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Monday, July 11, 2011

The Architect's Bank

            Architects have been suffering from market share, compensation and economic cycles for a long time, and one of the contributing factors has been bank financing policy. The architect’s fee is small in comparison to project value, but stands out because banks don’t consider it a construction cost that can be collateralized by real property. Whenever something stands out it becomes a target. The simplest answer is to reduce its exposure. In this case if you can’t fight the banks, become a bank. The problem is that many projects are never built. In these cases, the design fee becomes a loan that is collateralized by the borrower’s assets and credit rating. Collection is a banking problem that is older than the idea.

The architectural profession represents a sizable depository base if it can be organized. The banking goal would be to offer below-market interest rates to construction borrowers of the highest credit quality when represented by an architect whose fee is included in the loan.

            If a new bank is not feasible, an alliance with an existing bank is an option when the deposits of an entire profession are offered in return for an agreement to include design fees in construction loans sponsored by an architect. This is the kind of business proposition banks understand.

            I’ve mentioned architect and not AIA member for a reason. Everyone has climbed a mountain to reach a license. The entire database represents the list of potential depositors. Any segregation simply perpetuates distinctions that are a professional liability. The AIAKnowledgeNet is a significant attempt to improve this model, but old habits die hard; and AIA members can elect exclusive conversations among themselves. This is not healthy and continues to divide a small profession that must combine to multiply its strength.

            There are too many divisions of interest within architecture. A bank represents a centralizing influence for a relatively small group of professionals that need a common bond. The bond right now is inadequate market share and compensation in return for the investment made and the economic cycles endured. The bank is a concept to enter the mainstream of construction activity while stabilizing cash flow and introducing return to investors. AIA membership in return for deposits is another idea. It is a concept that may not survive that devil in the detail, but a concept caught by the AIAKnowledgeNet is an idea that won’t swim away - but may be eaten.

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