Utah Facilities January 2011

IN THIS ISSUE: Snow and Ice Management

2 I UTAH FACILITIES JANUARY 2011

4 I UTAH BUILDINGS FALL 2010

JANUARY 2011

DEPARTMENTS

6 22 24 25 26 30 37

Utah Buildings is now Utah Facilities

Flooring Indoor air quality and floor care

Careers Keys to recession-proofing your career

Fire Alarm Systems Upgrading to new technology

Contracts The anatomy of construction defects

Building Controls Control systems can maximize efficiency

Think outside the cube in an office redesign

Construction Cost of materials flat in Utah

28 Energy-efficient windows capture energy savings

38 40 44 48 50

42

Publisher’s Letter

Public Health Preparing for a pandemic

Fall Protection Building owners are responsible for safety

Janitorial Cleaning for the Holidays

LEED Is LEED EBOM in your budget?

Legal Tax consequences of a commercial loan workout

FEATURES

8 18 20 27 33 46

Developing Downtown Salt Lake City forges ahead, despite economy, with several commercial building projects

Property Manager Todd Maybe, senior property manager for Zions Securities Company

Office Market Outlook Positive trend continues

Property Management Companies Valuing a property management company, beyond profit and loss

BOMA Utah Newsletter Snow and Ice Management Well-run snow management contractors

On the cover: Aerial view of City Creek development. Photo courtesy CCRI.

UTAH FACILITIES JANUARY 2011 I 5

PUBLISHER’S LETTER As you may have noticed, Utah Buildings is now Utah Facilities, Solutions for Building Owners & Managers. This is one of the many exciting changes coming to the publication. We have changed the name to more accurately reflect the magazine’s purpose, which is to help building owners and managers make informed decisions regarding the construction, modernization and management of their facilities. In addition, Utah Facilities will be published bi-monthly rather than quarterly, beginning with this issue.

Involved in a variety of disciplines, facility managers play a significant role in the realization of business objectives as well as the daily operations of buildings and the organizations that use them. Many of our readers are high-level decision makers, contributing to strategic planning. Considering the current economic climate, building owners and managers have a more difficult job than ever.

One year ago financial and real estate experts were telling us to sit tight and ride out 2010 because we wouldn’t see any meaningful economic recovery until 2011. Now the question remains, will 2011 bring a rebound to the commercial real estate sector? Will businesses be willing to expand? Will entrepreneurs be able to launch new companies, and will Utah’s commercial real estate industry see positive growth in leasing and new development?

The outlook for commercial real estate seems to have improved from a year ago, but our enthusiasm should be tempered by the challenges that remain. The frustrating thing is that the future of commercial real estate is not completely within our control.

Whether you are a property manager, building owner, builder or developer, your problems are bigger than real estate, and the answers are beyond the scope of this industry. Problems include jobs, inventory and lending.

Despite optimism about employment growth, nobody knows where the jobs are going to come from. Empty storefronts and vacant offices continue to be a problem and more inventory is coming online. Banks are facing regulatory pressure to clean up balance sheets loaded with overvalued real estate. This trifecta causes many to believe that the other recessionary shoe may still drop. And this fear continues to hurt the commercial real estate industry.

There is some good news. Though economists have toned down their estimates for 2011, most dismiss the likelihood of a second recession. Employment in the public sector has contracted, but the private sector has finally started to add jobs and consumer confidence is up for the fifth straight month. 2011 may be the year that the private sector finally takes over for the public sector in attempting to drive growth.

And if the new Republican Congress cuts government spending, many anticipate a stimulative effect on the economy.

CONTACT Publisher Travis Barrington travis@jengomedia.com

Managing Editor Kelly Lux kelly@jengomedia.com

Editorial Assistant Brooklyn Ashy

Art Director Doug Conboy

Contributing Photographer Dana Sohm

Contributing Writers Brent LaPorte D. Kevin Dyreng Darin Mellott Eric Baxter Jill Rasmussen John Allin Josh Elder

Kyle C. Jones Kynan Wynne Mark T. Woolley Sean Murphy Thomas Carlson Rich Thorn

Utah Facilities Publisher Utah Facilities

The publisher is not responsible for the accuracy of the articles in Utah Facilities. The information contained within has been obtained from sources believed to be reliable. Neither the publisher nor any other party assumes liability for loss or damage as a result of reliance on this material. Appropriate professional advice should be sought before making decisions.

Copyright 2010 Utah Facilities Magazine. Utah Facilities is a Trademark owned by Jengo Media.

6 I UTAH FACILITIES JANUARY 2011

PO Box 970281 Orem, Utah 84097 Office: 801.224.5500 Fax: 801.407.1602 JengoMedia.com

Utah Facilities is a proud BOMA National Associate member.

Lighting Control Solutions Energy Savings With a lighting control system installed by Utah Yamas Controls, you’ll see an immediate return on your energy-saving investment. Compared with other energy-saving technologies, a lighting control system can provide both a lower initial capital outlay and a quicker payback.

Easy Installation (Great for Retrofits) Our Powerlink lighting control systems are housed in the lighting panelboard.

No extra boxes to mount. No relays to wire. No complex panels to decipher.

Installation takes no more time than mounting a standard lighting panelboard.

Code Compliance and LEED Certification The ASHRAE/IESNA standard encourages energy-efficient design for both interior and exterior lighting. Utah has recently adopted energy codes based on these standards. Efficient lighting control is required for certification under the Leadership in Energy and Environmental Design (LEED) initiative.

www.utahyamas.com info@utahyamas.com

13526 South 110 West Draper, Utah 84020 Telephone: 801.990.1950

3284 East Deseret Dr, Suite 7 St George, Utah 84790 Telephone: 435.635.0205

2230 South Cole Rd, Suite 130 Boise, Idaho 83709 Telephone: 208.323.8088

UTAH FACILITIES JANUARY 2011 I 7

Photo courtesy CCRI

8 I UTAH FACILITIES JANUARY 2011

B

etween the City Creek Project, Gateway Five and Six, 222 S. Main, the Hyatt Place Hotel, the Performance Center on Main, the Utah Film and Media Center, Broadway Park Loft, the O.C. Tanner flagship store, the Leonardo, the Public Safety Complex, the Frank E. Moss Courthouse, Harmons, and the Questar Corporate Headquarters, downtown Salt Lake City is rising.

“Salt Lake City is really coming into its own,” said Jason Mathis, executive director of the Downtown Alliance. “The challenges in the national economy have created an opportunity for Salt Lake City to forge ahead.

It has given us a leg up on moving forward to become a real regional capital.”

Looking toward the future, political, community and religious leaders in Salt Lake City have strategically planned the development of downtown Salt Lake City, Mathis said. The City Creek project is the lynchpin in the development of downtown, leading the way for other projects like 222 South Main and the OC Tanner Flagship store, he said.

“We affirm that a vibrant metropolitan center is an important economic engine for the regional community and supports economic development that energizes downtown,” according to the 2010 Public Policy Guide released by the Salt Lake Chamber. “A strong downtown is essential for the economic strength of the entire region.”

Salt Lake City is growing its portfolio of commercial office buildings with Gateway Five, a four-story, 65,000square foot building completed in 2009 by the Boyer Company, plans for Gateway Six, the Questar Corporate Headquarters and 222 S. Main, Salt Lake City’s first LEED Gold Certified high-rise. Developed by Hamilton Partners, the 460,00 square feet of 222 S. Main is nearly 60 percent leased, an indicator of the leasing climate in Salt Lake City.

“We hope that we have made a positive contribution to the overall tapestry of downtown,” said Bruce Bingham, a partner with Hamilton Partners, in reference to 222 S. Main. “Our office building is first class in every way. We see downtown Salt Lake City as becoming nothing but better and stronger as the years go by. …

Pound for pound, Salt Lake City has more going for it than any other city in America.”

The residential component provided by City Creek is also playing a major role in the development of the Central City. Approximately 700 residential units will be constructed in City Creek, including Richards Court and Promontory. The Church of Jesus Christ of Latter-day

Saints’ role in the City Creek residential buildings is serving to bring a new demographic of members of the Church to Utah’s capital. Their participation is portraying a safe, clean and comfortable downtown, Mathis said.

“The residential component of City Creek is wonderful,” said Jake Boyer, president of The Boyer Company. “To get more people living downtown is a positive for everybody in the downtown area.”

Other condominium projects, including the Broadway Towers, the Westgate Lofts and the Patrick Dry Goods Lofts, are also helping to bring young professionals and retired baby boomers to the area, Mathis said. All of these projects could potentially triple the population in downtown, bringing with it significant change and supporting the current development.

“The influx of residential living is an important component to the growth of downtown,” said Danica Farley, public relations representative for the Downtown Alliance. “More residents will make the city more vibrant, as they will be contributing economically to downtown.”

The population growth will be welcomed with retail and office space, introduced as needed, as well as with better transportation to and from the city, within the city and to the Salt Lake International Airport. Residents will also be accommodated with the construction of a fullservice grocery store, the only one of its kind in downtown Salt Lake City. The construction of the Utah Performance Center and the conversion of the Utah Theater into the Utah Film and Media Center will add more entertainment venues to the downtown portfolio, enhancing the nightlife for Utah residents.

“Each project is a big deal in its own way,” said Mathis. “It is easy to get excited about each one of them.”

Salt Lake City will continue to develop its downtown with proposals for a 1,000-room convention center hotel next to the Salt Palace Convention Center, a streetcar line that connects the Broadway District to The Gateway and City Creek and a year-round public market that would be akin to markets in other large cities.

“There is something different everyday,” Farley said.

“We see new businesses all of the time. There is such a vibrancy and a great network of people who all work together ... There has long been the foundation for this to happen. With the right timing and the right people, it all came together.” UF

Downtown stories start on page 10 UTAH FACILITIES JANUARY 2011 I 9

Six Gateway Building Owner: The Boyer Company Building Type: Office Commercial

10 I UTAH FACILITIES JANUARY 2011

S

ix Gateway will be the capstone building to the Rio Grande Street at The Gateway in Salt Lake City’s downtown, completing a multi-use project that began in December 1999 with the $16.5 million renovation of the Union Pacific Depot and opened in 2001 in time for the 2002 Winter Olympics.

“The vision behind the project was to provide a mixed-use environment that would unite retail, office, cultural, residential and entertainment space in a location that would enliven the downtown area and give people in Utah a reason to pass regional suburban malls and head downtown,” said Jake Boyer, president of the Boyer Company, which owns and manages the office buildings at The Gateway. “Over the years, the critics have been silenced by Gateway’s success and its ability to bring people and sales tax revenue back into downtown Salt Lake.”

Six Gateway will add to the continued success of the Gateway and downtown Salt Lake City, Boyer said.

“Six Gateway is another addition to a lot of great stuff going on in terms of growth in our downtown,” said Boyer.

“The Gateway is an important part of the downtown area.”

The Boyer Company carefully considered what to build in the vacant lot, contemplating the construction of a Nordstrom or another large retailer on the site. Eventually, the company responded to the needs and demands of the market and settled on building more office space. Boyer was close to moving forward on the project nearly two years ago when the economy collapsed. At that time, the company and its investors decided to “put the project on ice”and wait for the economy to turn, Boyer said.

Now, a year and a half later, the financial market has stabilized and tenant interest has increased enough to breathe new life into the project, Boyer said. The Boyer Company is currently negotiating leases with several companies in hopes to secure an anchor tenant and generate more leasing interest. If all goes well, construction on Six Gateway could begin as early as the

end of 2010 with a year-long construction schedule. The completion of Six Gateway will bring the total office space of The Gateway to approximately 760,000 square feet.

“Six Gateway will further build upon the success of the other office space being built in the area,” Boyer said. “We are excited about what it will do. We are excited about The Gateway’s continued success.”

The 105,000-square foot, five story, Class A building will be the sixth and final office building at The Gateway, an open-air destination providing shopping, dining and living in one location. Positioned adjacent to the newly built 128-room Hyatt Place hotel and the Fidelity Investment building, Six Gateway will have views of Rio

Utah Performance Center on Main Building Owner: Salt Lake City Building Type: Arts and Culture Building

T

he Utah Performance Center on Main will be a 2,500-seat theater for Broadway shows and other community activities and events. As a continuation of City Creek, the Performance Center will “provide an economic catalyst on Main Street through a state-of-the-art venue for arts enthusiasts that will present touring Broadway, local performances, and exceptional cultural experiences to engage, excite, unite and inspire,” according to the Salt Lake City Redevelopment Agency.

A development team, which includes Swisher, Garfield, Traub as the developer, VCBO Architecture and

Grande Street and the Olympic Legacy Plaza. Designed by Babcock Design Group, Six Gateway will be similar in design to the Union Pacific Station with a red brick facade rather than the stucco used on the other Gateway buildings. The building will likely be Leadership in Energy and Environmental Design (LEED) Certified and will have the most advanced mechanical systems available.

