Urban Land - 08 Aug 2009

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Bank of America, N.A. Member FDIC. Equal Housing Lender .“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, which are both registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed. ©2009 Bank of America Corporation.

A mandate for change is a mandate for smart. The world is ready for change — that much is clear. For leaders of all kinds, this moment presents a rare opportunity. Our planet is not just getting smaller and flatter. It is also becoming smarter. And that means we have the potential to change the way the world literally works. Computational power is now being put into things we wouldn’t recognize as computers — cars, appliances, cameras, roadways…even pharmaceuticals and livestock. We are interconnecting all of this through the Internet, which has come of age. And we are applying powerful new systems and sophisticated analytics to turn oceans of data into insight, knowledge and intelligence. Consider the changes already under way. Smart traffic systems are helping to reduce gridlock by 20%, cutting pollution and increasing ridership on public transit.

IBM, the IBM logo and ibm.com are trademarks of International Business Machines Corporation, registered in many jurisdictions worldwide. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml.

Smart food systems based on RFID technology embedded into supply chains are monitoring meat, poultry and other items from the farm to the supermarket shelf.

Smart healthcare systems are helping to lower the cost of therapy by as much as 90%. Police departments are correlating street-level information from myriad observations and devices to identify crime patterns — helping prevent crime, rather than simply punishing it. The list is long, and the transformation is just beginning. Its benefits will be reaped not only by large enterprises, but also by mid-sized and small companies — the engines of economic growth everywhere — and by individuals and communities around the world. Imagine how a smarter planet will transform all the things we seek. The ways we pursue economic growth, societal progress, environmental sustainability and cures for disease. The way we interact with each other and with the world. The opportunity is before us, and the moment will not last forever. Will we seize it? As we look to stimulate our economies and rebuild our infrastructure, will we simply repair what’s broken? Or will we prepare for a smarter future? Join us at ibm.com/think

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build to suit lease for LEED gold certified building

eco-friendly resort group

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preservation of agriculture and family farms

preservation of 116,000 acres in Adirondacks contracts for LEED Gold certified hotel and conference center

One of the largest proposed LEED-ND urban neighborhoods in the U.S. from Gale International, Morgan Stanley and W/S Development

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2009 ULI Fall Meeting & Urban Land Expo November 3–6, 2009 SaN FraNciSco, cal iForNia

ConneCt with the right people

l The Fall Meeting is the place industry leaders meet to share survival strategies and opportunities, and to build relationships with prospective clients, business partners, and employers.

Sharpen your SkillS

l Workshops and sessions provide take-home value and the skills to gain a competitive edge in today’s challenging business environment. Get continuing education credits for AIA and AICP.

hear about trendS from the people Shaping them

l Get the information you need from top experts on capital markets, financing, demographics, what’s next for real estate, and how it will affect your bottom line.

tailor your experienCe to meet your buSineSS needS and budget

l Choose a one-day ticket or attend the full meeting. Select tracks, interactive sessions on a wide variety of topics, workshops, tours, and networking events that will give you the most value and make this meeting worth your time and money.

See San franCiSCo

l Experience innovative projects firsthand and stay to explore the city.

1025 thomas Jefferson street, Nw suite 500 west washington, DC 20007-5201

RegisteR Now

www.uli.org/Fall2009 Interested in sponsorship, exhibiting, or advertising? Contact JB Rauch, VP for Development, at [email protected] or call 202.624.7135.

august 09 Vo l u m e 6 8 , N u m b e r 8

mainstreaming Green

urbanland

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w w w. u l i .o r g / u r b a N l a N d

58 The race to Clean energy

New sustainable design strategies, materials, and modeling tools are enabling the mainstreaming of green development projects.

Patr icia L. Kir K

With 2050 fast approaching as the deadline for replacement of fossil fuels with clean, renewable energy resources, scientists around the world are working to expand the use of alternative energy and development of new technologies to ramp up production, storage, and distribution of clean energy.

63 Harnessing the Wind Jer ry W. Szata n

42 42 a New Shade of Green New design strategies, energy-efficient materials, and innovative building technologies are helping take green mainstream.

r ob Lyn ch a n d r a Lf eLSa e SSer

48 regenerative Design JaSo n K i n g a n d S cot t e . th aye r

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66 Developing biofuel research Facilities

Mat t c a n t e r b ury

Sustainable design and planning strategies are setting new standards for green development projects that integrate the social, economic, and environmental needs of communities.

In recent years, the use of wind power has grown rapidly in the United States—and is poised for greater growth if transmission and political challenges can be met.

51 51 modeling High-Performance buildings ro bert bo Li n

Sustainability and modeling tools, which enable multiple energyefficient design strategies to be evaluated in a short period, are driving today’s high-performance buildings.

The convergence of environmental awareness, scientific innovation, political will, and entrepreneurship has pushed forward the development of alternative-fuel technologies.

68 Q&a with Green leaders c ha r LeS LocKWood

“Worldwide, we will see more nations forming green building councils, and millions of buildings constructed or retrofitted to green standards. The financial and environmental benefits are too compelling for this not to happen.”

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O n t h e C O v e r : t h i n F l at s, t wO - s t O r y s ta C k e d d u p l e x e s n e a r d Ow n t Ow n p h i l a d e l p h i a , i n C l u d e a g r e e n r O O F, s O l a r t h e r m a l pa n e l s, a s t O r m w at e r COlleCtiOn system, radiant h e at e d i n t e r i O r F l O O r s, a n d e x t e n s i v e day l i g h t i n g . ( s e e pa g e 4 0 . ) phOtO: marikO reed



august 2009

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urbanland® 70 Land Writes 70 The Greening of Egypt Sam al i

Egypt intends to create a nationwide green building code and to join the World Green Building Council, an effort that presents daunting challenges—and the possibility of substantial rewards—to a developing country that wants to follow the path of sustainability.

74 Global Investing: Keep it Simple

ma lcolm R iddell

Pau l Phil l iPS

China presents new opportunities for foreigners to invest in Chinese real estate and for U.S. and western property owners to sell to Chinese investors. Foreign investors are finding opportunities not only in Chinese property and operating companies but also in the assets owned by cash-strapped western firms.

While the long-term strengths of regional economies may not be clear, the short-term reality of pricing core opportunities at value-added prices is clear.

20 Developments

26 Dialogues

U.K. Approves Only One-Quarter of Ecotowns; Proposes Zero-Carbon Standard by 2016

26 Dialogue: Policy

34 Dialogue: Energy

82 In Practice

Climate Change: The Good, the Bad, and Obama

Renewable Communities

Sustainable Development at the Graduate Level

edwaR d t. m cma hon

Su Sa n Fin e a n d ca R olin e G. ha R R iS

The recently passed U.S. economic stimulus plan includes numerous provisions—and billions of dollars—aimed at advancing the energy and climate change agenda.

By increasing renewable energy resources at a community level, the value of foreclosed homes could be raised while reducing the carbon footprint on a community-wide basis.

Everyone’s talking about “green,” but who’s teaching it—and what’s being taught?

28 Dialogue: Climate Change

36 ULX

91 In Print, Etc.

Patrick L. Phillips Named ULI Chief Executive Officer

Betting on Market-Driven Solutions

R on n yR en

BREEAM Introduces New Rating System for Sustainable Communities; Pilot Tests with MediaCityUK in Manchester

ch and Ra n n a iR

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ULI Energy Efficiency Exchange Set for Launch on Web Solar-Powered City in Sunshine State Sets Example for Sustainable Design Plans Unveiled in Chicago for First Smart Grid for U.S. Commercial Building ULI Releases Recommendations for Transportation Reform Real-Time Carbon Counter Launched in New York City First U.S. Solar Highway Installed in Oregon Recession Watch:

The global public good should not be placed on the sacrificial altar of the private interests of unregulated financiers. Governments, not solely the market, should be involved in alternative energy industries.

30 Dialogue: Environment Q&A With Fred Krupp About Cap and Trade Ro n nyRen

The president of the Environmental Defense Fund talks about emissions cap-and-trade systems, the potential for integrating renewable energy sources into buildings, and methods for minimizing greenhouse gas emissions in the production of building materials.

l Commentary: Hints of Recovery?

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72 China’s New Real Estate Opportunities

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Residential Green Ten multifamily housing developments give high-density living an even greener spin.

76 ProActive 76 Capital Markets Applying Responsible Investing to Green Building KiR K Sy KeS

A recent real estate investment strategy emerging out of the smart growth and sustainability movements takes green to the next level by marrying business interests with environmental and social goals.

Joa n ca Pel in

87 Solution File Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization Hungry City: How Food Shapes Our Lives

93 Trustee Profile 112 Back Page Stimulus Package Recharges Renewable Energy PeteR l. G Ray

The 2009 economic stimulus package has changed the ground rules for investors. Projects considered unthinkable a year ago are now underway.

Departments 16 Publisher Note

78 At Issue

19 This Issue

Initiatives to Set Up Cap-and-Trade Programs

95 Regional Spotlight: New York/ Massachusetts

JeR Ry w. Szata n

While federal legislation is being debated, coalitions of states and provinces have been developing and implementing regional capand-trade programs to control greenhouse gas emissions.

108 Advertisers Index

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urbanland® w w w. u l i .o r g / u r b a N l a N d Vo l u m e 6 8 , N u m b e r 8

Publisher

Rachelle L. Levitt [email protected]

e d i to r i N C h i e f

Kristina Kessler [email protected]

m a N ag i N g e d i to r

Karen Schaar

[email protected] C o P y e d i to r s

James A. Mulligan [email protected]

David James Rose [email protected]

a r t d i r e C to r

Betsy VanBuskirk [email protected]

graPhiC desigNers

Anne Morgan

[email protected]

Byron Holly

[email protected]

First Aid for Ailing Real Estate Projects Do you nEED stRAtEgiEs AnD solutions foR youR Ailing PRojEct? Arrange a session with the “Deal Doctors” at the uli fall Meeting in san francisco, november 3–5, 2009.

DeAl Doctor sessions (formerly Project Analysis Sessions) offer a two-hour review of your project by an expert interdisciplinary team of members, assembled by UlI to address your specific issues. our Deal Doctors provide: l In depth, project specific, pragmatic advice l Interdisciplinary team of practitioners in the land use and real estate professions l Intimate, conversational format for creative thinking ApplicAtions due: September 30, 2009 • Fee: $3,500 to Apply or For more inFormAtion, contact tom eitler at [email protected] or go to our webpage at www.uli.org/dealdoctors.

P r o d u C t i o N m a N ag e r

Craig Chapman

[email protected] P r o d u C t i o N C o o r d i N ato r

Colleen DiPietro [email protected]

s e N i o r a dV e r t i s i N g m a N ag e r

Carmela Acampora

202-624-7042/[email protected] N at i o N a l s a l e s m a N ag e r s (design/planning/engineering/construction)

Yasmine Yates

202-624-7175/[email protected] (financial/legal/accounting services)

Tom Mitchell

202-624-7133/[email protected] Urban Land® (ISSN 0042-0891) is published monthly (except the combined November/December issue) by the Urban Land Institute, 1025 Thomas Jefferson Street, N.W., Suite 500 West, Washington, D.C. 200075201; www.uli.org/urbanland. ©2009 the Urban Land Institute, all rights reserved. Receipt of Urban Land is a benefit of membership in the Urban Land Institute. Single and multiple copies are available through ULI Publications Orders (800-321-5011 or E-mail: [email protected]); single-copy price, $15; $9 each for five to 24 copies; $4.50 each for 25 or more copies. Opinions expressed in articles or columns appearing in Urban Land are those of the author(s) or person(s) quoted and are not necessarily those of Urban Land or of the Urban Land Institute. Advertisements appearing in the magazine do not constitute or imply endorsement by Urban Land or the Urban Land Institute. Urban Land assumes no responsibility for the loss or damage of unsolicited manuscripts or graphics. The contents of this publication are protected by copyright and may not be reproduced in whole or in part or in any form without written authorization. Article proposals for Urban Land can be sent by E-mail to Kristina Kessler ([email protected]). Letters about articles and columns published in Urban Land, as well as comments about other topics of interest to its readers, can be sent by E-mail to Karen Schaar ([email protected]). Submissions are subject to editing for clarity, style, and length. Urban Land’s 2009 editorial calendar, editorial and graphics specifications, and photo permission agreement forms can be found at www.uli.org/urbanland. To request permission to reprint Urban Land articles, contact Lisa McNeil at [email protected]. Postmaster: Send address changes and circulation inquiries to Urban Land, Member Services Division, ULI, 1025 Thomas Jefferson Street, N.W., Suite 500 West, Washington, D.C. 20007-5201. Periodicals postage paid at Washington, D.C., and additional mailing offices. Printed in the U.S.A.

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publishernote Moving Cooler a Challenge to the Land Use Community Seminal research on the effect of transportation and land use policy strategies on production of greenhouse gases (GHGs) was released at the end of July by the Urban Land Institute. Titled Moving Cooler, the report is expected to inform the debate at all levels of government on how to reduce emissions. The product of a unique collaboration among nonprofit

Moving

Cooler

n sporTATio is of TrAn cing An AnAlys s for redu sTrATegie ions gAs emiss se ou nh gree Inc. Systematics, Cambridge

organizations, federal government agencies, the private sector, and foundations, Moving Cooler should provide policy makers the data to understand the implications of decisions made to reduce GHGs. Moving Cooler measures the potential effectiveness of strategies to reduce GHGs against a current trends baseline. The strategies examined are: pricing and taxes; land use and smart growth; nonmotorized transport; public transportation improvements; ridesharing, car sharing, and other commuting strategies; regulatory strategies; operational and intelligent transportation systems; capacity expansion and bottleneck relief; and a more effective multimodal freight sector. While increased automobile fuel efficiency would seem to be a logical solution to reduce greenhouse gas emissions, in fact, increased auto travel more than offsets expected sav-

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ings. For evidence it is only necessary to look back to 1975, when federal automobile fleet efficiency was increased from 15 miles per gallon to 25, but increased travel more than offset any savings. Moving Cooler found that to achieve significant impact on GHGs, a multipronged policy is necessary—a policy that includes local and regional pricing and regulatory strategies that increase the cost of single-occupancy vehicle travel; lowering of speed limits; educational strategies to encourage eco-driving behavior; land use and smart growth strategies that reduce travel distances; and expanded multimodal strategies to broaden travel options. Land use changes that increase density and proximity to jobs and that enable nonmotorized travel would provide a reduction of 6 to 9 percent in GHG emissions by 2050, Moving Cooler found, constituting a significant component of the solution. But, the ultimately frightening conclusion of the research is that if all transportation and land use policies were implemented at the highest level possible, carbon emissions would only be reduced by 35 percent by 2050—proving how difficult it will be to achieve what is necessary to control global warming. Considerable changes to transportation systems and operations, travel behavior, land use patterns, and public policy and regulations will be needed. The challenge will be for the public and private sectors to work toward making the hard decisions that will be required. Rachelle L. Levitt Publisher Moving Cooler is available for purchase from ULI’s Web site, www.uli.org.

W h o ’ s W h o at U L I a n d t h e U L I f o U n dat I o n ULI–the Urban Land Institute is a nonprofit education and research organization that was founded in 1936. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. ULI offIcers Jeremy Newsum, Chairman Randall Bone, Vice Chairman Joseph E. Brown, Vice Chairman, Policy and Practice Daryl J. Carter, Vice Chairman James J. Curtis, III, Vice Chairman, Councils Michael D. Fascitelli, Vice Chairman Patricia R. Healy, Vice Chairman, District Councils Keith G. Kerr, Vice Chairman Scott D. Malkin, Vice Chairman Alexander Otto, Vice Chairman Peter S. Rummell, Vice Chairman Lynn Thurber, Vice Chairman and Treasurer Daniel C. Van Epp, Vice Chairman Bret R. Wilkerson, Vice Chairman and Secretary Todd W. Mansfield, Immediate Past Chairman Marilyn Jordan Taylor, Past Chairman James D. Klingbeil, ULI Foundation Chairman Richard M. Rosan, Chief Executive Officer ULI trUstees

