New strategies for attacking deferred maintenance december 2012

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New Strategies for Attacking Deferred Maintenance

Presenters:Jim Kadamus, Vice President, SightlinesJuanita Holler, Associate Vice Chancellor of Facilities & Campus Services, University of Massachusetts - Amherst

December 5, 2012

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A Few Housekeeping Items

Enter questions here at any point during the webinar

Please call us at (215) 983-7125 with technical questions – audio, video, etc.

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Today’s Agenda

Trends in Higher Education and What They Mean for You – Jim Kadamus

Five Easy Steps to Reduce Facilities Risk – Jim Kadamus

UMass Amherst Experience – Juanita Holler

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Trends in Higher Education Facilities and What They Mean for You

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• Annually tracking $5.9 billion in operations budgets and $9.0 billion in capital projects

• Database of 345 campuses, 25,000 buildings and 1 billion GSF

Sightlines National Database345 campuses in 42 States – evenly split public and private

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#1 Campuses are getting olderMore high risk space on campus

2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

70%

80%

41% 40% 39% 39% 38% 36%

19% 19% 20% 21% 22% 23%

(%) Square Footage over 25 years old(Renovation Age)

% of Space 25 to 50 % of Space Over 50

Ove

rall

Dat

abas

e

7

2005 2006 2007 2008 2009 2010 2011 2012$0

$1

$2

$3

$4

$5

$6

Annual Capital One-time Capital

#2 Capital investment moves up and down in cycles over timeRecurring capital remains steady; 2012 totals are equal to 2007 levels

Capital Investment in Existing Space - $/GSF

Ove

rall

Dat

abas

e

8

#3 Capital investment mix changed modestly since 2005Proportionately less investment in space as overall capital funding grows

Ove

rall

Dat

abas

e

14%

28%

14%

35%

9%

FY2005

17%

29%

17%

31%

7%

FY2012

13%

24%

14%

41%

8%

FY2002

Building Envelope Building Systems Infrastructure

Space Renewal Safety/Code

Total Project Spending Mix

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#4 “Backlog of needs” are increasingBacklogs up about $11/GSF over last six years

Total Backlog $/GSF

2007 2008 2009 2010 2011 2012$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Ove

rall

Dat

abas

e

14% increase in total backlog since 2007

10

#5 Facilities operating budgets flat since 2008Operating budgets are flat; 2012 budgets are equivalent to 2007 levels

Ove

rall

Dat

abas

e

Daily Service Budget

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Conclusions

• More buildings are crossing over into higher risk age profile and will increase campus backlog unless addressed

• Shrinking capital and operating budgets and increasing debt will make setting clear priorities for capital renewal critical

• Renovate or demolish decisions will become more common in next decade, especially for the +50 buildings

• Cuts in operating budgets will force campuses to find new ways to deploy staff without reducing levels of service and quality of campus appearance

• Campuses need data-driven strategies for documenting backlog of need, creating portfolios for investments and identifying highest priority projects

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Five Easy Steps CFOs Can Take to Reduce Facilities Risk Exposure

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Five steps to reduce facilities risk exposure

1. Understand your campus age profile.

2. Understand the cost of keeping-up (Annual Stewardship) and how much cost you are deferring into the future.

3. Understand your capital project mix – is it diverse and hitting all aspects of campus need?

4. Understand work order hot spots – this information can tell you where the greatest risks are on campus.

5. Understand energy consumption and costs to identify opportunities for savings.

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FY01 FY06 FY11 FY160%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

47% 40%29%

14%

22% 40%53%

56%

15%

12% 10%

19%

16%8% 8% 11%

Shift in Campus Renovated Age Profile

Under 10 Years 10 to 25 Years 25 to 50 Years Over 50 Years

#1 Understand Age Profile of Campus – Past, Present and FutureYounger buildings have moved into older age categories since FY01

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Old age results in higher riskCampus has more space that falls into the higher risk categories than peers

Buildings Under 10Little work .“Honeymoon” period.