“Once people see it coming out of the ground, it will generate a lot of interest,” Boyer said. “There is office space to be found in downtown, but this type of product in this type of environment is not as common as you might think. So it is pretty appealing.”

Historically, The Gateway has had few vacancies and currently is leasing 98

percent of its office space. Its location and amenities play a vital role in its appeal, Boyer said. Its proximity to Interstate 15, Trax, the commuter train and the future light rail make The Gateway offices ideal for many tenants, Boyer said. With 13 full-scale restaurants, a food court, a fitness facility and the Hyatt Place hotel, the amenities are hard to beat. Employees have easy access to shopping, the Olympic Legacy Parkway and other downtown sites. Additionally, Boyer said, The Gateway provides a safe environment for its tenants and patrons.

“The Gateway is a place for people to office, to live, to work, to shop and to play,” Boyer said. “It is the whole experience. A 24-hour, seven-day-aweek experience.”

Moshe Safdi as the architects and Hamilton Partners as the private developer, is moving forward on the financing and feasibility of the Performance Center. The proposed facility will be approximately 148,000 square feet, with an estimated 150 performances per year and close to 300,000 patrons annually. The Center is expected to have a yearly citywide economic impact of $27.3 million.

In addition to the Performing Center, Hamilton Partners plans to develop an office building on the corner of Main Street and 100 South. Still in the conceptual design phase, the office building is expected to be approximately 400,000 square feet with about 20 stories. Hamilton Partners will not begin construction on the building until the economy has stabilized and the market has need of more office space, said Bruce Bingham of Hamilton Partners.

“We believe that the office building and Performing Center will be a complement to the quality and design of City Creek,” said Bingham.

Lisa Harrison Smith, deputy director of communications for the RDA, said the Utah Performance Center is still in the early stages of development. Before construction can begin, the RDA will be

working to finalize a plan of finance, perform fiscal and economic impact study, finalize operating models and market analysis and analyze theater impact on existing venues and arts groups. Once the design has been completed on the Center, construction will take approximately 36 months.

Once approved and complete, the Utah Performance Center will increase the livability and viability of downtown Salt Lake, Harrison Smith said. The Center will draw visitors who will patronage local restaurants and businesses, acting as an economic driver for the city, she said.

“The performing arts center will be a centerpiece of Main Street attracting arts lovers, building new audiences for all downtown arts organizations, generating stronger patronage for downtown businesses, raising property values and welcoming the region to Utah’s Capital City,” according to the RDA. The conversion of the Utah Theater into the Utah Film and Media Center will also complement the Performance Center.The RDA, which owns the Utah Theater, wants to phase this development with street front retail or development of art and cultural facilities.

UTAH FACILITIES JANUARY 2011 I 11

Frank E. Moss Federal Courthouse Building Owner: General Services Administration Type: Commercial Office

T

he General Services Administration will own, operate and manage the new federal courthouse which will be built on the former site of the Historic Odd Fellows Hall on the block between 300 and 400 South and

City Creek Building Owner: City Creek Reserve, Inc. Building Type: Mixed-Use

C

ity Creek, a 20-acre mixed-use development project sponsored by The Church of Jesus Christ of Latterday Saints, is an integral part of the revitalization of downtown Salt Lake City. The project, one of the biggest developments in the United States with eight office towers, a department store-anchored regional shopping center, 700 residential units and 5,000 underground parking stalls, is nearing completion after nearly 10 years since the project was first conceived.

“We are in the final miles of a marathon,” said Mark B. Gibbons, president of City Creek Reserve, Inc., the downtown Salt Lake City redevelopment arm of the LDS Church.

“Today we are probably at the 23-mile mark of that 26-mile marathon.”

On March 22, 2012, the 900,000 square-foot City Creek retail center, anchored by Nordstrom, located mid-block on West Temple, and Macy’s, located on the east side of Main Street, will open, concluding the final piece in the construction of the three-block project. Managed mostly by Taubman Centers, more than 80 retail stores, some open air and some located beneath a retractable roof, will flank Nordstrom and Macy’s, bringing more than 2,000 jobs to downtown. The total retail square footage will be less than was available before the City Creek development began to better accommodate The Gateway, allowing both projects to coexist and remain 12 I UTAH FACILITIES JANUARY 2011

viable to downtown, Gibbons said.

A food court opened in the summer of 2009 and currently has nine operating kitchens. Vendors include A Taste of Red Iguana, Bocata, Chang Chun, Great Steak, McDonald’s, Roxberry Juice, Sbarro, Subway and Suki Hana. Harmons Grocery Story is currently building a full-service grocery story at 135 E. 100 South.

By reconfiguring the available retail space in downtown, CCRI hopes to revitalize the Center City and strengthen Utah’s economy, Gibbons said. More than 10 million visitors are expected to visit City Creek per year, doubling the number of yearly visitors to Temple Square, he said.

CCRI hopes the development and the addition of 800,000 square feet of residential space will encourage population growth in downtown. Approximately 700 residential units will be built, some of which will be rentable properties. The residential buildings, Richards Court, The Regent at City Creek and Promontory, should all be completed by mid-2011, he said.

The 2.1 million square-feet of office space will also be vital in revitalizing downtown, Gibbons said. A six-story office building is under construction on South Temple and is expected to be complete by mid-2011. The KeyBank Tower has been remodeled. The Deseret Building, also known as the First Security Building, has been almost completely restored and is now “a beautiful jewel,” Gibbons said.

The entire development will encompass green space, water features and open walkways. The flow path of the south fork of City Creek, the lifeblood for the Mormon pioneers who first arrived in the Salt Lake Valley in 1847, will be reintroduced into the development as part of the seven acres of gardens and landscaped open space. Walkways will follow historic routes from pioneer days, allowing mid-block access to residential,

Main Street and West Temple.

A new federal courthouse was necessary for Salt Lake City because the Frank E. Moss Courthouse does not have sufficient security nor does it meet the new standards for federal courthouses, said Al Camp, GSA project manager on the courthouse project.

The GSA will be responsible for the 409,000 gross square-foot building, comprised of 10 stories of aboveground office space and two stories of underground parking. The building will consist of 14 courtrooms, 16 judge’s chambers, a floor for U.S. Marshal’s Services and space for other administrative uses, Camp said.

Planned to be built under the LEED (Leadership in Energy and Environmental Design) Gold standards, the Federal Courthouse will have high-efficiency boilers, chillers and glazing. The building control system will also be comprised of the most up-to-date technology, minimizing the building’s energy consumption.

“The whole building is kind of a special feature,” said Sergey Akhpatelov, associate with Naylor Wentworth Lund Architects, the architectural firm on the project.

Okland Construction, who was awarded the bid on the project, will

office and retail elements of the community.

To maximize the available open space, all parking at City Creek will be underground. Approximately 5,000 stalls will be available for retail, residential and office parking. Gibbons boasted about the innovative features of the parking garages, noting flat parking decks, columns which are only located at the tops of parking stalls and highly-automated parking machines.

Once completed, the entire development will revitalize

begin construction on the courthouse once final approval has been given on the funding. The building will take 38 months to build. The U.S. Federal Courts will be moved into the new building upon completion, at which time the Frank E. Moss Courthouse will be renovated to later house the Bankruptcy Court and the U.S. Attorney’s Office.

“The economy is such that the bidding climate is favorable. It is the perfect time to build, from an owner’s perspective,” Camp said. “We are anxious to move forward on the construction funding and build it.”

downtown Salt Lake City, ensuring a viable future for Utah’s residents, Gibbons said. Not only will City Creek breathe new life into Utah’s City Center, it will also “preserve and enhance the world headquarters of the Church of Jesus Christ of Latter-day Saints and respect the history and the heritage that exists in that location,” Gibbons said. “It is a gift to this city, this community and this state by the Church of Jesus Christ of Latter-day Saints.”

UTAH FACILITIES JANUARY 2011 I 13

Rendering courtesy EDA Architects

The Leonardo Building Owner: Salt Lake City Building Type: Art, Culture and Science Center

W

hen The Leonardo opens in the spring of 2011 in the renovated Salt Lake City Main Library, the building will operate on updated mechanical and electrical systems, contributing to the energy efficiency of the more-than 50-year-old structure, located at 209 E. 500 South.

The 113,000 square-foot building is being converted into a museum for onsite exhibits, workshops, classes and teacher training that explore the multidisciplinary worlds of science, 14 I UTAH FACILITIES JANUARY 2011

technology and art, courtesy of The Leonardo, said Larry Migliaccio, The Leonardo project manager. The renovation of the building, which began in July 2010, is being funded through a $10.2 million bond. The building will be completely remodeled inside, while the exterior of the building will be enhanced and preserved. “We are trying to upgrade systems so they meet current building codes and last another 50 years,� said Fred Broberg, a mechanical engineer with Colvin Engineering Associates and senior project manager on The Leonardo.

All of the old electrical systems will be replaced with up-to-date, energyefficient systems, said Dave Whitton,

principal at Envision Engineering, electrical consultants for The Leonardo project. The transformers, which were old and leaking, are being replaced with new, pad mounted oil transformers.

New electrical panels will be installed.

And wiring devices will be replaced with new switches and outlets.

A 30 KW photovoltaic system will be installed on the roof to generate additional energy for the building.

New, more energy-efficient light fixtures will be used throughout the building. Daylight harvesting, a control system that reduces the use of artificial lighting provided by interior electric lamps by utilizing natural daylight instead, will be implemented in offices with perimeter windows.

Questar Corporate Headquarters Building Owner: Wasatch Commercial Management Inc. Building Type: Commercial Office and Retail

C

onstruction has begun on the six-floor, 171,000 square-foot Questar Corporate Headquarters, with plans for tenants to occupy the space at 333 S. State Street by February 2012. The shell and core of the building will be complete in August 2011, at which time the building will be turned over to Questar for tenant improvements.

Wasatch Commercial Management Inc. is developing the new office tower, which will house 600 Questar employees, as a new LEED Silver-certified building. In addition to the office space, the ground floor of the building will have 6,500 square feet of retail and restaurant space. Wasatch is partnering with Zions Bank to build the $45 million building. Sub-contractors on the project include EDA Architects, Inc., Dunn Associates, Colvin Engineering Associates, Inc., EELD Associates, Psomas Engineers and Arcsitio Landscape Architects.

Wasatch Commercial Management will manage the Questar building in addition to the City Center building, which occupies the same block, adding to its already extensive downtown building portfolio of the Wells Fargo Center, the Ken Garff building and 50 and 80 West Broadway buildings.

As general contractor and owner of the building, Wasatch Commercial Management has a vested interest in ensuring long-term durability while lowering life-cycle and maintenance costs. Tait Ketcham, principal at Dunn Associates, the

Additionally, the HVAC, mechanical, plumbing and fire protection systems will be completely updated in the building, said Broberg. The HVAC system will have new coils and controls. New plumbing and piping fixtures and the addition of overflow drains will bring the building up to code, he said.

“We are replacing older equipment so it will last longer. Putting in new controls so it will control better,” said Broberg.

“We are updating it to meet current building code, which is important for life safety and ventilation.”

The combination of the new mechanical and electrical systems will

structural engineers for the Questar building, said the project is a good example of value engineering, the process of finding a system or product that saves money without sacrificing function.

Communications between Wasatch and its architects and engineers has been thorough and efficient, contributing to a more economical build of the Questar building, Ketcham said.

For example, when the tenant, Questar, requested some design revisions on the building, Wasatch was able to participate in the discussions regarding the changes.

“They were able to coordinate with the sub-contractors to implement those changes in a way that was quicker than the former process of revising and submitting changes for approval,” Ketcham said. “They were able to inform their subs of upcoming changes sooner than what would have otherwise been accomplished. Obviously as a design evolves, there are changes that occur. With Wasatch building and owning the building, they can comprehend the impact of those changes more fully.”

Not only is Wasatch making the most of its position as general contractor, the company is also making the most of the current economic conditions in Salt Lake City. John Dahlstrom, executive vice president of general council of Wastach Commercial Management, said the timing of the construction of the Questar building couldn’t have been better with the City Creek development nearing completion and the low cost of building supplies. And since the building will be mostly occupied by Questar, the additional office space to downtown Salt Lake City should have minimal impact on the market, Dahlstrom added.

“We think the timing is perfect,” Dahlstrom said. “We hit the building market at a time when a lot of projects were on hold, and those that were being developed were reaching the end of their development cycle. It is a favorable time in the economic construction cycle in Salt Lake City to build at a cost that we couldn’t have a year or two ago.”

contribute to the building acquiring LEED (Leadership in Energy and Environmental Design) Silver Certification, a new requirement of all Salt Lake City-owned buildings. In addition, the seismic upgrades and the abated asbestos will contribute to a healthier and safer building for tenants and visitors.