Douglas D. Abbey; Dorothy L. Alpert; Joseph F. Azrack; Peter E. Baccile; Claude M. Ballard; Michael Banner; Bryce Blair; John Bucksbaum; Preston Butcher; James H. Callard; Joseph C. Canizaro; John A. Carrafiell; James J. Chaffin, Jr.; Simon H.T. Clark; Alice M. Connell; Jan A. De Kreij; Charles H. Fedalen, Jr.; Gary W. Fenchuk; Leonard Forkas, Jr.; Harry H. Frampton III; Merrie S. Frankel; Theresa O. Frankiewicz; Stephen J. Furnary; Lizanne Galbreath; William A. Gilchrist; Eugene J. Godbold; Rosalind E. Gorin; Greenlaw Grupe, Jr.; Joseph Gyourko; Veronica W. Hackett; John S. Hagestad; Helen D. Hatch; Ian D. Hawksworth; John J. Healy, Jr.; Tara Carter Hernandez; John W. Higgins; Gregory W. Hummel; Wayne S. Hyatt; George Jautze; Harold S. Jensen; Marty Jones; Neisen O. Kasdin; Gadi Kaufmann; Michael F. Kelly; Charles R. Kendrick, Jr.; Bernd Knobloch; Hakan Kodal; Cheong Koon Hean; John Z. Kukral; Christopher W. Kurz; Robert C. Larson; Charles B. Leitner; C. Y. Leung; Randall W. Lewis; Robert C. Lieber; James W. Light; Peter D. Linneman; Vincent H.S. Lo; Robert J. Lowe, Sr.; Victor B. MacFarlane; Jay Mantz; George M. Marcus; Paul Marcuse; John E. McNellis; Santiago Mercade; Bruce E. Mosler; Barry G. Moss; Toshio Nagashima; Stephen P. Navarro; Daniel M. Neidich; Joseph W. O’Connor; Gerald N. Parkes; Patrick L. Phillips; Olivier Piani; Stephen R. Quazzo; I. Rocke Ransen; Wayne Ratkovich; Jonathan F.P. Rose; Kenneth T. Rosen; Stuart M. Rothenberg; Randall K. Rowe; Mitchell E. Rudin; Hitoshi Saito; P. Sheridan Schechner; Jonathan Short; Michael Spies; Geoffrey L. Stack; Martin E. Stein, Jr.; Robert S. Taubman; J. Ronald Terwilliger; Anthony J. Trella; Marilee A. Utter; Greg J. Vogel; John M. Walsh III; Carl Weisbrod; Kazuhiko Yamamoto; Smedes York; F. Karl Zavitkovsky; Jon H. Zehner U L I f o U n dat I o n James D. Klingbeil, Chairman Richard M. Rosan, Chief Executive Officer Joseph E. Brown, Secretary Harry H. Frampton III, Treasurer Peter S. Rummell, Past Chairman U L I s e n I o r s ta f f Richard M. Rosan, Chief Executive Officer Cheryl G. Cummins, President, The Americas William P. Kistler, President, EMEA (Europe/Middle East/Africa)/India Michael Terseck, Chief Financial Officer/ Chief Administrative Officer David Howard, Executive Vice President, Development/ULI Foundation Maureen McAvey, Executive Vice President, Initiatives U L I f e L LoW s Stephen R. Blank, Senior Resident Fellow, Real Estate Finance Michael Horst, Senior Resident Fellow, Leadership Tom Murphy, Senior Resident Fellow and ULI/Klingbeil Family Chair for Urban Development John K. McIlwain, Senior Resident Fellow and ULI/J. Ronald Terwilliger Chair for Housing Edward T. McMahon, Senior Resident Fellow and ULI/Charles Fraser Chair for Sustainable Development

thisissue

A Low-Carbon Future plans to convert wave energy from the Pacific Ocean off the coasts of California and Oregon into electricity. Siemens reportedly is developing the world’s first floating wind turbine to open the deep ocean for wind farming. On the materials side, nanotechnology is being explored for its potential to offer silicon-replacing materials to produce an inexpensive, portable solar energy product and a carbon nanotube wire that can conduct electricity with no need to store energy. In addition, advanced modeling tools are enabling the evaluation of multiple energy-efficient building design strategies in record time.

m+a arChiteCts

The Obama administration’s stimulus bill allocates about 13 percent of its spending, or $104 billion, to green initiatives. These include renewable energy, smart grid, and energy efficiency programs; tax incentives and grants for renewable-energy technology manufacturers and facilities; clean-water infrastructure improvements; improved public transit; and other items. The administration’s new energy plan—which calls for reducing carbon emissions by 80 percent by 2050, a possible cap-and-trade system for emissions, and a 40 percent increase in fuel efficiency for cars and trucks by 2016—will more directly affect the development industry. While the pros and cons of a cap-and-trade system are currently being debated, developers are looking at a near future in which almost all new buildings will have to be green and all existing buildings will have to be more energy efficient, with a percentage of electricity coming from renewable sources. In the switch to renewables, the electricity grid will almost surely need to be rebuilt, which will require federal financing and policy action in land use, interstate law, and liability. With cities around the world implementing new green goals and standards, the pace of innovation in materials, clean technology, and green design is accelerating rapidly, enabling development of healthier buildings and the upgrading and retrofitting of existing stock. The U.S. Green Building Council predicts that the value of green building construction will increase to $60 billion a year in 2010 and that the green building market will reach $140 billion by 2013. In addition to solar and wind power, clean technologies being explored include biomass, geothermal energy, radiant cooling, ocean thermal energy conversion, coal gasification, and nuclear fusion reactors. California’s Mojave Desert is already home to the world’s largest solar installations. Texas is planning an “energy highway” transmission grid to move wind energy from the west Texas plains to urban centers. The proposed High Plains Express intends to deliver energy by integrating wind projects in New Mexico, Colorado, and Wyoming. A $1.5 billion clean coal plant prototype called FutureGen, to be built with coal gasification technology by the U.S. Department of Energy in Mattoon, Illinois, will generate enough electricity to power up to 150,000 homes with virtually no greenhouse gas emissions. Lockheed Martin

Roughly $150 billion in global government stimulus spending has been proposed for clean energy projects. Yet, in a world where gas, coal, and electricity are still cheap, the greatest challenge is finding the money to nurture the green energy industry until it becomes viable. As the credit crunch has caught up with the industry, many recent developments in energy efficiency have come to be considered risky investments by the private sector. In the first three months of this year, new investment in clean energy was down 53 percent from 2008. Investment by venture capitalists in early-stage companies dropped 48 percent to $1 billion for the first quarter. Energy costs more than $1 trillion a year in the United States alone. When carbon is assigned a price by the world’s governments, demand for carbon-free electricity is expected to explode. The nation that leads the 21stcentury global economy will be the nation that leads the world in creating a new clean-energy economy. ULI can play a vital role in this new economy by partnering with worldwide agencies and city leaders to help plan for a low-carbon future. Kristina Kessler Editor in Chief



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develop U.K. Approves Only One-Quarter of Ecotowns; Proposes Zero-Carbon Standard by 2016 The U.K. government has scaled back its ecotown proposals in England following widespread opposition from the communities that would have been affected and has abandoned its intention to bypass the planning system to fast-track approvals. Only four of the original short list

E DAW /

AECOM

Development of four proposed new ecotowns, with homes built to zero-carbon standards, is expected to proceed as part of recently trimmed-down U.K. government plans, including one on the site of a former army barracks at Whitehill Bordon in East Hampshire.

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of 15 proposed settlements, each of which was to include 10,000 homes built to zero-carbon standards, were given the go-ahead to proceed to the next stage in a July 16 announcement by Housing Minister John Healey. Two others are being supported for further preparation. (See “U.K.’s Proposed Ecotowns Spur Local Objections,” June 2008, page 25.) The four projects are all led or backed by local authorities, and the sites are already included in regional and local development plans. Only one, which will be an extension to Bicester, Oxfordshire, is a green-

August 2009

field site. The others are on former military and industrial land at St. Austell in Cornwall, Rackheath in Norfolk, and Whitehill Bordon in East Hampshire. Developers in each of the four locations will be able to bid for a share of £60 million ($101 million) to support local infrastructure. The original timetable for the schemes, which are intended to serve as exemplars for a low-carbon future, envisioned construction starting in 2010, with 10,000 homes in place by 2016, but this schedule is now likely to slip back. Private investors who were initially involved in proposals are reported to have lost interest in the ecotown projects following the government’s retreat from its original intent to establish a separate approvals process for the developments. In a parallel announcement, Healey reported the same day that the U.K. government had decided to define “zero-carbon” home, as it will be applied in the revised statutory building standards, as a home with carbon dioxide emissions—taking account of emissions associated with all energy use in the home—of zero or negative across the year. “Our definition of ‘energy use’ will cover both energy uses cur-

rently regulated by the building regulations and other energy used in the home,” he said. The proposed regulations will require all new homes built starting in 2016 to be zero carbon by this definition. In order to address concerns raised by investors and builders regarding these definitions, Healey has formed a group of experts to report back to him by September. “They will examine the energyefficiency metrics and standards which will realize our ambition of the highest practical energy efficiency level realizable in all dwelling types,” he said. “I intend to announce decisions on a clear new standard by the end of this year.” The Home Builders Federation (HBF), which represents most of the large residential developers, welcomed the greater clarity provided, but warned that the challenge of delivering a zero-carbon standard by 2016 was enormous. “The government must support the industry wherever necessary on research funding, mitigating cost, and other commercial issues,” said Stewart Basely, HBF executive chairman. Brian Baker is a freelance journalist based in

Glasgow, Scotland.

R e a l -T i m e C h i n a “E.T.—energy technologies that produce clean power and energy efficiency—is going to be the next great global industry, and . . . China has gotten on board—big time. Now I am worried that China will . . . ‘clean our clock’ in E.T.” From “Can I Clean Your Clock?” by Thomas L. Friedman, New York Times, July 5, page WK8.

ments Patrick L. Phillips Named ULI’s Chief Executive Officer Patrick L. Phillips, president and chief executive officer of ERA AECOM (formerly Economics Research Associates), has been named chief executive officer of the Urban Land Institute. Phillips, as of September 14, will be taking over the position being vacated by ULI CEO Richard M. Rosan, who has led the Institute’s staff for more than 17 years. Phillips, 52, is a ULI trustee whose career in the economic analysis of real estate and land use spans more than 20 years. Since 1993, he has coordinated all aspects of ERA’s organization, strategy, business development, and service delivery; his own consulting practice focused specifically on the intersection of private investment and public policy. To further expand ERA’s reach and impact, Phillips guided the sale of the company in 2007 to AECOM, a global provider of professional technical and management support services to a broad range of industries, including land use, transportation, environmental, and energy. “The opportunity to guide ULI staff presents a unique chance to help boost the influence the Institute has on land use both globally and locally,” says Phillips. The global recession has presented a challenging environment in which ULI must stay relevant and provide high member value, he adds. “While ULI has traditionally been viewed through the lens of development and growth, we are facing lower prospects for growth in a number of the established markets

we serve worldwide. At the same time, we are starting to have a larger presence in emerging markets. “We need to take a fresh look at the entire portfolio of products and services ULI provides to make sure that what we offer reflects member needs, both in times of changing market conditions and for the long term,” he says. He emphasizes that ULI’s core priority areas—sustainability, including environmentally and economically viable investment and development; connecting infrastructure and land use planning; workforce housing; and capital markets—continue to be relevant in the current economic environment. It is important to position ULI in the dialogues on sustainability and restoring capital flows—two areas of particular urgency, says Phillips. Given the worldwide scope of the discussions and public policy changes related to these issues, “ULI has a profound role to play.” Phillips foresees reinforcing ULI’s value to members not just through the improvement of the Institute’s traditional programs and business development tools, but also through the development of research designed to have an impact on various policy debates. “ULI is hugely influential in how urban areas are developed around the world,” he points out. “I look forward to exploring new ways and new partnerships to build on ULI’s previous success and move the Institute forward in the decades to come.” Recently named ULI chairman Jeremy Newsum, executive trustee of U.K.-based Grosvenor Estate, says ULI is “very fortunate to have someone of such high integrity

and intellect, and who, as a longtime member, is so devoted to the fulfillment of ULI’s mission.” Referring to Phillips as “a land use leader for the 21st century,” Newsum says his “breadth of industry knowledge, interest in diverse ideas and opinions, and belief in the synthesis of different perspectives create a perfect match for such a multidisciplined organization as ULI.” Todd W. Mansfield, ULI chairman until this past June, points to Phillips’s years of involvement with the Institute, both as a volunteer member since 1990 and a ULI staff member in the policy research program during the mid-1980s. In recent years, Phillips served on such high-profile ULI advisory service panels as those following Hurricane Katrina in New Orleans and the 9/11 attacks in lower Manhattan. He was a juror on the ULI Hines Student Urban Design Competition, and a member of the Urban Development/ Mixed-Use Council, the Program Committee, and the ULI J.C. Nichols Prize Management Committee. “Patrick truly understands the importance of active member engagement and the need to encourage the information exchange that distinguishes ULI from other professional

Patrick L. Phillips

organizations,” notes Mansfield, CEO of Crosland LLC in Charlotte, North Carolina. “The various perspectives he has gained from his experience in the industry and with ULI will serve Patrick well as the new CEO.” Rosan will be shifting full time into the role of president of the ULI Foundation, a position he has held simultaneously while serving as ULI’s CEO. (See “Succession Planning at ULI,” March, page 29.) Trish riggs is vice president, communications, ULI.

Wind Turbine as arT “Rising from the land in shapes as gracile as Brancusi sculptures, they seem to inhabit a middle ground between technology and nature—perfect emblems, perhaps, of a conflicted culture that cherishes its iPhones and organic gardens in equal measure.” From “Windscapes: American Vistas Where Energy Is in the Air,” by Adam Goodheart, New York Times Magazine, July 19, page 35

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developments BREEAM Introduces New Rating System for Sustainable Communities; Pilot Tests with MediaCityUK in Manchester The U.S. Green Building Council (USGBC) later this year will launch its much-anticipated Leadership in Energy and Environmental Design– Neighborhood Development (LEEDND) program, which will rate new communities on their density, walkability, open space, green buildings, and mixed-use features. The new LEED-ND designation is expected to transform development patterns, much as LEED ratings have already encouraged construction of healthy, high-performance green buildings. The U.K.-based Building Research Establishment’s Environmental Assessment Method (BREEAM), however, has beaten the USGBC to the punch. This June, BREEAM released its new sustainable communities assessment program. Under BREEAM, the world’s first and most widely used building assessment system, more than 110,000 buildings in the U.K., Europe, and the Persian Gulf states have been certified, and more than a half million have been registered for upcoming certification. The program, BREEAM Communities, promotes a planning process intended to result in sustainable development. BREEAM Communities gives local planning boards and developers a tool to ensure that sustainability objectives and public planning requirements are satisfied at the site according to BREEAM guidelines. Next, an independent third party, the BREEAM assessor, evaluates the proposed development for its adherence to sustainability standards. This approval is

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ULI Energy Efficiency Exchange Set for Launch on Web

The Building Research Establishment’s Environmental Assessment Method (BREEAM), used in the U.K., Europe, and the Persian Gulf states, has released a neighborhood development assessment program that encourages sustainability features in new developments. One of the pilot projects is MediaCityUK, now under construction in Manchester.

required before any final approvals are granted. In creating its communities program, BREEAM pilot tested the initial guidelines at various projects in the U.K., including the first phase of MediaCityUK, now under construction on a long-forlorn, 36-acre (14.6-ha) site on the Salford waterfront near downtown Manchester, 220 miles (355 km) northwest of London. The project eventually is expected to encompass the entire 200-acre (81-ha) waterfront property. The first phase is being developed and managed by a division of the Manchester-based Peel Media, a division of the Peel Group, which is investing £500 million ($800 million) in the first phase. At its opening in 2011, the first phase will include 378 apartments and 80,000 square feet (7,400 sq m) of retail space. Tenants will include five departments of BBC (British Broadcasting Corporation) and 2,500 employees, part of the network’s move to decentralize some of its operations away from congested, high-priced London. MediaCityUK reuses a long-derelict waterfront site, incorporating existing infrastructure and easing pressure for sprawl development at the end of Greater Manchester. The development’s mix of uses, including residential, is expected to reduce trips to and from the site. In addition, MediaCityUK connects to the Manchester Metrolink tram system.

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MediaCityUK will rely on sustainable power generation from an on-site combined heat-and-power (CHP) tri-generation plant that will provide the base-load power for the site. Tri-gen power is the simultaneous provision of electricity, heat, and cooling. Through the use of the heat byproduct, the power generation will be 70 percent efficient, compared with 30 percent efficiency for power from the U.K.’s national grid; similar systems have reduced costs and CO2 emissions. In the tri-generation scheme, electricity is produced by a large engine powered by natural gas or biofuel. The waste heat generated is captured and used to heat water, which is circulated in arterial pipes buried deep underground. This system supplies heat to each building connected to the pipe circuit, and any excess heat produced by the engines is used to drive absorption chillers. The chilled water is used for cooling, which is distributed in the same manner as the heat. MediaCityUK is expected to provide a significant economic and image boost for the community, as well as for its investors. Further development will depend on the success of its first phase. Charles loCkwood is a green real estate

authority and consultant in southern California and New York City.

The first phase of the ULI Energy Efficiency Exchange, a new interactive Web site designed to create a pan-European online exchange of current information and best practice in energy-efficient design and retrofitting, is scheduled to go live in September. (See “ULI Europe Introduces Energy Exchange Initiative,” Urban Land Green, Spring 2009, page 17.) The first phase of the project will comprise the following:

l A home page that explains the goals of the site and how visitors can get the most out of it. l A knowledge center of information relevant to practitioners, where visitors can filter information according to their profession, location, type of project, and design stage to ensure the most useful results. l A learning zone that includes best-practice case studies, and highlighted articles from Urban Land magazine, ULI senior fellows, partners, and industry leadership. l Policy summaries of pan-European and national regulation, commentary by leading experts, etc. l Short examples of research into energy efficiency and retrofitting from Arup, including the top five interventions for each featured sector, such as office, retail, and hotel. l A venue for practitioners to contribute their data to develop a shared business case for the financial investment in energy efficiency and retrofitting. A data amnesty is being developed to allow post-occupancy data to be provided anonymously. The second phase of the project will go into development in October— contingent on funding—and will include:

l An online community in the form of interactive forums, with a site moderator to lead, monitor, and stimulate conversations; the forum will be built on the existing LinkedIn group. l Webinars offering information online on topics such as green leases and sustainable financing. l Blogs by invited experts. A third phase, including online professional networking through the MyULI online membership, will also be developed. alexandra noTay is director, research,

ULI Europe. Those interested in offering a case study, commentary, or contributing to the site as an expert practitioner or peer reviewer should contact Alexandra Notay at anotay@uli. org or Josie Baum at [email protected]. ULI is seeking a number of other supporters to join Arup as primary project partners and allow the on­ going development of the Exchange site. Opportunities also exist for lower levels of support and recognition. For information, contact Brian Kilkelly at [email protected] or Alexandra Notay at [email protected].

Solar-Powered City in Sunshine State Sets Example for Sustainable Design Located alongside a 73,000-acre (30,000-ha) nature preserve, Babcock Ranch, a sustainable community planned near Fort Meyers, Florida, will span 18,000 acres (7,300 ha) and include 19,500 homes surrounding a central business district with more than 6 million square feet (557,000 sq m) of retail and office space. A 75-megawatt solar power plant costing $300 million to $400 million will be located on 400 acres (160 ha) at the northern tip of the development and be managed by Florida Power and Light (FPL). Smart-grid technology will help monitor system efficiency and manage peak loads by providing instant data streams from all electrical outlets and remote access to them.

