April 23, 2024 at 6:00 am · Shelly Clark · Comments Off on RECAP OF FEBRUARY 29, 2024 MEREDA REGIONAL FORECAST

RECAP OF FEBRUARY 29, 2024 MEREDA REGIONAL FORECAST

By Chris Paszyc, CCIM, SIOR | The Boulos Company – Partner, Broker

On February 29th Chris Paszyc participated on the “Regional Outlook” Panel at the Maine Real Estate & Development Association’s (MEREDA’s) 2024 Annual Forecast Conference. Below is a recap from his presentation.

AUGUSTA

The office market in Augusta has proved to be resilient and often surprising, bucking regional and national trends.  Office leasing and sales have held up well despite the work-from-home movement.  Furthermore, rents have seen an uptick in the past 12-18 months.  Augusta also had one of the largest investment sales to occur in Maine at Central Maine Commerce Center, which sold for $18.5 million in 2023.

On the residential front, Augusta’s City Council has a stated goal to encourage new and varied types of housing development.  This has led to a variety of single-and-multifamily project to be permitted.  However, many of them have yet to be constructed.  Given the difficulty and costs associated with debt, equity and construction pricing juxtaposed with market rents, it may be a while before we see shovels in the ground.  The leadership at Augusta also want to see industrial development, as their vacancy rate is practically zero.  Again, given the high costs of new development versus market rents, it will be difficult to move new developments forward.

WATERVILLE

Waterville continues to excite!  According to a recent tally by the Central Maine Growth Council, downtown initiatives investment now total over $100 million.  Some exciting projects on the slate for 2024-2025 include the Head of Falls Village on Front Street, spearheaded by a partnership of Todd Alexander at Renewal Housing and Josh Benthien at Northland.  This is the new 63 units planned, with a project budget of $36 million.  Demo and site remediation to start Spring 2024.  In addition, North River has 145 new units planned at Lockwood Mills – 65 units of workforce and market rate in Phase 1, with 80 more planned in Phase 2.  There’s also 120,000 sf of new industrial planned for the new Trafton Rd exit, a new Reny’s and a new $60 million performing arts center at Colby.

LEWISTON/AUBURN

In Lewiston/Auburn, there’s demand for housing – a market study states there is demand for 2,600 new market rate units, with downtown capturing 560 of those units.  There are numerous housing projects in various stages of development:

• Jason Levesque and Joe Mannisto have 320 units with approvals near Central Maine Medical Center in Lewiston
• The Residences at Great Falls on the Androscoggin have 244 units approved
• Dave Gendron has site plan approval for over 200 units in Lewiston, and John Gendron has 96 now permitted, with plans for over 1,100 in Auburn
• In all, Auburn as 475 new units in the pipeline for since 2020

However, the office market outlook for L/A is uncertain.  There are a number large office buildings currently not utilized.  In all, we estimate over 700,000 sf currently sitting idle or underutilized.  The alternatives are industrial conversion, housing or retail.  Or smaller subdivided office, just not likely with the existing tenants.

Industrial continues to dominate with very little functional vacancy.  Dave Gendron has started construction on another spec multi-tenanted flex industrial building in Auburn and permitting another in Lewiston after recently filling the last remaining vacancy.

In conclusion, Auburn is vying to become one of Maine’s federally designated Tech Hubs for advancement of innovative forest bioproducts with a large industrial project in the works around Exit 75.  That will be making headlines in 2024.

THE “DARK HORSE”

My “dark horse” bet for 2024 is the Jay Paper Mill redevelopment.  Developers are going thru SLODA to subdivide the land and buildings to make available for lease and purchase opportunities.  They’re also going thru with a gas turbine and solar facility taking advantage of the 150MW interconnect.  Recently, they announced a deal to sell a 60-acre parcel to construct a 300,000 sf plant that will manufacture oriented stand board (OSB).  However, it’s just the start for this 1,000 acre site with 900,000 sf of existing high-bay industrial space.

In summary, Central Maine remains an integral component of Maine’s commercial real estate landscape.