“Many changes will take place that will not be visible to people who are walking through the building,” Broberg said. “But the building will function better overall.”

The renovation of The Leonardo is expected to be complete in the spring of 2011, with an opening date scheduled for April 15. Ascent Construction is the general contractor on the project. AJC Architects were the designers on the renovation.

“This will be a show piece for the residents of Salt Lake City and is expected to be a draw for tourism,” said Migliaccio, who works for Parsons Brinckerhoff.

UTAH FACILITIES JANUARY 2011 I 15

Harmons Building Owner: Harmons Building Type: Commercial Grocer

C

onstruction has begun on the 43,410 square-foot City Creek Center Harmons, the only full-service grocery store in Salt Lake City’s central business district.

“This will be the first grocery store to really be right downtown,” said Frank Lundquist, vice president of store development for Harmons Grocery Stores. “I think there is a definite need for a grocer down there.”

Harmons had been looking for a site to build a downtown store when the Church of Jesus Christ of Latterday Saints invited the grocer to be a part of the City Creek development, offering the site at 135 E. 100 South for the construction of the building.

“We’re certainly grateful to the LDS Church for seeking our local grocery chain for this opportunity, and we’ve been researching, planning and testing the latest trends in fresh foods, services and processes in the grocery industry since the announcement of this store nearly four years ago,” said Bob Harmon, coowner and vice president of Harmons.

As part of the City Creek Center, Harmons will provide downtown residents with signature fresh foods, including artisan bread, a carving

16 I UTAH FACILITIES JANUARY 2011

station with hot entrees, Italian gelato and a large delicatessen full of freshlyprepared foods, said Lundquist. The ground level of the grocery will house fresh foods, a pharmacy, a floral department, a deli, a pizza oven, a gourmet cheese island, salad and olive bars, a custom meat counter, a produce department and other groceries. The upper level will consist of a 18,412 square-foot mezzanine with a credit union, a Temper gourmet cooking product section and a cooking school, much like the Bangerter Crossing store, he said. An upscale seating area with a fireplace, couches, tables and chairs and Wi-Fi access will be available to customers.

Due to limited surface parking in downtown, a parking garage, fully equipped with elevators, will be built above the store — an unusual feature for a grocer in Utah.The parking garage will mimic those found above grocery stores in San Francisco and Los Angeles. Two hundred stalls will be available for Harmons customers, with the remainder being reserved for the LDS Church. Lundquist said the enclosed parking structure will be

especially beneficial during rain or snow storms, helping to keep customers and their groceries dry. He suspected that management of the garage would require a slightly different skill set than management of the typical field parking found at other Harmons.

Harmons City Creek will look quite different from the traditional Harmons stores. The company has decided to forgo its traditional solid brick design, replacing the facade with expansive glass exteriors, complying with downtown ordinances, Lundquist said.

The design and construction team on the downtown Harmons includes Okland Construction, Skidmore, Owings and Merrill, LLC, Prescott Muir Architects, City Creek Reserve, Inc, MHTN Architects, Spectrum Engineers and Professional Engineering Services. Construction on the City Creek Harmons is expected to be complete by late 2011.

“Harmons is doing its part to boost the local economy through the City Creek project, and we appreciate the community’s enthusiasm and support of our locally-owned downtown store,” said Harmon.

Keeping Up with the Jones’ Building Owners Turn to Tenant Improvements, Renovations to Stay Competitive

N

early 10 years ago, Layton Construction Company started Interior Construction Specialists, Inc. to meet the needs of commercial tenant improvement, renovation and remodel markets. Their services have been especially beneficial for owners and tenants of Salt Lake City’s downtown office buildings who are trying to stay competitive in a market where a significant amount of new office space is being introduced, said Alan Rindlisbacher of the Layton Companies.

“The bottom line is there is activity going on in downtown and it is opening up opportunities for tenant improvement,” Rindlisbacher said. “It is all part of the fact that downtown is rising.”

As Hamilton Partners secures new tenants in its Boston Building in downtown Salt Lake, tenant improvement work is being completed throughout the entire building, as well as a core upgrade including HVAC and seismic work. Recently, EDA Architects relocated to the Boston Building after 20 years in the Broadway Center. The 7,400 square feet now occupied by EDA was renovated to show the history of the downtown office building. Demolished interiors were from an earlier era where all elements of the building’s structure

were hidden behind drywall and dropped ceilings. The space now has exposed floors, beams, columns and masonry and includes 40 workstations, multiple collaborative breakout spaces along with large conference spaces.

“The move to this historic structure symbolizes EDA’s continued commitment to the downtown community,” according to EDA’s website.

PriceWaterhouseCoopers, an accounting firm, is also moving into space that was recently renovated by Interior Construction Specialists in the One Utah Center on Main Street. The 4,700 square feet of office space will be completed by early January 2011.

Organizational changes associated with KSL TV, KSL Radio and the Deseret News led to the renovation of two floors of the Triad Center. Build-out is also occurring on two additional floors of the Triad Center.

In the past decade, Interior Construction Specialists has completed nearly $500 million in renovations and tenant improvements. That work comprises a long list of “small projects” that have added up to big business for tenants such as American Express, CB Richard Ellis, Discover Card Services, Ernst & Young, Holme Roberts & Owen and Squatters Pub Brewery. UF

Interior of EDA Architects office space in the Boston Building.

Photo courtesy Chris Knoles of The Layton Companies UTAH FACILITIES JANUARY 2011 I 17

Communication Key to Effective Property Management

By Kelly Lux

T

odd Maybe was introduced into the property management world at a young age. His father, who was a building manager in downtown Salt Lake City, would bring the young Maybe to work with him and show him the chillers and the high speed motors that kept the buildings operational.

During these outings, Maybe learned to love building equipment and systems.

“I’ve been around this stuff for a long time,” said Maybe, who is now the senior property manager for Zions Securities Company LLC. “Buildings intrigue me.”

Maybe was employed as a master electrician in the 1980s when his father invited him to work at the JCPenney on 310 S. Main in Salt Lake City as a building engineer. Maybe accepted, wanting to come in from the cold.

Eventually, Zions Securities offered Maybe his father’s job managing the JCPenney Building. Maybe had been anticipating the offer and had prepared himself by going back to school and getting his bachelor’s degree in business management. Maybe would later become the senior property manager for Zions Securities.

“I wanted to get rid of my suit and put my Levi’s back on and actually take care of the equipment side, where you can see what is broken and you can go in and take care of it and see the results of your work,” Maybe said.

18 I UTAH FACILITIES JANUARY 2011

Todd Maybe, Senior Property Manager for Zions Securities Company. Photo by Dana Sohm.

property manager “I am very interested in what makes the buildings tick and the structure of buildings.”

Primarily over the management of the 500,000 square-foot Triad Center, located at 55 N. 300 West in Salt Lake City, Maybe manages the operations staff for each building at the Triad Center and works with another property manager who oversees additional properties owned by Zions Securities. The complex nature of the commercial property of the Triad Center can be challenging at times, Maybe said. The Triad Center consists of the BYU Salt Lake Center, the LDS Business College, the Devereaux House, the Carriage Cafe and two other office buildings, as well as parking facilities, creating a challenging mix to manage.

“It is such a big mixed-use property and there are so many different people involved that I sometimes feel like I am the juggler keeping the stack together and keeping it moving,” Maybe said. “I just have to make sure that everyone is aware of the changes and that we make sure we consider everyone who is involved.”

As an older facility built in 1984, Maybe said the Triad Center is undergoing a series of upgrades, including restoration work, modernization of elevators, fire system upgrades and new, energy-efficient mechanical systems. All of these changes require Maybe to maintain communications with all tenants, keeping them involved and aware of what is going on in their buildings.

These upgrades are part of Maybe’s focus on preventative maintenance. He believes that foresight in determining what systems need to be maintained and what systems need to be upgraded is the best way to protect the building owner and their assets.

“It is just putting that five-year plan together and making sure that you put forward the work and the effort to make sure it is the best solution to fix problems

or upgrade systems,” Maybe said.

Besides maintaining the building, Maybe feels it is also important to keep tenants happy.

“I want to make sure the property looks nice, that people are treated fairly and honestly and that the tenants are respected,” Maybe said. “We make sure we take care of our tenants and that they are happy with the services they get from us. … I wouldn’t be in business if the tenants didn’t want to be in my property, if I didn’t treat them fairly and provide them with the services that they need.”

This management style may be part of the reason why the Triad Center is at full leasing capacity. The economy has had little impact on the property, Maybe said. Operating as an educational center has also played a role in the buildings’ success and its future, which is to convert the entire

Triad Center into an education facility.

During this transition, Maybe plans to continue with operations as usual at the Center. And, as the president-elect of the Building Owners and Managers Association of Utah, he will continue to look for new opportunities to improve his skills and gain knowledge about the industry.

Maybe believes that participation in BOMA, or any similar organization, can be a great benefit to property managers. BOMA provides opportunities for building owners and managers to exchange ideas and perspectives. Maybe calls it education without the cost of tuition.

“It goes way beyond being a member of an organization and having lunch,” Maybe said. “It is school in itself. It is a place where you can better yourself and improve your skills.” UF

UTAH FACILITIES JANUARY 2011 I 19

Photo by Dana Sohm

Office Market Outlook for 2011 Positive Trends Expected to Continue, Improve Steadily

By Darin Mellott

O

ffice demand picked up during 2010, but remained at subdued levels. Looking ahead to 2011, it’s expected the positive trends will continue and steadily improve. Much like 2010, the first half of 2011 will be affected by a handful of large transactions.

The Cottonwood submarket is probably the most dramatic example of how large transactions can inflate market indicators.

When several tenants move into their recently leased space during the first half of 2011, Cottonwood Class A vacancy is estimated to fall to around 3 percent. This year, Cottonwood’s performance will be most affected by Fusion-io, a relatively new company that is developing solid state storage products. Their expansion at the Cottonwood Corporate Center will total almost 118,000 square feet, or roughly 8 percent of Class A space in the entire submarket. Although this rebound is exemplary, not all

20 I UTAH FACILITIES JANUARY 2011

submarkets will achieve anywhere near that level of success in 2011.

A few key developments will aid recovery on a market-wide basis over the next year. First, most office space inventory will be on the market by the beginning of 2011, including former single tenant properties. Additionally, the duration of the “Great Recession” and accompanying problems in the financial sector caused a tremendous restriction in credit availability. As a result, many projects were not funded, preventing large amounts of new supply from entering the market.

Without new office construction, demand will increase for existing space, allowing the market to more quickly reach supply and demand equilibrium. Vacancy rates can be expected to decrease this year and asking lease rates will stabilize. High demand areas are even likely to experience upward pressure on asking lease rates by the second half of the year.

Furthermore, favorable demographics, which cushioned the

state’s economy from reaching lower levels, will amplify positive trends during the coming year.

Current economic forecasts for 2011 give reason to be optimistic.

Arthur Jones, senior economist at CB Richard Ellis Econometric Advisors (CBRE-EA), expects job growth in Salt Lake to outpace 2010 levels and accelerate during the second half of 2011. Professional service sectors, which drive office growth in particular, will show a marked improvement during the coming year.

By the second quarter of 2012, CBRE-EA expects a total of just more than 16,000 new office jobs to be created before normalizing at historic trend levels. Office product in Salt Lake will benefit more than other markets due to a local economy that is strongly oriented toward professional services.

Although Salt Lake’s economy boasts many favorable attributes that will help it recover, a dramatic turnaround in demand for office space

office market outlook should not be expected. However, conditions will continue to improve and outperform national averages. Many of the same business strategies implemented during 2010 will be required in 2011.

From a property management perspective, not much changes according to Gary Coker, managing director of Asset Services at CBRE. No matter what the general economic outlook, Coker said, “Sound property management fundamentals are always important, but in a downturn, we place an even stronger emphasis on tenant relations and retention.” CBRE building managers strive to find and employ the most cost effective methods to maintain assets.

According to Coker, “Our managers focus on lowering operating expenses, which become even more critical to preserve asset values during a downturn.”

From a leasing perspective, landlords need to remain aggressive. Although demand trends are encouraging, large amounts of shadow and former single tenant space entered the market over the last year. For that reason, vacancy continues to remain at elevated levels in spite of a return to positive absorption.

Incremental improvements in demand will not translate into decreased competition for landlords during the nearterm due to an excess amount of inventory already on the market in most areas.

Moving forward, new space utilization techniques will be a drag on demand. One of the most dramatic examples nationally, is the accounting firm Deloitte’s new headquarters in San Francisco. Although the company plans to increase its current workforce by 10 percent, total square footage occupied will shrink by roughly 40 percent.

