CT Construction Digest Thursday June 16, 2022
Shelton P&Z approves 92-apartment building on Canal Street
SHELTON — Revitalization of Canal Street is continuing, with plans in place for construction of a new building with retail and 92 apartments, some of which are classified as affordable.
The Planning and Zoning Commission, at its meeting Tuesday, approved Shelton resident and Primrose Companies owner John Guedes’ plan to build a five-story structure, dubbed Riverview Park Royal, at property listed as 113-123 Canal St.
The building will have 11,000 square feet of retail or commercial space and 92 apartments, with, according to the commission’s resolution, no less than nine units set aside as affordable under state statute 8-30g, the state’s affordable housing law.
Guedes had stated at one of the public hearings on the application he would “voluntarily” include eight studios as affordable units.
Commissioners responded with a request for 10 percent, or nine units, to be allocated in a format that would be structured and administered to comply with the state’s affordable housing law.
The commission, in its resolution, affirmed its stance on nine units, further recommending the units be reserved in a “mix that corresponds generally with the overall mix of the proposal, such as three studios, two one-bedroom and four two-bedroom.
Overall, there would be 28 studio apartments, along with 16 one-bedrooms, 44 two-bedrooms and four three-bedroom apartments.
Structured parking will be provided on a deck at street level, at the rear of the commercial space and under the apartments, with a lower level of parking at the basement level. There will be 205 on-site parking spaces, with one designated for each apartment.
The site, tucked between the railroad tracks and Veterans Memorial Park, consists of 2.57 acres and was originally part of the former industrial development along Canal Street but is now owned by the City of Shelton.
It is a former brownfields parcel, essentially remediated, save for additional excavation necessary to accommodate the development proposal.
The city has owned the property for years after seizing it following the previous owner’s failure to pay back taxes. Guedes and his partner, Biaggio Barone, have a contract to purchase the land from the city.
The deal also includes Guedes covering the cost of extending the River Walk from Veterans Memorial Park, along the river and ending at Canal Street East.
Bristol votes to approve several new projects
BRISTOL – Bristol voted to approve the creation of six new parking lots in the West End, the construction of a new firehouse on Church Avenue and the building of a new Northeast Middle School.
The city acquired lots on School Street, across from Café Real, which Mayor Jeff Caggiano said were delinquent in taxes. These parking spaces will be used to support businesses in the West End during the Route 72 construction.
“The construction will start in the fall around Park Street and shouldn’t impact the area until next year,” he said. “The street will be closed during most of that project and it will be a one-lane road. But, by then, the new parking lots should be in place.”
The firehouse, Caggiano said, will replace the existing fire house no. 3.
“This is something that we have been working on for eight years and now we can finally get it done,” he said. “The project is now in the design phase. The fire house that is currently there is outdated. There aren’t separate male and female living spaces. The new firehouse will be more compatible with modern equipment. The door is currently not high enough if we wanted to put a new ladder truck in there. Hopefully, this project will move forward quickly.”
The town council also unanimously approved the construction of an entirely new Northwest Middle School. Previously, Caggiano said, there had been some discussion of renovating the building and re-using some elements.
“I’m not the happiest with the way it went down, but the current building is old and we need more room for students,” he said. “The project cost will now increase by $14 million to $89,068,962 from the previous $75 million.”
Caggiano said that this project is also currently in the planning and design phase. The town will also be seeking approval for a grant from the State Department of Administrative Services, which could assist with costs.
“It could cover 60% or so of the project,” said Caggiano.
Officials give approval on tax-fixing agreement to build $39 million apartment complex in Newington
NEWINGTON – Elected officials have put their stamp of approval on a tax-fixing agreement to build a $39 million apartment complex at the corner of Pane and Masselli Roads.
Town Manager Keith Chapman and former Town Assessor Steve Kosofsky negotiated with Smith & Henzy Affordable Group (SHAG) to finalize the contract, providing the developer with a 43% tax abatement over 10 years.
“This has been a long time coming; I’m very pleased to see we’re at this point now,” Chapman told the Town Council. “I know the developer is anxious to get his final documents in place to be able to move forward.”
