Though the federal government’s investment is significant, it falls short of the trillions needed to repair our deteriorating infrastructure, therefore projects will look to private funding, through public-private partnerships (P3s) and other innovative funding mechanisms, to keep projects in the black.

Modular & Prefabricated Construction: Modular and prefabrication construction companies continue to carve out a niche in the industry due to their ability to construct residential and commercial buildings, especially repetitive structures like hotels and apartment buildings, efficiently and cost-effectively. Modular and prefabricated construction can reduce or eliminate issues related to limited site or lay down areas, weather, and labor limitations. In line with the next point on sustainability, modular and prefabricated construction tends to create less waste and allow for the reuse and recycling of materials.

Urbanization & Sustainability: With 68% of the world population projected to live in urban areas by 2050, from today’s 55%, urban and environmental sustainability will be essential to improve urban quality of life. To support this need, efforts in areas like sustainable buildings, smart and public transportation, water efficiency and conservancy, and renewable energy are coming to the forefront, even in Maine. Sustainable construction goes beyond LED lighting and low-flow toilets, but encompasses the entire process – from design, to material sourcing, to construction, and through commissioning.

Rising Costs & Labor Shortages: Though there is much to be excited about in the new decade, increasing material costs due to increased demand and uncertainty in the political arena will likely affect contractors. In addition, as many contractors know, filling skilled worker positions and even professional-level positions is difficult given the demand all over the state, New England, and even the country for such labor. Both issues together will result in an unavoidable increase in costs in 2020 – requiring contractors to be more efficient and utilize strict project controls to make their profit margin.

Originally published on January 28, 2020 – https://www.bernsteinshur.com/what/publications/the-construction-advantage-34/