Similarly, in Salt Lake City, investment firm Goldman Sachs is on the cutting edge of creating more efficient workspaces. Goldman will be locating an estimated 1,250 employees in 154,000 square feet of office space, or 123 square feet per employee. Deloitte’s plans allocated almost exactly 100 square feet per employee.

Both Deloitte and Goldman represent a dramatic departure from the 200 square feet per employee average

currently used to calculate space needs.

Interestingly, companies will now be able to lease space in newer buildings that can handle increased density, feature green technology and boost prestige, all while paying lower rent on a per employee basis. First Vice President Tab Cornelison at CBRE commented about recent trends saying, “When organizations evaluate their office needs, they are focused on employing the most efficient and creative office designs available. Additionally, tenants are expecting deep discounts due to the generally subdued state of the economy.”

The year 2011 will not usher in the same type of euphoric growth that was observed in commercial real estate during the last decade. Barring any external economic shocks, 2011 will be much like 2010 with incremental improvement, but at an accelerated rate.

Aside from a few large movements, underlying trends will be less impressive.

Consistently robust absorption will only return as the job market recovers. Furthermore, tenants

will require less square footage as office spaces are designed to be more efficient.

Lease renewals during the coming year will be signed in many cases by organizations that emerged much leaner from the recession. As a result, space inefficiencies created by work force contractions will be correcting themselves, further dampening growth.

Continued challenges facing the market will require landlords in particular to maintain an aggressive approach to their business.

Darin Mellott is a research analyst at CB Richard Ellis. Additional contribution and editorial review by Stephanie Marthakis, research manager at CBRE. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.Visit their website at www.cbre.com/slc. UF UTAH FACILITIES JANUARY 2011 I 21

Proper Floor Care Improves Air Quality

By Thomas Carlson

C

onserving natural resources and improving the indoor environment of retail locations to make it more advantageous for customers to visit is a common interest among building owners. The causes of poor indoor air quality are better understood today, yet options that lead to better air quality are sometimes overlooked. Not only are basic design elements, such as ventilation systems, critical, but architects, designers and facility managers need to also recognize the impact of building materials and cleaning processes.

The choices we make for carpet cleaning can impact these environmental concerns and should be taken into consideration. Along with the focus of using environmentallyfriendly (green) cleaning products, it is also important to review the amount of water used during cleaning and the amount of organic particles (mold spores) released into the air due to excessive moisture in the carpet.

Dusts and bio-aerosols are common contributors to ongoing poor indoor air quality. (Bio-aerosols can be pollen, bacterial, fungal or mites.) Therefore, it is essential that buildings be kept clean and dry. Poor cleaning practices will contribute to the accumulation of dusts and biological debris.

Inadequate frequency of cleaning or incorrect cleaning can result in poor indoor air quality due to soil contaminates that build up in the carpet without proper removal.

Airborne particulates and organic growth increases as the soil levels grow.

The introduction of substandard cleaning chemicals can trap and attract soil more rapidly.

For decades, the popular choice for carpet cleaning has been hot water or 22 I UTAH FACILITIES JANUARY 2011

steam extraction, which utilizes a high volume of water and detergent solution to rinse the soil from the carpet.

This method takes an extended time to dry and the moisture left behind can breed mold and mildew spores that may be released into the indoor environment. Some extraction chemicals can also cause rapid re-soiling due to the detergent residue left in the carpeting after it dries. This method should only be used for restorative purposes and be followed by fans that dry the carpet as quick as possible.

Another alternative is dry compound “powder” cleaning. This absorbent mixture, resembling wet

Indoor Air Quality • The levels of some pollutants in indoor air have been found to be considerably greater than in outdoor air.

• The average person spends approximately 90 percent of his or her time indoors.

• OSHA estimates 30 percents of commercial buildings have indoor air quality problems — potentially affecting about 21 million people.

sawdust or powder, is spread over the carpet. A machine brushes the mixture into the carpet to absorb the dirt. When the mixture dries, it is vacuumed out.

This method does not have overwetting or moisture concerns, but certain soil levels might not be fully removed and powder particulates are

sometimes left in the carpet and may be released into the indoor environment.

This method usually requires an annual hot water extraction to remove any powder or excessive soil residues.

A technology that is gaining strength for retail spaces is low moisture encapsulation cleaning. Encapsulation utilizes a specialized polymer technology that removes soil from the carpet fibers and encapsulates or surrounds it in a crystalline coating that dries brittle for easy removal with a HEPA filter vacuum. This method utilizes a foam/spray application with brush or pad agitation which minimizes the water required for effective cleaning.

The following are the most noteworthy benefits of encapsulation carpet cleaning: • Powerful Polymers: These detergent polymers encapsulate and suspend ground-in dirt. The polymers also enhance the efficiency of routine vacuuming, allowing for continued removal of residual soils after the initial application. This preserves the appearance of the carpet fiber long term with less disruption.

• Stain Resistant: Encapsulation solutions also contain stain resistors that provide superior protection from acid dyes commonly found in food and other items.

flooring • Surface Tension Modifiers: These chemicals enhance the product’s efficiency and are particularly effective in removing oils and greasy dirt found in many commercial carpets.

• Continued Protection: Correct cleaning frequently, utilizing high quality encapsulation products, can keep the carpeting looking great with little visual degradation between cleanings due to the soil and stain resistant properties that are introduced with each cleaning.

• Water Conservation: Significantly less water is used for encapsulation cleaning versus conventional hot water extraction, which enables use of carpeted areas sooner. This keeps the carpeted areas accessible to

customers and also eliminates problems which can be caused by lingering moisture.

• Indoor Air Quality: Creates fresher, healthier environments by reducing odors and soiling caused by either excess water or sticky residues. Organic compounds such as oils, particulates, mold, mildew and fungus are encapsulated and many times eliminated from existing contaminated carpet.

• EPA (dfe) designed for the environment “Green”: dfe Certified encapsulation carpet cleaning products will not harm the environment. They are free of hazardous air pollutants that can negatively affect indoor air quality.

In addition, the product contains a light, clean, fresh scent as opposed to unpleasant chemical odors,

which are emitted from traditional carpet cleaning solutions.

With Indoor Air Quality (IAQ) being an area of increased government and building occupant concern, it is apparent that the focus on cleaning will be equally important for health reasons as well as appearance levels. An efficiently planned, regular maintenance program for your commercial carpet will create a more pleasant environment for your customer, prolong carpet fiber life and improve carpet appearance. The correct carpet cleaning methods will help conserve natural resources and provide a clean indoor environment for your patrons.

Thomas E. Carlson, president of Commercial Service Solutions, has nearly three decades of experience in all aspects of the carpet industry, including production, installation and maintenance. UF

UTAH FACILITIES JANUARY 2011 I 23

careers

Keys to Recession-Proofing Your Career in Property Management

A

s the nation struggles through the current recession, the unemployment rate remains unstable, threatening the stability of many property manager’s careers.

Proactive measures like increasing your job performance and setting goals can help to recession-proof your career.

“To recession-proof your career, do an honest self-assessment, accept the truth and move forward to change your future and your career,” said Michael Cowley, president of CE Maintenance Solutions, at the Facility Decisions Conference & Expo in Las Vegas. Property managers who want stability in their careers should analyze their job performance through honest critiques, performance appraisals and peer evaluations, he said.

Honestly assessing your career is the first step to solidifying your employment during unstable times, Cowley said. Ask yourself whether you are below average, average or above average, he suggested.

Most people feel they are above average.

The reality is, however, that most people are average, meaning you get to work on time, complete assignments, do what is expected and do it well, he said. Striving to be above average, going above and beyond the call of duty, will place you above your peers.

24 I UTAH FACILITIES JANUARY 2011

“Ask what makes you special. If you want to grow, you have got to be special,” Cowley said. “That is the key to promotion.That is the key to your future.”

Cowley offered several suggestions on how to become an above average employee: continue your education, volunteer for assignments, join professional organizations or become a teacher.

Put some effort into increasing your knowledge about your profession, Cowley said. He suggested taking courses, attending training seminars and educational conferences and signing up for Webinars. Read books and magazines relative to your industry, he added.

“There is a bunch out there. There is a bunch you can learn,” Cowley said.

“Pursue higher education. It will give you information and skills to learn and to grow.”

Offer to do something outside of your normal assignments and duties without being asked, Cowley suggested.

Help with meetings. Volunteer to speak at conferences. Do something that makes you uncomfortable, he said.

“Your boss will be surprised and impressed,” he said. “He will know he can depend on you.”

There are hundreds of professional

organizations available for property managers to join. Find one that is right for you, Cowley said. Choose one that allows you to network with peers in your profession who will understand your world. Networking allows you to gain knowledge and develop new ideas. It can also open up new job opportunities.

Teaching courses or seminars on property management is the best way to learn more about your profession, he said. You learn more as a teacher than you do as a student.

“Be a teacher of your profession, not a student. Be a player, not a pretender.

Be a leader, not a follower,” Cowley said.

“Teach a class in your facility or maintenance organization to share your knowledge. Assist those entering the profession by becoming a mentor.”

Distinguish yourself from your peers by always looking toward the future and investing in your career, he said.

“Step out of your comfort zone, take a long look in the mirror,and begin planning for your future,” Cowley said. “Maintenance needs and expertise will always exist, so if you have the credentials and the drive, the profession will need you.” UF

fire alarm systems

Technological Changes in Fire Alarm Systems Require Upgrades

By Josh Elder

W

ith the constant technological advances in our world, it’s not surprising when we are told that our laptop computers are simply too old to upgrade or repair and that our Smartphones are simply antiquated.

We are then forced to break into our wallets and spend a few hundred or a few thousand dollars on the new and improved version. For the most part, we all have come to accept this in our lives and budget accordingly. But what about other types of equipment that utilize processors or electronics, are they any different? And what about technology that protects life and property?

Fire alarm systems have been around in some form for many years.

Like anything else that is electronic or technology based, alarm systems started out in a simple form with simple functions and have evolved into what can be a complicated system of panels, devices and technical building integration. Fire alarm systems utilize circuit boards and processors, just like your laptop and smart phones. And just like those pieces of technology, they can wear out or become antiquated to the point that they are simply too difficult or impossible to repair or even find parts for.

Fire alarm systems are generally designed to last 10 to 15 years. They can last longer with proper maintenance and/or limitation on expansion, but maintenance is vital.

Once these systems get a certain age, the technological advancements simply outpace the demand for the old parts or support. It is common for major manufacturers to simply stop supporting the old technology. In most cases, the old technology cannot meet

the new code requirements or the spec requirements of the engineer. (This is a common practice for all types of

electronics and software; try getting a 15-year-old laptop repaired.) It then can become problematic to repair older systems and even more difficult to expand an existing fire alarm system.

Even if you’re lucky enough to scrape enough of the older parts together, sometimes the labor involved to piece these devices together outweighs the material savings.

If your building employs an older fire system, and you’re considering an expansion or remodel, you should hire an inspection company to evaluate the system and see if an upgrade is required.

Try to make decisions based on future needs. If you think you will have frequent remodeling or changes, then you will want to start any major fire

alarm upgrades early in the plan. Keep in mind, those old devices such as horn strobes and smoke detectors will probably not be compatible with a newer system. There are many listings that fire alarm systems are required to have, and that means you cannot always mix and match devices and rarely can you mix and match brands that are not designed to work with each other.

Also, when deciding to install a new system or renovate an existing system, take time to research the manufacturer of the product. There are many brands but only a handful of major manufacturers. If you make the wrong decision, you could be left with a brand with such strict limited distribution that you end up only having a single choice in fire alarm contractors and service providers in your area.

The most important decision you can make is to ensure that your fire alarm system is properly maintained and inspected on at least an annual basis.

This is all in accordance with the code requirements.There is not much point in having a fire alarm system that does not operate in the event of an emergency.

Well-maintained systems are the smart choice when developing your building maintenance and budget plan. Fire alarm systems are your first line of defense in an emergency situation. Prudent and practical maintenance will not only ensure proper operation but will help you get the maximum life out of your valuable investment.

Josh Elder is the R/S/I manager for Firetrol Protection Systems, Inc. He can be reached at 801.485.6900. UF

UTAH FACILITIES JANUARY 2011 I 25

contracts

The Anatomy of Construction Defects Well-prepared contracts and detailed design documents reduce liability

By Mark T. Woolley

A

s I am writing this article, I can already hear a few of you owner and management types asking yourself, “Why do I need to know about construction defects? Isn’t that someone else’s responsibility?” Or perhaps, “That sure does not effect me!”Neither response could be further from the truth. The correct response should be, “What is a construction defect, and how does this affect the building I own and/or manage?”

Today, with the rising costs of energy, the need to conserve and be environmentally conscious, along with the cost and benefit of any real property improvement, it is paramount to have an understanding of construction defect elements and of applying them to your portfolio, as this provides tremendous benefits and should be an integral component of your operations and risk management.

