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July - August 2014 Issue

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Guam Chamber



Construction Story:
Military, residential projects keep builders hopping


At press time, Cementon Micronesia was still negotiating with Port Authority of Guam officials to lease a two-acre Cabras Island site with access to a pier. Perez says the company plans to erect at least four 6,000-ton-capacity storage silos. “We may increase the capacity to six silos, depending on market demands,” he says.

Market demand for bulk cement on Guam (and in the NMI) has been met by Hanson Permanent Cement and its predecessor, for the past 50 years. Heidelberg Cement now owns Hanson, which operates the Guam facility. Hanson’s single, 9,000-ton-capacity silo was built in 1973 by Black Construction.

Derek K. Sadler, general manager of Hanson, says the company has been looking at options to expand and operate more efficiently. It just improved a dust collection system that captures airborne cement and carries it back into the silo — preventing waste and a huge dust cloud — and increased its ship offload rate from 120 tons of cement per hour to 170 tons per hour.

Hanson has had discussions with port officials about building a wharf or using an existing pier to increase cargo capacity which is limited by Hanson’s current location. Ships needing to unload cement must berth alongside a “bumper” barge anchored to the shoreline because the water in the area is very shallow. Even with the barge, ships can’t carry more than 6,000 U.S. tons to the facility without risking grounding. “A new facility could allow 10,000 to 12,000 tons per ship,” Sadler says.

Hanson imports its cement from Japan, and will sell about 90,000 tons of it this year on Guam, up from an annual average of 65,000 tons. About 4,500 tons has gone to Saipan, where sales are down 50%, Sadler says. “This is a very small market compared to China, the West Coast, Japan. What I do in a year, a (Hanson) sister company will do in two weeks,” he says.

It certainly is a plus to be the only game in town, Sadler agrees. But at $60 per ton, the current market price, he wonders whether the market is strong enough for two importer/distributors.

Perez Brothers has been in business on Guam for 56 years, six years longer than Kaiser/Hanson/Heidelberg, and has provided a growing community with aggregate and concrete and concrete blocks. Perez says the company’s view in the past was that the cost of building a cement handling unit is considerable, and the cost versus potential payback, given the market at the time, was determined to be insufficient. “Then an opportunity presented itself,” he says.

If all goes as planned, military construction will accelerate from $100 million a year in 2009 to $1.5 billion the following year. Guam may see as much as $15 billion in overall spending during the estimated five to six-year buildup period. The opportunity is a chance to possibly sell more cement in a relatively short period of time than Hanson has sold in 50 years.

It’s also an opportunity to lead the industry as it markets cements with a range of technical specifications.

“We see it all the time, even prior to the buildup,” Perez says about building plans calling for “boutique” cement mixtures. “We are excited for the opportunity to offer various cement types that were previously unavailable to the island’s building community,” Perez says. “It is our intent to provide additional cement types to better meet the specifications of Guam’s modern construction techniques and specifications.”

It is also the company’s intent to make money. Perez says the company understands there are several key factors that will determine how soon it can recoup its investment, and begin to turn a profit.

“A major factor that comes to mind is the scope and timing of the DoD buildup. Wellplanned, robust construction activity and a reasonable land lease period will certainly assist us to recoup the company’s substantial investment in a timely manner,” Perez says.

Building the 600-room Outrigger Guam Resort was an excellent green learning experience for Tanota Partners, which completed and opened the Tumon centerpiece in 1999. The next phase of the developer’s Tumon Bay project, Bayview Five, a planned 400-room 30-story tower, is under construction.

Tanota’s Michael Ysrael says the real estate and hotel development company took advantage of the knowledge gleaned from building the Outrigger when planning Bayview Five. High-efficiency air conditioners were used in the Outrigger, but improvements nine years later offer an energy savings of 50%. The company realized significant energy savings from building insulation installed throughout the Outrigger. The new tower will also have glass windows treated to reflect both light and heat.

To take advantage of Guam’s 90 inches of rain annually, a catchment system will collect water for use in air conditioning cooling towers and to irrigate landscaping. Condensation from air conditioning equipment will be diverted to the catchment system. Low-flow toilets and waterless urinals will also be used to conserve water.

Tanota may build a passive solar heating system on a rooftop to warm water before it runs through active water heaters and into guest rooms, if concerns about typhoon winds can be allayed. Photovoltaic technology is also under consideration, Ysrael says.

Guam contractor Inland Builders teamed with the Philippines’ SKI Construction Group to garner the $95 million project. Guam architect Oscar Coloma did initial design work, about 60%, and Inland was tasked with value engineering the remainder, Ysrael says.

Also on the Tumon front, Paxcia Construction continues the renovation of The Charterhouse, the former Tropicana Hotel. And across the street, Hanil Construction and Korando Corp. have moved about 100,000 cubic yards of earth to prepare for a new stripmall.

The panorama that has emerged in Oka adjacent the Guam Memorial Hospital complex is nothing short of spectacular. On a 10-acre parcel along the cliff line about 100 feet above the surf, Younex International and Hanil Construction Co. Ltd., are carving out the basement parking garages for four luxury condominium towers with a total of 260 units, all with that million-dollar view.

Mok Tou Kyun, vice-president for Younex, says it will take about three years to complete the $100 million project, the groundbreaking for which was held in May. The Emerald Oceanview Park Verace Guam will include two 15-story and two 18-story towers of 3, 4 and 5 bedroom units ranging from 1,500 square feet to 2,900 square feet, and 20 villas.

Younex is upgrading water and wastewater infrastructure servicing the area, at a cost of $1.3 million, Mok says. The company has pledged that only 30% of the property will be used for actual building space, the rest will be open or green areas with overlooks, parks and other amenities.

