Draft lite davis langdon national construction conference oct 2012
1. Construction Review and Outlook
Davis Langdon, An AECOM Company
2016 Olympic Park, Rio de Janeiro, Brazil
AECOM Masterplanners
Paul Mitchell
2. AGENDA
• Review
• Construction Output
• Stimuli
• Public Capital Programme
• European Investment Bank
• REIT’s
• Industry Issues
NUIG Enginerering Building
Cost and Project Management
3. 2012 Review
• Industry still falling but at much slower rate – down 9% to 7.75bn (-27% in ‘11)
• Still well short of €15bn target
€40.0 bn
€35.0 bn
• Tender prices erratic; slightly increasing +3% on avg;
€30.0 bn
€25.0 bn
• Prices now at early 2000 prices
€20.0 bn
• Materials;
€15.0 bn oil & gas products more expensive + 2%
€10.0 bn
•€5.0 bn
Public spending -18% (reduced from €4.7bn to forecast €3.4bn)
€0.0 bn
• Housing Output down to c.6/7,000 units
• NAMA announces €2bn construction budget over 4 years (May ‘12)
• Government announces €2.25bn stimulus package (July ‘12)
14. What does 10% p.a. growth look like?
45,000
X 30 extra Primary Schools
X 1 new Children’s Hospital
40,000
35,000 X 15 extra Secondary Schools
X 1 large FDI New Office Block
30,000
X 10 extra 3rd level Buildings
25,000
X 1 No. Central Bank move
20,000
X 2 new mental health facilities
15,000
X 4 Hospital Ward Blocks X 1 No. Intel major investment
10,000
5,000
X 30 housing estate workouts X 20 FDI Fit Outs
‐
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
15. Is it achievable? What about 15%...?
€45,000m
• Probable?
€40,000m
• Year on year?
€35,000m
• Against a falling PCP?
€30,000m
CONSTRUCTION • Nama - €500m p.a. X 4 yrs.
OUTPUT
€25,000m
• Stimulus – €2.24bn
€20,000m
• Can we respond?
€15,000m 15% PER
OPTIMUM ANNUM 10% PER
12% OF GNP GROWTH ANNUM
GROWTH
€10,000m
€5,000m
€0m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
17. What does this do for employment?
€45,000m
€40,000m
€35,000m
• 20,000 new employees by 2015?
€30,000m
CONSTRUCTION
OUTPUT • Project type – labour intensive v. non
€25,000m 170k
145k
125k
€20,000m 100k
85k
70k
55k
€15,000m
OPTIMUM 40k
25-30k
12% OF GNP 15-20k
10k
€10,000m
10% PER
€5,000m ANNUM
GROWTH
€0m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
18. Stimulus?
Telecity Data Centre
Cost Management Services
19. NAMA €2bn investment
€45,000m
• €2bn targeted at major centres to address supply shortages
€40,000m
Dublin, Cork, Limerick, Galway & Dublin Commuter counties
€35,000m
• Commercial & Residential sectors
€30,000m
CONSTRUCTION
• It can be recycled (fund to develop – sell – use proceeds to fund again)
OUTPUT
€25,000m
• 100% of the finance will go to construction
• Only invest if there is a return better than selling / waiting
€20,000m
• €587m already funded
€15,000m
OPTIMUM
12% OF GNP
€10,000m
€2bn over 4
€5,000m
years from 2013
€0m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
20. NAMA €2bn investment
€45,000m
• €587m funded before announcement:
€40,000m
• €50m for Dun Laoghaire housing scheme
€35,000m • €25m for South Dublin housing schemes
• €30m to housing schemes throughout Ireland
€30,000m • €13m for Charlestown SC
CONSTRUCTION
OUTPUT
• €47m on shopping centres in Laois, North Dublin and Waterford
€25,000m
• €7m on Dublin Cinema
• €3m hotel refurb in Cork
€20,000m
• €3m hospital in Dublin
€15,000m
OPTIMUM
12% OF GNP
€10,000m
€2bn over 4
€5,000m
years from 2013
€0m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
21. Government Stimulus
• €2 ¼ bn stimulus package announced in July 12
€1.4bn non-Exchequer funding for PPP projects
€0.35bn in State funding of PPP’s
€0.50bn for Public Infrastructure
• 13,000 jobs
non‐Exchequer
funding for PPP
projects, €1.40bn,
62%
Public State funding of
Infrastructure , PPP’s, €0.35bn,
€0.50bn, 22% 16%
49 The Leadenhall Building, London
Cost Management Services
22. Government Stimulus
• Proposed projects
Education Health
1. 2 Nr. new PPP schools bundles 1. 2 Nr. new Primary Care Bundles (~ 10 Nr.
