Home Construction and Building Permits Rise

The Commerce Department said on Wednesday that construction starts on single-family homes surged 7 percent to an annual rate of 628,000 units last month, the highest level in six months. Single-family homes are by far the largest segment of the market.

Groundbreaking in the volatile apartment and condominium sector tumbled 11.1 percent. That limited the rise in overall housing starts to an 891,000-unit annual rate, much smaller than the 917,000-unit rate economists had expected.

While higher mortgage rates have slowed home sales, demand for homes, as the rate of household formation rises, is expected to bolster residential construction.

“Home building seems to be holding up decently in the higher mortgage rate environment, probably due to the support of strong underlying fundamentals — thin inventories and steady household formation,” Guy Berger, an economist, said.

Mortgage rates have risen in recent months in anticipation that the Federal Reserve was ready to reduce its $85 billion monthly purchases of Treasury and mortgage-backed securities, which it has been buying to keep interest rates low and stimulate the economy. The Fed, however, surprised the financial markets on Wednesday by maintaining its bond-buying program and not cutting back. That move could ease mortgage rates.

In a separate report, the Mortgage Bankers Association said applications for home loans rose last week as mortgage rates eased off recent highs. Since early May, rates on 30-year mortgages have risen more than 1 percentage point to about 4.5 percent.

Still, mortgage rates remain historically low, and economists do not expect the increase to throw the housing recovery off track. Home building is expected to slow a bit this quarter from the second quarter, but still contribute to growth this year.

Though residential construction accounts for only 3.1 percent of the nation’s gross domestic product, economists estimate that for every single-family home built, three jobs that last for a year are created.

Last month, building permits for single-family homes rose 3 percent to their highest since May 2008.

A survey on Tuesday showed that confidence among builders of single-family houses remained near an eight-year high in September, with builders upbeat about prospective buyer traffic.

“We expect to see a more meaningful rebound in construction activity in the coming months,” said Millan Mulraine, senior economist at TD Securities.

Building permits for multifamily homes, however, dropped 15.7 percent last month, pushing down overall permits 3.8 percent to an annual rate of 918,000 units.

The drop in multifamily housing starts and building permits suggested that the higher mortgage rates could be making developers cautious about taking on new projects. Builders have also been complaining about expensive materials and a shortage of labor.

Investors Bet on Olympic Construction Boom

TOKYO — Ever since a group of out-of-work samurai pooled their pensions to found Onoda Cement 130 years ago, the company has had its ups and downs: industrialization, a crippling war, Japan’s postwar economic miracle.

But after domestic cement demand peaked in 1990, at the height of Japan’s bubble economy, Taiheiyo, the successor company, and the industry, fell into a seemingly permanent decline in a mature and shrinking Japan.

Tokyo’s victory on Saturday in the race to host the Summer Games for a second time, in 2020, is giving Taiheiyo a new lease on life.

On Monday, a day after Japan reveled in the good news, the stocks of general contractors, property developers and other long-suffering construction-related companies surged in Tokyo, as investors anticipated a construction boom before the 2020 Olympic Games.

Construction companies helped lead a 2.48 percent rise in the Nikkei index to 14,205.23, a one-month high. Taiheiyo’s stock jumped more than 7 percent to its highest level in six years, while Taisei, the contractor that built Tokyo’s Olympic Stadium in 1964, soared 14 percent. Both stocks continued their rapid ascent Tuesday morning.

“We expect Tokyo’s success in bidding for the Olympics to become a very positive catalyst” for Japanese stocks, Hiromichi Tamura, a strategist at Nomura, said in a note to clients.

Helping to elevate shares was a revision of Japan’s second-quarter economic growth figures to an annualized rate of 3.8 percent on the back of strong capital investment. Preliminary estimates had shown growth of 2.6 percent.

The government estimates that hosting the Olympics will increase the economy by 3 trillion yen over the next seven years, or 0.3 percentage points of Japan’s economic growth a year.

But that estimate is too modest, Robert Feldman, head economist for Japan at Morgan Stanley MUFG Securities, wrote in a report last week.

He said that the impact would most likely reach 6 trillion to 8 trillion yen over the next seven years, or 0.7 to 0.8 percent of gross domestic product.

The most visible impact will be in construction. Tokyo has promised to keep costs down by using as many as 15 “legacy” buildings, including three built for the 1964 Games. Still, it will build 22 more sites at an estimated cost of $3.1 billion.