Syd Kitson, chairman and chief executive officer of Kitson & Partners, a Florida-based real estate company, says he is seeking to prove that a truly ecofriendly city can be economically successful. He acknowledges the challenges presented by the current market, but believes that his development will prove that sustainable communities can be economically competitive. The idea, says Kitson, is to first establish the business center, then the community infrastructure—part of the strategy to ensure financial stability. To keep Babcock Ranch competitive, Kitson has established a financing structure that includes as a major component a public/ private partnership with the state, which has agreed to manage the nature preserve and appropriate the revenues from logging, tourism, and other operations to upkeep of the land. Because of this agreement, no taxpayer money has been needed to support the property during the recession. The Florida legislature also granted Babcock Ranch independent special district status, allowing for certain financial benefits, such as use of tax-exempt

bonds, without the associated risks, such as liability in civil lawsuits. Babcock Ranch is envisioned as a proving ground for photovoltaics— a place where businesses, universities, and government can test and implement their ideas. It also will serve as a living laboratory where companies can evaluate sustainable technologies, as well as research and develop their own solutions to combat climate change. The design has been completed, but Kitson says several more steps remain before the project moves forward, including breaking logjams in the Florida legislature, which recently failed to pass a bill that would have established a standard for renewable energy technology in Florida. This provision would have given FPL the funding it needs for the photovoltaic facility, the keystone of Babcock Ranch’s solar-powered design. Despite the current economic climate and political setbacks, Kitson says he hopes to begin construction of the photovoltaic facility during the first quarter of next year. adam maynard is studying urban studies at Brown University in Providence, Rhode Island.

Set to include the world’s largest photovoltaic facility, Babcock Ranch near Fort Myers, Florida, will be the world’s first city powered exclusively by the sun.

Plans Unveiled in Chicago for First Smart Grid for U.S. Commercial Buildings A $185.4 million smart grid program that would deliver a utilityscale, clean, virtual generator through implementation of smart grid technology in more than 260 commercial buildings in downtown Chicago was announced early this month by the Building Owners and Managers Association (BOMA) of Chicago. To help fund what would be the nation’s first commercial office building smart grid program, BOMA/Chicago has applied for $92.7 million in matching stimulus funds from the U.S. Department of Energy’s Smart Grid Investment Program, which was formed under the recently passed American Reinvestment and Recovery Act. BOMA/Chicago represents more than 80 percent of the square footage and an estimated 1,000 megawatts of peak demand in the city’s central business district. The virtual generator could provide as much as 200 megawatts of demand response capability, lowering costs, and eliminating the need to construct expensive new generation plants. Annual energy cost reductions are estimated at $82 million, and carbon emissions are expected to be cut by 300 million pounds. The program calls for upgrading the buildings’ electricity metering infrastructure with smart meters that will communicate with a BOMA/ Chicago-run network operating center (NOC) in real time. The NOC will analyze electricity demand in light of grid conditions and electricity market prices, then send suggested response strategies back to the buildings for implementation. The program will enable commercial buildings to compete in markets formerly dominated by large central station generators.

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developments “Our program will demonstrate that demand-side resources, such as our commercial buildings, can provide operating reserves, frequency regulation, and capacity in wholesale grid markets,” says Michael Cornicelli, executive vice president of BOMA/Chicago.

First U.S. Solar Highway Installed in Oregon

P G E / O r E G O n D E PA r t M E n t O f t r A n s P O r tAt i O n

The first U.S. solar highway installation —covering about 8,000 square feet (740 sq m) and roughly the length of two football fields—has begun operating in Tualatin, Oregon. The 104-kilowatt solar photovoltaic system is producing about 112,000 kilowatthours per year, 28 percent of the 400,000 kilowatt-hours used to light the Interstate 5/Interstate 205 interchange. (See “Solar Power along the Highway,” October 2008, page 214.)

The first solar highway in the United States is supplying renewable power to help light the way for drivers at a major freeway interchange in Tualatin, Oregon.

The $1.3 million solar photovoltaic demonstration project is a public/private partnership involving Portland General Electric (PGE), US Bank, and the Oregon Department of Transportation (ODOT). The solar panels produce electricity during the day, supplying power to the PGE grid, and PGE returns an equivalent amount of power at night to light the interchange. For more information on the project, visit www.oregonsolarhighway.com.

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ULI Releases Recommendations for Transportation Reform

R e a l e s TaT e R e T u R n s ? “We are now looking at one of those rare opportunities to invest in commercial real estate.”

The upcoming reauthorization of federal surface transportation legislation—the current legislation expires in September—presents a historic opportunity to fundamentally rethink how the United States plans, funds, and builds its transportation networks. A new ULI report, Transportation for a New Era: Growing More Sustainable Communities, lays out recommendations for transportation policy reform. A number of proposals for reform are on the table as Congress, the Obama Administration, and others work to forge a path forward, and the connections among land use, infrastructure, and sustainability are being considered as they have never been before. To contribute to this conversation, the Urban Land Institute, through its National Transportation Policy Dialogue program, brought together leading real estate and transportation thinkers and practitioners in workshops and other forums over the past year to consider the links among real estate, development, and transportation. Several recommendations— intended to guide transportation policy and programs at the federal level—are laid out in the report, including the following: l Create a national vision for transportation and infrastructure. l Support the metropolitan areas that drive U.S. prosperity. l Recognize the role of land use in linking infrastructure, housing, and sustainability. l Foster and encourage more compact development. l Channel funding through the “three Bs”—use base formula funds to maintain the system; provide a bonus pool to create incentives for sustainable investment; and create an infrastructure bank, to invest in infrastructure.

—Hessam Nadji, managing director, Marcus & Millichap, a commercial real estate investment adviser based in Encino, California, referring to properties that are located in places where supply is constrained—otherwise solid properties now on sale because losses elsewhere are forcing owners to raise money.

August 2009

From “There’s Value in Real Estate, If You Find Your Florida,” by Paul Sullivan, New York Times, August 8, page B7.

ULI receives support for the ULI National Transportation Policy Dialogue from the Rockefeller Foundation and ULI trustee James Curtis. raChel macCleery is managing director of

ULI’s infrastructure initiative group. Transportation for a New Era is available for download at the ULI Web site, www.uli.org.

Real-Time Carbon Counter Launched in New York City The world’s first scientifically valid, real-time carbon counter, a nearly 70-foot- (21-m-) tall digital billboard displaying the running total of long-lived greenhouse gases in the atmosphere, was launched in mid-June by global investment firm Deutsche Bank’s Asset Management (DeAM) division outside Madison Square Garden and Penn Station in New York City. The number on the carbon counter is based on measurements developed by scientists at the Massachusetts Institute of Technology that include all longlived greenhouse gases covered under the Kyoto and Montreal protocols—24 gases excluding ozone and aerosols. “The carbon counter is a bold new experiment in communicating climate science to the public,” says Ronald Prinn, professor of atmospheric science at MIT. “With

climate change in the news around the world, it is useful to have an upto-date estimate of a single integrating number. . . . This number can help convey how fast these greenhouse gases are increasing, and the progress, or lack thereof, in slowing the rate of increase.” The Carbon Counter Number is available at www.know­the­number.com; updates will be available at http://twitter.com/knowthenumber.

r e c e s s i o n wat c h

Commentary: Hints of Recovery? The financial crisis has pushed the U.S. economy into a severe recession, and the commercial real estate in­ dustry is facing its most serious crisis since the last major real estate down­ turn during the early 1990s. Stresses associated with the ongoing reces­ sion, including large­scale deleverag­ ing, limited financing options, and declining net operating income, are putting downward pressure on both property values and market funda­ mentals. Because the performance of real estate markets is a deriva­ tive of the larger economy, those involved in commercial real estate are watching for signs of a bottom and hints of recovery. There has been considerable dis­ cussion lately about “green shoots of recovery” in the economy. While a variety of indicators continues to present a mixed message, some eco­ nomic data suggest that the recession is running out of steam, including smaller­than­expected declines in gross domestic product and employ­ ment. An examination of several key credit market indicators, along with some important economic indicators— among them, employment, housing, and retail sales—helps gauge the overall condition of the U.S. economy and the outlook for the commercial real estate industry. l Credit markets. Several important market indicators now suggest that general credit market conditions have improved noticeably lately. These improvements may reflect the return of liquidity to the fixed­ income market, improved confidence in counterparty risk, the return of some level of risk tolerance, and a reduction in uncertainty for both lenders and borrowers. Following its policy meeting on June 23 and 24, the U.S. Federal Reserve Board commented that “the pace of economic contraction is

slowing” and noted that “conditions in financial markets have generally improved.” Interest rates reportedly are going to be kept at “exceptionally low levels” for an extended period, and the Fed will continue with its plans to purchase up to $1.25 trillion of mortgage­backed securities and up to $200 billion of agency debt. The Fed is also expected to wrap up its program to purchase up to $300 bil­ lion of long­term Treasury securities in September. That effort, over the past six months, has helped keep interest rates low. These recent announcements coincide with the growing notion that the worst of this economic downturn might be over and that the economy may begin to recover later this year. In late April, the Federal Reserve announced it would expand the acceptable maturity from three years to five years under the Term Asset­Backed Securities Loan Facil­ ity (TALF) program for some assets. In May, the Fed decided to accept legacy real estate–backed bonds that were created before this year. Previously, only newly issued com­ mercial mortgage–backed securities were deemed acceptable collateral. This could help restart the securiti­ zation market and provide needed relief for the wave of commercial real estate financings coming due over the next few years. l Employment. The July employment report provided a pleasant surprise, with estimated job losses well below market expectations. While the drop in the unemployment rate in July was probably a statistical anom­ aly, U.S. job cuts are moderating and the job market has marginally improved, though it remains weak. Nonetheless, the unemployment rate probably will continue to rise in the coming months and prob­ ably will not peak until early 2010. l Housing. Prices likely will con­ tinue to fall through the end of this year at the national level, though the change in prices will vary signifi­

cantly by metropolitan area. Histori­ cally, an increase in home sales has been a reliable leading indicator of a rebound in prices as well. Both new and existing home sales have shown clear signs of stabilization during the first half of this year, though there has not been a strong and consistent uptick yet. This stabilization is threatened, however, by an increasing supply of foreclosed homes coming to the market. It will still take many months before the housing inventory returns to a normal figure. When the hous­ ing market finally reaches bottom in terms of inventory, the subsequent increase in residential investment will help drive gross domestic product growth, while improving home prices will help buoy consumer confidence and, ultimately, personal spending. l Retail sales. After a record free fall of six consecutive months during the second half of 2008, U.S. retail sales are beginning to display signs of sta­ bility. U.S. consumers will continue to be under pressure from mounting job losses, declining disposable income, and declining home and investment portfolio values through at least the end of the year. While the savings rate will remain elevated compared with recent years, stabi­ lization in the job market should improve both consumer confidence and spending. However, retail sales will improve gradually, rising at a rate of about 3 percent annually over the next few years, compared with the 5 percent annual growth between 1992 and 2007. In past recessions, the recovery of the commercial real estate sector has consistently lagged the larger economy, and there is no reason to expect a different result this time. In addition, because of the continued challenges facing the economy, the recovery process could be less robust and more protracted than in previous recoveries. Finally, the unprecedented actions taken by the Fed and the U.S. government may

result in some unintended risks and consequences, with the cur­ rent high level of federal spending raising worries about higher taxes, a declining dollar, and inflationary pressures in the future. Rising long­ term Treasury yields will inevitably put upward pressure on lending costs for mortgages and business borrowings, which could temper the economic recovery process, particu­ larly for commercial real estate. In the long run, commercial real estate remains an attractive asset class in a mixed­asset portfolio for the benefits of diversification and high current cash flow, and as a potential hedge against inflation. With develop­ ment pipelines rapidly shrinking, new supply will be more constrained going forward, which should help boost market fundamentals as the economy improves. In addition, the dislocation in the current market is presenting unprecedented oppor­ tunities for patient and well­funded investors to capitalize on lower prices and the eventual recovery of the real estate market. DaviD Lynn is managing director and head

of research and investment strategy for ING Clarion Partners in New York City. Tim Wang is a vice president, and BohDy heDgcock is an associate in the research and investment strategy group.

New information will be posted in the middle of each month on ULI’s Real Estate Business Barometer, a new online resource that helps ULI members track economic and financial trends. More than 60 key indicators are gathered and summarized, with graphs showing how these indicators are changing over time; an overview explains what these changes mean for the U.S. real estate industry. Visit www.uli. org/researchandpublications/ barometer.aspx.

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dialoguepolicy E Dwa r D T. M c M a h o n

Climate Change: The Good, the Bad, and Obama The recently passed U.S. economic stimulus plan includes numerous provisions—and billions of dollars—aimed at advancing the energy and climate change agenda.

Edward T. McMahon is the

Charles E. Fraser Chair for Sustainable Development and Environmental Policy and a senior resident fellow at ULI.

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Recently, there was some good news—and some bad news— on climate change. The good news is that the United States reduced energy-related carbon emissions in 2008 by 2.8 percent while the gross domestic product (GDP) increased by 1.1 percent. According to the U.S. Department of Energy’s Energy Information Administration, the transportation and industry sectors led the reductions. The bad news is that the reductions resulted from lower demand caused by high gasoline prices and the worst economy in decades. Gasoline and diesel prices hit all-time highs in 2008, and the GDP fell in the fourth quarter by 6.3 percent, leading the United States into its worst economic downturn since the Great Depression. To make matters worse, the American Association for the Advancement of Science earlier this year reported that the pace of climate change has picked up more quickly than expected and is triggering self-reinforcing mechanisms in global ecosystems. “We are basically looking now at a future climate that is beyond anything we have considered seriously in climate model simulations,” says Christopher Field, founding director of the Carnegie Institution’s Department of Global Ecology at Stanford University in Palo Alto, California. In May, the Massachusetts Institute of Technology’s Joint Program on the Science and Policy of Global Change added to the bad news when it said new research shows that “in the absence of stringent reductions in greenhouse gas emissions, 21stcentury climate change may be far more significant than previous cli-

August 2009

mate assessments had indicated.” The results also showed that even if nations act quickly to reduce emissions, it is more likely that warming would be greater than previous studies indicated. Now, after years of discussion, debate, and delay, the U.S. Congress and the new Obama administration have finally set aggressive new goals for addressing global warming and reducing dependence on foreign oil. The recently passed U.S. economic stimulus plan includes numerous provisions—and billions of dollars— aimed at advancing the energy and climate change agenda. President Obama has also announced an ambitious new energy plan that would move the United States away from fossil fuels and toward renewable and alternative sources of energy. While many of the goals in the energy plan will not directly affect the real estate industry, those that do include the following: l Reducing carbon emissions 80 percent by 2050. This is an extremely ambitious goal that will require drastic change in what people build and how they live and move around. Because U.S. buildings currently account for about 40 percent of the country’s carbon dioxide emissions, the real estate industry will have a big role to play. Jones Lang LaSalle (JLL) recently advised its clients that the administration’s “stated goal is not attainable without active participation of the commercial real estate industry.” As a result, JLL said, “real estate executives should act now to review their properties’ energy and sustainability performance.” Added JLL, “a comprehensive energy man-

agement program can generally pay for itself in one to two years and save tens of millions of dollars in utility expenses annually after that.” l A cap-and-trade system. Early this year, the U.S. Environmental Protection Agency proposed a rule that all major carbon emitters begin reporting their emissions by 2011. This rule is a prerequisite to implementing a cap-and-trade system for emissions. Such a system would allow companies to emit a specified amount of carbon dioxide, set by the government, each year. If a company exceeded the cap, a financial penalty would be imposed. If the company’s emissions fell below its cap, it could sell the unused emissions credits to another company that would otherwise exceed the cap. A bill to establish a cap-andtrade system was approved by the U.S. House of Representatives in June, and while its prospects in the Senate are unclear, it remains a high priority for the Obama Administration, and real estate companies would be well advised to prepare themselves for big changes ahead. Some of the likely changes include a requirement that new buildings be carbon neutral by 2030. This means that in the future virtually all new buildings will have to be green buildings. Also likely are requirements to increase the energy efficiency of existing building stock. In addition, the administration is expected to require that a certain percentage of electricity be generated from renewable resources. Because buildings consume 70 percent of the electricity in the United States, building owners should also expect new tax incentives and subsi-

dies to encourage the use of renewables and to spur building upgrades. Perhaps, most significant, Obama announced in May a new plan to boost full efficiency standards for new cars and trucks to an average of 35.5 miles per gallon by 2016. This amounts to a 40 percent increase in fuel efficiency, up from an average of 25 mpg today. The new standards also will impose —for the first time ever—a limit on greenhouse gas emissions from vehicles. The new requirements would eliminate tailpipe emissions of 890 million metric tons of greenhouse gases by bringing vehicle emissions down from roughly 400 grams per mile today to 250 grams by 2016. According to Scientific American (May 19), this is equivalent to taking 177 million cars off the road—more than two-thirds of the entire U.S. automobile fleet—or shutting down 194 coal-fired power plants.