(~ 12 Nr. post-primary schools) centres)
2. Stage One of Grangegorman
Transport
Justice
1. N17/N18 Gort to Tuam
1. Courthouses (extent TBA)
2. M11 Gorey to Enniscorthy
2. Garda Divisional Headquarters
3. N25 New Ross Bypass
3. State pathology Laboratory
4. Galway City Bypass (target)
Grangegorman Campus
Cost and Project
Management Services
23. Public Capital Programme (PCP)
UCD Student Learning Leisure and Sports Facility
Project and Cost Management Services
24. Public Capital Programme (PCP)
• 5 year €17bn PCP announced in Nov ‘11
• €3.9bn in 2012
• 14% reduction for 2013
• ‘Forecast’ at consistent output from 2013-2016
€4,500m
Other
€4,000m
€3,500m Health
2012 Other
€3,000m 13%
Education & Skills Transport,
€2,500m Tourism &
Health Sport
10%
€2,000m Jobs, Enterprise & 31%
Innovation
€1,500m Education &
Skills
Environment,
€1,000m 11%
Community & Environmen
Jobs,
Local Govt t,
€500m Enterprise &
Community
Transport, Innovation
Tourism & Sport & Local Govt
€0m 13%
22%
2012 2013 2014 2051 2016
UCD Student Learning Leisure and Sports Facility
Project and Cost Management Services
25. Public Capital Programme (PCP)
• So howSpentthe Plan going....3 •months left? in 9 months
is To Spend €1.7bn spent
€1,400m
€1,200m • €2.2bn to spend in 3 months.. €793m
€1,000m 43%
€800m 57% €596m
€600m
€309m
€400m €150m
€59m €158m
€438m
€59m €42m
€200m
€280m
€265m
€21m
€232m
€21m
€205m
€109m
€59m
€45m
€35m
€23m
€0m
Spent To Spend
UCD Student Learning Leisure and Sports Facility
Project and Cost Management Services
27. European Investment Bank (EIB)
• EIB was set up in 1958 by the Treaty of Rome
• Shareholders: 27 EU Member States (Ireland owns 0.567%)
• Non-profit-maximising
• EIB’s Lending in Ireland: €12bn in nearly 300 projects
The Shard, London
Cost Management Services
28. European Investment Bank (EIB)
Pre-accession Countries include:
Candidate Countries: Croatia, Iceland, the Former Yugoslav Republic of Macedonia, Montenegro and Turkey.
Potential Candidate Countries: Albania, Bosnia and Herzegovina, Kosovo, Serbia.