Tokyo’s huge new Olympic Stadium, called the cycling helmet for its space-age design, will seat 80,000 people and cost at least $1.3 billion to build. It will feature a retractable roof – a first for an Olympic Stadium. The city also plans to spend $955 million on a waterfront Olympic Village complex capable of housing 17,000 athletes and trainers.

Naoki Inose, the governor of Tokyo, has called the project “Tokyo’s biggest housing development in decades.”

Investors hunted for more Olympics-related shares. Advertising and travel agencies gained on Monday, as did Japanese sports equipment makers, like Mizuno and Asics.

Sagami Rubber Industries, which says it makes one of the world’s thinnest condoms, with a thickness of only 0.022 millimeters, jumped more than 8 percent during Monday trade, and continued to climb Tuesday. Condoms have been distributed to Olympics athletes since the Seoul Summer Games in 1988. Last year, the London Games distributed more than 150,000 condoms to athletes, according to British media reports.

Taiheiyo Cement is also poised to be one of winners of the Olympic rally.

Analysts at Nomura said that building the stadiums for the Games would require more than three million tons of cement in 2016 through 2019. And total demand for cement could be even greater, as hopes for a tourist influx before the Games prompt developers to plow money into hotels and other commercial projects.

The tide is already beginning to turn at Taiheiyo, as it taps reconstruction demand after Japan’s tsunami and nuclear disasters.

For the fiscal year through March, Taiheiyo’s net profit surged 44 percent from a year earlier to 11.3 billion yen, or $114 million, and the company expects an additional 14.7 percent increase this year, to 13 billion yen.

But how long will an Olympics-fueled rally last? Strategists at Nomura, who studied market patterns after past Olympic announcements, are optimistic. Their analysis shows that stock markets tended to perform well over the longer-term after a successful Olympics bid.

“Once strong investor interest in Olympics hosting-related stocks wanes, the stock market as a whole appreciates,” Mr. Tamura said.

Construction Law: Ways to Craft a Construction Contract to Protect Owner

While there is no way to eliminate all of an owner's risks on a construction project, the most important, and often most overlooked, tool to minimize those risks is the construction contract.

The Boss: Founder of Rand Construction Didn’t Care for Teaching

When I was in high school, the career path for women was largely teaching or nursing. I didn’t like the sight of blood, so I majored in social studies and minored in education at the University of Michigan. I had heard teaching was a great profession for women for a few years — until they got married and had children.

After graduating in 1970, I relocated to Washington, hoping to find a teaching job. There weren’t many available, so I got a master’s in education at George Washington University and then found a teaching job in a Washington suburb. I didn’t care for the job and left after three years.

In 1975 I married a doctor; we divorced in 1980. I had two daughters and had to start over financially. In 1981 I got a job as a secretary making $16,000 a year at what was then Peat Marwick (now KPMG). A year later I was promoted to the managing partner’s executive assistant, and three months after that I was promoted to director of practice development, or marketing.

That job gave me a foundation in business. The managing partner took me under his wing, and other executives there, who are still friends of mine, taught me about business as well.

In 1985, Sherry Turner, a fellow member of the Greater Washington Board of Trade, asked if I wanted to join her in starting Hart Construction, a rare women-owned construction company. She was a marketing executive for an architectural firm, and I knew C.E.O.’s in Washington from my job in accounting. Between our Rolodexes, we were able to hire people with construction experience.

Washington was experiencing a building boom then, and there was a dearth of construction companies willing to do small projects, so we pursued these jobs in the commercial sector. Washington general contractors are much more sophisticated now, and if we were just starting out today I doubt we’d be as successful.

In 1989, Sherry, who owned 51 percent of the company, said that she wanted to dissolve the partnership. With the money she paid me for my stock, I started Rand Construction. In addition to my time at Peat Marwick, my teaching skills and courses in adolescent development really came in handy when running my own business.

Being a female in a male-dominated field didn’t present difficulties when working with clients, but I occasionally experienced discrimination from members of the building industry. I was the antithesis of the stereotypical macho construction executive. It was a daunting task to walk into a room full of men who didn’t want me there. But being different also gave me the courage to do it.

Once I called a subcontractor about a coming project. He hung up on me, called back and asked to speak to the president of the company. Our receptionist told him, “That’s who you were talking to.” After that, he treated me as he would any construction company president.