Known as “The Pike,” the project received approvals from the Town Plan & Zoning Commission earlier this year. Plans call for building two, four-story buildings with 76 units each on the vacant, five-acre parcel at 227 Pane Rd. At least 10% of the units will be designated as affordable for people making less than 80% of the area’s median income.
No less than 173,800 sq. ft. of new construction will feature approximately $25.14 million of fully-taxable property once completed. With the 43% abatement, that equates to $4.4 million in taxes payable to the town from 2023 to 2032, according to Kosofsky. Over the following 10 years (once the property is fully taxable) it will render $10.96 million in tax revenue for the town.
Councilors praised Chapman and Kosofsky for their attention to growing the grand list, as this and other recent projects have been the result of their prioritizing economic development.
“Keep up the good work; thank you,” Councilor Mike Camillo said. “This wouldn’t happen without you. It’s going to bring more people to the town and they will support the businesses that are already here, which pay taxes too, so this helps everybody.”
Councilors Mitch Page and Kim Radda voted against the agreement, which Page called “inappropriate and irregular.”
“I’m troubled by this,” he said, adding that he may be willing to support an abatement for retail development but not housing. “We don’t need to do this. Newington is a very desirable location and this to me raises ethical questions.”
This opinion was not shared by the majority of the council, which by the guidance of Chapman, has supported other tax abatements in an effort to incentivize development, as a stagnant grand list leads to higher taxes.
“This is the way of the world now,” the town manager said. “Based upon our information and knowledge of the way in which developers operate today, without a tax-fixing agreement in place I would predict this project as well as all the other ones we’re working on will disappear.”
Surrounding towns like Berlin and New Britain regularly execute abatement agreements on housing, commercial and other projects in order to incentivize development.
“The towns that don’t do not get development,” Chapman said. “It’s really a choice of collecting $10,000 a year for a vacant piece of land versus collecting a half-a-million and after 10 years over a million…You will not be able to sustain what you have in this town if you don’t develop it.”
As state residents and visitors get on the road for summer travel, it’s a good idea to consider what might be in store on Connecticut’s highways and byways.
The Connecticut Department of Transportation has identified nearly two dozen “major” highway and bridge construction projects, though several, such as the new dedicated northbound lane at exit 29 on Interstate 91 for traffic to head east on the Charter Oak Bridge in Hartford, have been completed.
Others, such as the I-84 Hartford Project, are examining the condition of two miles of aging bridges between the Flatbush Avenue ramps and the I-91 interchange and other transportation needs.
But work continues on several projects this summer so drivers should check ahead for potential lane issues and work areas. The DOT resource, a real time “CT Travel Smart” map, is at https://cttravelsmart.org/.
Some of the projects are, per the DOT:
I-84 improvements in West Hartford: Providing safety and operational improvements to address concerns with congestion and traffic operations on I-84. Improvements include adding an additional westbound lane between exits 39A and 43 and between exits 40 and 41 eastbound.
Bridges over Berkshire Road and Ridgewood Road westbound will be widened or replaced.
Construction will be in three stages to affect traffic as little as possible. Major detours are scheduled to redirect traffic from April through October.
East Haddam Swing Bridge project: The $58 million Route 82 bridge rehabilitation project involves steel repairs in all spans, mechanical and electrical system upgrades and operator house repairs. The project also calls for a cantilevered sidewalk to be added to the south side of the bridge and approach sidewalks built, as requested by the towns of East Haddam and Haddam.
A swing span operation outage, where the bridge cannot open for tall marine traffic, is proposed from Dec. 1, 2023, until April 1, 2024, as electrical and mechanical system components are replaced. Construction is anticipated to start this summer and end in the fall of 2024.
Rochambeau Bridge reconstruction: The I-84 east- and westbound bridges over the Housatonic River in Newtown and Southbury have extra-wide shoulders, providing enough room for traffic in both directions on one bridge while the other is reconstructed.
The nearly $53 million project is scheduled to be completed at the end of 2023.
The rehabilitation of I-691: Resurfacing, bridge rehabilitation, lighting improvements, sign replacement, drainage upgrades and guiderail replacement. The project targets the poor condition and degradation of the roadway, makes critical repairs to the bridge and safety enhancements. This project’s limits begin near the Meriden Mall and MidState Medical Center area in Meriden and extends through Middlefield, Meriden, Southington and Cheshire.