In reality, there are four elements of construction defect avoidance: contracts, design defects, product defects and installation or labor defects. As there is not space in this article to cover them each in detail, nor to cover specific concerns on individual properties, I will explore each element briefly in this and in a subsequent article.

Contracts Some experts leave out the first element of contracts simply because they see it as another dimension to the overall process, which is not construction related and therefore not a defect. Throughout my career I have seen and experienced many cases where the element of the contract would have completely avoided the end result of other defects and deficiencies, had the contracts been properly thought through, prepared, executed and followed.

Using construction terminology or symbolism, the contract is the keystone or foundation for all the other elements.

It should represent the entire agreement between the parties, outlining such things as the standard for any work being 26 I UTAH FACILITIES JANUARY 2011

proposed, the payment for those services and materials and a scope of work for each and every aspect of the work to be completed. It also should include the guidelines for completion, time lines of the proposed work, work conditions and payment provisions, as well as any penalties for non-completion or time delays affecting the contract.

Recently, I was engaged in the resolve of a conflict due to inadequate contract documents. Although the issues were many and complex, the root of each core issue pointed to the original contract, which lacked clear and specific performance details as well as adequate language detailing which party was to do what and when it had to be performed or completed. In essence, the parties failed to clearly state the objectives and outcomes sought and were not on the same page. They were going down completely different paths, neither of which would appease both sides to the agreement. Work was not completed as contemplated, deadlines and opportunities were missed and each party blamed the other for the failure.

I am continually amazed by the number of projects I encounter, which have no written contract. Many others, such as the example I have given above, have weak or non-existent performance elements with no clear understanding as to who will do what. This is a recipe for problems down the road.

It is to your benefit to engage your legal council early in the process to make certain you are covering the necessary elements in any contract prior to executing it. Dollars spent now will yield savings in the future.

Design Design represents the construction drawings and plan specifications which detail the proposed work and improvements. It is just as important in remodeling and mechanical upgrades as it is for new construction. The design professional preparing the documents

must be familiar with the project and must make certain the specifications and plan details can be built according to any manufacturers specifications and performance guidelines.

This is often missed or glossed over by some design professionals. Some practitioners state that this responsibility falls to the team or company who is doing the actual work; nothing, however, is further from the truth.

Design guidelines and documents must include the details and the specifications necessary to clearly outline both the intent and the application particular to the environment of the project.

Engaging a design professional and requiring a complete set of construction documents with sufficient detail is the surest method to ensure problems and potential defects are limited or preempted.

Adhering to the first two elements, that of well-prepared contracts and detailed design documents, greatly reduces liability and exposure should any legal action occur later.The other defects of product and installation will be covered in my next article.

By applying these principals on each and every project, from a new build to tenant improvements or whole structure mechanical and other upgrades, the longevity and durability of the structure increases and the operating costs are lowered. This might well provide a great cost benefit to you as the owner or manager.

Mark T. Woolley is the founder and president of Buildtec Solutions, an industry consultant, specializing in construction related issues, including defect avoidance.

Mark represents owners, contractors and insurance firms as well as their legal advocates in resolving defect issues and claims. He can be reached at mark@buildtecsolutions.com or 801.550.9996. UF

Value of a Property Management Company Dependent Upon Cash Flow, Risk

By Kelly Lux

C

ash is king when it comes to valuing a property management company, according to Don Drysdale, managing member of Drysdale Valuation PLLC. “A company can have all kinds of earnings, their income statement can look good, but they can still be cash poor, even if their profit and loss statements look good,” Drysdale said.

The value of a company depends on the cash flow as well as the risk associated with the business, Drysdale said.

Valuation companies will carefully consider a company’s cash flow, looking at the past and the present and assessing the future. The future state of the company is important in determining risk.

“We are careful in looking at cash flow because the past doesn’t necessarily equal the future,” Drysdale said. “We make sure there aren’t issues and items that would change the future cash flows.”

A company with an equal amount of cash flow but less risk than another company will have a higher overall value, Drysdale said. Unfortunately for property management companies, the risk is fairly high either way due to the current state of the economy, or what Drysdale called

macro-environmental factors.

“We can see that the economy, these external factors, have had a huge impact on the value of companies in the real estate industry,” Drysdale said. “And we can’t ignore that.”

Property management companies, as well as any real estate-related business, have lost value because they are perceived as more risky than they were five years ago, Drysdale said. Fortunately, there are ways for these companies to retain their value and reduce their risk.

Valuations can be done for a number of reasons, said Drysdale. But no matter what the reason, Drysdale says any company, even property management companies, can benefit from a valuation. A valuation company can assess the value of a company and provide options for property managers in terms of increasing value.

“If done properly, business valuations can provide a wealth of information to the business owner, things they may not have even thought about,” Drysdale said.

“We can help business owners increase the value of their property. We can come in and assess the business and provide the business owner with a whole host of ways and manners that they can improve

their business — make it more valuable.”

The owner of a property management company can trim the costs of their operations and increase efficiency, Drysdale said. An owner can be more selective in their tenants, leasing to businesses that show more long-term health and provide adequate cash flow.

Consider paying bills on time instead of early, suggested Drysdale. In addition, owners always have the options of increasing prices and cutting costs, he added.

“There are other things that can be done,”Drysdale said.“Sometimes it takes some creativity to look at those things.”

Valuation companies that have a business valuation credential and members who are knowledgeable as well as specialized will be more beneficial in giving direction to property managers who wish to increase the value of their company, Drysdale said.

“Valuing a business is not a science,” Drysdale said. “You can’t just run some formulas and calculations and say, here is the value. There is a level of art that is necessary. In reality it is a craft, much like a surgeon. You need the technical knowledge as well as the skill.” UF

UTAH FACILITIES JANUARY 2011 I 27

C

ommercial buildings account for 19 percent of energy consumed in the United States, according to the American Council for an Energy Efficient Economy (ACEEE).

Although most of the energy used by commercial buildings goes toward space conditioning and lighting, installing energy-efficient windows in new construction or retrofits can help reduce energy use and costs.

An opening in your commercial building’s envelope (its outer shell) is called fenestration, a term that includes windows, skylights and doors.

The amount of energy lost through windows can be significant. According to ENERGY STAR, it is estimated that nearly 30 percent of a commercial building’s energy dollars are simply going “out of the window.” Since there are usually numerous windows in most buildings, they represent a large source of unwanted heating and cooling loss.

Energy-efficient windows can improve the overall comfort and energy efficiency of a commercial property and provide cost-saving benefits for many years. Energyefficient windows have lower heat loss, less air leakage and warmer window surfaces that improve comfort and minimize condensation. In addition, they can provide increased light and

28 I UTAH FACILITIES JANUARY 2011

lower heating and cooling costs.

Two or three layers of glass and invisible reflective coating provide insulation and repel the sun’s heat while stabilizing your building’s indoor climate. Savings realized from installing energy-efficient windows can be significant if the window replacement rectifies issues such as long-term air leakage.

To find energy-efficient windows, simply look for the ENERGY STAR logo or look for efficient windows with a U-value of 0.30 or lower. For guidance, you can always check with your local window provider.

Installing new, energy-efficient windows will improve your building’s energy performance and may improve its appearance, functionality and

Tips to choosing the right type of energyefficient window for your commercial property:

efficiency. In addition, various tax credits and rebates are available for installing energy-efficient windows.

Check with your local utility to see if there are rebate programs available to help you offset the cost of installing energy-efficient windows and stop throwing your money out the window.

For more information about energy efficiency, technical assistance and how to take advantage of rebates for natural gas equipment, contact Questar Gas Company about their ThermWise Business program at ThermWise.com or 800.323.5517. Additional resources and incentives may be available for electric equipment by visiting rockymountainpower.net/utsave. UF

✔ Select windows with low U-values to maximize energy benefits. ✔ Look for the National Fenestration Rating Council (NFRC) label; it means the window’s performance is certified. ✔ Select windows with air leakage ratings of 0.3 cubic feet per minute or less. ✔ Remember that new windows must be installed correctly by a reputable, qualified installer to avoid air leaks around the frame.

UTAH FACILITIES JANUARY 2011 I 29

Control Systems Maximize Efficiency of Building Operations

By D. Kevin Dyreng

T

oday’s buildings are designed to maximize the productivity of the people who work inside. Modern building codes ensure there is plenty of quality light, adequate fresh air to keep workers alert and healthy, and climate control systems to keep the people efficiency factor as high and productive as possible.

Most buildings are equipped with some sort of control system to tie all of the pieces together and make the building operate effectively. For the most part, the control system does its job silently in the background. Only in the event of a problem do we tend to turn our attention to the building controls.

Control systems have many built-in tools to help manage buildings better, but many of these tools are seldom used. Quite often these tools already exist in the building’s control system.

We don’t even have to buy them. The control system is programmable and can be easily modified and customized to suit management needs.

Equipment Utilization Reports Reporting capabilities of a building control system are powerful. Monthly utilization reports offer statistics from the building that managers seldom see.

These reports can show the fraction of equipment usage by month or year.

Equipment usage can be tracked against baselines. Most control systems have reporting capability included with the software. These reports can be customized to include daily run-times, which allow for easy performance comparisons between periods. Monthto-month or year-to-year comparisons are easy to create. Weekend, holiday and other unoccupied period performance can also be evaluated.

30 I UTAH FACILITIES JANUARY 2011

Sub-Metering Have you ever invested in an energy-saving strategy and wondered what actual savings were realized?

Sub-meters installed inside the building can answer these questions.

Control systems can provide real-time data to show what portions of energy consumption are currently allocated to lighting, HVAC and other building systems. Energy usage goals can be set and the daily and hourly achievement of these goals can be measured by a variety of sub-metering techniques.

Sub-meters also define what fraction of energy bills are used for lighting, outside lighting, snow melt, HVAC, manufacturing process and other systems to help us identify over-usage and building deficiencies. Submetering is also frequently used to track utility bills for accuracy.

Tenant or Department Billing With run-time monitoring and sub-metering systems in place, it can be possible to evaluate which areas of a building are using the most energy.

Energy budget dollars can be divided and allocated to the responsible party.

This can create incentives for departments to be more energy conscious and budget minded. In tenant leasing situations, profit centers can be created by negotiating leases to include tenant billing for after hours usage of building systems. Monthly billing reports can be generated by the control system.

Energy Dashboard An energy dashboard is a window to the control system that shows building occupants the current performance of a building. Energy goals are displayed and real-time achievement of these

goals can be monitored. Typically, the energy dashboard is located in a place where all persons who do business there are able to see it — a lobby or common entry area are favorite places. In addition, the energy dashboard can describe energy features and other characteristics of the building and show graphically how each system is functioning. If solar or wind energy is generated on-site, the energy dashboard can describe the process. LEED points or Energy Star achievement levels can also be displayed.

Building Alarms Alarms are something building control systems do well, but typically the alarm information is not delivered to the right person or in the right way.

Many times the control system generates such a high number of alarms that the alarm notification system gets ignored. Alarms in a building are only good if they are customized to the building operator’s needs.

Is it appropriate to send an alarm if the CO2 level in a space rises above 1500 ppm? Does a valid alarm condition occur when a space temperature rises above 80 degrees?

Every building is different and its operators respond in different ways.

Alarms need to be prioritized and can easily be configured to be a more effective tool. Today’s control systems can now easily generate emails and text messages to notify operators about certain conditions. Energy alarms can also be created to send a message when a pump or air handler which is supposed to shut down at night continues to run for a 24-hour period.

building controls Summary Control systems in buildings are powerful. Their capabilities are often underutilized. Many of the tools they have and, in most cases, that we already own, can be used to our advantage. We just have to know what the tools are and how we can use them effectively.

Kevin Dyreng, energy services manager for Utah Yamas Controls, has been in the controls industry for more than 30 years. He is a certified energy manager and has served on the board of the Utah Chapter of Energy Engineers.

He specializes in commissioning buildings and energy management through controls optimization. UF

UTAH FACILITIES JANUARY 2011 I 31

32 I UTAH FACILITIES JANUARY 2011

Mission BOMA Utah is the standard of excellence, providing best in class industry leading practices, strong education, local advocacy and friendly networking unity.

Contact Info To learn more about BOMA Utah or to join, please visit our website at www.BOMAUtah.org or contact us at Admin@BOMAUtah.org, 801-710-2590 PO Box 13697 Ogden, Utah 84412

Inside Calendar Thursday, January 13, 2011 Monthly Luncheon Mark Bouchard, senior managing director, CB Richard Ellis, Salt Lake City January 23-26, 2011 BOMA International Winter Business Conference Lake Buena Vista, Fla. (Walt Disney World) February 10, 2011 Monthly Luncheon The Outstanding Building of the Year (TOBY) Awards

2010 Sponsors The Outstanding Building of the Year Information Emergency Preparedness BOMA Utah Information, Officers, Board of Directors and Committee Chairs Calendar of Events EER Information

UTAH FACILITIES JANUARY 2011 I 33

Generosity of Sponsors have made 2010 a Great Year for BOMA Utah As 2010 draws to an end, we must thank and recognize our sponsors for their continued support throughout the year. It is because of this generosity BOMA Utah is able to continue its growth and provide quality programs and events.