Under the plan, all classes of vehicles—from compact cars to SUVs—will be required to make fuel-efficiency improvements. Automobile mileage will need to rise from an average of 27 mpg today to 39 mpg by 2016, while truck mileage will have to jump from 23 mpg today to 30 mpg. The new fuel-efficiency standards, together with the ethanol and biofuel requirements enacted during the Bush Administration, provide two of the three approaches needed to reduce carbon emissions from transportation—improved vehicle efficiency and low-carbon fuels. To make a meaningful dent in the emissions problem, a third element is needed— reduction of vehicle-miles traveled (VMT) through improved urban growth patterns. The importance of sustainable land development in mitigating climate change is highlighted in a research report, Moving Cooler: An

Analysis of Transportation Strategies for Reducing Greenhouse Gas Emissions, published by the Urban Land Institute in July. Given that most scientists now say carbon emissions must be reduced by at least 80 percent from 1990 levels by 2050, much more will be needed than fuel-efficient cars. Americans will also need to drive a lot less. “The projected 59 percent increase in total miles driven between 2005 and 2030 will overwhelm expected gains from vehicle efficiency and low carbon fuels,” says Reid Ewing, transportation and urban development professor, city and metropolitan planning department, College of Architecture and Planning, at University of Utah in Salt Lake City. The best way to reduce driving is to build compact, walkable, mixeduse communities that encourage walking, biking, and the use of public transportation. At least two-

thirds of the development expected by 2050 is not yet built. Sticking to the sprawling development patterns of the past will require more time spent behind the wheel. Compact, mixed-use communities are a key to the future because even when there is a need to drive, there will be shorter and fewer trips. By building compact, mixed-use communities and by investing in green buildings and energy-efficient retrofits, the real estate community can make major contributions toward solving the climate change problem. UL Moving Cooler: An Analysis of Transportation Strategies for Reducing Greenhouse Gas Emissions, and Growing Cooler: The Evidence on Urban Development and Climate Change are ULI published books available at www.uli.org/ bookstore, or call 800-321-5011.

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dialogueclimatechange ChanDran nair

Betting on Market-Driven Solutions The global public good should not be placed on the sacrificial altar of the private interests of unregulated financiers. Governments, not solely the market, should be involved in alternative energy industries.

Chandran nair is founder

and CEO of Hong Kong’s nonprofit think tank Global Institute for Tomorrow.

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How to expand the global economy without depleting the planet’s resources is a challenge that has been ignored for far too long. The financial meltdown has now come as a stark reminder of the grave consequences of the world’s failure to strive for sustainable development. Humanity faces an urgent challenge: climate change, largely brought about by human activity and excess. As few as five years ago, many governments, politicians, and corporations were in denial, refusing to accept the limits to unsustainable practices. The financial world relied on market mechanisms for righting breakdowns, even those affecting the natural world. The origins of the financial crisis— subprime mortgages—tell the story of unsustainable ways. Those in the United States who procured subprime loans were not destitute, homeless individuals. According to the Durham, North Carolina–based Center for Responsible Lending, 90 percent of the people who obtained subprime loans from 1998 to 2006 already owned homes and, according to world averages, probably belonged to the top 10 percent of the population in terms of quality of life and housing. Many people refinanced homes, further fueling a consumption-driven lifestyle—in some cases to make ends meet, but in others, to purchase second homes and other extravagances. With banks miraculously financing these excesses, many spent beyond their means. Second homes not only tax the planet’s resources, but their heating and cooling needs also gobble up energy.

August 2009

Consumers are not the only offenders. Lured by the promise of disproportionate rewards, banks fed this culture of “more and bigger is better,” overlooking how high-risk loans would be repaid. Banks lent to unqualified borrowers, ultimately leading to plummeting property prices, a slowdown in the U.S. economy, and trillions of dollars in bank losses, and wiping out the savings of millions of people around the world. With climate change, the parallels are evident: mankind heads toward disaster while many people hold on to the belief that the markets will save the day. Much of this philosophy is pushed by the Anglo-Saxon centers of finance in London and New York City. Many policy makers pin hopes on market-driven solutions—in the form of carbon credits or bets on investments in renewables—to solve the climate crisis. The reality, however, is that market mechanisms have serious limitations and carry the potential to create more problems than solutions. A closer look at carbon trading shows rampant problems with this proposed panacea. First, carbon trading does not reduce emissions, but rather frees polluters of responsibility by allowing them to purchase credits elsewhere— typically in developing countries— thus encouraging complacency. Carbon trading also is unreliable, and the tools to measure credits are imprecise. Trading companies disagree on the level of credits required for the simplest offset calculations. Companies tend to favor a quick fix by investing in cheap, short-term projects. The remedy demands sacrifices of people in the developing world

who are already scratching out a miserable living; even in booming China, almost half the population still struggles on an income of $2 or less per day. With political survival at stake, no government, democratic or otherwise, will adopt complex global trading schemes run by Western banks and risk dashing the economic aspirations of their people. Renewable energy schemes also are vulnerable to excesses. As the stakes rise and project proponents become greedier, bankers and lawyers develop increasingly complex, opaque financial instruments to tap into growing potential—as is already happening in the emissions trading markets. The results will be high, short-term profits for the usual suspects of investment banks, fund managers, analysts, and speculators with little regard for reversing negative trends. This distorts the focus, shifting it from crisis mitigation to profit generation. Reckless behavior will not be self-corrected by the competitive market until it is much too late. Problems associated with overdependence on market solutions to address climate issues are already apparent. In the past few months, investments in renewable energy resources have dried up—a decline triggered by the financial crisis and decisions by bankers driven by shortterm profit motives and lacking understanding of the renewables industry. Even in areas that have remained strong throughout the downturn— namely early-stage venture capital investments in developing cleanenergy technologies and building new capacity, such as wind farms or solar parks—project proponents depend on funding from the same

institutions that brought down Wall Street through their preoccupation with maximizing profit. Natural checks on rampant consumption-driven growth exist, but the market, corrupted by perverse incentives and overconsumption, has ignored the warning signals. Those who hold the belief that there should be no limits on the market are living in a fantasy world, and one can hope that steadfast belief in market mechanisms is beginning to lose credibility. With global markets on shaky ground, governments have intervened to ensure stability. The same should be the case for climate issues. The global public good should not be placed on the sacrificial altar of the private interests of unregulated financiers. In the case of climate change, clean-technology projects need funding, and that funding should come from the public

purse, not solely through financial instruments designed to create disproportionate profits for the few who control capital flows. Better strategies must be found to combat climate change, but the most obvious strategy is also the least popular. Reducing emissions requires rapid reduction in the consumption of fossil fuels, and that means accepting limits to growth based on promoting relentless consumption. A close look at the unfettered ecological consumption patterns of countries shows that economic growth pursued under free-market conditions allows the same type of excesses that caused the financial crisis. Population and consumption patterns of three ecological-debtor countries are particularly telling: the United States consumes 1.8 times its national biocapacity—the area available to produce resources and cap-

ture emissions; China consumes 2.3 times its biocapacity and India, 2.2 times. The global average available biocapacity per person is 5.2 acres (2.1 ha) per person, but the global average actual per-person footprint is as high as 6.7 acres (2.7 ha). Americans require 23.2 global acres (9.4 ha) on average, while residents of poorer countries require only one to two acres (0.4 to 0.8 ha). Until far-reaching regulations are introduced to reduce emissions, the true innovations needed to protect humanity will not surface. Draconian measures to make sustainability operable are a key element because few people act purely for the greater good. Awareness and pious words do not constitute action. Such measures, of course, are easier to enforce under authoritarian forms of government than in liberal democracies. China, for example, managed to reduce pollution levels

in Beijing by imposing restrictions on car use on certain days of the week. Public acceptance in China of this policy promoting the greater good illustrates that effective solutions to the climate crisis depend on taking actions free of political intervention by vested interests. The financial crisis demonstrated the need for strong government to protect the public good. In a resourceconstrained world, likewise, there is no substitute for sound regulations. Policy makers must concede that capitalism has met its nemesis in climate change and should not be seduced by the market’s promise of a quick fix. UL See “Talking Global Sustainability with Chandran Nair” by Ron Nyren, July 2007, page 30.

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August 2009

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dialogueenvironment ron nyrEn

Q&A with Fred Krupp on Cap and Trade The president of the Environmental Defense Fund talks about emissions cap-and-trade systems, the potential for integrating renewable energy sources into buildings, and methods for minimizing greenhouse gas emissions in the production of building materials.

ron nyrEn is a freelance

architecture and urban design writer based in the San Francisco Bay Area.

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Fred Krupp, president of the Environmental Defense Fund, a New York City–based nonprofit environmental group that partners with businesses, governments, and communities to find environmental solutions, cowrote Earth: The Sequel: The Race to Reinvent Energy and Stop Global Warming with writer Miriam Horn, published this year, which profiles inventors and investors who are devising creative strategies for producing renewable energy as well as for greening conventional energy sources. During the late 1980s, Krupp played a crucial role in convincing the administration of George H.W. Bush to promote the world’s first emissions cap-and-trade system to reduce acid rain, requiring power plants to cut sulfur dioxide emissions to a certain targeted level or else purchase allowances from other plants that were cutting emissions below their own targets. In Earth: The Sequel, Krupp maintains that a capand-trade system is the best option for stimulating innovations in the private sector to reduce greenhouse gas emissions as well. As a tactic for fighting global warming, what makes a federal emissions cap-and-trade system superior to renewable energy tax credits, or to a carbon tax? If you look around the world at other air pollution problems, we’ve never solved a single one without establishing a legal limit. Establishing a cap on greenhouse gas emissions— one that becomes more restrictive over time, at a rate consistent with what the climate scientists tell us is necessary—is the only way to guar-

August 2009

The system should cover the whole country—ultimately, the whole world—in all sectors of the economy: buildings, transportation, energy, and manufacturing. This is the only way to guarantee we safeguard the atmosphere. When you start the hunt for solutions to global warming, you want that hunt to cover the widest possible territory to find the best solutions that provide maximal reductions for the investment.

antee that the atmosphere can be protected. A cap-and-trade system also provides incentives to develop many ways to reduce emissions— and even to capture greenhouse gases already in the atmosphere. Of course, a cap-and-trade system doesn’t preclude the possibility of also having renewable energy tax credits. Tax credits could be a complementary measure. A carbon tax might well be redundant, however, because the cap-and-trade system will already add a cost to producing carbon emissions. How should a cap-and-trade system be crafted for maximal effectiveness? To be maximally effective, a capand-trade system would set short-, mid-, and long-term declining caps on emissions. It would include all the sources of greenhouse gases— not merely carbon dioxide, but also methane, perfluorocarbons, and gases that are used in small amounts in industry but that are in some cases thousands of times more powerful than carbon dioxide in contributing to global warming.

Congress has a history of letting tax credits expire, and that uncertainty has hindered the growth of the renewable energy industry. What makes a cap-and-trade system more likely to “stick” and support long-term change? The proposals in Congress for capand-trade systems call for a time frame of 40 or more years, with a cap that declines steadily over time. This is in contrast to the shorter time limits that have been placed on renewable energy tax credit proposals. The Environmental Defense Fund supports tax credits as well, and we think they should be made long term. Many of the innovators that my coauthor and I write about in Earth: The Sequel want the problem solved, and so they’re happy to have the level playing field that a cap-andtrade system provides. So the capand-trade idea gets support from a lot of innovators, whether they are in the solar energy business or in the advanced biofuels industry, or whether they’re proposing to preserve forests or change agricultural practices in a way that captures greenhouse gases already in the atmosphere. From the standpoint of the emitter, too, the cap-and-trade system

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dialogueenvironment provides more choices. For instance, if the operators of coal plants can find a way to capture the gases coming out of their stacks and safely bury them and keep them locked up underground, that would be allowed under the cap-andtrade system—as long as the U.S. Environmental Protection Agency scientists certify that they really are safely locked up. The trading mechanism would allow coal plants the option of buying allowances from elsewhere in the economy instead. So I think the emitters are seeing the very flexibility of the system as something that gets the job done while allowing them a future. If technological advances are made that significantly reduce greenhouse gas emissions at low cost in certain industries, others can still operate by purchasing offset credits until similarly cost-effective technological advances become available for them?

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Yes, you get the most aggressive schedule of reduction that Congress will mandate, but you get it at a lower cost, because the reductions are captured from the areas that can do it the fastest. Lower costs create more political will to make the steeper reductions that scientists tell us are necessary. Under a system like this, industries that are ready would contribute bigger reductions earlier, and the ones that take longer to develop practical technologies would contribute later on. Earth: The Sequel has chapters on solar energy, biofuels, ocean energy, geothermal energy, and coal. In which of these realms do you see the most innovative thinking or the most readily effective solutions? The reality that I found as we researched the book is that there are hundreds of alternatives. It’s not just one area that can contribute, and the policy proposal that we are

August 2009

advocating doesn’t require that we all place our bets on even a few areas. I do think that there is enormous near-term potential in solar energy over the next few years. The costs are coming way down, thanks to some of the policy initiatives in Europe. I see a lot going on in the geothermal industry as well. How much potential do you see for integrating renewable energy sources into buildings? I see a lot of potential. More and more businesses and homeowners are already integrating renewable energy generation into their buildings. Companies like Wal-Mart are using third-party financing to integrate rooftop solar power arrays into their buildings. Wal-Mart doesn’t pay for the panels or own them, it just commits to buy the electricity at a set price for 20 years. Gridpoint is a company in Washington, D.C., that makes smart bat-

teries that customers can use to store excess power coming from variable energy sources, such as solar or wind, saving it for use later when the sun goes behind a cloud or the wind stops. In New York City, Credit Suisse’s offices at the Metropolitan Life tower rely on an ice storage–based air-conditioning system that uses off-peak power to freeze ice, which is then used to cool the building during the day. The electricity is cheaper, and the system requires less energy to operate than conventional air conditioning does. What kinds of innovative building materials are showing the most promise for helping to reduce greenhouse gas emissions? Other than fossil fuel consumption, cement manufacture is the biggest source of carbon dioxide emissions in the country. If we can make cement with different materi-

als, such as fly ash, we can reduce carbon dioxide emissions. There are structural insulated panels available to build homes— these are prefabricated panels, a sandwich of insulating foam and fiberboard that uses far less energy to make than traditional building materials. And because they are insulated, they reduce energy use over the life of the building. Conventional drywall is responsible for 12 million tons (10.9 million metric tons) of carbon dioxide emissions globally every year. In the book, we talk about Serious Materials in Sunnyvale, California, which is making an alternative product called EcoRock and claims that manufacturing it doesn’t require the extensive use of external heat sources that drywall production does. There’s also a company called Calera Corporation in Los Gatos, California, that claims it has a process for capturing the carbon dioxide emitted in the fumes produced by natural gas power plants—and then using that carbon dioxide to make cement. The best sites for building largescale wind farms and solar power plants are often far away from population centers. What are some of the challenges of developing the transmission infrastructure to bring renewable energy to the places that need it most? We need to identify corridors where we can safely put in new transmission lines. Our Texas office has worked closely with the Southwest Power Pool Electric Energy Network, a regional transmission organization based in Little Rock, Arkansas, to push legislation to create what are called competitive renewable energy zones (CREZs) for new transmission lines in places where renewable energy sources are plentiful, but go untapped because they’re not accessible to cities. It’s important that environmentalists not be just critics of the past, but also architects of the future. We have to do more than just say what isn’t good—we have to be willing to come forward and say what is good. UL

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dialogueenergy S U S a n F i n e a n D CaroLine G. HarriS

Renewable Communities By increasing renewable energy resources at the community level, the value of foreclosed homes could be raised while reducing the carbon footprint on a community-wide basis.

SuSan Fine , a real estate professional (left), and Caroline G. HarriS , a land use attorney

(right), founded Renewable Communities (www. renewablecommunitiesinc.com) to help communities and institutions develop comprehensive energy conservation plans that are capable of practical and cost-effective implementation.

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The homes foreclosed during the U.S. subprime crisis tend to be clustered in discrete—and historically poor—neighborhoods across the country. Last year, the U.S. Congress enacted the Housing and Economic Recovery Act (HERA) to stabilize these vulnerable neighborhoods. The plan, designed by the National Community Stabilization Trust, is to move the foreclosed residences from banks to local government or not-for-profit ownership for rehabilitation, and then back to homeownership. Retrofitting the dwellings for energy savings is being considered as a requirement. But, the cost of energy investment combined with the Herculean chore of moving these residences off banks’ balance sheets will likely eclipse the primary goal of ensuring long-term value to the homes. Providing renewable energy to the communities where these dwellings are clustered is not even on the radar screen—but it should be. The concentration of large numbers of homes in each distressed neighborhood is the key to developing a pilot for delivering solar and other greening strategies at economies of scale. A neighborhood-oriented renewable energy strategy, in conjunction with the implementation of the HERA, can reduce bureaucratic hurdles, facilitate citing and bulk discounts for equipment and installation, and generate local green jobs. Energy costs would be reduced for each of the homes in the program. Other homeowners in the neighborhood who kept their residences through the crisis could join the network as well, at affordable costs.

