draft lite davis langdon national construction conference oct 2012
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Construction Review and Outlook
Davis Langdon, An AECOM Company
Paul Mitchell
2016 Olympic Park, Rio de Janeiro, BrazilAECOM Masterplanners
AGENDA• Review
• Construction Output
• Stimuli
• Public Capital Programme
• European Investment Bank
• REIT’s
• Industry Issues
NUIG Enginerering BuildingCost and Project Management
2012 Review
€0.0 bn
€5.0 bn
€10.0 bn
€15.0 bn
€20.0 bn
€25.0 bn
€30.0 bn
€35.0 bn
€40.0 bn
• Industry still falling but at much slower rate – down 9% to 7.75bn (-27% in ‘11)
• Still well short of €15bn target
• Tender prices erratic; slightly increasing +3% on avg;
• Prices now at early 2000 prices
• Materials; oil & gas products more expensive + 2%
• Public spending -18% (reduced from €4.7bn to forecast €3.4bn)
• 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)
Construction Output
€0m
€5,000m
€10,000m
€15,000m
€20,000m
€25,000m
€30,000m
€35,000m
€40,000m
€45,000m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Construction Output
CONSTRUCTION OUTPUT
OPTIMUM 12% OF GNP
15% PER ANNUM GROWTH
10% PER ANNUM GROWTH
‐
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
What does 10% p.a. growth look like?
X 30 extra Primary Schools
X 30 extra Primary Schools
‐
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
What does 10% p.a. growth look like?
X 30 extra Primary Schools
X 15 extra Secondary Schools
X 15 extra Secondary Schools
‐
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
What does 10% p.a. growth look like?
X 30 extra Primary Schools
X 15 extra Secondary Schools
X 10 extra 3rd level Buildings
X 10 extra 3rd level Buildings
‐
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
What does 10% p.a. growth look like?
X 30 extra Primary Schools
X 15 extra Secondary Schools
X 10 extra 3rd level Buildings
X 2 new mental health facilities
X 4 Hospital Ward Blocks
X 30 housing estate workouts
X 30 housing estate workouts
‐
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
What does 10% p.a. growth look like?
X 30 extra Primary Schools
X 15 extra Secondary Schools
X 10 extra 3rd level Buildings
X 2 new mental health facilities
X 1 new Children’s Hospital
X 4 Hospital Ward Blocks
X 1 large FDI New Office Block
X 30 housing estate workouts
X 1 No. Central Bank move
X 1 No. Intel major investment
X 20 FDI Fit Outs
€0m
€5,000m
€10,000m
€15,000m
€20,000m
€25,000m
€30,000m
€35,000m
€40,000m
€45,000m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
CONSTRUCTION OUTPUT
OPTIMUM 12% OF GNP
15% PER ANNUM GROWTH
10% PER ANNUM GROWTH
• Probable?
• Year on year?
• Against a falling PCP?
• Nama - €500m p.a. X 4 yrs.
• Stimulus – €2.24bn
• Can we respond?
Is it achievable? What about 15%...?
Employment
Titanic QuarterAECOM Engineering Services
€0m
€5,000m
€10,000m
€15,000m
€20,000m
€25,000m
€30,000m
€35,000m
€40,000m
€45,000m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
CONSTRUCTION OUTPUT
OPTIMUM 12% OF GNP
What does this do for employment?
10k15-20k
25-30k40k
55k70k
85k100k
125k
145k170k
• 20,000 new employees by 2015?
• Project type – labour intensive v. non
10% PER ANNUM GROWTH
Stimulus?