30. European Investment Bank (EIB)
• EIB funding in Ireland
€2.7bn in the last 5 years
€1.1bn in Energy
€765m in Transport
€435m to SME through Banks Urban
Infrastructure,
€309m to Health & Education €15m
SME Credit
€15m to Industry Transport, Lines, €435m
€765m
€15m to Urban Infrastructure
Health,
Education, Energy,
€309m €1,107m
Industry, €15m
31. European Investment Bank (EIB)
€2.7bn in the last 5 years
€1.1bn in Energy
ESB Network And E-Cars Infrastructure
Bord Gais Whitegate CCGT
Eirgrid East-West Interconnector Ten-E
ESB Renewable Programme
ESB Aghada Gas Fired Power Station
€765m in Transport
Dublin Airport Terminal 2 (Ten)
Dublin Airport Development - Ten
M50 Motorway
M7 - M8 Portlaoise
N6 Galway To East Ballinasloe PPP
32. European Investment Bank (EIB)
€2.7bn in the last 5 years
€435m to SME through Banks
Allied Irish Banks Loan for SME II
Allied Irish Bank Loan for SME I
Bank Of Ireland Loan for SME I
Ulster Bank Loan for SME I
(120,000 SME’s reached in 2011 Source: EIB)
€309m to Health & Education
Irish School Programme (550 classrooms)
University College Dublin (Science and Law Buildings)
Irish Schools Investment Programme (27 schools PPP)
Trinity College Dublin (Biomedical Research Building)
33. European Investment Bank (EIB)
2012 and beyond
EIB committed to enhanced support for Ireland
Key areas:
Strategic infrastructure through PPP Financing
Access to Finance for SMEs and mid-caps
…and in the longer-term
Exchequer-funded investments
support to the Corporate sector
€1,200m Further ways for financing the SMEs and Mid-Caps
€1,000m
Under Appraisal
€400m
€800m
Signed / Approved
€600m
€1,020m
Financed
€400m €500m
€450m €475m
€200m €345m
€256m
€100m
€0m
2007 2008 2009 2010 2011 2012
34. European Investment Bank (EIB)
2012 and beyond
€100m financed
Irish Schools programme
€500m approved
€155m for Bord Gais Onshore Wind
€75m for N11-N7 Motorway PPP
N17-N18 Gort to Tuam PPP
€400m under appraisal
€200m for AIB Loan for SME’s & Mid Caps
€200m for Irish Water programme
36. European Investment Bank (EIB)
What can be financed by the EIB?
Projects in line with EIB priorities
(broadly Transport, Energy and Knowledge Economy)
Eligible costs
Counterparts with an acceptable credit profile
EIB can finance up to 50% of the total project cost
University College Dublin: Campus development incl. Science Centre, School of Law and student accommodation
38. Real Estate Investment Trusts (REIT’s)
• What is a REIT?
• A real estate investment trust, or REIT, is a company
that owns, and in most cases, operates income-
producing real estate.
• Most of its assets and income tied to real estate
(investment rather than development).
• It must distribute at least 90 percent of its taxable
income to shareholders annually in the form of
dividends.
• Owing to 90% annual dividend it avoids corporation
tax which is one of it’s benefits.
The Tate Modern extension
Cost Management Services
39. Real Estate Investment Trusts (REIT’s)
• What is a REIT?
• There are 25 REIT’s operating in the UK with a total
market cap in excess of £26bn.
• UK REIT scheme was launched in January 2007
• There are 166 REIT’s operating in the US on the
stock exchange with a total market cap in excess of
$579bn. There are 1100 in the overall US market.
• Transparent operating structure
• Investments are under constant scrutiny in market
and tend to be very liquid; traded much like equities.
One World Trade Center, New York
AECOM Construction Management
40. Real Estate Investment Trusts (REIT’s)
What is the benefit of REIT’s to the construction industry?
• Attract funds to Ireland’s property market
• Introduce liquidity to investment market
• It offers a chance for the smaller investor to invest in diversified large scale commercial
property.
• Release Nama / Developer funds from illiquid assets which in turn would create funding
for development needs
REIT
NAMA €€€
€€€
41. Real Estate Investment Trusts (REIT’s)
How probable is a REIT in Ireland?
• Fine Gael Manifesto 2011
• Legislation is currently passing through government
• Nama would welcome the introduction – big benefits
in unwinding assets
• Domestic investors might be very eager to get in on
liquid commercial investment
• International Investors would be very interested (e.g.
€1bn chasing recent Office Building sale)
• Hopefully Budget 2013 will lead the way...
One Warrington Place
Pre-acquisition Due Diligence
42. Industry Issues
National Children’s Hospital (Mater site)
Cost Management Services
Cleveland Clinic, Abu Dhabi, U.A.E
Cost Management Services
43. Industry Issues
• Abnormally Low Tenders
• Public Sector capacity to deliver PCP
• Graduate & Apprentice pipeline
• PPP model & cancellations
• Circular 10/10
• Public Procurement Procedures
• Performance and Infrastructure Bonds
• Disputes
• Building Regulations & Compliance
New Engineering Building NUIG
Cost and Project Management
44. Thank You
Paul Mitchell, Director
Head of Office ‐ Ireland
Olympic Stadium, London
Cost & Project Management Services Davis Langdon, An AECOM Company
paul.mitchell@davislangdon.com