August 2009

A federal program to support the installation of renewable energy technology at the community level would enable this model to be implemented. Although the government has in place a tax credit to help homeowners incorporate solar energy, even the wealthiest homeowners find the upfront costs too high and the benefits too long term. The costs to individual homeowners become affordable only when a critical mass of homes in a specific community is being retrofitted, allowing for economies of scale. With existing incentive programs, the upfront cost of retrofitting and providing renewable energy to 1,000 homes is estimated at between $5,000 and $10,000 per home. These amounts are less than 5 percent of the face value of most of the foreclosed mortgages, and they are much less than the amounts being written off the mortgages by the banks. However, these upfront installation costs would still be out of reach for the people who live in the communities where foreclosures are concentrated. There is a need for federal support. The U.S. Department of Energy, the U.S. Environmental Protection Agency, and the U.S. Department of Housing and Urban Development should coordinate their activities to achieve this goal, first as a model project, then as a pilot program. The funding should support feasibility studies, startup costs, and initial infrastructure purchases. Once the renewable energy projects are up and running, any revenues derived from selling power back to the grid could be returned to a revolving grant fund that would provide

startup costs to other community renewable energy projects. Such a program could start as a vehicle to provide improvements, jobs, and renewable energy to neighborhoods that were taken advantage of by unscrupulous lenders. It could result in a model for renewable energy at the local level for the rest of the country’s communities. For example, a distressed neighborhood in Atlanta is able to effectively use solar power. Because the installation of solar panels is now happening across a neighborhood, the cost of installation per home— whether paid for by a federal grant or by the homeowner—becomes more manageable, and paperwork and bureaucratic demands are streamlined. The energy consumed by these homes decreases due to retrofitting and consumer awareness, and the supply of energy comes from a local renewable source. These savings make the homes more affordable for new occupants. As a result, the entire community could participate in generating and using a new— renewable—supply of energy. By greening, jobs are created. Where possible, public and private buildings add green roofs, and vacant lots are turned into community gardens. These combined efforts have the potential of promoting sustainability and reducing the carbon footprint of an entire neighborhood. UL

Stimulating the Economy through Energy Retrofits The recent steep decline in U.S. residential construction employment suggests this sector would be a good target for job creation through a government stimulus program. With large inventories of unsold homes in many markets, however, it is hard to argue that the government should prime the pump for new construction. But the construction of new homes is not the only form of residential construction activity; the government could put laidoff construction workers to work improving older homes’ energy efficiency. A massive program to improve the energy efficiency of older residences would reemploy hundreds of thousands of unemployed workers in the construction and related trades. At the same time, it would substantially reduce greenhouse gas emissions and energy use, improve energy security, and reduce utility costs for millions of Americans. How much would such an undertaking cost? A research brief issued by the Washington, D.C.–based National Association of Home Builders last October estimated that $100,000 of housing rehabilitation supports about half of a construction/specialty trade worker for a year, plus another half of a worker for a year, spread out among jobs in manufacturing, transportation, and the like. This means that $1 billion would support jobs for roughly 5,400 construction workers, plus 5,700 workers in supporting fields, and $100 billion would support jobs for 540,000 construction workers and 570,000 workers in manufacturing, transportation, and other supporting fields. Amortize this $100 billion over a two-year period to give the workers time to do all the work and provide support for what is likely to be a prolonged downturn, and two years of employment can be supported for some 270,000 construction workers, and another 285,000 workers in supporting fields, for a grand total of 555,000 jobs directly supported for two years. Tens of thousands of additional jobs could be created from the spillover effect on communities that results when the workers spend their salaries. Could $100 billion possibly be spent on energy-efficient retrofits? A recent analysis by officials at the EPA Energy Star program found that the average costs of energy-efficient home modifications using the industry-leading home performance with Energy Star approach was $7,000. (Estimates based on programs to weatherize homes occupied by low-income families are lower, but the home performance estimates seem more relevant to large-scale efforts to modify homes of varying income levels.) Thus, $100 billion would enable about 14.3 million homes to be modified. Assuming lower per-unit costs to improve the energy efficiency of multifamily units—say, half the $7,000 average for single-family homes—would increase the number of housing units that can be served to about 16.4 million. That is roughly 15 percent of all occupied residential units, 21 percent of all occupied housing units built earlier than 1985, and 28 percent of units built before 1975. Roughly one-fifth to one-fourth of the nation’s older housing stock needs energy-efficient improvements. The U.S. Congress has already allocated $5 billion for weatherization of low-income homes and another $6 billion for state and local energy-efficiency programs in the American Recovery and Reinvestment Act of 2009. Additional funds are included for energy-efficient improvements in public housing, energy-efficient tax credits, and other provisions.

But much more is needed to put the nation’s unemployed contractors back to work improving the energy efficiency of older homes. In particular, there is a need for a robust program of low-cost financing—using U.S. Federal Housing Administration insurance or other credit enhancement—that would allow much of the $100 billion in energy-efficient improvements to be financed. Low-cost financing combined with an extended payback period could allow homeowners to pay for the improvements with their monthly savings from lower utility costs. Owners of rental units with individual metering may have to charge somewhat higher rents to cover the financing costs, but these rent increases would be offset by lower utility costs. A second priority is a more robust and effective tax credit. The recently passed recovery package strengthened the existing tax credit for energy-efficient rehab, but the reimbursement rate is still only 30 percent, with a strong focus on the installation of big-ticket items like furnaces and windows. This will surely benefit many higher-income families who choose to undertake home improvements, but it is hard to believe that a 30 percent credit is enough to induce moderate-income homeowners, with incomes just above the 200 percent of poverty limit for weatherization funding, to undertake the needed repairs. To reach moderate-income families, the tax credit needs to reimburse a much larger share of qualifying costs. How about a tax credit equal to 75 percent of the cost of qualifying improvements with the same $1,500 maximum credit that we have now? At the same time, it is important to make sure a parallel incentive is in place to improve the energy efficiency of rental units and that it is clear that labor costs and the costs of simple low-tech solutions like caulking are covered. This would provide a strong incentive for owners to undertake the first $2,000 in repairs. Once contractors are on the scene, and low-cost financing is easily available, it is likely that additional work will get done. Finally, we need to address the need for energy-efficient improvements in privately owned subsidized housing. Funding to improve the energy efficiency of this important component of the housing stock was included in earlier versions of the economic recovery package, but was drastically reduced in the final bill. We should also determine if additional funding is needed to complete energy-efficient improvements in public housing and rental units occupied by families with federal housing vouchers. Where will the funding come from? In short: the climate change bill. At present, Congress is considering climate change legislation that is expected to reduce greenhouse gas emissions and raise billions for investments in energy efficiency and alternative energy by putting a price on carbon emissions. By using a portion of the funds generated through this process for energy-efficient home improvements, Congress could help reduce the amount of greenhouse gases emitted and improve housing affordability by lowering families’ utility costs—all while stimulating the economy by providing desperately needed construction jobs. JEFF lubEll is executive director of the Center for Housing Policy in

Washington, D.C.

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ulx

ron nyren

Residential Green Multifamily housing is intrinsically green, making more efficient use of land and infrastructure, lowering individual energy bills with less heat loss per unit, and requiring fewer building materials per unit. With renters and homebuyers becoming more costconscious in the current economic climate and more aware of environmental issues, developments

sited close to public transit and fitted with design measures that lower energy and water bills have an additional edge over their conventional counterparts. Being close to neighborhoodserving retail as well as pedestrianand bike-friendly environments are essential as well to allow residents to reduce their reliance on cars. One of the challenges ahead is to

mainstream the incorporation of significant green building strategies into all multifamily developments, not mainly those aimed at the luxury market or at the affordable housing sector. Ron nyRen is a freelance architecture and urban

design writer based in the San Francisco Bay Area.

Tim CroCker

Ten multifamily housing developments give highdensity living an even greener spin.

1. Accordia Housing CambriDge, engLanD, UniteD KingDom

Close to Cambridge’s city center, a site formerly occupied by dilapidated, single-story 1940s-era government office buildings is being converted for high-density living. Feilden Clegg Bradley Studios of Bath, England, master planned the 23.5-acre (9.5-ha) site for developer Countryside Properties of Brentwood, Essex, England, and designed the majority of the buildings, which altogether include 378 residential units in a variety of building types, including apartment blocks, rowhouses, and semidetached homes. The design preserved more than 700 mature trees, with residences overlooking a variety of shared green spaces linked by

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au g u s t 2 0 0 9

bicycle and pedestrian paths. Each unit has dedicated bicycle parking, and the project is close to public transit and the city center. Precast concrete construction provides high thermal mass, supplemented by significant insulation to cut energy costs. Whenever possible, timber used in construction came from sources certified by the Bonn, Germany–based Forest Stewardship Council. Green roofs, permeable paving, swales, and reed beds enhance stormwater retention and filtration. The first phase was completed in 2006.

2. Carabanchel 19 As a way to accommodate Madrid’s fast-growing population—fueled by economic growth and an influx of immigrants—the city’s housing authority, Empresa Municipal de la Vivienda y Suelo, has been pairing foreign architecture firms with local ones to bring fresh thinking to high-density public housing. In Madrid’s Carabanchel suburb, Sheppard Robson of London teamed up with ACP Arquitectos of Madrid to design the 107-unit Carabanchel 19. The five- and six-story blocks are organized around three courtyards that maximize natural light and contain landscaping and pools of water that cool the air. A screen of white aluminum louvers wraps the entire exterior, providing protection from solar heat gain and wind. For individual control of their environment, residents can adjust louvers above the balustrade level of their balconies. Concrete frame-and-slab construction and insulated walls work in combination with extra-thick roofs to moderate temperatures. Rooftop solar thermal panels heat the building’s water. The project was completed in 2006.

Dennis gilberT

maDriD, Spain

3. Cave Avenue Homes

William mCDonough + ParTners

banff, aLberta, CanaDa

The 19-unit cooperative housing of Cave Avenue takes cues from the natural landscape. Located in downtown Banff, the Cave Avenue Homes project follows the site’s sloping topography, and the rooflines echo the distant mountain peaks. The layout preserves an existing wildlife trail, while vegetated roofs and native landscaping further help the structures blend in. Thickly insulated walls, highly insulated and oversized windows, and heatrecovery ventilators enable each home to rely solely on a high-efficiency gas fireplace for warmth in winter. Rainwater is collected for reuse in toilet flushing and site irrigation. Parking is tucked underground. Completed in 2005 for local developer Arctos & Bird Enterprises, Cave Avenue was designed by William McDonough + Partners of Charlottesville, Virginia, with IBI Group Architects of Calgary as architect of record. The homes are paired with the mixed-use Bison Courtyard at Bear Street, which includes retail and restaurant space as well as residences and was completed a year later for the same developer.

4. Elleven A few blocks from the Staples Center, the 13-story Elleven includes 176 studio, one-bedroom, and two-bedroom lofts and penthouse units as well as nine twostory live/work townhomes. Designed by Ankrom Moisan Associated Architects of Portland, Oregon, and completed in 2006, Elleven received Gold certification from the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) green building rating system for sustainable measures, such as operable floor-to-ceiling windows for natural ventilation and daylight, watersaving fixtures and landscaping, odorless paint, and other low-emitting materials and finishes. Residents received memberships in a car-sharing program and have access to on-site bicycle parking. The base of the building offers ground-floor retail as well as gardens, paseos, plazas, and water features. Elleven is one of a trio of LEED-certified condominiums completed in the South Park neighborhood in recent years by local developer South Group.

©2009 laWrenCe anDerson/esTo

LoS angeLeS, CaLifornia

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ulx 5. Gish Family Apartments The Gish Family Apartments project addresses two challenges: the high cost of housing in the Bay Area and the scarcity of family housing in urban areas. The 35 units include efficiencies as well as two- and three-bedroom apartments, all renting to households earning between 35 and 50 percent of the area median income. Thirteen units are reserved for residents with developmental disabilities. The building includes a computer center for residents as well as a ground-floor convenience store and beauty salon. Residents receive a free transit pass. The redevelopment of a former gas station site, the building includes rooftop photovoltaics; low-flow water fixtures; low-emitting adhesives, paints, and sealants; and highly insulated windows and walls. Designed by the Office of Jerome King, a local architecture firm, for local nonprofit developer First Community Housing, the Gish Family Apartments were completed in 2007 and received LEED Gold certification.

bernarD anDre

San JoSe, CaLifornia

6. Intervale Green

Tom ligamari

bronx, new yorK

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In the Bronx’s Charlotte Gardens Urban Renewal Area, the local nonprofit organization Women’s Housing & Economic Development Corporation has cleaned up a long-vacant brownfield and built 128 units of housing for households earning 60 percent of the area median income. Because of the high asthma rate in the neighborhood, improving air quality was a concern: interiors make use of low-emitting adhesives, paints, and sealants and formaldehyde-free particleboard, while green roofs, two landscaped courtyards, and more than 40 new street trees remove carbon dioxide from the air and soak up rainwater. Other sustainable measures include low-flow water fixtures, high-efficiency water boilers, and high-recycled-content flooring. Marble and Italian porcelain tile was diverted from the landfill and donated for use throughout. Designed by Edelman Sultan Knox Wood Architects of New York City, Intervale Green incorporates elements such as red brick, decorative cornices, and ironwork that reflect the architectural traditions of the Bronx. The ground floor comprises commercial storefronts, while a public sculpture garden displays work by local artists.

7. Pine Ridge Townhomes

8. RiverClay Denver, CoLoraDo

ZoCalo DeveloPmenT

To blend into the surrounding neighborhood of singlefamily and multifamily housing, the Pine Ridge Townhomes development consists of two- and three-story structures designed to resemble large single-family homes in their massing. They are arranged around a central open space to enhance views and daylight penetration into the living areas, with a water feature, barbecue pavilion, and play area. Completed in 2006, Pine Ridge includes 32 units: 19 are for-sale market-rate units and 13 are deedrestricted community housing units for households earning 80 percent of the regional median income. Window placement, overhang design, and building orientation are intended to maximize heat gain during cold months. Solar tubes bring sunlight into kitchens, bathrooms, and internal circulation areas. Other sustainable strategies include radiant heat; nontoxic adhesives, cabinets, paints, and stains; high levels of insulation; and native, drought-tolerant landscaping. Close to public transit, the site’s pedestrian and bike paths connect to a county bicycle path network. Living Architecture designed the townhomes for developer Thunder Spring LLC; both are based in Ketchum.

living arChiTeCTure

KetChUm, iDaho

Making solar power more affordable to homebuyers is a continuing challenge. Buyers of condominiums at RiverClay in Denver, Colorado, were able to take advantage of not only federal solar tax credits and utility rebates, but also a mortgage that includes the cost of each unit’s share of the photovoltaic system of 30 rooftop 1.26-kilowatt solar modules. Completed in 2008 for Zocalo Development of Denver and designed by John Gagnon of Samuel Engineering in Greenwood Village, Colorado, the six-story, 60-unit RiverClay project is located across from a seven-acre (2-ha) park a couple of blocks north of Invesco Field stadium. Nine of the condos are earmarked for households earning 80 percent of the area median income. RiverClay has been awarded LEED Silver certification for features such as water-efficient fixtures, reflective roofing to reduce solar heat gain, a highefficiency mechanical system, highly insulated low-emission glass, and high levels of building insulation. Close to mass transit, RiverClay provides numerous bicycle parking spaces as well as a community bicycle maintenance facility.

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ulx 9. Thin Flats

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10. Vento Residences CaLgary, aLberta, CanaDa

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Part of the city’s master-planned redevelopment of a former hospital site into an urban village, the Vento Residences are located along an existing commercial corridor, a short walk from light-rail and bus lines. The threestory structure includes 20 two-story townhouses organized around a second-floor courtyard, with ground-level commercial space and two affordable housing suites for households earning 65 percent of the median income. Completed in 2006, the building reduces energy costs by relying on a highly insulated exterior envelope, radiant floor heating and heat recovery ventilators in each unit, and extensive use of daylighting. The structure forgoes mechanical cooling. A graywater recycling system collects 100 percent of rainwater from the roof and courtyard as well as water from sinks and showers for reuse in toilet flushing and site irrigation. Designed by Busby Perkins + Will of Vancouver, British Columbia, for Windmill Development Group of Ottawa, Ontario, the Vento Residences project has achieved a LEEDCanada Platinum rating. UL

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Located among the rowhouses of Philadelphia’s Northern Liberties neighborhood, close to downtown, the Thin Flats live up to their name: each of the eight two-story duplexes, stacked in pairs, is only 18 feet (5.5 m) wide. Facing the street, the complex presents a double facade: a rhythmic composition of glass and metal panels punctuated with openings stands three feet (1 m) in front of the inner facade, providing shade and a sense of unity. The top of the building supports both a green roof and solar thermal panels for heating the building’s water. A stormwater collection system brings water into a cistern for use in irrigation. Inside, the concrete floors are equipped with radiant heating. Skylights, open internal layouts, and interior glass walls and staircases allow natural light to penetrate throughout. Materials were sourced from providers within a five-mile (8-km) range. The creation of local development/design/build collective Onion Flats LLC and its architectural firm component Plumbob LLC, Thin Flats was completed in 2008 and is awaiting LEED Platinum certification.

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urbanland

Matt CanterbUry

new design strategies, energy-efficient materials, and innovative building technologies are helping take green mainstream. Conceptual structures showing off exotic new environmentally friendly technologies have given way to real buildings, achievable goals, practical standards, energy-efficient materials, and innovative and sustainable new spaces. Today, green design is an integral and inescapable feature of the design and development landscape. The extent to which many architects, designers, developers, and builders are incorporating sustainable and ecofriendly materials the power and presence of green design. The dramatic growth of the U.S. Green Building Council (USGBC) is evidence in itself that green design and development have entered the industry’s mindset. From about 500 members at the beginning istoCKphoto.CoM

n

and technologies into their everyday work reveals

of the decade, the organization’s membership has grown to nearly 20,000 organizations from across the development industry.