Work on the first phase began in September and ended in November. The 2022 construction season will focus on the remaining half of eastbound and the first half of westbound improvements.
Substantial completion is expected in August 2023.
Route 7/15 Norwalk Project: The 7/15 Norwalk Project is an initiative to provide the missing connections between routes 7 and 15, which is the Merritt Parkway. Its intent is to improve mobility and safety at the Main Avenue and Route 7 interchanges on the Merritt Parkway. The project’s schedule extends to 2025.
The current Route 7 /Route 15, or Merritt Parkway, is a partial interchange. Missing connections include Route 7 North to the Merritt Parkway North, Merritt Parkway South to Route 7 South. The missing connections cause traffic congestion and delays on Main Avenue and other local roads.
Stamford Railroad Station parking garage: The project calls for a 928-space, seven-level parking garage on South State Street in Stamford and a 320-foot pedestrian bridge over Washington Boulevard connecting the garage to the Stamford Transportation Center.
It includes elevators and stairs connecting the garage to the track 5 platform, 38 electric vehicle parking spaces, 100 bike parking spaces, pedestrian crossing improvements at South State Street and Washington Boulevard and connection to the planned Mill River Greenway.
The project is scheduled to be completed in 2023.
Route 8/I-84 Mixmaster at Waterbury: The $153 million project includes rehabilitating numerous bridges within the Route 8 and I-84 Interchange to preserve and provide a 25-year service life and assure structural integrity. The project calls for deck repairs and replacements, steel repairs, substructure repairs, joint repairs and other general repairs.
A bypass of three temporary bridges was built to carry Route 8 northbound traffic through the interchange. This bypass will be in effect for three years.
The date of completion was originally Sept. 10, 2022, but is now set at June 2023.
A significant amount of deterioration was found on the bridges that carry Route 8 through the interchange, requiring full deck replacements for Route 8 northbound and Route 8 southbound.
Another upcoming “major” project, for which construction funds have not yet been identified or allocated, is the I-84 Danbury Project, which is intended to improve safety, increase capacity and improve operations and access between exits 3 and 8 in Danbury.
The Department of Transportation cites congestion along the eight-mile stretch of the highway and is the agency’s highest priority for expanded capacity on the I-84 corridor west of Waterbury. State funding of $17.5 million is earmarked for planning, preliminary engineering and other requirements.
Why construction stocks are like honey for the bear market
This week, the prospect of a recession got real. Scary real.
Nearly six months into the stock market’s tumultuous ride, investors woke up Monday to see the claws of the bear now too late to duck: 40-year-high inflation for six months and the prospect of a quick spike in interest rates to tame it.
The S&P 500 fell into a bear market, defined as a 20% decline from its peak, and fell further Tuesday. Meanwhile, the 30-year fixed mortgage crossed the 6% threshold for the first time since 2008, sending mortgage applications in May to a 22-year low.
“Federal Reserve policymakers will continue to aggressively combat inflationary pressures,” said Anirban Basu, chief economist for the Associated Builders and Contractors in a statement, forecasting a recession later this year or next.
An ominous confirmation: The yield curve for government bonds — the difference between interest paid on 2-year and 10-year Treasuries — is getting closer to bending in the wrong direction, a widely recognized signal of an impending recession.
While the blood ran thick on Wall Street — 495 of the S&P’s 500 underlying stocks ended lower Monday — nonresidential construction companies could be a safe haven against broader economic headwinds.
For instance, while the S&P 500 has lost 22% this year, the ISE Global Engineering & Construction Index, which tracks 56 large, multinational construction companies, has lost about half that — 12%.
There are several reasons these firms may show resilience in the face of a broader sell-off and sagging economy, including new project pipelines worth billions and plenty of future prospects to bid for in the $1.2 trillion Infrastructure Investment and Jobs Act.
And multi-year projects lead to “late cycle” profits in a downturn. Many key players, like AECOM and Jacobs Engineering, are pivoting to a less-risky business services model and away from the uncertainties and vagaries of physical construction.