The Outstanding Building of the Year (TOBY) Sponsors Visionary Sponsor - Varsity Contractors, Inc. Silver Sponsor - ISS Facility Services, Inc. Bronze Sponsors CB Richard Ellis RBM Services, Inc. Securitas Security Services USA Utah Disaster Kleenup Supporting Sponsors Otis Elevator Qwest Communications Roderick Enterprises Utah Facilities April Luncheon Sponsor American Shredding, Inc.

2010 BOMA/Securitas Golf Tournament Tournament Sponsor - Securitas Security Services USA Breakfast Sponsor - Varsity Contractors, Inc. Welcome Gift Sponsor - Spectra Flooring Lunch Sponsor - Comcast Raffle Sponsor - RBM Services, Inc. Golf Cart Sponsor - Commercial Service Solutions Gold Sponsor - G4S Secure Solutions Silver Sponsor - Centimark Corporation Drink Sponsor - The Lawn Butler Putting Green - Utah Disaster Kleenup Contest Hole Sponsors 5Star Family of Services American Shredding, Inc. Big-D Construction Mechanical Service & Systems Schindler Elevator Corporation

Hole Sponsors American Building Maintenance BELFOR Property Restoration Bell Janitorial Supply, Inc. Carrier BSS/Otis Elevator Co. CB Richard Ellis CCI Mechanical Daw Construction Group Double Take Commercial Carpet Cleaning Dynamond Building Maintenance Jacketta Sweeping RiverPark Management & Development Roto Aire Filter Sales & Services Securitas Security Services USA ThyssenKrupp Elevator Western Waterproofing Company, Inc.

The Outstanding Building of the Year Award: It Could Be Yours!

Be a member of Utah’s real estate elite by entering your property in The Outstanding Building of the Year (TOBY) competition.

Be a local, regional and international winner and get recognized!

About TOBY Awards The prestigious TOBY Award is bestowed as the highest mark of excellence for outstanding building management and is the most all-inclusive program in the commercial real estate industry. All facets of a building’s operations are thoroughly evaluated during the judging process by a panel comprised of industry professionals.

The evaluation criteria for the TOBY Awards include tenant relations programs, community involvement, emergency evacuation procedures and continuing education for building personnel. Winners of the local competition advance to regional and international competitions.

Questions If you have questions about the TOBYs, contact Renee Schmid, TOBY chair, at renees@roderickrealty.com or 801.506.5005 or TOBY Vice Chair Dave Shepard at david.shepard@qwest.com or 801.237.8955.

2011 TOBY Sponsors to date:

34 I UTAH FACILITIES JANUARY 2011

Who Should Enter Building owners and managers who want to showcase their property and management teams should enter their building(s) into this year’s competition.

Go to www.BOMA.org to view BOMA International’s TOBY requirements and for general information about categories, eligibility, portfolio specifications, submissions registration information and content and judging and building inspection forms.

To facilitate owners and managers in preparing their properties for the competition this year, BOMA has implemented a number of significant changes to the judging process.

The TOBY committee and BOMA Utah strongly encourage your team to prepare a portfolio in conjunction with preparing your property. All entries must complete the local application form (available now) and register their building online with BOMA International.

Guidance provided by the TOBY Committee and BOMA has proven to be extremely valuable to our Utah entrants and will continue in 2010/11. To assist you in your winning efforts, we will be happy to work with you and your building team throughout the process.

Become part of the elite group of owners and managers in Utah who have won the TOBY, proving their dedication and commitment to commercial real estate and having the vision to continue to improve the standards to which we all strive to achieve.

More reasons why BOMA Utah is the Standard of Excellence This has been a whirlwind year for BOMA Utah. Membership renewal rate was 90 percent this year. We held our TOBY Awards in February with six local buildings competing. March was the tour of the 222 S. Main Street building and our annual vendor only brunch. April was a member social with a scavenger hunt and lots of fun times. In May, our Vendor Expo consisted of more vendors and booths than ever before. In August, we held the 2010 BOMA/Securitas Golf Tournament. It was the biggest and best in BOMA Utah’s history, raising $5,200 for the Road Home and our first BOMA Helping Hands work day. Partnering with the Road Home to donate upwards of $47,000 in materials and volunteer time was a definite highlight of the year.

We can’t forget the unsung heroes: our members serving on various boards and committees with BOMA International; the Pacific Southwest Region and Utah’s Private Sector Homeland Security Steering Committee and Council. We’ve expanded our online presence to Facebook, LinkedIn and Twitter. We’ve worked hard to make BOMA Utah known in the real estate community through the Utah Facilities Magazine, a quarterly publication soon to be bi-monthly.

Don’t forget our first medical office buildings seminar or the Kearns Building winning the Regional TOBY Award and advancing to the international competition. We have a new website. And our leadership and committees put forth countless hours to ensure BOMA Utah remains the “Standard of Excellence.”

With everything that BOMA has accomplished this year, it’s time to pass the torch on to new leadership. We are pleased to announce the 2011 BOMA Utah officers, board of directors and committee chairs: President: Jim Derrick, Miller Management Company President-Elect: Todd Mabey, Zions Securities Corporation Vice President: Lorrie Ostlind, Hines GS Properties, Inc. Secretary/Treasurer: Casey Killian, Varsity Contractors Past President: Dave Jones, City Creek Reserve, Inc. Board of Directors: Scott S. Bennion, Commerce Real Estate Solutions Jon H. Carlson, Lincoln Harris CSG Gary L. Coker, CB Richard Ellis Eric S. Pauly, CentiMark Corporation David D. Penrod, Zions Bancorporation - Zions Bank Russell Shinrock, Securitas Security Services USA, Inc. Committee Chairs: Community Services Chair: Ali Williams, SimplexGrinnell Vice Chair: Brett Parry, Harris Companies Disaster Preparedness/Business Continuity Chair: Eric Fairbanks, Utah Disaster Kleenup Education Chair: Rick Rice, Zions Securities Corporation

Golf Chair: Jerry Pace, CCI Mechanical Vice Chair: Terrell Sparks, RiverPark Management & Development Local Advocacy Chair: Stephen West, Cottonwood Management Services Vice Chair: Paul Porter, Bell Janitorial Supply, LC Medical Office Buildings Chair: Jon H. Carlson, Lincoln Harris CSG Vice Chair: Chris R. Day, The Boyer Company Membership Chair: Eric S. Pauly, CentiMark Corporation Programs Chair: Casey Killian, Varsity Contractors Public Relations Chair: Travis Barrington, Utah Facilities Magazine Vice Chair: Kelly Lux, Utah Facilities Magazine TOBY (The Outstanding Building of the Year) Chair: Renee Schmid, Roderick Enterprises Vice Chair: Dave Shepard, Qwest

Becoming involved in a committee is one of the best ways to enhance your BOMA experience. Committee participation provides countless networking and leadership development opportunities. Participating on a committee is also a rewarding way to gain a better understanding of the association.

To sign up for a committee or learn more about one, please contact the BOMA Utah office at 801.710.2590 or email Shelli at Admin@BOMAUtah.org. You may also visit our website for a complete listing of each committee.

UTAH FACILITIES JANUARY 2011 I 35

BOMA Utah leading the charge in Emergency Preparedness Various agencies from across Salt Lake County know the importance of BOMA Utah and the critical role our members can play during an emergency. The Salt Lake County Emergency Office Center (EOC), Salt Lake City Emergency Management and the Utah Department of Public Safety, Homeland Security Division, along with BOMA Utah, have begun implementing a public-private emergency preparedness notification plan and strategy for protecting occupants.

While it’s rational to assume that Salt Lake City and surrounding areas are not a key terrorist target, Utah is vulnerable to other threats, including severe snowstorms, tornadoes, dangerous floods, energy black-outs, fires and earthquakes. To better prepare for such disasters, the Utah ShakeOut Earthquake Exercise is scheduled for April 2012. The Utah ShakeOut is designed to enhance the capabilities of Salt Lake County, local jurisdictions and Salt Lake Valley residents to effectively respond to and recover from a catastrophic earthquake occurring along the Wasatch Front.

BOMA Utah, along with city, state and federal agencies are creating a plan to boost communications and strategic thinking in the midst of an emergency. In doing so, the state is at the forefront of creating an integrated disaster plan. The privatepublic cooperation has been undertaken to develop strategies for shelter, evacuation and early warning.

Our goal is to strengthen communication between our members who own properties and local emergency response officials. It is also important that we know and communicate well with our neighbors, especially in coordinating emergency plans and procedures.

One communication capability that exists within the Salt Lake Valley is the Public Information Emergency Response (PIER) System. The PIER System is an all-in-one, web-based solution for crisis communications management, mass notification, public and media relations and business continuity. Our members are strongly encouraged to register on PIER, under the BOMA Utah group, at www.utahemergencyinfo.com/go/mailinglist/2515/ Currently, BOMA Utah has representatives that sit on the Private Sector Homeland Security Coordinating Council as well as the Lt. Governor’s Private Sector Homeland Security Steering Committee. We have been asked to join the newly created Salt Lake Valley Steering Committee and recently participated in the Salt Lake Valley Venue Evacuation workshop and FEMA Region VIII ShakeOut tabletop exercise.

As part of our continued effort, we will begin to update our online member database and will ask every member to provide detailed information regarding buildings owned/managed by members, key tenants, 365-24/7 contact information for every facility, vendor services provided, key personnel, etc. This is critical and necessary information from our members if we are to succeed.

Property/facility managers, if you are not currently a member of BOMA, you will be missing out on some of the most important planning and disaster preparedness programs in the industry, as no other real estate organization in the state of Utah has been asked to participate on any level.

Think it through for a moment. Your building is being evacuated.

Your neighbor’s building is evacuating. Are your occupants/tenants all congregating to the same area? How are you accounting for your employees and tenants? Do you have a memorandum of understanding with various buildings? How will you be notified of an after-hours emergency? Do you have a 72hour kit at your office and what does it consist of? Do you shelterin-place or evacuate? And who makes that call?

It’s not if a disaster will occur and impact businesses, it’s a matter of when. Fire drills and other preparedness drills seem inconsequential when deadlines are pending. However, building a dynamic communications plan, knowing where to go and what to do, is a serious matter in the event of an emergency and BOMA Utah will be your source for that information.

Measuring building operating performance has never been easier. The online EER allows you to track income and expense performance of assets in hundreds of markets with just a few quick mouse clicks. Custom searches allow you to examine specific types of assets, such as MOBs, corporate facilities, all electric buildings and building characteristics, including building age, height and tenant types.

Share Data. Improve Performance. Achieve Excellence. That’s what EER is all about.

Connect with BOMA Utah – Join us on Facebook, Linkedin and Twitter 36 I UTAH FACILITIES BUILDINGS JANUARY SUMMER 2011 2010

T

he cost of construction materials in Utah have stabilized while contractors in other states nationwide are feeling the squeeze of rising prices for key construction materials.

Nationally, prices for materials used in construction jumped by 0.6 percent in October and 4.8 percent over the past 12 months, while the price for finished buildings remained flat, according to an analysis of the October Producer Price Index figures released by the Associated General Contractors of America. So not only is the construction industry facing declining demands and dramatic layoffs, but now the industry must pay more for key materials while charging the same for finished products, according to the AGC of Utah. These factors will likely cause many builders to struggle like they have never struggled before, which could add to the already staggering 17.3 percent unemployment rate for the sector nationally.

In Utah, the cost of most construction materials have flat-lined, said Glenn Beckstead, chief cost estimator for MHTN Architects.

Labor is flat.The cost of construction is flat. Oil has stabilized. Only copper and steel have gone up slightly, he said.

Scott Parson, CEO of Staker Parson,

said the cost of concrete and asphalt has declined slightly as the demand for these materials has dropped, creating an over-supply of the products.

“There’s intense competition for available construction materials because residential, commercial and transportation construction opportunities are down,” Parson said. “And when that happens, pricing will decline.”

Concrete prices remained unchanged nationally from the previous month and are down from a year ago.

Prices for asphalt paving mixtures and blocks dropped 0.5 percent in October but were still 4.8 percent higher than last year. Across the nation, lumber and plywood prices declined 0.9 percent since September but rose 6.7 percent during the past 12 months.

The price of diesel fuel is up 7.2 percent since September and 20 percent since October 2009. Steel mill products have increased in price by 1.4 percent since September and 12 percent over the past 12 months.

