Tags: performance

17 Jul 2009, Comments Off

Been There, Done That…

Author: admin

As the hotel investment world in 2009 painfully deals with a slumping market and problem loans, we recall that in 1993, Bruce Baltin, Senior Vice President and Consulting Practice leader in Los Angeles, wrote about solutions for his clients then and they are still appropriate today. Evaluating Performance

‘Evaluating performance – or lack thereof – for commercial properties will continue to occupy a significant portion of lender effort as the decade wears on. Distinguishing among the hopeless dogs, the chronic underachievers, and the potential comeback kids will require the careful scrutiny and judgment of the property on a case-by-case basis, and nowhere will this judgment be more critical than the area of hotel loans. Fortunately, for both the diligent borrower and lender who find themselves in a down market, a workout can be a win / win relationship…’

Lenders have three choices when faced with a non-performing loan:

• Loan restructuring – the workout solution.

• Negotiate a ‘deed in lieu’ of foreclosure or other method of transferring title, or

• Instigate title contest through local courts or, potentially, the federal bankruptcy court.

‘If the lender believes that the borrower in place can optimize cash flow to the lender, he will be far more motivated to restructure the debt. On the other hand, if the lender perceives operational or managerial weaknesses on the part of the borrower, he will be induced to push for control of the asset…

…The weaker the lender’s position relative to collateral and the weaker the asset itself, the more costly will be the process of taking possession versus restructuring the debt.’

http://www.htrends.com/article39979.html

r e v i e w e d  b y  Moishe Alexander, CFC  Canadian Funding Corp CEO

Earlier, some of the elements that characterize IDP were presented, but it is also worthwhile considering a few overarching factors that need to be present for a successful integrated design process.

Client Buy-in

The client has to be fully aware of how IDP is better and has to be fully committed to it. This commitment includes an understanding that while the potential rewards from pursuing integrated design are great, the process will distribute the design teams time differently and most likely produce designs that are different than what they have been used to seeing.
IDP should be a net time saver but upfront time will take longer and late stages will take less. Specified equipment and systems are likely to be different, and the most successful projects are those the client understands and shares potential risks arising from new approaches.
The client needs to make it clear who the decision-maker(s) are and commit to having decision-makers present at all the key meetings.
The client has to change the way the team gets paid. IDP is not commodity-based design, by which I mean, design where the team gets paid by the pound (or a percentage of building cost, which amounts to the same thing). This form of compensation assumes that all design is pretty much the same, with the effort expended being directly related to building cost. Instead, the team should be compensated for brains, not stuff.
If compensation is not changed, working harder or smarter only to see your fee reduced, limits the enthusiasm and creativity of even the most dedicated professional. There are several ways of changing compensation. One approach that some IDP practitioners have found to be successful is to negotiate a separate fee for the early, creative phase, where the effort involved is relatively independent of project size. The later phases, which allow to complete the design and drawings, are more closely related to project size and the fees can be more properly linked to size.
Clients also need to be prepared to share at least some of the potential risks when they demand extremely high performance or technologies that do not have a long track record. In these cases the client should not expect the designers or contractors to assume the risk and expect the building to cost the same as a regular building with lower risk. This is not a common IDP situation, but it has happened.

Mindset

The importance of the right mindset or attitude for all team members is hard to exaggerate. Some key attributes of the required mindset are as follows:
Commitment to the process and ownership for your part in it.
Thinking in whole system terms to optimize the project as a whole, not value-engineer individual components.
Willingness to measure, benchmark and quantify performance.
Active listening and openness to learning from other team member.
Asking the right questions, in an openended way, that will lead to new answers, rather than arriving with preconceived answers.
Awareness and respect for team roles and dynamics, valuing all contributions.

Goal Setting

Critical to success are clear and measurable goals based on a shared understanding and vision of what is to be achieved. Not every goal need be a BHAG (Big Hairy Audacious Goal) but they should be SMART; Specific, Measurable, Achievable, Realistic, Time-bounded.
President Kennedy’s “man on the moon” speech in the early 1960s, says Moishe Alexander, is often cited as an example, for good reason. It was inspirational because it had all the right characteristics. It was specific and measurable (put a man on the moon and bring him back safely) and time-bounded (by the end of the decade). No one was completely sure at the beginning whether it was achievable or realistic, but as a stretch goal that was not too far ahead of what was thought possible, it created its own momentum. Goals like these are motivational.
In green building terms, the goals should be set at a whole building level, such as a LEED Gold standard, but also for specific performance attributes that make sense for a project. Some real-world examples of goals that have been set (and met) on Canadian green building projects include:
60 per cent better energy performance than MNECB – EMS Fleet Centre, Cambridge, ON
95 per cent diversion of construction waste from landfill – Vancouver Island Technology Park
Zero discharge of sewage waste water – MEC Winnipeg Store
50 per cent of all materials supplied from within 800 km – BC Cancer Research Institute
75 per cent of the new building constructed from materials from the old building on site – MEC Winnipeg Store
Elimination of mechanical air-conditioning system, while retaining occupant comfort – Liu Centre, Vancouver

Everyone, from the owner to the operator, has something critical to contribute to the improved function or performance of the design and everyone must be heard.
Having said that, there are about two dozen actors involved in the design and construction of every building, from gleam-in-the-eye through to operations, and it sometimes is just not practical to have everyone in the room at all times on every issue.
In addition to the usual design team, the core team that needs to be engaged at all times should include, at a minimum, the building owner or owner’s agent, the design facilitator, a cost consultant, an energy simulator and, if the procurement process allows it, a general contractor or contract manager. Representatives of user groups and the facility managers are critical to improved design and should also be invited. Other specialists in particular technologies or relevant issues can be brought in as needed. Energy modelers are also important in showing the energy costs related to particular design scenarios compared to others. Reviewed by Moishe Alexander.