February 20, 2024 at 6:00 am · Shelly Clark · Comments Off on Factors Affecting the Value of a Company

Factors Affecting the Value of a Company

By: BerryDunn Professionals, Casey Karlsen, Senior Manager | CFA, ASA and Seth Webber, Principal | CFA, ASA, CEPA

Consider the value of the following two hypothetical companies. Anita owns A+ Manufacturing, a car parts manufacturer that employs 100 people. Roger owns a very similar company, D- Manufacturing, which also manufactures car parts and employs 100 people. These companies are both almost identical, and last year, they generated the same amount of revenue and income. A key difference, however, is in the management styles of the owners. Roger is extremely disorganized and has difficulty with record retention, locating information, and tracking and analyzing data. He is relatively inexperienced as a manager. Anita, meanwhile, is very punctual and organized and has 15 years of management experience. She relies heavily on tracking operational and financial data and makes this information readily available to managers and their teams. She believes in an organized, clean workplace, and her strong leadership and carefully maintained culture have resulted in employee tenure that is much higher than industry standards. Which company is more valuable?

Despite being identical in terms of service offering and size, most people would identify A+ Manufacturing as being more valuable. Alarm bells start to ring in a valuation analyst’s head when learning about the sloppy management style, lack of experience, and poor use of data at D- Manufacturing. The difference in value should be substantial. Despite generating the same amount of profit last year, A+ Manufacturing could be worth twice as much as D- Manufacturing because these risk factors may jeopardize future profits.

In addition to the risk factors from the above example, there are many other drivers of business value.

Valuation formula
In its simplest form, the valuation of a business can be reduced to the following formula based on earnings before interest, taxes, depreciation, and amortization (EBITDA). Factors that affect value do so by affecting the valuation multiple. Companies such as D- Manufacturing would be worth a lower multiple of EBITDA, and a higher multiple would be justified for less risky companies such as A+ Manufacturing.

Estimating an EBITDA multiple
A generic multiple often thrown around is 5x EBITDA. EBITDA multiples from the DealStats database have historically been in this range, but have come down in the last few years, as shown in the accompanying chart.1

Median Selling Price/EBITDA with Trailing Three-Quarter Average

EBITDA multiples vary widely by industry. For example, in the DealStats database, the median EBITDA multiple for retail trade was 3.7x compared to 6.1x for manufacturing companies.2 The chart below presents EBITDA multiples by industry from the DealStats database.

Selling Price/EBITDA Interquartile Range by Industry Sector (Private Targets)

Even within a specific industry, multiples can vary dramatically. For example, from the chart above, the median wholesale trade multiple was slightly above 5.0x, but the 75th percentile multiple for this industry was nearly 10.0x.

Factors affecting EBITDA multiples
Differences in valuation multiples from company to company reflect differences in risk profiles. High-risk companies command lower multiples than safe investments. The following chart illustrates how certain operational risk factors may affect the valuation multiple.

Other factors that affect valuation multiples include the following:

Access to capital
Supplier concentration
Supplier pricing advantage
Product or service diversification
Life cycle of current products or services
Geographical distribution
Currency risk
Internal controls
Business owner reliance
Legal/litigation issues
Years in operation
Location
Demographics
Availability of labor
Employee stability
Internal and external culture
Economic factors
Industry and government regulations
Political factors
Fixed asset age and condition
Strength of intangible assets
Distribution system
IT systems
Technology life cycle

One model to assess risk and select an appropriate multiple is the exit and succession planning software prepared by MAUS Business Systems (“MAUS”). The MAUS Business Attractiveness model assists analysts in assessing and diagramming the risk profile of a company. This model was developed to assess business attractiveness to potential acquirers based on common risk factors. Analysts can use this software as part of their assessment of an appropriate valuation multiple. This model is also a helpful communication tool because it provides a visual representation of a company’s risk profile and highlights the areas in which a company can improve.

Using this model, analysts assess a company’s risk profile regarding several key factors. MAUS then generates a report that includes a series of diagrams like the one below. Business attractiveness factors are positioned around the outside of a polygon. If a company performs well regarding a particular factor, a point is plotted toward the outside of the polygon. If the company performs poorly, a point is plotted toward the center of the shape. The points are then connected to visualize a company’s risk profile.

Business Risk & Value Factors

The larger the colored shape is in the MAUS diagram, the higher the valuation multiple should be. However, these factors do not all affect the multiple equally. The valuation multiple may be highly responsive to some factors and less responsive to others. Additionally, each factor may not have a linear effect on the valuation multiple. For these reasons, formula-based estimates of valuation multiples are often inaccurate, although a great place to start for a ballpark indication of value. For matters of importance where accuracy is paramount, we strongly recommend consulting with a valuation professional. In addition to valuation expertise, an outside party provides an independent, unbiased assessment of value.

Conclusion
The value of a business can be affected dramatically by its risk profile. Analysts value businesses based on a number of different factors that affect value.

Learn what risk factors your company may have and how those affect your business value by downloading our value driver matrix.

