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VOL. 125 | NO. 38 | Thursday, February 25, 2010

Recession Pushes Looney Ricks Kiss Into Bankruptcy

By Eric Smith

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Looney Ricks Kiss Architects Inc., one of the city’s most recognizable and renowned architectural and design firms, on Tuesday filed a Chapter 11 bankruptcy petition.

This bankruptcy procedure allows LRK to reorganize and retool in hopes of navigating through a slumping economy that has taken a toll on the entire architecture industry.

LRK will continue with normal business operations but will restructure its offices in Memphis, Princeton, N.J., Celebration, Fla., and Baton Rouge, La. The company already had closed its offices in Dallas and Houston, and its Nashville office earlier this month spun off LRK to become Smith Gee Studio.

This voluntary reorganization comes on the heels of a debilitating two-year period for architecture firms that saw contracts all but dry up.

Founded in 1983 in Memphis by Carson Looney, Frank Ricks and Richard Kiss, LRK grew into a national planning and design firm that once claimed nine offices around the country.

Notable projects in town include AutoZone Park, FedExForum, Lenox Park office complex and the award-winning, LEED-certified Independent Bank branch in Germantown. (LEED is the U.S. Green Building Council’s Leadership in Energy and Environmental Design designation.)

Ricks, LRK’s managing principal, said the firm enjoyed steady growth during the past decade as it built a national client base and undertook numerous projects. The company expanded to nine offices and 240 people at its peak.

“Being large was never our desire,” he said. “We really wanted to be as small as we could be but take care of the clients we wanted to work for and do the kind of projects we wanted to do. That led to our growth.”

Unfamiliar territory

Ricks said the company had been through some dips in the marketplace before, but when the economy began tanking in late 2007 and early 2008, it signaled a recession like none that he and his partners had seen before.

During previous downturns, the company’s diversification – everything from multifamily complexes to single-family homes, from office to retail – had been its savior because each market is on its own cycle.

But the current slump was different.

“This time, because of the severity of it and because of the underlying lending problem, it began to really dampen every market segment that we’re in, which in most of our work is private sector,” Ricks said.

With private-sector developers having difficulty financing their projects, it sparked a two-year drought in new projects. And that meant LRK’s business model was no longer sustainable.

“We had an infrastructure built for 200-plus people,” he said.

Now down to a work force of 46 in the four remaining offices, with the majority in Memphis, LRK is focused on retaining those employees moving forward and regaining its footing as a potential recovery looms on the horizon. That means matching staff size and infrastructure costs to workload.

“I’m hopeful that we see improvement this year, but everything I hear and read says it’s really looking at 2011 before we see a lot of significant improvement,” he said, adding that many don’t project a full recovery until 2012.

Ricks said Kiss retired from LRK a few years ago, and that the firm now has nine principals, all of whom remain along with several senior associates.

More time needed for recovery

LRK’s bankruptcy was news to Heather Koury, executive director of the Memphis chapter of AIA, but she said companies have done what they can – from restructuring to layoffs to business diversification – to weather the storm as well as possible.

“At least locally, our industry has felt the economic challenges for the past three years,” she said. “It’s still deeply affecting our people. It’s affecting the companies themselves. It’s affecting individuals within the firms. We are continuing to see layoffs in the local community. We had hoped that that would have tapered off in the fall of last year.”

Koury said projections show a pickup in 2011, although the recovery reaching local firms so that they can rehire and expand will lag.

“Unfortunately, I see that this is going to continue until next year,” she said.

As for AIA membership, Koury said the number of firms has grown from about 65 to 70 because a handful of architects that were laid off in the past year or so have launched their own companies.

She said the only AIA member firm to close because of the economic slowdown came when the Mississippi-based firm of Johnson Bailey Henderson McNeel Architects shuttered its Memphis satellite office in June.

Rather, firms have been laying off and “doing what they can” to get by.

Nationally, the forecast remains gloomy.

The American Institute of Architects’ most recent Architecture Billings Index shows January with a score of 42.5, down from 45.4 in December.

An ABI score above 50 indicates growth; a score below 50 indicates decline. The new projects inquiry score was 52.5, down more than seven points.

PROPERTY SALES 85 305 21,577
MORTGAGES 62 223 16,417
BANKRUPTCIES 34 138 6,717