To be sure, interest-rate sensitive sectors, such as income-producing properties, are likely to take hits. But on the nonresidential construction side, observers see reason for optimism.
Big backlogs
“In the headlines, we’re hearing more and more talk about recession risk,” said Sean Eastman, senior equity research analyst at financial services firm KeyBanc Capital Markets. “Meanwhile, most of the engineering and construction companies I cover just reported record or near record backlog levels in the first quarter.”
The ABC’s Construction Backlog Indicator, which measures jobs contractors have won, but not started, hit nine months on Wednesday, the highest since September 2019 — before the pandemic and when commercial construction was near its peak.
“It is simply remarkable that contractors continue to add to backlog amidst global strife, rising materials prices and ubiquitous labor force challenges,” said Basu in a statement. “Backlog is up in every segment over the past year.”
Investors seek a safe haven
The firehose of infrastructure funding, which has just started to pump and will continue for five years, gives observers plenty of evidence that nonresidential construction firms could weather a recession.
“I’m still bullish on construction … Public construction spending, at least, is likely to hold up even if the economy slows dramatically,” Ken Simonson, chief economist at the Associated General Contractors of America, told Construction Dive.
Their stocks could be safer bets for investors trying to shed risk, especially construction and engineering firms with more public infrastructure business.
“The growth prospects are a little bit more locked in and are not as uncertain in a market that’s looking for a safe haven,” said Andrew Wittmann, senior analyst at financial services firm Robert W. Baird.
While many would like to forget the Great Recession that hammered the housing sector, profits in commercial construction were buffered longer because of the long lead times and government contracts.
“Housing crashed around 2006, but nonresidential construction on the private side kept going right up until the fall of 2008,” AGC’s Simonson said. “Even then, public construction kept going for a year after that, because those were pretty long runway projects.”
The big players also cover a lot of ground. Take Granite Construction, based in California. While the company is a roadbuilder at its core, the firm has posted big gains in its aggregate business — selling things like asphalt and other materials needed for construction — during the pandemic.
Shying away from risk
Others say these companies’ strengths lie beyond just a business cycle strength, at least this time around. The reason why is because companies like AECOM, Jacobs and Fluor are diversifying into more stable, higher-margin work like government services. That helps compensate for cost overruns on fixed-price contracts that erase profits.
“They’re a little more resilient than they were a few years ago,” said Krzysztof Smalec, an equity analyst on the industrials team at investment research firm Morningstar.
Nevertheless, some pundits see plenty of risk in these stocks. CNBC’s Jim Cramer, for example, recently panned Fluor in his “Lightning Round” stock-picking segment. “Under no circumstance do you want to buy Fluor,” Cramer said. “That business is way too hard.”
But KeyBanc’s Eastman argues that view disregards the secular changes these companies have made in recent years. He says the upside of their new approaches has yet to play out.
“These businesses have become considerably more predictable, and I feel like we’re able to forecast out a lot further than we could have previously,” Eastman said. “That adds another layer of contrast. We haven’t even really seen the tailwind from the Infrastructure Investment and Jobs Act hit these models yet.”
Apartments, hotels, retail and office beware
That said, the outlook certainly isn’t rosy for all sectors of construction. For one, rising interest rates will almost surely have brutal impacts, especially for properties that collect rent.
“I’m stunned to see how much the 30-year fixed mortgage rate has gone up just today so far,” said Simonson on Monday, when rates jumped to 6.13%, a nearly 30-basis point leap in a single day, and double the rate six months ago. “That’s clearly a danger sign for home building and for any income-producing property type. Apartment construction, hotel, retail and office, to the extent that those were coming back, and it’s hard to tell if they were, are all certainly vulnerable.”
Basu added that supply chain and inflation worries will continue to plague contractors, no matter what sector they work in.
“For contractors, the challenge will continue to be the cost of delivering construction services,” said Basu. “The risk of severe increases in costs and substantial delays in delivery remains elevated given the volatility in input prices, the propensity of the labor force to shift jobs in large numbers and equipment shortages and delays.”
But for shares of large, public-facing nonresidential contractors, the bear market may be just the makeover they need to transform into Wall Street darlings at last.