1,2 DealStats Value Index 4Q 2023, Business Valuation Resources, LLC (www.bvresources.com).

Original article published on 01.24.24, and reprinted with permission by BerryDunn, https://www.berrydunn.com/business-value

January 23, 2024 at 6:00 am · Shelly Clark · Comments Off on OSHA Recordkeeping Requirements

OSHA Recordkeeping Requirements

OSHA Injury and Illness Recordkeeping and Reporting – Post Form 300A by February 1

Brought to you by the Safety & Risk Consulting Team at Clark Insurance & Marsh McLennan Agency

Many employers having more than 10 employees are required to keep a record of work-related injuries and illnesses, (OSHA Logs). All establishments subject to this requirement must complete and post the OSHA Annual Summary Form 300A, even if no work-related injuries or illnesses occurred during the calendar year.

Are you partially exempt from the recordkeeping and reporting requirements?

Employers in certain low risk industries are exempt from these requirements unless OSHA, the BLS, or the Division of Occupational Safety and Health asks them to do so. Follow these steps to determine if you qualify for the partial exemption:

• Determine your NAICS, and identify the first 4 numbers.
• Review the Exception Table – If your first 4 numbers appear on the table, your company is exempt unless otherwise required.

Posting Requirement – By February 1 of each year you must:

• Review the 300 Log to verify the entries are complete and accurate.
• Complete the Summary Form 300A utilizing the information recorded on the 300 Log.
• A company executive must certify and date the 300A Summary Form.
• Post the Annual Summary from February 1 to April 30 of the year following the year covered.
o You must post a copy in each establishment in a conspicuous place or places where notices to employees are customarily posted.
o You must ensure the posted 300A is not altered, defaced, or covered by other material.

Electronic Submission Requirements (if applicable):

The electronic filing requirement applies to the below listed establishments:

• Establishments with 20 to 249 employees in specific industries with higher instances of injuries or illnesses must submit the information from the Form 300A electronically. Review a Full List of these industries.
• Establishments with 250 or more employees required to keep OSHA injury and illness records must submit the information from the Form 300A electronically.
• Upon notification, you must electronically submit the requested information from your OSHA injury and illness records to OSHA or OSHA’s designee.

Note: Employers can find instructions for registering and recording the 300A data on OSHA’s ITA webpage. Establishments have to submit the required information by March 2 of the year after the calendar year covered.

***NEW Additional Requirements for Employers with over 100 Employees

On July 17, 2023, OSHA announced a final rule that will require certain employers in designated high-hazard industries to electronically submit additional injury and illness information than what is currently requires but employers are already required to keep. This rule became effective on January 1, 2024, and applies to your 2023 submission.

The final rule includes the following submission requirements:

• Establishments with 100 or more employees in certain high-hazard industries must electronically submit information from their Form 300, Log of Work-Related Injuries and Illnesses, and Form 301, Injury and Illness Incident Report, to OSHA once a year. These submissions are in addition to the submission of Form 300A, Summary of Work-Related Injuries and Illnesses; and
• Establishments are required to include their legal company name when making electronic submissions to OSHA from their injury and illness records to improve data quality.

The final rule retains the current requirements for electronic submission of Form 300A information from establishments with 20-249 employees in certain high-hazard industries and establishments with 250 or more employees in industries that must routinely keep OSHA injury and illness records.

Resources

OSHA Recordkeeping – Overview | Occupational Safety and Health Administration
Cal/OSHA – Brief Guide to Recordkeeping Requirements
________________________________________

*If you have 10 employees or less, you are exempt, unless requested by OSHA or the Bureau of Labor Statistics (BLS) to maintain these logs.

If you have any questions or need assistance email us at RiskControl@MarshMMA.com

Article originally published on January 9, 2024 c8974405-c063-4824-8e0a-1c5ac8462903.pdf (constantcontact.com)

January 16, 2024 at 8:00 am · Shelly Clark · Comments Off on Construction Technology Trends

Construction Technology Trends

By David V. Jean, CPA, CCIFP, CExP |Principal, Albin Randall & Bennett

Contractors have always had to keep a close watch on technology trends to stay on the leading edge of the industry. But, historically, they have had more time for strategic planning ahead of adopting new technology. Since the pandemic, taking part in the digital transformation is a high-stakes, high-velocity endeavor. Leveraging the latest technology has become a necessary part of driving growth, increasing efficiency, boosting production, mitigating risks, and evolving with the changing needs of the industry and market. Here’s a look at some of the top technology trends in the construction industry.