As I became more successful, I started serving on company boards and saw how few other females there were around the table. I’d hear that companies couldn’t find enough qualified women. Last fall I financed an executive education program at George Washington University to teach women how to be successful board members. The first class, 15 women, began in February. I like to move the needle where it can make a difference.

N.Y. Construction Law Firm Launches in Pa. With P3 Practice

New York-based construction law firm Peckar & Abramson has launched a Philadelphia-area office with the hire of a local attorney who focuses on public-private partnerships.

Frank M. Rapoport is no stranger to being the lone man in Philadelphia for an out-of-town firm. He is joining Peckar & Abramson from McKenna Long & Aldridge, where he was the only Pennsylvania lawyer at the firm.

Peckar & Abramson launched a new Devon, Pa., office upon Rapoport's hire. He will be working out of the 100-lawyer shop's New York and Devon locations.

Rapoport's hire comes less than a year after the July 2012 passage of Pennsylvania's Act 88, P3 enabling legislation that creates a state board to review possible opportunities for public-private partnerships. The board will look to identify opportunities and will also accept unsolicited proposals from private entities. New York and New Jersey are eyeing similar legislation, Rapoport said.

Rapoport had been with McKenna Long for the last 12 years, but it wasn't until about 2006 that the idea of a P3 legal practice really began to take off. There are only a few firms in Philadelphia who handle the work -- perhaps most notably Ballard Spahr, whose 50-plus attorney P3 practice includes former Pennsylvania Governor Edward G. Rendell.

Rapoport said he was doing P3 work before it was really called that. He represented GMH, now known as Balfour Beatty, in its $2 billion privatization of military housing. In that deal, the private company absorbed the cost of renovating all of the housing and then collected the soldiers' housing stipends when the homes were ready to be lived in.

The real push for P3 work took off in 2009 when the country began focusing on the need to redo its infrastructure and there wasn't taxpayer money to fund it, Rapoport said. Now, private equity funds and pension funds are interested in rebuilding the nation's roads and bridges with the idea that they will then be privately run after the improvements were made, he said.

The Northeast, including Pennsylvania, New Jersey, New York and Maryland, are some of the last states to the P3 party, but this is now the region that is expected to see the most deal flow, Rapoport said. He said his old firm didn't have offices in New Jersey or much of a presence in New York or Pennsylvania. Peckar & Abramson has offices in New York, New Jersey, Washington, D.C., California, Florida, Chicago and Georgia. A call to McKenna Long was not immediately returned.

Rapoport said about 75 of Peckar & Abramson's 100 lawyers are pure construction attorneys. He said he adds the finance piece to the P3 table, focusing his practice on getting state and local governments on board and then pairing investors and contractors together who can take on these deals.

Much of Rapoport's early engagement on a project is not legal work but more on the government relations side. He often charges clients a small monthly retainer for this work with the idea that his firm gets the legal work that comes when the P3 deal is agreed to.

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Construction Law Group Joins Lewis Brisbois

By Christine Simmons All Articles 

New York Law Journal

January 9, 2013

Ten construction attorneys have left Lester Schwab Katz & Dwyer to join Lewis Brisbois Bisgaard & Smith. The group includes senior partner Darrell Whiteley, who will be vice chair of Lewis Brisbois' construction practice, and partners Clare Cunningham and Joshua Jemal. Cunningham was an associate and Jemal was of counsel at Lester Schwab. The other seven are associates.

Whiteley said the group defends construction companies and developers. Their clients have included Tishman Construction Corp., Hunter Roberts Construction Group, Lower Manhattan Development Corp. and the Metropolitan Transportation Authority, he said.

Los Angeles-based Lewis Brisbois has about 850 attorneys in 25 offices, including about 90 lawyers in New York. Whiteley, who practiced at 60-attorney Lester Schwab for 19 years, said he wanted the opportunity to practice at a firm with a larger footprint. He said some construction companies no longer operate regionally. "The scope of this firm is one that suits the construction industry," he said, adding that the departure from Lester Schwab was amicable. "They've been very gracious," he said.

Michael McDonagh, managing partner of Lester Schwab, said many of the firm's partners represent construction companies in accident and labor law cases. "We did not lose any capability to defend those type of matters on behalf of our clients" and the group's departure will "have no effect on the viability" of the firm, he said. Lester Schwab hired two attorneys this week and is looking to fill other positions, he said.

Degrees of Debt: Colleges’ Debt Falls on Students After Construction Binges

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