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The USGBC’s Leadership in Energy and Environmental Design (LEED) guidelines have become more expansive and sophisticated over the years, setting universal standards that have helped promote and popularize green construction. In the United States, buildings account for 72 percent of electricity consumption, 39 percent of energy use, 38 percent of all carbon dioxide emissions, 40 percent of raw materials use, 30 percent of waste output (136 million tons a year), and 14 percent of potable water consumption, according to the USGBC. In addition, the council predicts that the green building market will nearly triple in size over the next few years, reaching $96 billion to $140 billion by 2013. By next year, the value of green building construction is projected to increase to $60 billion, and the market for green building products is projected to reach $30 billion to $40 billion a year. Cities everywhere are implementing comprehensive new environmental goals and standards for commercial and residential development. A closer look at the specific ideas and technologies attracting attention reveals an intriguing aspect of the green revolution—the degree to which sustainable, energy-efficient, and environmentally friendly materials and technologies have helped spur an architectural design renaissance. The realization that green design is good design has spurred renewed interest in the practical application of sustainable strategies, recycled and renewable materials, and new energy-efficient technologies and design innovations. It also has motivated builders, architects, and designers to increase investment in the pursuit of effective products and ideas. The increasingly favorable cost/benefit equation has helped create a vital marketplace for green ideas. But assessing a product’s potential in terms of practical utility and financial viability is only part of the equation. Today’s green architect needs to be equal parts designer, engineer, and conservationist, and must have a more sophisticated skill set in order to be able to balance traditional ideas about space, light, utility, and visual appeal in the context of a rapidly expanding palette of promising materials and technologies. Some firms already devote resources to keeping abreast of new developments in technology and green design, and are working closely with green manufacturers and suppliers of sustainable and recycled materials to stay informed. 44

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The pace of innovation is accelerating, including in wind power, increasingly sophisticated photovoltaic cells that capture solar energy, use of thermal and radiant heating to heat water and for climate control, turnstile door–powered engines and elevator counterweights that capture and store potential energy, and a growing selection of recycled and sustainably harvested materials. Landscape efficiency is increasing with advances in smart irrigation, including moisture sensors and weather stations that incorporate weather forecasts into water-saving, energy-efficient systems that can save 30 to 60 percent on irrigation costs. Daylight sensing and timers provide programmable control of lighting components, and designs that take better advantage of daylight and ambient light are proliferating. Sunshades and programmable louvers can respond to environmental cues to adjust to maximize natural lighting and reduce reliance on heating and air-conditioning systems. A host of new materials, such as healthier paints, finishes, and adhesives, and carpets that use recycled fibers and ecofriendly dyes, have contributed to cleaner and healthier buildings. Upgrades and renovations have made retrofitting a viable option. Updates to the U.S. Custom House in lower Manhattan, for example, included redesign of the building’s lighting to accentuate the structure’s grandeur. The addition of light-emitting diode–based fixtures cut energy consumption by 43 percent and is expected to save $6,654 a year in electrical expenses, plus the fixtures have a life expectancy 25 times longer than traditional incandescent bulbs. Wal-Mart and other retailers have promoted the sale of compact fluorescent light bulbs (CFLs), another longer-lasting and energyefficient lighting option; replacing one conventional bulb with a CFL can save up to $30 in electric costs over the lifetime of the bulb. Wal-Mart plans to add solar panels at ten to 20 stores in California within the next 18 months; 18 of its stores already use solar energy. Studies have shown that natural lighting not only lowers energy bills, but also leads to better performance by employees and better test scores for students. The academic performance of students in schools with abundant natural light is 20 percent higher than students in schools lacking natural lighting. Wal-Mart found that registers positioned to receive more natural light consistently had higher

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Green

sales. Use of low-volatile-organic-compound (VOC) paints and other low-VOC building materials can decrease incidence of asthma and allergies and improve the health and productivity in offices. With rising numbers of insurers acknowledging the financial benefits of a healthier workplace by rewarding companies with lower insurance premiums and other financial incentives, the motivation to go green in the workplace has never been stronger. A team of researchers at North Carolina State University recently developed a new design approach that requires 30 percent less reinforcing steel in the manufacture of certain concrete beams commonly used in construction of parking garages. The new

Currently in the design stage, the corporate headquarters for an energy co-op in central Ohio has a sustainable site design that includes a natural bioswale for stormwater treatment, evaporative cooling from a reflecting pool, extensive green roof systems, and terraced facades allowing natural daylight to penetrate the interior of the building.

design maintains strict safety and reliability standards while reduced use of steel allows manufacturers to cut labor costs and manufacturing time in half. Modular housing shows promise as a sustainable development strategy. This approach not only facilitates precise control over materials and finishes, but also eliminates a significant amount of material waste and can speed up construction by up to 50 percent for most projects. Because many of the components can be assembled before they reach the construction site, much of the building site and adjacent land can be kept nearly in its original state, allowing retention of mature trees, grasslands, wetlands, and other natural resources.

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While energy-efficient technologies such as radiant floor heating have improved and become more popular—for example, newer systems eschew the use of circulating water and instead use a heated gel topped with self-heating materials—some of the oldest and most familiar green technologies are regaining popularity. Improvements in the efficiency and effectiveness of photovoltaic technology, along with broader legislative trends promoting solar energy and a greater appreciation of the power of energy-efficient engineering and design possibilities, have prompted some architects and developers to forge green-oriented deals. Under a recent power purchase agreement between Developers Diversified Realty (DDR), a Cleveland-based real estate investment trust, and Beltsville, Maryland–

or schematic phase of a project is becoming less a luxury and more a necessity in the marketplace. Studies like these show the initial investment, consider factors such as depreciation and state and federal incentives, and predict a return-on-investment time frame. While technological advances have been a driving force behind newer and more efficient green design innovations, architects have continued to move forward by looking back for inspiration: green design strategies that rely on old-school remedies like improved air circulation and the capture and retention of passive energy are proliferating. Focused more on reducing wasted energy and taking full advantage of natural lighting, heating, and cooling potential, passive energy can have a significant impact on energy demand, particularly in tem-

Gr een design asks people to reexamine the places

where they live and work with a critical eye, to ask new questions, and to adopt a more holistic, longterm approach to development. based SunEdison, a solar energy services provider, solar technology is to be introduced to more than 200 DDR shopping centers. The agreement allows SunEdison to install solar power systems on unused rooftop space that it will lease from DDR, which subsequently will be able to buy energy for use in common areas of the shopping centers. Retail tenants will have the option of buying the solar-generated power at a rate lower than that for retail energy. Agreements such as this are prompting architects and developers to continue to plan for the future and accommodate green design potential into their designs. For example, even in projects that do not have immediate plans to implement a solar energy system, many new buildings have rooftop space designed and engineered to accommodate solar panels. At the same time, the increasing popularity and growing demand for green design features has motivated some architects to increase their in-house capability to conduct feasibility studies and other energy-efficient, preconstruction evaluations. The ability to execute professional feasibility and profitability studies during the design and development

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perate climates. Fans, operable windows, and timed vents that open and close at different times of the day can limit a building’s reliance on forced-air heating and cooling. South-facing surfaces and exposures that use dark surfaces, stone, and other natural materials hold heat longer. The trend toward use of larger and more open and shared spaces likely has hastened a passive design reawakening and—by necessity— increased awareness of the value of understanding the way air and heat move through designed space. One building that has not only transformed a large shared space into an energy-efficient asset, but also has attracted attention for its implementation of multiple green design elements is the Lillis Business Complex at the University of Oregon School of Business in Eugene. Completed in 2003 and awarded a LEED Silver designation for new construction in 2005, the Lillis Center is considered one of the most energy-efficient university buildings in the United States. The $41 million, 195,600-square-foot (18,200sq-m) complex was not only built with salvaged, recycled, and sustainable materials, but also uses motorized daylight shades, low-flow water fixtures,

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In the Marina District along the Lake Erie shoreline in Sandusky, Ohio, a mixed-use complex is planned that will include buildings constructed with recycled-content materials and energy conservation technologies. The site will incorporate pervious pavers and be within walking distance of a municipal park and shoreline areas.

operable windows for fresh air intake, and high-efficiency lighting systems. The building’s south-facing exposure and large-scale four-story glass atrium were transformed from an energy liability into an asset with photovoltaic elements in the atrium glazing, strategic ventilation systems, and classrooms and offices positioned to derive maximum benefit from natural lighting. The Lillis Center is so energy efficient that the university is able to sell surplus power back to the local utility company. Architects and designers are doing a better job of advocating for green materials and technologies, articulating the pluses and minuses to clients and introducing elegant new green solutions in ways that balance financial and aesthetic priorities. Green design asks people to reexamine the places where they live and work with a critical eye, to ask new questions, and to adopt a more holistic, longterm approach to development. That motivation is

reflected in the increasingly popular idea of a triple bottom line, a value system in which the health and well-being of people, the condition of the planet, and a project’s ability to turn a profit all merit equal consideration in design and development decisions. The triple bottom line acknowledges that design is not a theoretical exercise: all construction and development affects the people that inhabit those spaces and the communities in which people build. UL Matt Can terb ury is director of business development with Dublin, Ohio–based M+A Architects, a full-service architecture firm. Canterbury can be reached at [email protected].

Cost and Benefits of Energy Efficient Buildings and Retrofitting Buildings to Be Green, ULI InfoPackets, are available at www.uli.org/ bookstore, or call 800-321-5011.

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Jason KinG anD sCott e. thayer

Regenerative

Design sustainable design and planning strategies are setting new standards for green development projects that integrate the social, economic, and environmental needs of communities.

Green design solutions typically have aimed at doing less harm to the environment than previous approaches, but they tend to fall short of achieving true sustainability. Reduce, reuse, and recycle—the three Rs of sustainability—have succeeded in introducing the concept to a broad audience. But in order to expand from the concept of doing less harm to actually restoring the environment and enhancing the prospects for future generations to meet their needs, a fourth R is needed—regeneration. Regeneration, biologically speaking, is the active involvement of an organism in restoring a lost or damaged part so that the original function is restored. In this case, the organism is Earth, and the original function is the variety of ecosystem services that nature has performed over millennia that often are harmed by development activities. Regenerative development leaves a more equitable and healthy world for everyone. The Portland, Oregon, region offers a number of examples of regenerative development, among them Independence Station, a mixed-use, 57,000-squarefoot (5,300-sq-m), three-story structure that through a combination of technological innovation and integrated design strategies will become self-sufficient 48

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and ultimately provide a net positive in water and energy use. The structure will have a number of standard green development features—rainwater collection and reuse; extensive daylighting; highly energy-efficient lighting, mechanical, and building envelope systems; use of recycled and reclaimed building materials and components; low-volatile-organic-compound paints and adhesives; and rapidly renewable materials such as wheatboard cabinetry panels, cork-based linoleum flooring, and bamboo paneling. In addition, it will employ waste heat reuse and climate control provided in the form of radiant heat and cooling delivered in a thermal mass structure. The building will have a heat-and-power cogeneration system fueled by locally sourced waste vegetable oil, and use thermal storage, photovoltaic solar panels, and high-tech batteries for storage of excess solar power that allow recharging many more times than standard batteries. Rather than being dependent on the local power grid, Independence Station will be capable of operating off grid for extended periods during which it can feed the excess energy it generates back into the system, creating a net-positive energy flow. The

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Independence Station in Portland, Oregon, will integrate a range of strategies to achieve net-zero energy, including a combined photovoltaic and ecoroof array.

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project also will have an alternative energy research center that will partner with Oregon State University to monitor and evaluate all systems, providing constant performance updates. Rainwater will be collected, purified, and used on site; wastewater will be naturally treated. Eventually, Independence Station will be connected to a larger restorative system with regenerative design strategies that include habitat restoration along adjacent Ash Creek, a blackwater waste treatment bioreactor, and natural wastewater treatment ponds. Organic-production greenhouses and tilapia farming will add to the project’s net-benefit capability by producing food for the community. The design will create other community amenities such as an open space with café seating, water features, paths, and educational opportunities provided by classes, signs, workshops, and tours. Independence Station’s goal is to become not only the world’s greenest building, but perhaps the world’s most environmentally and socially regenerative development. The project is seeking the highest rating ever achieved by a commercial building under the Leadership in Energy and Environmental Design (LEED) program—a Platinum rating with 66 points awarded of the 69 possible. In addition to the U.S. Green Building Council’s LEED system, Independence Station also is using the Living Building Challenge as a design and decisionmaking framework. Developed by the Cascadia Region Green Building Council, the Living Building Challenge has as its goal creation of buildings that are fully functioning members of the ecosystem, contributing to its overall health. Phase I of Independence Station, which is under construction, is planned for completion next year. Another regenerative development project in the Portland area is the Headwaters at Tryon Creek, a residential project that incorporates market-rate condominiums, affordable apartments, and housing for seniors, and provides residents with access to the site’s amenities as part of its goal of restoring the surrounding natural urban ecosystems. The central design component is restoration of Tryon Creek as a functioning urban waterway after it had been buried for years in a pipe under layers of asphalt. A range of restorative site

solutions—flow-through planters, rain gardens, green streets, ecoroofs, and permeable pavement—work in tandem to protect the newly restored natural resource and to create the nexus for watershed regeneration. Tanner Springs Park, in Portland’s Pearl District, is an example of the regenerative potential of parks and open space through emulation of a wetland ecosystem in a public setting, illustrating how habitat and nature can be reintroduced into the heart of a densely developed city. The park, next to Tanner Creek, captures stormwater from the surrounding streets and funnels it into the low point of the park where it can

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In Portland, Oregon, the Headwaters at Tryon Creek balances mixed-use residential development with restoration of a key urban watershed.

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Modeled after a wetland ecosystem, Tanner Springs Park provides an urban park for the public—and wildlife— in Portland’s densely developed Pearl District.

rise and fall, fluctuating with storms and dry periods as it would in nature. The flow is recirculated through a series of cleansing vegetated biotopes made up of 27 native wetland species that clean, cool, and slow runoff before releasing it into the Willamette River. Aside from the major improvements it provides for the health of the river and for the benefit of endangered aquatic species such as salmon, the park has become a draw for urban naturalists, as well as great blue herons, mallard ducks, and red-winged blackbirds. Every new sustainable project helps shift the development community a bit closer to a holistic regenerative strategy. But rather than get there incrementally, it is time for development to add the essential fourth element, regeneration, so that innovative site and building solutions can be implemented to restore and support the ecosystems on which life depends. UL 50

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Jaso n K in g , a senior associate and landscape architect with Portland, Oregon–based GreenWorks PC, has been named by the U.S. Green Building Council as a member of the new technical assistance group for LEED implementation of sustainable sites. s C o t t e . thayer , a principal with Portland-based Ankrom Moisan Architects and co-leader of the firm’s sustainable design initiatives, has been involved with a number of projects that have obtained or are seeking LEED or Living Building Challenge certification.

(Independence Station was designed by an interdisciplinary team including Ankrom Moisan Architects and GreenWorks PC. Headwaters at Tryon Creek was designed by GreenWorks PC. Tanner Springs Park was designed by GreenWorks and Atelier Dreiseitl, based in Überlingen, Germany.)

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Modeling

Buildings

©toM Bonner photography

HighPerformance sustainability and modeling tools, which enable multiple energyefficient design strategies to be evaluated in a short period, are driving today’s high-performance buildings. Years ago, architects were master builders. They understood how performance was related to aesthetics and built engineering principals into their architecture naturally, accounting for mass, shade, and climate at every turn. But, as the 20th century approached and the ability to electrically light and mechanically heat and cool a building presented itself, climate-specific building massing and orientation became less significant. Instead, technology could bring thermal and visual comfort to any facility, regardless of locale. When circumstances in the 1970s ushered in a worldwide oil crisis, energy for the first time became a driving force in the built environment. Windows were locked to maintain close control of energy use, and aesthetically pleasing, unhealthy buildings fueled the division between architecture and engineering. This continued until the 1990s, when efforts in sustainability returned holistic design to the drawing board.

Since then, the desire to reduce energy consumption while creating more environmentally sound, comfortable facilities has led to the unveiling of mature, high-performance buildings. The key to the design and construction of these structures, however, is collaboration between project architects and engineers. The opportunity for making major improvements in building performance presents itself when all team members are part of an integrated design process implemented early on and linking architecture with passive systems design. Collaborating to drive integration from day one, today’s architectural and environmental systems designers have a better chance to meet the project’s budget, schedule, and increasingly challenging sustainability goals to create a more livable, breathable, comfortable facility. The Natural Resources Defense Council’s (NRDC) 15,000-square-foot (1,400-sq-m) Santa Monica, California, office building—adapted from buildings that

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The Natural Resources Defense Council’s office building in Santa Monica, California, includes an integrated light well on the second floor that provides natural light and a path for air to exit the building.

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©sysKa hennessy group

A 7.5-kilowatt rooftop photovoltaic array meets 10 percent of the NRDC facility’s electricity demand; the rest is met by green power resources through clean energy contracts.

housed a school of acupuncture and a three-unit residence—offers a case in point. The building repurposing, designed by Pasadena, California–based Moule & Polyzoides, Architects and Urbanists, with help from New York City–based engineering and construction firm Syska Hennessy Group, is projected to achieve 70 percent energy savings compared with a conventional building through passive techniques. Among the elements employed at the building are daylighting via integrated light wells; control of pendant-mounted indirect lighting fixtures with occupancy and photo sensors and dimmable electronic ballasts; tankless natural gas–fueled water heaters for domestic water and space heating; operable windows with contacts to disable the heating, venting, and air-conditioning system when open; high-efficiency split systems for peak cooling periods and perimeter convectors for peak heating periods; an indoor air monitoring system; and energy-efficient computers and equipment. The facility’s advanced stormwater and wastewater system uses 60 percent less potable water than a comparable facility, saving 60,000 gallons (227,000 liters) per year through its use of recycled water for toilet flushing and landscape irrigation, as well as drought-resistant plantings and water-efficient plumbing. A 7.5-kilowatt rooftop photovoltaic array meets 10 percent of the site’s electricity demand, with the rest met by green power resources through clean energy contracts. 52

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The early project team collaboration on the NRDC headquarters office helped the building earn a Leadership in Energy and Environmental Design (LEED) Platinum rating not long after the adaptive-use building was completed in September 2003. The use of modeling and simulation tools has furthered integration across project teams. Providing the ability to model energy use and simulate daylight patterns or air flow and temperature control, the tools allow engineers and analysts to evaluate multiple design strategies in a short period, permitting potential conflicts to be resolved early in the building process. For example, the precise amount of external solar shading balanced with daylighting needed for a building can be simulated during the initial design phase, before construction documentation, using energy modeling and daylighting simulation tools (see “Using the Right Tools,” facing page). This interactive process allows early decision making while also optimizing design and maximizing energy savings. Design work also can be shared through integrated modeling tools that convert three-dimensional data from the architect’s building information modeling (BIM) software directly into compatible engineering performance tools, automatically creating a thermodynamic model of the architecture. This can streamline the design process by reducing the time necessary to evaluate alternative strategies, ultimately resulting in a more efficient, integrated building design.

