AAMA Day Two: Tale of Two Michaels

Two of the mostly widely anticipated presentations on yesterday's day two of the American Architectural Manufacturers Association (AAMA) Summer Meeting both involved Michael Collins-two different speakers, each of the same name-and provided some of the most important information of the event.

Michael Collins #1, vice president of Jordan, Knauff and Company, an investment banking firm in Chicago, specializes in the door and window industry and writes a monthly column in Door and Window Manufacturer magazine. He gave an expansive overview of what's happening in that industry and crammed tons of statistics into his one-hour presentation. Among his comments about the U.S. housing market were the following:

• One to three million homes face foreclosure in the near future and 7 percent of these haven't been able to work something out with lenders because those lenders are too overwhelmed to be able to handle the workload.
• The average home price has declined 8 to 9 percent since last year.
• The multi-family market is not faring too poorly.
• One-third of the homes sold in 2007 were second homes.
• Even though the residential housing market looks bleak now, more than 19 million units will be needed before 2014.
• The East will rebound first, then the Midwest. The Western states will come back last.
• High-end new construction is doing well. "That market always has money," said Collins.
• Remodelers are failing because they tend to remain overstaffed rather than lay off employees they had for years. "This eventually takes the whole ship down," said Collins.
• Homebuilders are starting to get creative. One in Reno even offers a guarantee that if the last home the homebuilder sells is sold for less than what you paid, he will cut you a check for the difference.

At the bottom of a business cycle such as this one, Collins says there is a "festival of wealth destruction" that takes all types of wealth out of the market. He also reminded the audience that commercial market lags behind residential by 12 to 18 months.

"The United States is the single biggest construction market in the world," he said. "It's a 1.6-trillion dollar market."

Collins expects the nonresidential construction market to grow five percent this year, but he cautioned against factors that are hurting the business.

"There seems to be a lack of coordination among the various standard and code writing organizations; this creates an artificial tax, or a lot of additional cost for the industry," he said.

He said the glass industry continues to defy description. "There are some companies that pay up to 25-percent more for exactly the same glass as another company buys. There is no good reason for this. I had someone told me that if the glass industry woke up, they would buy their glass by the pound, rather than the square foot."

Collins then turned his attention to LEED certification. He said that, in general, achieving Platinum certification will add 6.8 percent to a building's cost, Gold adds 2.2 percent, and Silver 1.0. "We expect to see most people move toward Gold or Silver," he said.

"We are still seeing a ton of activity in door and window companies," he continued. "And the multiples have remained a steady four to seven times EBITA, saving the best nugget of information for close to the session's end. "The problem is that the EBITA has come down in the last 18 months, not the multiples."

It was easy to tell Michael Collins #1 and #2 apart. Michael Collins #2 spoke to the audience with a snappy British accent. Collins #2 is affiliated with BIM World and knows and understands what building information modeling (BIM) will mean to the future. Collins said there are currently more than 300,000 licensees throughout the world.

"First we had line drawings, then AutoCad that you see so prominently today. The difference is that when you make the dwg files, the lines and arcs don't know what they are-a square is a square. With BIM they can live and breathe intelligently. Those squares have information saying whether it's a door or a window or a piece of glass. The whole process is parametric."

Collins used EFCO Corp. as an example ("I'll pick on Dave Hewitt because he's not here," he joked). "EFCO offers one window with more than 6,000 variables. With other programs you have to draw that 6,000 times. With BIM, you make one window and then 6,000 parametric variables. The new generation of Internet-driven design engineers will design this way. It's already here."

The AAMA summer meeting comes to an end this afternoon.

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