It’s almost a new year, but so far the same old story when it comes to aquatics facility development. Stagnant credit markets combined with ongoing uncertainty means new construction is not yet seeing a rebound, especially when it comes to large private projects such as waterparks.
“Lenders are still extremely cautious,” said David Sangree, president of Hotel & Leisure Advisors, LLC in Cleveland.
Randy Mendioroz agrees. The principal of Aquatic Design Group in Carlsbad, Calif., said a number of the private developers he knows have told him they simply can’t get funding right now.
What’s more, because many state and local governments are still facing huge deficits, few public projects are happening. As work that was funded prior to the recession now has been mostly completed, builders and designers such as Mendioroz are facing tough competition for new jobs.
“It’s come to a screeching halt,” said Scott Burton, president of Prestige Pools, a Las Vegas builder. “It was pretty decent until just recently, but most of it has slowed down. … ”
As a result, Burton and many builders are finding themselves competing against firms from around the nation. “There was one last year, a community indoor pool, and every builder and his brother all across the country bid it,” he said.
For his part, Mendioroz said it’s been the school and university work that’s kept his team busy.
In addition to fewer projects, there’s also stiff price competition. “We’ve seen prices come down 30- to 35 percent in the commercial sector,” said Bill Rowley, president of Rowley International Inc. in Palos Verdes Estates, Calif.
In the case of smaller-scale commercial jobs, many believe the lower bids are coming from builders without much commercial experience.
“They’re underpricing jobs terribly because they don’t understand the differences between residential and commercial construction,” said Kyle Chaikin, president of Chaikin Pools in Farmingdale, N.Y. “I cut my margins in half, but it’s still not anywhere near [the lower bids.]”
Many commercial developers know the risk they take by hiring inexperienced builders, but are willing to chance it because the firms they’re working with have performance bonds, Chaikin added.
The good news is, many do see an upturn on the horizon.
Equipment manufacturers are predicting a slight increase in 2011, with most of the work involving renovations and energy efficiency upgrades.
“I think within the next year we’ll start seeing lenders start offering loans,” Sangree said.
Until then, developers will have to continue to seek out alternative means of financing. That was the case with Jay Peak Resort in Jay, Vt. Operators financed a new waterpark via EB-5, a unique foreign investor program.