Nationally, contractors will likely feel the squeeze of rising materials prices, the AGC predicted. In Utah, Parson suggested that those who are looking to build and who have the resources should build now while the cost of materials is low.

Now is an excellent time to build a

project since building owners will get a lot for their money. Beckstead would agree, saying that most projects are coming in with 25 to 35 percent lower costs than two years ago.

“If you have the money to build right now, it is a great market,” Beckstead said.

Construction costs in Utah will likely remain flat through 2011 but could increase as the rest of the country sees rising prices, Beckstead predicted.

Optimists are forecasting a 1 to 3 percent inflation rate, which would mean things are looking better economically, he said.

“We hope it happens. But it won’t be until March before we have a better understanding of what the trends are,” Beckstead said.

Rich Thorn is the president and CEO of Associated General Contractors of Utah, a position he has held since 1982. Rich can be reached at 801.363.2753. The AGC of Utah is the state’s oldest and largest nonresidential construction trade association representing more than 500 members who perform the majority of all nonresidential construction in the state. UF

UTAH FACILITIES JANUARY 2011 I 37

Building Owners take Precautions to Prepare for Influenza Pandemic

By Kelly Lux

W

hen the H1N1 flu virus started to spread across the United States, Zions Bank already had the policies and procedures in place to minimize the impact of a potential influenza pandemic, according to Brian Garrett, senior vice president and director of business continuity for Zions Bank. Hand sanitizer was placed throughout the approximately 150 branches of Zions Bank. Employees were reminded of good health practices, to wash their hands with soap and water, to cover their mouths when sneezing or coughing and to stay at home if they were sick. Zions made sure to communicate with its employees regarding the outbreak, informing them of any special precautions that needed to be taken.

A pandemic such as H1N1 (Swine flu) could result in lost business revenue and high employee absentee rates, according to “Pandemic Influenza: Are You Prepared,” a resource available through BOMA International. Multitenant buildings are especially susceptible to influenza outbreaks, making it imperative for building

38 I UTAH FACILITIES JANUARY 2011

owners to implement containment measures that will limit the spread of the disease.

Communicating with building tenants and employees is essential in preparing for and preventing a flu outbreak in a commercial building, said Theron Jeppson, a health educator for communicable diseases at the Utah Department of Health. Building owners should take the initiative to share educational information on preventing the spread of germs, posting reminders in common areas, break rooms and bathrooms. Much like the procedure followed at Zions Bank, hand sanitizer stations should be placed in several locations throughout a building, especially near doors and bathrooms.

“People don’t have to do a whole lot to keep from getting sick and to stop the spread of germs,” Jeppson said.

“Many things can be done behind the scenes by building owners to help prevent the spread of disease.”

Maintaining a clean building is essential to preventing an outbreak of a virus, Jeppson said. Janitorial staff should focus on keeping hand railings,

door knobs, desks and countertops sanitized. Employers should create policies encouraging employees to stay

Preparing for a Pandemic • Develop a plan with building management before a pandemic occurs.

• Appoint a representative to coordinate the plan with building management.

• Make sure plans and policies are understood by management, tenants and employees.

• Keep an open line of communication between management, tenants and employees before and during a pandemic.

• Increase health measures in your building by coordinating with the janitorial staff/vendor.

• Encourage tenants and employees to practice sanitary personal hygiene.

public health at home if they are sick, he said.

Building owners should develop a plan for safe and healthy business practices in case an outbreak does occur.

Working with human resources, facility management, security and executive management, Garrett said Zions Bank was able to develop a business continuity and emergency preparedness plan addressing influenza pandemics. The bank identified employees who could work from home, offices that could operate on a split shift to reduce the number of people working in high density work spaces and other points of failure in the workplace. A plan was also put in place to minimize the number of customers who enter the building during times of outbreaks by utilizing the drive-thru for most of the bank’s business.

Additionally, a system was created to monitor the sick time being used by employees within each Zions branch.

This way, Garrett said, measures could be taken in the affected buildings to stop the spread of the virus within the individual branches as well as the overall company.

Communication will be the key to ensuring policies and procedures are followed during a pandemic, Garrett said. Zions has memos and notifications which can be easily modified and sent out to employees

and customers as needed. Garrett also keeps a comprehensive list of contact information for employees, suppliers and vendors in his office and his car for easy accessibility during an emergency.

“Getting ahold of people is going to be the way you are going to be able to get things done,” Garrett said.

“You can live or die by your communications.” UF

UTAH FACILITIES JANUARY 2011 I 39

Building Owners Responsible for Safety of Window Cleaners

By Brent LaPorte and Kynan Wynne

W

e’ve all seen them hanging from the side of a building and thought to ourselves, “Man, I would never do that. Those guys must be crazy.”

Well, to be honest, some of them are, but most are not. The fact is, the profession of washing windows on high rise buildings is actually very safe when all of the standards and regulations are followed properly. Of course, it still takes a tremendous amount of courage to climb over the side of a building and into a boatswain’s chair or to power that stage down when there is nothing separating you from the ground other than a thin aluminum floor.

So how do these folks do it? What makes them secure enough to make a cognitive decision to walk off of a perfectly good rooftop and into thin air, where, for the next hour or so, they will be suspended from lines as thin as your thumb, all the while cleaning the glass of your office or condo building?

The answer is, or should be, safety.

Safety is the most important factor 40 I UTAH FACILITIES JANUARY 2011

when any suspended maintenance work is being performed. Who is responsible for this safety, and what does working safely really mean?

The first question is being asked all across the United States every day with respect to window cleaning, particularly window cleaning done from a boatswain’s chair. Up until now, there was no clear definitive rule with respect to boatswain’s chair work under Federal OSHA. Federal OSHA does address cleaning windows using a

powered platform. While some of those rules can be applied to chair work, there are so many areas of uncertainty that Federal OSHA has made proposed changes to Sub Part D – Walking Working Surfaces where they include some rules with respect to this common form of window cleaning.

The new document and the existing ANSI Standards clarify that it is the responsibility of the building owner to provide anchorages for these window cleaning professionals to attach their

fall protection suspension and safety lines. This is important when the workers are utilizing boatswain’s chairs because more often than not, they are rigging directly to the rooftop anchors for both the suspension and safety lines. The rules and regulations both state that the suspension (the line supporting the worker) and safety lines (used in the event the suspension line fails) should be attached to separate and independent anchorages.

The standard form of anchorage is a rooftop anchor attached to the building’s structure that has been ideally installed during construction.

We do know, however, that most building’s do not have these permanent rooftop anchors. Thus, the window washing professionals are required to make do with what structure is available on the rooftop.

We cannot expect a window washing contractor to obtain permission to drill through the roofing and down into the structure and attach a rooftop anchor as, quite simply, they are not qualified to perform this type of work.

Therefore, it is incumbent upon the owner of the building to ensure rooftop anchors are available for workers to attach to prior to commencing their work.

The next burning question, assuming we have rooftop anchors or some other form of structure, is how are these workers to attach safely?

Many buildings, maybe even yours, have some form of window washing system installed. Unfortunately, more often than not, they are not in compliance with today’s rigid standards and proposed regulations.

We often see derelict davit bases at an unprotected roof edge. These davit bases were originally designed to be used for suspended stages. However, as you know, most window cleaning operations are performed using a boatswain’s chair. So, how do the window washers work safely if there are no independent rooftop anchors available? The workers do what they must to ensure they can complete the work as safely as possible. This does not mean they complete the work in

compliance with all the codes and standards. It means they do what they must, which, at times, really is crazy.

They will attach to vent stacks, stair railings or cinder blocks piled on the roof, none of which are designed to take the applied loads of a fall.

Further, if these davit bases are existing at the roof edge, often the window washers will attach a tag line between the davit bases and attach both the suspension and safety lines to this line. The problem is the tag line has not been engineered, and in the event of failure of this line, both suspension and safety lines are attached to the same “anchorage.” The failure of one line leads to a catastrophic failure of this unengineered system, resulting in serious injury or death of the worker.

Now, realizing this is a lot of information to take in, I expect you have a lot of questions about the codes and standards. What is required? How

do I know? Etc. The test is simple.

Take a walk out onto your rooftop and ask yourself, “If I had to, would I attach my entire life to that anchorage?” If there is any doubt in your mind at all, contact a rooftop anchor design professional and have your building assessed for compliance and safety.

Once you have the building assessed and certified and when someone asks you if those window cleaners are crazy, you can confidently answer, “Not as crazy as you think.”

Kynan Wynne has 22 years in the window cleaning industry, seven years in the fall protection industry, and is a former president of the International Window Cleaning Association. Wynne is currently the vice president of Rooftop Anchor, Inc. Brent LaPorte has 21 years of experience in the fall protection industry and is currently Rooftop Anchor’s national sales consultant. They can be reached at 801.839.2900. UF

UTAH FACILITIES JANUARY 2011 I 41

Think Outside the Cube in an Office Redesign

By Sean Murphy

T

hese days, the word cubicle has become synonymous with prison cell. You’ve seen the photos and movies that depict a large office space with tall gray panels as far as the eye can see. We can all agree that no one wants to work in a space like that.

Furthermore, with distractions such as Facebook, YouTube and the 2 p.m. cubicle nap, excessive privacy isn’t always a good thing.

Well then, what are the alternatives? If you’re looking for a new office space or revamping an existing one, there are a lot of creative ways to make the most of your square footage while maintaining privacy.

42 I UTAH FACILITIES JANUARY 2011

Don’t Be Such a Square First, get rid of the idea of a 6x6 cubicle with a little doorway. When you begin to reconfigure your open areas, consider keeping some of that openness.

Today’s panel systems can make use of filing and other storage units as divisions between workstations. Instead of panel walls that completely surround the worker’s space, use a combination of short panels and other dividers to give division of space and only as much privacy as is needed. Adjacent workstations can be separated by a short panel or translucent screen. You’d be surprised. Employees in these open

workstations adapt to their surroundings, lowering their voices accordingly. For workers that spend a lot of time on the phone, higher panel walls can be used sparingly while maintaining the benefits of a spacious floor plan.

In addition to rethinking the overall footprint of a workstation, there are newer schools of thought concerning the actual desk or work surface. The Lshaped wraparound work surface was designed for a bulky CRT monitor in the corner, but today’s flatscreen monitors require less space. Often, a single rectangular or wedge-shaped work surface is all that is necessary, leaving

space planning more space for storage that can keep books and files off of the desk. There are a lot of options here. A reputable office furniture dealer can show you the ropes.

Less is More Too often, what’s new is also what’s expensive. In the case of rethinking the cubicle, this is not necessarily the case.

Fewer bulky walls and less raw material are better for your wallet and better for the environment. New quality office furnishings are usually at least 80 percent recyclable, and use fewer resources to manufacture. You can actually fit more people in your space while reaching “green” goals and saving much-needed capital.

There are other savings, too. Lower panel walls allow for more natural light to find its way into the inner reaches of your space, reducing the need for excessive overhead lighting. Some workstation dividers leave open space under the desk, improving air circulation and cutting material cost. You can also get rid of those under-desk filing pedestals and opt for a single storage tower with several types of filing and shelf space. Another benefit of today’s panel systems is that storage space can be added later on an as-needed basis.

Spaces that Work Twice as Hard Walls are coming down. More and more companies are opting for more open workstations in lieu of large enclosed offices. One of the benefits of a large enclosed office is that the

employee can collaborate privately with coworkers, clients and vendors. That dialogue is essential to making your office work, so small informal meeting places are a necessity in your new open space plan. Instead of having threeperson meetings in your boardroom, create a few small quiet spaces in your office where employees can sit down for 15-minute collaborations. Instead of a small conference room with highback leather chairs, consider breaking up the cubicle farm with a café table and stools or a small cluster of firmsitting lounge chairs. These spaces are multifunctional and encourage idea sharing. What’s more, a short walk to an impromptu meeting area will lessen fatigue and improve focus when employees return to their desk.

You’re only as strong as your weakest link. Don’t let an uninspired office interior hinder your potential. A contemporary office environment will attract higher-caliber tenants. With a little searching you can find someone to buy your used cubicles (some companies buy used panels to refurbish and resell). You can also sell or donate your old furniture to a start-up company or charity. So tear down those walls and create an efficient space for your tenants to flourish!

Sean Murphy is a space planner with ROSI Office Furniture in Salt Lake City.

He can be reached at sean@rosiop.com. UF

UTAH FACILITIES JANUARY 2011 I 43

Communication Key to Juggling People, Cleaning Priorities During the Holidays

By Jill Rasmussen

F

rom pre-planned detail cleaning to unexpected disasters, property managers can struggle to find time to enjoy the holiday season. Tenant staffing levels become low during the year-end holiday break, making it the perfect time to perform detail cleaning without interrupting business.