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Green

The U.S. Environmental Protection Agency’s 250,000-square-foot (23,000-sq-m) Region 8 headquarters in Denver includes external, vertical sun shades on the building’s northeast and northwest sides (left) that counter low sun angles early in the morning and late in the afternoon. A horizontal external shading configuration on the southeast and southwest of the building (above) minimizes solar penetration while maximizing distribution of daylight.

Using the Right Tools Choosing the appropriate modeling or simulation tool can be a challenge for any designer. While software like Integrated Environmental Solutions’ (IES) Virtual Environment is a suite of performance tools, others are function specific, performing focused analysis on a single building element. The following is a short list of widely employed tools and how they are putting designs to the test. l Energy simulation software analyzes building designs and technologies in an effort to predict energy use and cost. Using building layouts, operating schedules, utility rates, local weather, and measurements of the building’s lighting, water, and heating, venting, and air-conditioning systems as input, the software simulates a variety of possible design scenarios. Programs range from those that are simple and easy to use with a graphic interface to those that provide stand-alone simulation, reading input and writing output as text files. These tools include eQUEST/DOE-2, IES Virtual Environment, EnergyPlus, and Trace 700. l Computational fluid dynamic (CFD) modeling software allows designers to model air flow, heat

transfer, contaminant transport, and thermal comfort. With CFD modeling, designers can obtain and compare the environmental implications of their designs. CFD tools include AirPak, Fluent, and IES Virtual Environment. l Daylighting simulation software provides environmental analysis for a variety of lighting and daylighting applications. Some programs include ray-tracing that predicts light levels and how a particular space will appear under varying levels of natural illumination. Tools include Ecotect, IES Virtual Environment, AGI32, and Radiance. l Climate/solar modeling software helps designers evaluate the potential energy production and savings, costs, emission reductions, financial viability, and risk involved in use of different renewable energy sources. Simulating the amount of energy produced by these technologies within a climatespecific framework will help designers evaluate potential scenarios. Most programs also include climate databases. Tools include Ecotect, IES Virtual Environment, PVWatts, RETscreen, and Climate Consultant.—r.b .

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©roBert CranFieLD/ZiMMer gunsuL FrasCa arChiteCts LLp

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In the case of design for the U.S. Environmental Protection Agency’s (EPA) Region 8 headquarters in Denver, a team was formed during the bid competition consisting of Syska Hennessy and Portland, Oregon–based Zimmer Gunsul Frasca Architects (ZGF). Working together on the building’s massing and orientation, the team was able to capitalize on the sun’s rays and local wind patterns to create a doubleL floor plan—forming a central atrium in the middle of a rectangle—that promotes energy efficiency and responds to the site’s climate and orientation. The team created one architectural performance solution for the southeast and southwest portions of the building, where a horizontal external shading configuration could minimize solar gain while maximizing interior daylight distribution. An alternative configuration was developed for the northeast and northwest orientations, where low sun angles in the early morning and late afternoon could be controlled with vertical external shades. Once the building’s envelope had been designed, its mechanical system was modeled to require less infrastructure, resulting in a smaller-than-typical air-conditioning system to support the 250,000-square-foot (23,000-sq-m) building. Through early and close collaboration, the team was able to use the appropriate climate and energy modeling tools to develop a climate-specific concept for the building that helped the team win the job. Building on the original competition design, the team fine-tuned each building component during the period leading to the project’s completion in 2006. EPA’s Region 8 headquarters building is 85 percent naturally lit as a result of the interior shades, exterior vertical fins, and atrium sails that control daylight, solar heat gain, and glare; an under-floor air distribution system delivers conditioned air to individual offices, providing optimal thermal comfort in an energy-efficient manner. A 20,000-square-foot (1,900-sq-m) modular green roof reduces stormwater pollution and minimizes the urban heat-island effect, while 48 photovoltaic panels mounted on the building’s south corner are expected to generate a peak output of 10 kilowatts. The interior of EPA’s Region 8 headquarters building is 85 percent naturally lit using interior shades, exterior fins, and atrium sails that control daylight, solar heat gain, and glare.

mainstreaming

Green

Power Packed with Net-Zero Energy As much as 76 percent of the energy produced by domestic coal-fired power plants is used to support today’s built environment, reports Architecture 2030, an organization that promotes the design, construction, and operation of carbon-neutral buildings by 2030. In an effort not only to slow the growth of greenhouse gas emissions, but also to reverse their effects, Architecture 2030 has issued the 2030 Challenge, asking the global building community to scale back its fossil fuel use on a graduated scale. The challenge calls for a 60 percent reduction in fossil fuel use by 2010, an 80 percent reduction by 2020, and a 100 percent cut by 2030, making all buildings carbon neutral. Thousands of firms and organizations—including design firms, contractors, government agencies, municipalities, universities, nonprofits, and trade organizations—as well as individuals have joined the challenge and are working together to create high-performance, integrated designs intended to make the following net-zero building definitions a reality: l net zero site energy: structures that produce at least as much energy as they consume annually when accounted for at the site.

l net zero source energy: structures that produce at least as much energy as they consume annually when accounted for at the source, which includes energy required both to generate and to deliver the energy to the site. l net zero energy costs: structures for which the utility pays at least as much to the building owner for energy the building exports to the grid as the owner pays the utility for its services and energy used over the year. l net zero energy emissions: structures that produce at least as much renewable energy free of emissions—including carbon, nitrogen oxide, and sulfur oxide—as they use from emission-producing energy sources annually. l near zero energy—structures that generate at least 75 percent of their required energy with on-site renewable technologies, such as photovoltaic cells or wind turbines. Off-grid buildings that use some nonrenewable-source energy for backup power are also considered near-zero-energy buildings because they typically cannot export excess renewable energy to account for use of fossil fuels.—r.b.

Energy modeling predicted just over 35 percent cumulative energy savings for the building, compared with an American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Standard 90.1–compliant building—savings currently being surpassed, according to preliminary data. Water calculations indicated 100 percent landscape irrigation water savings compared with baselines through a droughttolerant landscape and a green roof, and 49 percent plumbing water savings through high-efficiency and waterless plumbing fixtures—savings being met by the building, according to preliminary data. These savings were made possible through the integration of highperformance engineering with architecture. Use of integrated design to create high-performance buildings is also changing the complexion of project delivery. Traditionally presented in two-dimensional drawings, today’s building designs are three-dimensional models that evolve with each design change and addition. Both engineers and architects are involved earlier

in the design phases of projects, eliminating the need for contractors to resolve coordination issues during construction. Owner requirements, BIM software, and programs such as the American Institute of Architects’ new integrated project delivery process— a project delivery methodology through which an architect, builder, and owner enter into a venture to use the building information model to deliver the building from design through construction—will continue to expand collaboration as the drive for highperformance buildings grows. UL ro b ert b o lin , a Chicago-based professional engineer and

LEED-accredited professional, is senior vice president with New York–based engineering firm Syska Hennessy Group. Cost and Benefits of Energy Efficient Buildings, a ULI InfoPacket, is available at www.uli.org/bookstore, or call 800-321-5011.

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hok

Pat r i C i a L . K i r K

With 2050 fast approaching as the deadline for replacement of fossil fuels with clean, renewable energy resources, scientists around the world are working to expand use of alternative energy and development of new technologies to ramp up production, storage, and distribution of clean energy.

The Race to Replacement of fossil fuels with clean energy by 2050 is a tall order, particularly since the world’s energy requirement will double by then to 2 trillion watts. Though scientists say Americans must reduce their energy use by 80 percent to avoid helping trigger irreversible climate change, they contend that through conservation, a switch to clean energy resources, and advances in technology, people can live without fossil fuels while continuing to enjoy their current creature comforts. Americans represent just 5 percent of the world’s population, but use 25 percent of all energy produced.

Energy Policy Power While the cap-and-trade system proposed in the American Clean Energy and Security Act of 2009 does not go as far or have an impact as soon as many scientists had hoped, it would gradually

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reduce allowable carbon dioxide emissions. It sets targets of a 17 percent reduction from 1990 levels in CO2 emissions by 2020, 42 percent by 2030, and 83 percent by 2050. The policy would employ incentives and slowly rising penalties to encourage the switch to clean energy resources, explains Svend Brandt-Erichsen, attorney at the Seattle firm of Marten Law Group. In the beginning, the government would distribute 85 percent of CO2 allowances to high energy users, such as utilities and manufacturers, with the remaining 15 percent sold on an open market. The Economic Stimulus Act of 2009 triples the federal tax rebate for clean energy installations to 30 percent. California is the master at creating sustainable policy targeted at desired outcomes. Combining the federal tax incentive with California’s solar rebate lowers the cost of solar installations by up to 50 percent; cash rebates

hok

A passive ventilation system will keep the National Oceanic and Atmospheric Administration’s Pacific Region Center in Hawaii cool without using air conditioning. The system will employ wind scoops on the roof (above) to catch the prevailing breezes, which will be directed down into the building and across coils cooled with seawater, then distributed under the floor. Hot air will be released through a central atrium (facing page) that collects moisture in the air for use in the atrium’s water feature.

Clean Energy offered by some local governments can cut the cost by 75 percent. The state’s Public Utilities Commission projects that solar equipment installed on rooftops will provide 3,000 megawatts (MW) of electricity by 2017. The state’s Mojave Desert is already home to the world’s largest solar installations, with facilities owned by Solar Energy Generating Systems generating 354 MW of electricity. Four solar companies are planning facilities that would boost the state’s grid-tied solar capacity from 530 MW to nearly 3,000 MW. California-based OptiSolar and SunPower Corporation are building facilities in central California that will supply 800 MW of electricity to Southern California Edison (SCE). Another California company, eSolar, has partnered with NRG Energy Inc., a global energy provider based in Princeton, New Jersey, to build 500 MW of solar capacity at three

sites in California and New Mexico. Arizona’s Stirling Energy Systems currently is constructing two 7,000-acre (2,800-ha) solar farms in the desert with a combined capacity of 800 MW. SCE and San Diego Gas & Electric have signed a 20-year-contract with Stirling for the 800 MW, but may take an additional 950 MW. Texas, the leader nationally in wind energy with 8,916 MW installed to date, plans to build its own smart grid to move wind energy from the west Texas plains to urban centers. The Texas legislature in 2005 approved $5 billion in funding to build as part of the Competitive Renewable Energy Zone (CREZ) process, 2,400 miles (3,900 km) of transmission lines to create an “energy highway” scheduled for completion in 2013. CREZ is a new energy grid to transport power from wind and solar farms to urban centers, ultimately saving Texans $3 billion annually in utility costs, according to a

study by the Wind Coalition, an Austin-based nonprofit association that promotes development of wind energy resources.

tapping Mother nature Meanwhile, scientists are working on ways to exploit untapped power sources. Researchers at Florida Atlantic University’s (FAU) Center for Ocean Energy Technology in Dania Beach are working on ways to capture energy from the Gulf Stream, a powerful, sustained ocean current that originates in the Gulf of Mexico, then moves through the Florida Straits up the coast to Newfoundland before circulating to northern Europe and Africa. According to the center’s technical director Rick Driscoll, the Gulf Stream could provide Florida a reliable supply of 4 to 10 gigawatts (GWs) of electricity, or the equivalent of the output of four to ten nuclear power plants. His

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team is deploying turbines to assess the technology’s performance in various locations and the potential environmental impact. Similar turbines use the current in New York’s East River to help light Manhattan, and many similar projects are in the works nationally and globally. Submerged turbines operate like wind turbines and cost about the same, according to feasibility studies by the California-based Electric Power Research Institute, but they are more reliable and environmentally friendly, turning slow enough to allow marine animals to avoid them. The FAU center is also exploring the potential for two other types of energy derived from the ocean—ocean thermal energy conversion, which uses the difference in temperature between warm surface and cold, deep seawater to generate electricity, and radiant cooling, a system in which cold, deep seawater is piped directly into buildings near shore for use as a coolant. Radiant cooling is planned at the new National Oceanic and Atmospheric Administration (NOAA) facility in Hawaii. NOAA will use cold seawater to cool coils containing air from the prevailing ocean breeze, which is heated and cooled to remove humidity. This process will create a natural ventilation system that will reduce the building’s energy load by 70 percent. Also in greater use globally is geothermal energy—use of steam from groundwater that is heated when it seeps into the ground near reservoirs of molten rock from dormant volcanoes or fractures in the earth’s crust. Fifteen Calpine electric plants use steam from geysers that make up 30 square miles (78 sq km) of steam fields along the border of Sonoma and Lake counties in northern California to generate 725 MW of electricity, enough to power about 725,000 homes—a city the size of San Francisco—for a year. Globally, geothermal energy provides 10,500 MW of power, but 9,000 MW will be added by projects in the pipeline, nearly half of which are in the United States. A new process called enhanced geothermal systems (EGS) could make geothermal power generation feasible almost anywhere. Funded in part by the U.S. Department of Energy (DOE), a demonstration project has been launched by California startup AltaRock Energy at the northern California geysers to test EGS, which would reposition oil-drilling technology to tap into the earth’s 60

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molten crust to heat reservoirs of water, which would produce steam to turn turbines. A study by the Massachusetts Institute of Technology (MIT) for DOE indicates that exploitation of geothermal energy with EGS could provide enough electricity to power the entire nation for 140,000 years. The MIT scientists admit, though, that possibly only 12 million MW of electricity for 30 years may be recoverable—still an impressive amount. Though total U.S. annual geothermal production capacity is currently 1.1 million MW of electricity, AltaRock Energy president and chief technology officer Susan Petty says that with federal support, funding, and realignment of some oil drilling rigs for geothermal wells, this clean, renewable energy resource could account for 20 percent of the nation’s energy by 2043.

Cleaning Up Coal The U.S coal industry is spending thousands of dollars on ads promising clean-coal technology—an energy resource hard to ignore because the infrastructure is already in place and the United States alone has a 250-year supply of known coal deposits. The DOE recently committed funding for FutureGen, a next-generation, clean-coal plant prototype to be built with coal gasification technology. Gasification uses ammonia to capture CO2 in the flue, then stores it as liquid 3,000 feet (915 m) underground. The $1.5 billion demonstration plant, to be built in Mattoon, Illinois, will generate 275 MW of electricity to power up to 150,000 homes with almost no greenhouse gas emissions. Technology companies also are conducting gasification retrofit demonstrations. Chicagoarea Jupiter Oxygen, in partnership with the National Energy Technology Laboratory (NETL), is testing its patented high-flame-temperature oxy-fuel combustion process together with the NETL’s Integrated Pollutant Removal system at a 15-MW thermal (equivalent to 5 MW electric) test facility at Jupiter Oxygen’s research center in Hammond, Indiana. The goal is to advance creation of a virtually zero-emissions plant eliminating multiple pollutants— including nitrogen oxide, sulfur oxide, particulate matter, and mercury—as well as capturing 95 percent of CO2. The company, together with the NETL, already has successfully tested this technology at a smaller scale.

NRG Energy has begun carbon-capture retrofits on two plants—the 125-MW W.A. Parrish Power Station near Sugar Land, Texas, and New York state’s 540-MW Dunkirk Generating Station. The Texas plant uses technology developed by New Hampshire’s Powerspan Corporation at a North Dakota project that captures 90 percent of CO2 and recycles it for use in enhanced oil field recovery. That project—located at Basin Electric Power Cooperative’s Antelope Valley Station, a coal-based electricity-generation facility near Beulah, North Dakota—will capture about 1 million tons of CO2 annually from the 120-MW slipstream project, making this demonstration among the largest in the world.