Telecity Data CentreCost Management Services
€0m
€5,000m
€10,000m
€15,000m
€20,000m
€25,000m
€30,000m
€35,000m
€40,000m
€45,000m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
CONSTRUCTION OUTPUT
OPTIMUM 12% OF GNP
NAMA €2bn investment
€2bn over 4 years from 2013
• €2bn targeted at major centres to address supply shortages
Dublin, Cork, Limerick, Galway & Dublin Commuter counties
• Commercial & Residential sectors
• It can be recycled (fund to develop – sell – use proceeds to fund again)
• 100% of the finance will go to construction
• Only invest if there is a return better than selling / waiting
• €587m already funded
€0m
€5,000m
€10,000m
€15,000m
€20,000m
€25,000m
€30,000m
€35,000m
€40,000m
€45,000m
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
CONSTRUCTION OUTPUT
OPTIMUM 12% OF GNP
NAMA €2bn investment
€2bn over 4 years from 2013
• €587m funded before announcement:• €50m for Dun Laoghaire housing scheme
• €25m for South Dublin housing schemes
• €30m to housing schemes throughout Ireland
• €13m for Charlestown SC
• €47m on shopping centres in Laois, North Dublin and Waterford
• €7m on Dublin Cinema
• €3m hotel refurb in Cork
• €3m hospital in Dublin
• €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
Government Stimulus
49 The Leadenhall Building, LondonCost Management Services
non‐Exchequer funding for PPP projects, €1.40bn,
62%
State funding of PPP’s, €0.35bn,
16%
Public Infrastructure , €0.50bn, 22%
Health1. 2 Nr. new Primary Care Bundles (~ 10 Nr. centres)
Transport
1. N17/N18 Gort to Tuam
2. M11 Gorey to Enniscorthy
3. N25 New Ross Bypass
4. Galway City Bypass (target)
• Proposed projects
Education1. 2 Nr. new PPP schools bundles
(~ 12 Nr. post-primary schools)
2. Stage One of Grangegorman
Justice
1. Courthouses (extent TBA)
2. Garda Divisional Headquarters
3. State pathology Laboratory
Government Stimulus
Grangegorman Campus
Cost and Project Management Services
Public Capital Programme (PCP)
UCD Student Learning Leisure and Sports FacilityProject and Cost Management Services
€0m
€500m
€1,000m
€1,500m
€2,000m
€2,500m
€3,000m
€3,500m
€4,000m
€4,500m
2012 2013 2014 2051 2016
Other
Health
Education & Skills
Jobs, Enterprise & Innovation
Environment, Community & Local GovtTransport, Tourism & Sport
Transport, Tourism & Sport31%
Environment,
Community & Local Govt
22%
Jobs, Enterprise & Innovation
13%
Education & Skills11%
Health10%
Other13%
2012
• 5 year €17bn PCP announced in Nov ‘11
• €3.9bn in 2012
• 14% reduction for 2013
• ‘Forecast’ at consistent output from 2013-2016
Public Capital Programme (PCP)
UCD Student Learning Leisure and Sports FacilityProject and Cost Management Services
UCD Student Learning Leisure and Sports FacilityProject and Cost Management Services
€109m
€23m
€45m €2
80m
€265m
€232m
€205m
€35m
€59m
€438m€59m
€21m€59m
€150m
€596m
€158m
€309m
€21m€42m
€793m
€0m
€200m
€400m
€600m
€800m
€1,000m
€1,200m
€1,400m
Spent To Spend
Public Capital Programme (PCP)• So how is the Plan going....3 months left?
43%
57%
Spent To Spend • €1.7bn spent in 9 months
• €2.2bn to spend in 3 months..
European Investment Bank (EIB)
Rion-Antirion Bridge, Greece
AECOM Engineering Services
• 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, LondonCost Management Services
European Investment Bank (EIB)
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.
European Investment Bank (EIB)
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
€309m to Health & Education
€15m to Industry
€15m to Urban Infrastructure
SME Credit Lines, €435m
Energy, €1,107m
Health, Education, €309m
Industry, €15m
Transport, €765m
Urban Infrastructure,
€15m
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
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)
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
Further ways for financing the SMEs and Mid-Caps
€0m
€200m
€400m
€600m
€800m
€1,000m
€1,200m
2007 2008 2009 2010 2011 2012
€345m€450m
€1,020m
€256m
€475m
€100m
€500m
€400mUnder Appraisal
Signed / Approved
Financed
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
European Investment Bank (EIB)
EIB’s project due diligence and credit process
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
Real Estate Investment Trusts (REIT’s)
The Shard, LondonCost Management Services
• 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.
Real Estate Investment Trusts (REIT’s)
The Tate Modern extensionCost Management Services
• 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.
Real Estate Investment Trusts (REIT’s)
One World Trade Center, New YorkAECOM Construction Management
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
Real Estate Investment Trusts (REIT’s)
REIT
NAMA
€€€€€€
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...
Real Estate Investment Trusts (REIT’s)
One Warrington PlacePre-acquisition Due Diligence
Cleveland Clinic, Abu Dhabi, U.A.ECost Management Services
Industry Issues
National Children’s Hospital (Mater site)Cost Management Services
• 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
Industry Issues
New Engineering Building NUIGCost and Project Management
Thank You
Paul Mitchell, Director Head of Office ‐ Ireland
Davis Langdon, An AECOM Companypaul.mitchell@davislangdon.com
Olympic Stadium, LondonCost & Project Management Services
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