Prioritizing Requests High traffic and busy schedules during the holiday season make it difficult for property managers to address complaints and foresee issues that might arise. Property managers often have to juggle different personalities among tenants and cleaning priorities in their buildings. Managing a building is one thing, but it takes an entirely different skill set to manage people.

Michael Jordan, facility manager for Marriott International, manages several buildings with more than 400 employees. At year-end, he receives many cleaning requests concurrently, making it difficult to please everyone. Jordan said he has learned to prioritize requests and communicate his responsibilities with Marriott employees, helping them to understand his time frame in processing their demands.

“I try to resolve a problem with conversation,” Jordan said.

Property managers who are faced with conflicting priorities and too many cleaning requests at one time can explain that they understand the problem, have a solution and can commit to completing the project within a reasonable time frame.

“I’ve learned to treat people as my customer,” Jordan said.

“Everyone has a vested interest in different things. I have to make them feel important or give them a good reason why their request is not important at that particular time.”

44 I UTAH FACILITIES JANUARY 2011

janitorial Detail Cleaning Plan Implementing a detail cleaning plan to prevent complaints is a great start to a new year. Working with a well-managed janitorial company can help ease many year-end burdens.

Building a good relationship with your janitorial company allows you, as a property manager, to rely on the janitorial company to manage detail cleaning projects.

“It’s nice to know that I can rely on our janitorial company to carry out the terms of the contract,” Jordan said. “It’s important to check references to make sure the vendor you hire is going to do what they say.”

Vendors that don’t follow through with the terms of the contract don’t last long. The dirt speaks for itself. If people see dust, they assume they are breathing dirt in the air and working in a unhealthy building. Employees tend to notice visible dust on lights, air ducts, base boards and in their work areas.

“It’s all about perception,”Jordan said.

“If employees see a vendor performing detail cleaning, then they feel like the company is investing in them.”

Detail cleaning can boost morale, increase appreciation and decrease turnover if it is witnessed by employees, Jordan said. When a business takes action to improve the work environment, people feel valued. People feel more comfortable when they know their work environment is clean and sanitized, especially during flu season.

Marriott focuses on sanitizing restrooms and eating areas to help employees feel comfortable. Detail cleaning is scheduled twice a year to clean air ducts and glass, for high dusting and vacuuming, and for complete sanitizing of restrooms and eating areas.

Cleanliness is best communicated to tenants and employees through action.

Temporarily relocating people into different work areas for large carpet cleaning projects communicates that the

property manager cares about its tenants and their workspace. If a project is scheduled after-hours or on a weekend, it’s important to notify tenants or employees before the cleaning.

Vendor Communication Open communication with vendors is essential for a good working relationship. Building a good relationship with vendors can decrease the bottom line because “they are more willing to do things they would not normally do,” Jordan said. For example, Marriott worked directly with its vendor to implement a recycling program at no extra cost.

Communicate with your vendors so they are aware of their responsibilities.

Vendors should know you expect them to plan ahead, foresee problems and communicate daily.

“Our vendors inform me when

there are security issues like doors that won’t lock or strange people lurking in the parking lot,” Jordan said. “They have even helped us prevent disasters when they told us they smelled smoke and found a water leak.”

When it comes to juggling people and priorities, property managers can benefit from taking time to find a sharp janitorial company to rely on.

Jill Rasmussen and her husband, Roger Rasmussen, are co-owners of All Pro Cleaning, a janitorial building services, water damage and restoration services, carpet and upholstery cleaning, tile and grout cleaning and air duct cleaning located in Sandy, Utah. Contact Jill at 801.330.8585. UF

UTAH FACILITIES JANUARY 2011 I 45

Well-Run Snow Management Contractors Make Better Partners

By John Allin

E

very year property managers, property owners and businesses with parking lots or sidewalks have to go through an exercise most dread: soliciting pricing from snow contractors. This exercise often feels like just that — an exercise.

Most purchasers of snow and ice management services believe anyone can do that kind of work. It’s easy. And besides, aren’t these fellows just individuals who can’t find real jobs?

Being in the snow and ice management business requires a substantial capital investment in equipment, materials and labor. If the company you hire does all their work 46 I UTAH FACILITIES JANUARY 2011

with their own forces and equipment, it is likely they are not a large entity and are limited in their experience. It is not good business for a snow contractor to own all the iron associated with providing exemplary service. Leasing equipment is the norm all over North America as opposed to investing capital in equipment which may, or may not, be utilized year-round.

Good companies understand their costs and are focused on working hard to lower their cost, especially in light of the current economic times. And yet, some purchasers of this necessary service still try to insist the contractor own all the equipment. This pushes the

contractor’s costs higher and higher, resulting in increased costs to the property manager.

Another area of concern for snow and ice management is insurance coverage. Too often contractors are not savvy in this important area, resulting in under-insured or inadequately insured businesses. Yes, every purchaser of this service demands a certificate of insurance with some specific limits of coverage. And, unfortunately, some contractors supply certificates that have been doctored for purposes of saving money. Never allow the contractor to supply you with this important document. Always insist the certificate

snow and ice management come from the insurance broker or agent. Even then, one is not out of line by making a quick phone call to the contractor’s agent to confirm all the data is correct and accurate.

Contractors who supply snow and ice management services should be versed in the technology available to them to properly protect the property owners and managers they service. In today’s advanced technological age, snow contractors can allow their customers access to real-time data to ascertain when their property was serviced, what services were provided, and (in some cases) what charges have been incurred performing these services.

Make sure your contractor knows the physiology of how salt works. In fact, 500 pounds of rock salt per acre is adequate. Studies show as little as 100

pounds per acre will do the job. It is the rare snow contractor who invests more than $65,000 in a single piece of equipment that can distribute rock salt at low distribution rates. Snow contractors normally utilize slide-in or under-tailgate spreaders, which can be calibrated not lower than 300 pounds per acre. Talk to prospective contractors about their knowledge of distribution rates, how salt works, how long it takes to react when applied.

One important thing to note: If your parking lot is still white the day after a storm, it is likely due to over application of rock salt, and is definitely NOT because the contractor was trying to make you happy.

There is a science to everything.The same holds true with snow and ice management contractors. A well-run company making a viable profit makes

for a better partner in your overall risk management. Let’s face it, if someone slips and falls on your property, nobody wins (except maybe the lawyers). And it is incumbent upon the entity in charge of the site to ensure that the site is safe.

Most property owners and managers cannot correctly do the work themselves. They want to pass the risk on to the snow contractor. However, realistic expectations are required so the contractor can do the work, ensuring those who visit your sites are safe.

John Allin is a full-time consultant for Innovative Property Maintenance in Utah. His former company, Snow Management Group, did all of the snow and ice management for the 2002 Winter Olympic Games held in Salt Lake City.

He can be reached at 814.452.3919 or at john@johnallin.com. UF

UTAH FACILITIES JANUARY 2011 I 47

Should a LEED EBOM Certification Figure Into Your Next Fiscal Year?

By Eric Baxter

A

s a building owner or property manager, two primary business goals are to maximize net operating income and provide tenants with a comfortable, well-functioning building. In recent years, the U.S. Green Building Council’s LEED for Existing Buildings Operations & Maintenance (LEED EBO&M) rating system has been used successfully on hundreds of buildings to help meet these business goals.

LEED EBO&M provides building owners, property managers and operators with guidance on how to incorporate green building operational practices, offers standardized methods to rate building performance and acts as a third party evaluation platform to recognize achievements. The rewards for completing this process include reduced operating expenses, and a green differentiator to maintain and attract existing and prospective tenants.

The rating system is fairly simple in its layout. Any building seeking certification must meet both basic prerequisite requirements and accrue points from a variety of optional credit strategies. Basic

48 I UTAH FACILITIES JANUARY 2011

requirements include: verifying minimum water and ventilation system performance thresholds, conducting a baseline energy analysis of the buildings systems to identify costsavings opportunities and establishing building operational guidelines to encourage sustainable purchasing, waste management and cleaning practices. Additional credit strategies could focus on: exterior site features and maintenance practices, water and energy using systems performance, material purchased for building operations and tenants, waste and recycling performance or indoor environmental quality improvements.

The cafeteria style rating system allows project teams to customize their certification program based on building ownership requirements, budget and building infrastructure attributes.

Evaluation criteria are different for every project, usually balancing operational cost savings, marketing impact and tenant satisfaction. In the commercial real estate market, most teams focus on LEED strategies with a good simple payback that yields a quantifiable return on investment. For instance, it may sound like common

sense to optimize when air conditioning and lighting turn on and off each day in different areas of the building, but these quick payback opportunities and years of operational cost savings often remain untapped.

Many building improvements yield simple project cost paybacks of less than two years and thousands of dollars of annual savings. On one LEED project, scheduling changes like these required approximately $13,000 of controls contractor programming assistance but yielded an estimated $104,000 of annual operating savings.

There are also strategies that create financial payback while simultaneously improving tenant conditions, such as addressing issues with HVAC system economizer cycles. When working properly, these cycles should optimize outside air use for climate control and minimize use of the system’s mechanical compressors. But these economizers often operate incorrectly, using excessive energy and creating poor indoor air quality. Correcting this helps your bottom line and provides a positive, tangible story to share in releasing negotiations and in conversations with potential tenants.

Even though the benefits are clear, you’ll still need to be aware

LEED of and justify the costs of a LEED certification program. Basic costs incurred on all projects will include registering the project and paying for the independent third party review of your certification submission. Other costs could include outside consulting assistance, investments in equipment infrastructure and small changes to procurement practices. Many of your service subcontractors (window washing, landscaping, pest management, cleaning, etc.) are willing to move to greener operational practices for little or no cost premium to keep your business.

Buildings with more than 20,000 square feet typically find a good balance of costs-to-savings potential, and an assessment process will solidify what strategies make the most sense.

Smaller buildings can still find savings and improved occupant experiences with the same strategies larger buildings use, but certification costs may not make sense for them. On many projects a $50,000-$100,000 working budget range is a good placeholder to start planning your project before you assess for energy saving opportunities in your building systems.

Overall project costs range from as little as $0.10 per square foot to $1 per square foot. Though most projects begin with a focus on cost savings, many building owners discover equal value in quick payback measures and in operating and maintaining their facilities to a higher level of performance — a great benefit for their tenants, marketing , occupancy rates, the environment and, yes, their bottom line.

Eric Baxter is the existing buildings group director at Brightworks Sustainability Advisors. He can be reached at eric.baxter@brightworks.net. UF UTAH FACILITIES JANUARY 2011 I 49

legal

Know the Tax Consequences of a Commercial Loan Workout

By Kyle C. Jones

M

any who have successfully negotiated a reduction of their loan obligations have been caught by surprise when they receive a 1099 showing ordinary income equal to the debt reduction. This is generally known as cancellation of indebtedness (COD) income and is explicitly identified in the definition of “gross income” in Section 61(a)(12) of the Internal Revenue Code. Borrowers need to understand the tax consequences of each of the proposed options as part of the decision-making process.

While a detailed treatment of COD income is beyond the scope of this article, an overview of some of the key concepts and provisions may prove

helpful. Borrowing money from a lender does not result in taxable income because the receipt of the money is offset by the obligation to repay the loan. However, if the repayment is for less than the amount owing, the borrower obtains an economic benefit.

As is common in tax matters, the Internal Revenue Code sets forth a number of exceptions to the recognition of COD income.

Two of the most frequently used exceptions are a discharge of debt when the taxpayer is insolvent or is discharged as part of a Chapter 11 bankruptcy and a discharge involving indebtedness on the taxpayer’s personal residence. While insolvency would normally sound

promising, the determination of insolvency is made at the taxpayer level.

Accordingly, for any entity taxed as a partnership (such as most LLCs), the determination takes place at the owner level rather than the entity level. The owners would have to be insolvent to take advantage of that exception.

Additionally, the exceptions do not offer a “free lunch.” The borrower pays the price with a reduction in basis or other relevant tax attributes.

Finally, Congress has provided additional but temporary relief by allowing the taxpayer to elect to recognize COD income over a fiveyear period. To qualify, there must be a “reacquisition of an applicable debt instrument.” The term “reacquisition” includes complete forgiveness of the debt or any of the following: a purchase for cash or other property, an exchange of one debt instrument for another, an exchange of debt for stock or partnership interests, or a contribution of debt to the capital of a company.

Property owners will need to understand the practical impact of these tax considerations in order to fully assess the desirability of their workout options and to avoid surprise COD income at a time when they may be least able to pay. Consultation with tax professionals is strongly advised.

Kyle Jones is an attorney with the law firm of Fabian & Clendenin and is a shareholder in Fabian’s Business Organization, Tax and Transactions practice group. He can be reached at 801.531.8900 or kjones@fabianlaw.com. UF

50 I UTAH FACILITIES JANUARY 2011

UTAH FACILITIES JANUARY 2011 I 51

Utah Facilities P.O. Box 970281 Orem, UT 84097-0281