Enterprise Integration
In today’s remote atmosphere, enterprise integration helps contractors access pertinent data and connect via user-friendly applications across various devices. In an era of 5G wireless connectivity, contractors can connect the office to the field. Project meetings can take place virtually to move forward without the need to gather in person.

When contractors use automated and cloud-based solutions, such as job costing, risk assessment, asset management, project management, or customer relationship management software, they can access the information they need anywhere, anytime. By automating the request for information (RFI) process, construction firms can reduce bottlenecks, paperwork, and travel while accelerating decision-making and progress.

Internet of Things (IoT)
Equipment loss and safety issues are significant liabilities in construction. Through IoT, contractors can install network-connected sensors to their equipment to perform real-time inspections and performance assessments, ensure on-site accountability, and take accurate measurements using smart devices.

These sensors may also be used in wearable safety equipment. Contractors often use drones for aerial imaging, but AI-powered image recognition can help contractors identify at-risk materials or high-risk trends in worker behavior.

Data Analytics
Data analytics is a game-changer in the construction industry. Access to data goes hand-in-hand with enterprise integration and IoT. By employing automated solutions, contractors can improve transparency significantly, which provides advantages now and in the future. For example, job costing software allows contractors to track projects in real-time to make adjustments before taking a loss. Because it compiles historical data on actual costs over time, this software also allows contractors to analyze future job profitability and make estimates with greater accuracy and less risk.

Through IoT, they can gather valuable insights on worker safety and accountability, job site and material risks, and equipment performance. Predictive analysis technology uses AI, statistics, forecasting analytics, performance management, trend analysis, and simulation modeling. In combination with IoT sensor data, this technology can help contractors with predictive maintenance.

Augmented Reality (AR)
Contractors can use AR applications for training purposes or to detect errors before breaking ground. AR applications can show machine operators fuel levels or alert them of maintenance issues in real-time. AR applications for wearable smart devices, such as smart glasses and smart helmets, allow users to superimpose safety warnings or data points (such as temperature or pressure), and assembly and repair instructions directly onto the job site.

3D-modeling applications help contractors transform plans into three-dimensional holograms. Using a smartphone or tablet, contractors can use building site monitoring applications to overlay 3D buildings in the planning process to avoid errors, unexpected costs, and rework.

Robotics
Robots are often used to perform repetitive tasks, such as bricklaying or painting. They can also help contractors complete work during labor shortages and perform work in dangerous environments to reduce injuries.

Cobots, which are AI-enabled robots designed to work alongside workers, are less costly, easier to program, and more versatile. Cobots can improve quality and consistency by applying pressure, welding, fastening, or making cuts in the exact same way across every run, which means they can improve your products and processes. According to Interact Analysis, by 2028, annual cobot revenues will reach nearly $2 billion.

Modular & Industrialized Construction
Labor shortages and the increase in cost and demand for resources have shifted the industry toward an innovative manufacturing approach. In modular construction, project components are produced offsite on a large scale and shipped to the job site for assembly. Because of its effectiveness and efficiency, modular construction is an increasingly popular option. According to MarketsandMarkets, the modular construction market will reach over $100 billion by 2025.

Industrialized construction (IC) is an expansion of modular construction movement. In IC, contractors use digital twins, which are exact replicas of physical assets, processes and systems, to support building maintenance and operations. Digital twins work as prototypes, collecting real-world information to prevent costly rework and mistakes. Contractors also use 5D Building Information Modeling (BIM) technology to create digital representations of physical buildings. These technologies limit downtown and accelerate and automate traditional design, production, and operational processes.

Contractors are also turning to IC to reduce costs associated with waste. The price of plastic products, steel mill and other metal products, and number two diesel has increased significantly, and the price of lumber is back on the rise. By using innovative materials in their IC processes, contractors can align themselves with industry trends that employ sustainable and green construction methods, use fewer resources, and result in a lower carbon footprint.

Contact ARB
ARB’s Construction Advisory Services Team is dedicated to helping contractors maximize both the financial and operational aspects of their businesses, so we stay up-to-date on construction technology trends and other issues affecting your industry. We provide industry-specialized accounting, tax, and advisory services for construction start-ups, established firms, and the contractors that own them.

I help contractors with software selection and implementation, profitability analyses, forecasts, projections, job costing, and more. Contact me today if you have any questions or would like to discuss your company’s tax, accounting, and business advisory needs.

Article originally published on March 7, 2022  Construction Technology Trends | What’s Ahead for 2022? (arbcpa.com)