Champion Environmental Services, Inc. Update – Economic Outlook

Despite the continued economic impediment that exists in the real estate and construction related industries, we are still experiencing a high volume of solicitation for proposals involving demolition and environmental services.

Based on comparative metrics in relation to last year at this time, the degree of opportunity is up 18%. While the quantity remains elevated, the magnitude of projects taking place is on a smaller scale. Rather than full building demolition, many projects seem to center on interior renovations and build-outs. One could surmise that this is a reflection of cyclical construction patterns easing workloads as we turn into fall in anticipation of winter. However, the majority of retail, office, hospital, university, and multi-residential projects over the past four months have centered on minor to mid-size interior demolition projects.

Some Broad Conclusions.

Lenders are still reluctant to finance speculative or large projects. Convalescing older structures with minor aesthetic improvements in the $50,000 to $200,000 range of project cost seem to be experiencing little resistance to financing.

Another observation we have noted is that key decision makers are extremely reticent with regard to initiating the start of a project. We have a healthy backlog of verbal commitments sans executed contracts; the developers and owners (in my estimation) are attempting to determine short and long term market outlook.

One guiding principal employed is the American Institute of Architects Architecture Billings Index (ABI). The index serves as an economic indicator of nonresidential construction. The ABI is one factor of influence.

Daily economic reports which cover everything from jobless claims, to commodity price fluctuation, housing starts, manufacturing output, and the general bipolar nature of the Dow and Nasdaq activity rounds another sphere of persuasion.

The anticipation of the Chicago Olympics, in my opinion, induced a collective inhale of possibility and exhaled shared disillusionment. Partisan politics aside, the opportunity that would have been created for contractors had Chicago been awarded the Olympic bid is extraordinary.

I personally know several investors who literally would have digested blocks real estate, everything from vacant lots, to multi-residential parcels, to distressed industrial buildings; the geographic realm not only included Chicago, but Indiana, Wisconsin, and Detroit, Michigan as well. The infusion of capital, which has been sitting on the sidelines, will remain vaulted.

The complexity is truly exhaustive. The author James Joyce wrote, “A man of genius makes no mistakes; his errors are volitional and are the portals of discovery”. Those who operate under such a premise in today’s climate stand to ascertain little.