Low Risk

Buildings 10 to 25Lower cost space renewal updates.

Medium Risk

Buildings 25 to 50Life Cycles are coming due in envelope and mechanical

systems.Higher Risk

Buildings over 50Life cycles of major building components are past due. Failures

are possible.Highest risk

Highest RiskHighest Risk

Highest Risk

Medium Risk Medium RiskMedium Risk

Low Risk Low RiskLow Risk

Higher Risk Higher RiskHigher Risk

My Campus

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3% Replacement Value Life Cycle Need(Equilibrium)

Functional Obsolescence(Target)

$0.00

$5,000,000.00

$10,000,000.00

$15,000,000.00

$20,000,000.00

$25,000,000.00

$30,000,000.00

$35,000,000.00

$31,130,202.1

$11,604,541.3 $8,703,405.9

$15,234,112.9

$7,617,056.4

Envelope/Mechanical Space/Program

$ in

Mill

ions

FY2011 Stewardship Targets

#2 Defining Stewardship Investment Targets

Straight Line Deprecation Sightlines Recommendation

Total $ in Millions $31.1 $26.8 $16.3% of Replacement 3% 2.59% 1.57%

Setting a yearly goal to arrest the rate of facility depreciation

Replacement Value: $1.04 B

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Understand Rates of Deferrals

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11$0.0

$2,000,000.0

$4,000,000.0

$6,000,000.0

$8,000,000.0

$10,000,000.0

$12,000,000.0

$14,000,000.0

$16,000,000.0

$18,000,000.0

Stewardship Spending Mix

Envelope/Mechanical Space/Programming

$ in

Million

s

11 Year Target Total Actual 11 Year Investment $-

$10,000,000.0

$20,000,000.0

$30,000,000.0

$40,000,000.0

$50,000,000.0

$60,000,000.0

$70,000,000.0

$80,000,000.0

Envelope/Mechanical Target vs. Actuals

11 Year Target Total Actual 11 Year Investment

$-

$10,000,000.0

$20,000,000.0

$30,000,000.0

$40,000,000.0

$50,000,000.0

$60,000,000.0

$70,000,000.0

$80,000,000.0

Space/Programming Target vs. Actuals

$24.8 Million

$21.7 Million

$8.5 Million

$7.7 Million

$9.5 Million

$5.8 Million

Annual Stewardship Target

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FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY20110.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

FMB&A: Equilibrium Need FS: Depreciation Expense FMB&A: Stewardship Actual Investement

Annual Stewardship Spending vs. Depreciation Expense

Annual Stewardship not keeping up with rate of depreciation expense%

of T

otal

Rep

lace

men

t Val

ueAnnual Stewardship Compared to Depreciation

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#3 Making Sure Capital Project Mix is DiverseProject mix adjusts over time to meet campus needs

My Campus

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#4 Utilizing work order data to identify hot spots

ELECTRICAL MOBILE 2 C1-MOBILE M.M. O'BRIEN-M BLDG SHIRREFF HALL MORRIS 5247 ELIZA RITCHIE-HSE10 25 50 100

$-

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

$350,000.00

$400,000.00

$450,000.00

$500,000.00

Total FY11 Daily Service Work Order Cost by Building & Age CategoryTupper Building

$436,0001380 Work Orders

Dentistry$380,000

953 Work Orders

Central Services$372,000

519 Work Orders

Library$260,000

652 Work Orders

Strategically “resetting” high cost buildings can reduce “corrective” ops. costs

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Opportunity to release operational FTEs Buildings between 25-50 yrs. old take longer to service

Age CategoryAverage hours/ DS

Work OrderLess than 10 4.10

10-25 3.7025-50 5.25

Over 50 4.31

Age CategoryTotal Daily Service

Work OrdersLess than 10 1,295.00

10-25 2,060.00 25-50 8,774.00

Over 50 4,797.00

Reduce average work order time in 25-50 yr. old buildings by 1 hour.

