AIA’s Approach to Financing Pinch

Posted on November 4, 2011

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I was intrigued to read this morning in my weekly AIA e-newsletter that in an effort to jumpstart thousands of projects mothballed due to lack of financing, the American Institute of Architects (AIA) has initiated a Stalled Projects effort. 

The AIA is choosing to proactively manage the main hurdle to getting project work in place:  money. The Stalled Projects initiative is meant to be a hub to match potential investors with projects that are in suspended animation due to lack of financing.  Visitors can register as a project initiator or potential investor.  There do not appear to be any broker fees charged. 

Some of the data gathered on the listed projects include the usuals like size, location, cost, building type, fees, etcetera, but also some more telling facts:  energy rates / savings, project equity, credit profile, and existing / previous developer. Participants are encouraged to “sell” their story to potential investors by explaining why their project is worthy of investment. This selling effort is like a cross between a jury from architecture school and a business plan competition or angel investor presentation—quite novel I think for architects.

This relevant to healthcare because healthcare projects will likely begin showing up on the database as candidates for a cash infusion. This is an effort to not tip-toe around what is holding things up. Appropriately, the AIA is shedding the kid gloves to deal with financing head-on as a significant impediment in the design and construction industry.

While talking with hospitals this year, I hear two primary concerns holding up healthcare construction.  First, the uncertainty surrounding reimbursibles (political and legislative—including ACOs) are keeping hospitals from investing in more infrastructure; without knowing what they can recoup per procedure, per bed, etc., their business cases cannot be justified. Second, access to capital, coupled with a minimal appetite to incur debt, is keeping anyone without a healthy balance sheet from moving ahead with a sizable project.

The AIA can only attempt to influence that which it touches. Yet lately, more and more professionals involved in design and construction seem to be “touched” by the money side of a project. For us, that means educating both ourselves and our client on ways to tap financial resources. The learning curve is steep for some, but the AIA is taking a strong step forward for its members and the community…and it may benefit your hospital or a hospital near you.

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