It was the best time to buy a house on Guam. It was the worst time to buy a house on Guam. Builders in 2007 and 2008 were putting up some of the nicest, safest, most energy efficient homes — by the hundreds — ever erected on Guam. The activity followed a pronounced period of housing inactivity, especially in the luxury home market.

But since 2003, the median price for a home on Guam has almost doubled, from $115,000 to $197,000. Driven by speculation tied to DoD plans the Guam real estate market jumped off the chain.

But the jump might have been too early. Real estate brokers and agents report an enormous decrease in business during the first half of 2008. Captain says third-quarter sales in 2008 slid to almost half of what they had been a year ago. The on-again-off-again scenario can perhaps be explained thus; although the military is actually on schedule with regard to the buildup, some in the business sector, wanting to be in good position to move, committed money or assets or both early on, and now have to wait while the government rolls along at its own inexorable pace. Others who have seen these commitments languish are more wary, and those committed may not have additional capital to lay out. The financial crises and jittery Guam investors are driving prizes down even further.

Touted as Guam’s first eco-friendly private housing subdivision, Villa Pacita Estates sits along Rt. 15 in Yigo on the west side of Mt. Santa Rosa, minutes from Andersen Air Force Base. The developer of the 20-acre property is Vantage Group, which includes local businessmen Joe Sicad, Tommy Tanaka Jr. and James Tan.

Sicad and Tanaka were looking for land to develop and came upon the site, which already had roads and water infrastructure built by the Tan family, who owned it. A number of small homes had been built on the property, but it had never developed to the extent the owners had envisioned when it was subdivided into 119 lots in 1997.

The three men met and Sicad and Tanaka laid out their green building plan. A feasibility study had shown Sicad, who has a recycling background, and Tanaka, a realtor and businessman, that there was an unmet need and an opportunity to build a small community incorporating Green Building Council initiatives to promote healthier living, help to reduce the community’s waste stream and make efficient use of natural resources like sunlight and water.

“By first eco-friendly subdivision, we mean first to fully incorporate these systems into a subdivision,” Sicad says. “These systems are not necessarily new, it’s just that we made the commitment to put them into the subdivision.” One of Vantage’s first priorities was to mitigate exposure to radon which is prevalent in the northern part of Guam.

Villa Pacita homes, marketed by Century 21 Commonwealth Realty, include a passive water collection system installed under the foundation that can also function as part of an active system. Vantage focused on Guam’s average 90 inches of rain a year and saw a precious resource going to waste. As a result, Vantage homes include a catchment system of rain gutters directed to a 500-gallon tank that flows to a guest toilet and an outdoor hose connection. The system is engineered so it can flow to the whole house. “At least you are using rainwater as opposed to municipal water,” for car washing, hosing down the driveway or landscaping, Sicad says.

Other green water features include water saver toilets, aerated faucets, and a water softener to help keep mineral content out of plumbing. Water collected in an on-site ponding basin will be used to irrigate landscaping and a homeowner gardening area.

Vantage opted for clay tiles on top of a six-inch poured roof, and a three-inch thick layer of expanded polystyrene foam covered by drywall attached to interior ceilings to insulate the massive heatsink that Guam concrete roofs are.

Sicad says Vantage hoped to fill a niche market. “Our target is the environmentally-conscious professional who sees long-term value in the systems we are putting in.”

In 2010, when the environmental impact issues have been ironed out and the Department of Defense has the green light to begin the work to relocate units of the III Marine Expeditionary Force to Guam, the island’s present commercial port on Cabras Island alongside the Navy’s harbor property, will see more cargo than ever before.

That Guam’s port is not prepared at this time to handle the expected volume in an efficient and timely manner is common knowledge, but port management and a number of federal agencies are working to avert what was acknowledged as a potential bottleneck to the plan from the get-go.

In a recent statement, the Joint Guam Program Office says, “the Port of Guam Master Plan and Department of Defense studies indicate that the port's current capacity and throughput is limited. They also note that upgrades are required to handle expected increases in cargo volume associated with the military realignment and anticipated civilian population increase.”

Glenn A. Leon Guerrero, general manager of the Port Authority of Guam, who took over the reins of the facility in August, is acutely aware of its shortcomings. “The port was built in 1960 and hasn’t been modernized since,” Leon Guerrero says.

The master plan, which was the focus of a mostly favorable September public hearing, and now awaits the draft of an accompanying bill that is to include a tariff increase provision, was developed to bring the port to a world-class operational standard, Leon Guerrero says. The plan addresses the port’s need for more, and more capable, cranes, increasing wharf areas, expanding container handling and storage facilities, upgrading information management, and dredging berthing areas. It also sets operational goals like increasing the number of containers taken off a ship in a given time, and reducing the time it takes a trucker to get into the port, pick up cargo and get out on the road again.

Under the master plan, about $195 million is needed over three and a half years to bring the port up to par. By 2009, the port needs about $12.7 million for design, engineering and environmental planning. In 2010, about $49 million is needed to begin construction.

About $60 million is required in 2011 when most of the construction and upgrades are planned, and another $61 million is needed the following year to complete the project. Leon Guerrero says the port will have about $6 million set aside by January 2009. Of that, $2 million is coming from port coffers and the balance from the federal departments of Interior and Commerce, and DoD’s Office of Economic Assistance. The shortfall is huge, and the port continues to seek additional funding sources.

Gov. Felix P. Camacho in July submitted a $67 million request to the U.S. Office of Management and Budget for the 2010 budget. About $63 million of the request is slated to go to the port. “We’re hearing it’s positive,” Leon Guerrero says of OMB’s review of the administration’s request.


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