8774 work orders/1 hour= 8774 hours released!

8774 hours/2080 hours (1 FTE)=

4.2 Maintenance FTEs

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#5 Monitor Energy Cost and Consumption

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY110

5

10

15

20

25

30

35

40

45Energy Unit Cost Trends VS. Peers

UVM Fossil Unit CostUVM Electric Unit CostPeer Fossil Unit CostPeer Electric Unit Cost

$/M

MBT

UFY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY110

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000Energy Consumption Trends VS. Peers

UVM Fossil ConsumptionUVM Electric ConsumptionPeer Fossil ConsumptionPeer Electric Consumption

BTU

/GSF

Campus

Campus Campus

Campus

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UMass Amherst’s Experience

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University of Mass. - Amherst Background Information

• Flagship public institution• 10.4 M GSF• Located in Amherst, MA• Sightlines member since 2004

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Campus Overview - 2005

Campus was aging Energy Consumption was Increasing

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Campus Overview 2005

13%

17%

41%

13%

17%

FY00-FY05 Investment

Bldg. EnvelopeBldg. SystemsSpaceCodeInfrastructure

Space-heavy project spending

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Steps towards a solutionThe Integrated Facilities Plan process

Identify the needs

Segment the needs

Develop a strategy

Track progress towards strategy

Reassess plan

progress & goals

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Findings of Initial Report

Identified Needs$0

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

Original Needs Identified - 2006

Building Needs InfrastructureNew Construction

61%24%

15%

Existing Needs

A: 1-3 years B: 4-6 years C: 7-10 years

Over $2 billion in needs Over 60% of the needs were near-term

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Findings of Initial Report – continued

Cooling

HeatingHVAC

Plumbing

Electrica

l

Mechanica

l

Exterio

r Shell

Interior S

hell

Safety/Code

$0

$100

$200

$300

$400

$500

$600

Identified Needs by System and Timeframe

A: 1-3 Years B: 4-6 Years C: 7-10 Years

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Segmenting the campus with the Building Portfolio Approach

Total Project Inventory$2,280 M

New Space$571 M

Building Needs$1,627 M

Transitional Facilities

$196 M

Building Renovation

$581 M

Repurpose$40 M

Maintain$812 M

Non-housing facilities$602 M

Housing facilities$208 M

Site & Infrastructure

Needs$80.4 M

Note: data shows current FY11 data

Campus is too complex to be managed with a single strategy

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Reassessing our Building Portfolio Designations

20%

17%

34%

2%0.21%

25%

2%FY11 Building Investments by Portfolio

Maintain Maintain (Housing) Building Renovation Transitional Repurpose InfrastructureNew Space

Building Portfolio FY11 Investment ($/GSF)Maintain $3.58

Maintain ( Housing) $4.30

Building Renovation $14.89

Transitional $1.54

Repurpose $1.29

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Using the inventory to make strategic decisions

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Using the Net Asset Value (NAV) to identify opportunities

0 5 10 15 20 25 30 35 40 45 500%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

NAV – Maintain Portfolio Investment Strategy

“Catch Up” Stage: Buildings require more significant repairs; major building components are in jeopardy of complete failure; large-scale capital infusions or renovations are inevitable

“Keep Up” Stage: Primarily new or recently renovated buildings w/ sporadic building repair & life cycle needs

Balanced Profile Stage: Buildings are beginning to show their age and may require more significant investment and renovation on a case-by-case basis

Replacement Value – Deferred MaintenanceReplacement ValueNet Asset Value =

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Descriptive text goes here

Bartlett Hall Operating Costs

FY08 FY09 FY10 FY08-FY10 Average

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$415,154 $413,619 $371,394 $400,055

$378,523

$117,815

$23,674

$173,337

Bartlett Hall Annual Operating Costs$ in Thousands

Other CostsMaintenance & Cus-todial Costs

$573$395$531$794

FY08, FY09, FY10

FY08-FY10 AverageIncluded in Analysis

Building Maintenance 60,888$ Contract Administration 787$ Contract Oversight 166,880$ Custodial 339,167$ Pest Control 308$ Utilities 5,362$

Total Included 573,393$

Excluded in AnalysisAlterations 14,525$ Moving Services 566$

Total Excluded 15,091$

Grand Total All Expenses 588,484$

Understanding operating costs of old vs. new space…

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FY08-FY10 Average$0

$1

$2

$3

$4

$5

$6

$5.04

$1.32

Bartlett Hall & Alfond HallFY08-FY10 Average Annual Operating Costs - $/GSF

Bartlett HallAlfond Hall

$/GS

FBartlett Hall Operating CostsFY08, FY09, FY10

Numbers to RememberOperating Costs

Bartlett Hall: $5.04/GSFNew Facility: $1.32/GSF

Understanding operating costs of old vs. new space…

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Determine 10-Year total needs for the existing building vs. New Construction

Renovate Existing or Demolish and Build New?

Bartlett Hall

GSF 113,748

FY11-FY20 Capital Needs $52.9 M

FY11-FY20 Stewardship Needs $3.5 M

Immediate Funding to Address Reliability Needs $5.7 M

FY11-FY20 Operating Cost $5.7 M

Swing Space Funding TBD

Total Associated Costs $67.7 M

New Facility*

GSF 113,748

Demolition of Existing Bartlett Hall** $2.7 M

Planning/Relocation costs TBD

New Construction $51.2 M

FY13-FY20 Stewardship Needs $6.5 M

FY13-FY20 Operating Cost $1.2 M

Total Associated Costs $58.9M

*Opening of new facility assumed for 2013. Operating Costs based on $/GSF costs for Alfond Hall.**Demolition estimated at $23/GSF (based on University Apartments demolition cost).

New Facility

Bartlett Hall

$- $20,000,000 $40,000,000 $60,000,000 $80,000,000

$53,854,740

$52,872,454

$6,501,761

$3,446,295

$1,199,365

$5,733,930 $5,672,212

Total 10-Year Costs$ in Millions

Capital Requirements

Reliability Needs

Stewardship Needs

Operating Costs

It is less expensive to demolish Bartlett Hall and construct a new facility than to renovate the

existing facility.

•Non-quantifiable factors:• Current building configuration• Program needs• Funding options (donors for new space vs.

University/state funding for renovations)

Bartlett Hall

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Progress towards reduction of needs

Original IFP Dec. 06 Udpate

April 09 Update

Fall 09 Update

FY09 ROPA Analysis

January 2010

Update

June 2010 Update

January 2011

Update

June 2011 Update

$0

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$3,000,000,000

$1,478,629,837 $1,548,439,772

$1,973,885,193 $1,894,502,002 $1,831,108,985 $1,886,683,763 $1,792,271,617 $1,704,496,420 $1,626,790,660

$117,958,018 $121,231,686

$125,513,498 $107,164,736 $105,051,379 $105,512,965

$82,479,217 $85,285,462

$80,446,368

$639,913,000 $639,913,000

$456,809,974 $434,170,465 $434,170,465 $427,461,911

$409,674,173 $603,198,644 $571,383,434

IFP Identified Needs by Update Stage

Building Needs Infrastructure New Space

Lowest existing needs since 12/2006

18% decrease in building needs

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Progress with project selection

13%

17%

41%

13%

17%


Bldg. Envelope Bldg. SystemsSpace CodeInfrastructure

Space-heavy project spending

11%

26%

29%

12%

22%


Bldg. Envelope Bldg. SystemsSpace CodeInfrastructure

Balanced spending mix

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The keys to success

• Understanding key metrics and how UMA compared with peers

• A comprehensive list of identified needs

Knowing where we were

• Making decisions about the future of specific buildings

• Creating investment strategies by building portfolioCreating A Plan

• Regular review of successes and failures• Adjust as necessary – flexibility is important

Monitoring the Plan