Safer nuclear Energy Both the White House and members of Congress have voiced support for increasing nuclear power capacity, and the industry has been provided with subsidies, including $500 million in risk insurance from the DOE. Research and development in the area of new reactor designs may make fission reactors cleaner, safer, and less of a risk for nuclear weapon proliferation. Many of the new designs, collectively known as generation IV reactors, attempt to provide passive safety features that automatically shut down a plant when equipment malfunctions occur, as well as foolproof security measures. The International Thermonuclear Experimental Reactor, a collaborative effort of the European Union, the United States, Japan, Russia, South Korea, India, and China, is attempting to finally deliver nuclear fusion reactors, which would diminish or eliminate most of the risks associated with fission reactors. Fusion, the nuclear reaction that takes place in the sun, also would extend the lifespan of nuclear power facilities, generating enough electricity over the life of a plant for payback 25 times over, according to the University of Wisconsin– Madison Fusion Technology Institute. According to the Nuclear Energy Institute, nuclear power plants currently generate 20 percent of the nation’s energy. The United States has 102 nuclear reactors, more than any other country in the world, and the U.S. Nuclear Regulatory Commission expects that up to 29 nuclear power plants will be constructed over the next 20 years. NRG Energy recently submitted the first application for a

President Obama’s vision of a green economy fueled by the renewable energy industry—and the promise of a $15 billion annual investment in renewable energy technologies—already has taken flight in the Pacific Northwest, where Oregon, Washington, and Idaho are vying to capitalize on new technologies, manufacturing opportunities, and legislation that will buffer the impacts of the national recession and benefit the environment. Four years ago, Washington state adopted legislation that provides “feed-in” production incentives for homes and businesses that use solar and wind power, and offers tax breaks to attract renewable energy companies. This past January, legislation was proposed to create nearly 3,000 jobs in 2010 and 2011, expand the state’s green economy, and promote energy independence; it includes $455 million over the next two years for energy-efficiency projects, green buildings, clean energy technology, and transportation projects that reduce energy use. Becky Kelley, campaign director for the Washington Environmental Council, in 2005 worked with architects, developers, and educators to pass the state’s first-in-the-nation law requiring public buildings to meet green building standards. Last year, she helped shape legislation that calls for reduced greenhouse gas emissions, increases the number of green jobs, and decreases spending on imported fossil fuels. The Oregon legislature also is considering a climate change package that focuses on greenhouse gas reduction, energy efficiency, sustainable transportation, and renewable energy; the renewable energy component calls for expansion of solar pilot projects through a feed-in incentive program similar to the one in Washington state. The package sets a goal of 100 percent renewable energy use for state government, which includes a geothermal campus at the Oregon Institute of Technology and the nation’s first highway solar photovoltaic project. The highway’s 594 solar panels produce nearly 112,000 kilowatthours of electricity each year and use the utility grid as a battery, supplying energy

during the day for use to light a highway interchange at night, according to the Oregon Department of Transportation. In addition, Oregon’s legislative package includes expansion of the state’s business energy tax credit (BETC), designed to encourage businesses to invest in energy conserva-

OregOn Wind

Going for the Green in the Pacific Northwest

A Portland, Oregon–based wind power company has partnered with TriMet, the city’s mass transit agency, to bring to market the Helyx HE-100 wind turbine helix, made from post-consumer, locally sourced recycled materials.

tion, renewable energy resources, and use of sustainable resources through provision of a tax credit of up to 35 percent of eligible energy project costs. During the 2007 legislative session, the legislature increased the BETC for renewable energy projects to 50 percent. The BETC already has proved to be an economic boon for Oregon. According to a study commissioned by the Oregon Department of Energy, the program delivered a nearly three-to-one return on the state’s investment, creating more than $616 million in economic investments and wages and more than 1,700 jobs in the past two years. Washington, which already has the largest hydroelectric power industry in the nation, now is home to a growing number of privately owned wind farms, thanks to

increasing customer demand and the state’s renewable energy initiative. Oregon has attracted its share of wind power companies as well. Turbine supplier Vestas Americas announced late last year that it will build a 500,000-square-foot (46,500-sq-m) headquarters in Portland. Along with solar and wind power, Oregon companies are exploring the potential for wave energy. Columbia Power Technologies has partnered with Oregon State University researchers to develop and commercialize technology to harvest power from waves. According to the company, the “raw energy of the ocean” has the potential to generate 500 times the global demand for power, and wave energy could generate 2 trillion to 4 trillion kilowatt-hours of electricity per year. In Idaho, the private sector is paving the way, with business owners like Boise developer Mark Rivers taking the initiative to build the state’s renewable energy industry. Earlier this year, Rivers organized the Northwest Energy Innovation Summit to showcase emerging energy companies in the region and create a forum for business leaders to talk about industry opportunities. Last year, he opened in Boise the WaterCooler, an incubator for small businesses developing intellectual property, including renewable energy technologies. Rivers plans to open WaterCooler 2, which will be composed entirely of renewable energy companies that focus on smaller applications such as smart technology. In eastern Idaho, the city of Pocatello is drawing renewable energy companies attracted to its business-friendly environment, which includes tax incentives and a readily available workforce. Hoku Materials plans to build a $260 million plant that will produce polysilicon for solar energy components and create about 250 jobs, according to Gynii Gilliam, executive director of the Bannock County Development Corporation. In addition, Pocatello has attracted two manufacturers of wind power components. Though Oregon, Washington, and Idaho are striving to outshine each other in attracting renewable energy companies, the competition, most agree, benefits the region—and the nation—as a whole. Melody Finnemore is a freelance writer based in the Pacific Northwest.

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nuclear reactor in 30 years, seeking to add two advanced boiling-water reactors at the South Texas Project south of Houston, doubling that plant’s capacity to 4,500 MW.

Game-Changing Science Nate Lewis, professor of chemistry at the California Institute of Technology, is working on a revolutionary nanotechnology material to replace silicon, the most expensive component in solar energy products. The material would be used to develop an inexpensive, portable solar energy product that could be rolled out like bubble wrap or painted on buildings, roads, and other flat surfaces. The idea is to make solar power efficient, inexpensive, and portable so that everyone, even people living in undeveloped nations, can afford clean energy. In fact, nanotechnology is expected to be the underlying game changer in the world’s energy future, ultimately improving renewable energy efficiency, lowering costs, and offering ways to store electricity or transport it quickly where it is needed. Nanotechnology controls material at the atomic or molecular level, causing it to undergo a quantum change that makes it lighter and increasing its surface size and strength. Nanotechnology, for example, allows data contained on 250 DVDs to be stored on film the size of a coin. Wade Adams, director of the Richard B. Smalley Institute for Nanoscale Science and Technology at Rice University, is working on a superconductive wire, the carbon nanotube wire, which conducts electricity with little or no resistance. Possibly ready within five years, the wire could be used to build a global grid that moves energy quickly anywhere in the world and eliminates the need to store it. With the current energy-grid wire, 8 percent of the energy being carried is lost over a 200-mile (320-km) stretch and 40 percent over 1,000 miles (160 km). A lithium-ion battery patented by 123 Systems that uses a nanophosphate cathode chemistry material is already improving electric car batteries. Developed at MIT, the nanophosphate material is more stable than the cobalt oxide used in typical lithium-ion batteries so it does not heat up. Electric vehicles made by San Carlos, California–based Tesla Motors, which have cobalt oxide batteries, use an elaborate cooling system that adds to the cost. Unlike typical lithium-ion batteries, 62

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which can only be discharged partially or else they will deteriorate, the 123 Systems battery, which is being used in the new Chevy Volt hybrid, can discharge to 10 percent, giving it a range of 200 miles (320 km). At the University of Delaware (UD), researchers have developed a vehicle-to-grid (V2G) battery that doubles as a power generator. It charges when demand is low and adds power back to the grid during peak-demand periods. Vehicle owners could eventually be paid for the energy their cars produce. The 30-kilowatt-hour battery runs off the grid’s regulation signal and could power the average home for at least 20 hours. While a car’s impact on the grid is minuscule, the aggregate effect of hundreds of cars, 95 percent of which are parked most of the day, using batteries that could be plugged into the grid would be significant, points out Scott Baker, a UD graduate student who worked on the V2G project team. PJM, the grid operator for 14 states, including Delaware, is interested in buying the power when potential capacity gets to 300 MW, or at least 300 cars. The UD team is collaborating with California-based AC Propulsion to create and test car prototypes and fix potential problems before putting the invention on the market. The V2G battery charges in two hours if plugged into a 240-volt connection or 12 hours with a 110-volt connection and allows cars to travel up to 60 miles per hour (100 kmph) and cover 120 to 150 miles (190 to 250 km) between charges. Japan’s Daihatsu Motor Co. Ltd. recently announced development of a fuel cell that uses alkali, rather than acid, in the ion exchange membranes, allowing fuels cells to work with inexpensive materials like cobalt, rather than platinum. Instead of hydrogen, Daihatsu’s fuel cell uses hydrazine hydrate, a liquid industrial material that emits no CO2. Anticipating mass rollout of all types of clean-energy vehicles, Chevron has established five service station prototypes that use six different fuel technologies to make hydrogen from natural gas, water, and ethanol. The service stations, designed to produce and store hydrogen on site, are located in California, Michigan, and Florida to assess performance under different climatic conditions, notes Puneet Verma, manager of hydrogen power research at Chevron Technology Ventures.

Nanotechnology is what ultimately is hoped will shift the energy paradigm to clean fuel resources, making energy cheap, plentiful, reliable, and storable. If created at nanoscale, hydrogen fuel cell, or micro-fuel cell, batteries, once charged, could self-charge as long as the car is running, providing unlimited driving range and adding power to the grid when idle. Garry Golden, futurist consultant, predicts that within ten years, nanoscience will make it possible to store enough hydrogen energy in a block the size of a bar of soap or brick to power an average home for a month. Fixing climate change, a number of scientists suggest, would inadvertently effect positive changes in other areas. Driscoll points out that clean energy research and development present an opportunity for the United States to become energy independent, reverse the trade deficit, and solve the nation’s economic woes with new jobs that cannot be shipped offshore. “We have so much invested in traditional energy methods, it’s hard to switch, but our country is hemorrhaging from fuel payments. Our economic problems and budget deficit would take care of themselves if we stop spending on foreign fuel,” he contends. “You can’t solve water, food, and health problems without solving the energy problem,” says Adams. “You’re not going to win the war on terrorism if two-thirds of people on Earth are disenfranchised and desperate to earn a living to feed their families.” Lewis contends that people alive today are uniquely positioned to change the fate of the world. “No generation ever before or ever again will have this opportunity,” he says. “We get to do this experiment with our planet exactly once, and we can’t afford to fail.” UL Patricia L. K irK

is a freelance writer based in

Austin, Texas. Sustainable Development: Navigating the New World of Green Regulations and Incentives, a ULI book available this fall, and Energy and Real Estate, an InfoPacket, can be purchased at www.uli.org/ bookstore, or call 800-321-5011.

HarNessiNG the

In recent years, the use of wind power has grown rapidly in the United States—and is poised for greater growth if transmission and political challenges can be met. New wind power installation in the United States set a record in 2008 for the fourth consecutive year. The wind energy industry installed 8,545 megawatts (MW) of wind power capacity last year, more than 3,000 MW greater than the previous annual record set in 2007, according to the Washington, D.C.–based American Wind Energy Association (AWEA). Total U.S. wind power capacity is 28,206 MW as of the second quarter of 2009 and AWEA estimates that wind will generate about 1.25 percent of the nation’s electricity needs, enough to power more than 8 million average homes. The AWEA projects about 5,000 MW in new capacity to be installed by the end of the year. The American Recovery and Reinvestment Act of 2009, signed by President Obama in February, includes provisions to encourage wind and other alternative energy technologies. The production tax credit (PTC)—a key wind industry priority that provides a 2.1-cent per kilowatt-hour generated tax credit for ten years for wind and other renewable energy projects—has been renewed through December 31, 2012. The legislation also allows wind energy developers to choose between the PTC and a 30 percent investment tax credit, convertible to a grant from the U.S. Treasury, enhancing the ability to monetize renewable energy tax credits. Other provisions include financing for planning and building new transmission lines.

WInd The Maple Ridge Wind Farm northeast of Syracuse is the largest wind farm in the state of New York, providing up to 322 MW of electricity toward the state’s goal of obtaining 25 percent of its power from renewable energy by 2013.

PPM energy

J E r r y W. S z ata n

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Both the public and private sectors have been promoting renewable energy. Some 28 states and the District of Columbia have enacted renewable energy standards (RES), requiring that some percentage of electricity be supplied from renewable sources, usually in the next five to 15 years. The Obama Administration called for a national RES of 25 percent by 2025. The American Clean Energy and Security Act of 2009 (also referred to as the Waxman-Markey bill), passed by the House of Representatives 219–212 on June 26, calls for a national RES of 6 percent in 2012, increasing to 20 percent by 2020; up to 40 percent of which can be met by utilities increasing energy efficiency. The Senate is working on its own RES legislation. Further action is expected in the fall. Many private companies have set voluntary goals for using or developing green energy. In July, the U.S. Envrionmental Protection Agency recognized 58 Fortune 500 companies (and universities, governments, and others) for their purchases of green energy, totaling more than 8 billion kilowatt-hours annually. For example, Mountain View, California–based Goggle, Inc., launched in November 2007 an investment and research effort to develop electricity from renewable sources that would cost less than coal. Round Rock, Texas–based computer maker Dell, Inc., announced in February that 35 percent of its U.S. energy consumption was from green sources. A U.S. Department of Energy (DoE) study concluded in 2007 that wind power is competitive at the wholesale price level and has been consistently priced, including all rebates and credits, at or below the price of electricity produced at fossil-fuel or nuclear power plants. Moreover, wind project performance has been increasing due to improved project siting, larger turbines, and technological advances, and average prices have been declining for many years, though they increased in 2006 due to increasing costs for turbines. Prices vary by region and are the lowest in Texas and the Plains states, which the DoE defined as North and South Dakota, Nebraska, Kansas, Oklahoma, Minnesota, Iowa, Missouri, and Arkansas. As of the end of June, 35 states had utility-scale (generally defined as designed to be hooked to the commercial grid rather than 64

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top ten states’ total Installed WInd poWer CapaCIty (MW) (as of June 27) State Ranked by Existing Capacity Texas Iowa California Minnesota Washington Oregon New York Colorado Kansas Illinois

Existing 7,907 2,883 2,653 1,803 1,479 1,363 1,261 1,068 1,014 915

Under Construction 1,102 210 125 0 0 126 21 0 0 312

Source: AWEA. providing power to a single user such as a business or home) wind generation facilities. Texas, the leading state by far in total installed wind power capacity, again led the country in new installations in 2008, adding 2,671 MW (see table above). Iowa vaulted past California into second place in 2008. Minnesota and Iowa rely most on wind-generated electricity, obtaining about 7.5 and 7.1 percent, respectively, of their electricity from wind, followed by Colorado, North Dakota, and New Mexico. Only three of the top ten states in installed wind energy capacity are among the top ten for wind energy potential: Texas (2), Minnesota (9), and Iowa (10). The other top ten states for annual wind energy potential are as follows: North Dakota (1), Kansas (3), South Dakota (4), Montana (5), Nebraska (6), Wyoming (7), and Oklahoma (8). Wind energy proponents tout its economic impact. Wind farms provide income for rural landowners, ranging from $3,000 to $5,000 per turbine, according to the AWEA, while allowing farming or ranching to continue, and create construction and maintenance jobs. Since the turbines do not require water for steam to produce electricity, as do fossil-fuel and nuclear plants, they suit the often-arid Plains. Windmill component manufacturers announced more than 55 new or expanded facilities in 24 states last year. In May 2008, a DoE report, “20 percent Wind Energy by 2030: Increasing Wind Energy’s Contribution to U.S. Electricity Supply,” concluded that wind energy could provide 20

percent of U.S. electricity without major technological breakthroughs, though it would require significant capital and transmission investment. (Denmark and parts of Spain and Germany already get 20 percent of their electricity from wind.) While there is opportunity for growth, there also are barriers. First, a potential wind farm site has to be windy. Generally, wind speed of 15.7 to 16.8 miles per hour (25.1 to 26.9 km per hour) 164 feet (50 m) above ground (class 4 on a 1-to-7 scale) or higher is necessary for viable commercial-scale wind farms with current technology. Preferred sites are hilltops, ridge crests, mountain summits, large clearings, and other locations free of local obstruction and with less surface roughness. Windmills are tall—rotor diameters can be 262 to 295 feet (80 to 90 m) and towers can be just as tall—and getting taller, and wind farms sprawl as individual towers are spaced to avoid each other’s wind shadows. Wind is stronger higher up, and the energy output of wind increases proportionally to the cube of wind speed; e.g., doubling wind speed increases energy potential eightfold. Offshore windmills are bigger still, in part because it is easier to transport larger blades over water. While it is difficult to cite average wind farm size since some cover flat rectangular sites and others follow mountain ridge-tops, they are getting bigger. The 137-turbine Fenton Wind Project in southwest Minnesota, for instance, covers a seven-by-seven-mile (11-by11-km) span of farm fields in two counties. It takes about 18 to 24 months to develop a wind farm, with six months for construction and the rest for approvals. Wind alone is not enough for an ideal site, however. Environmental issues, protecting migrating birds and endangered species, avoiding radar interference, and concerns about noise and aesthetics all factor into site selection, but perhaps the biggest barrier is access to the electrical grid. The DoE notes: “While access to nearby transmission lines is a key requirement for large renewable power facilities, the first step for developing many renewable resources is for someone to actually build a transmission line.” Wind farms in wide-open spaces, where there are few conflicting uses or few residents to raise objections, also are often far from the demand for electricity and from transmission lines. The

d e Pa r t M e n t o f e n e r g y n at i o n a l r e n e W a b l e e n e r g y l a b o r at o r y

Peetz Table Wind Energy Center in northeast Colorado, built in 2007, required a 78-mile (125-km) transmission line to connect to the grid. Some states and business are taking steps to encourage transmission line building. In Texas, T. Boone Pickens, most widely known as an oil man, advocates developing wind power and plans to build transmission lines along a water pipeline right-of-way to connect wind farms in the panhandle with users in Dallas/Fort Worth, though plans have been postponed by falling natural gas prices and tight credit markets. In 2007 New Mexico established a Renewable Energy Transmission Authority, the first state-level authority, with the power to issue bonds to finance transmission lines to serve renewable energy facilities. The California independent system operator has been working with the Federal Energy Regulatory Commission to develop innovative financing for new transmission lines. Wind’s variability presents another challenge: wind generates power 65 to 80 percent of the time and on average generates at 30 to 35 percent of rated capacity annually— challenging grid operators to balance supply and demand and avoid blackouts. Traditional power plants also have downtime. Adding more wind farms to a larger grid would provide diversification and reduce variability concerns. “Improvements in wind forecasting are a key advance that can be used to better schedule wind power into the market, easing a lot of [variability-related] issues,” Christine Real de Azua, AWEA’s assistant director of communications, says. Efforts to maximize energy potential from wind include collocation with other energy sources. In November 2007, Puget Sound Energy began a demonstration project producing electricity from a 450-kilowatt solar facility located within the company’s Wild Horse Wind Facility in Washington. Also in 2007, a $2 million wind-to-hydrogen project was dedicated in Minot, North Dakota, to research using electricity generated by wind to separate hydrogen from water, which then could be used to power hydrogen-fueled vehicles. Offshore wind farms are common in Europe and technically attractive for their strong and steady winds—NREL estimates that offshore wind farms could supply up to 5 percent of U.S. electricity by 2030. But in the United

Wind resource and energy potential is abundant in the Great Plains area of the United States.

States they have proven particularly controversial, with residents and vacationers arguing that they mar ocean views and may interfere with fishing or navigation, notably in the proposed 130-turbine Cape Wind project in Nantucket Sound. In May, the Massachusetts Energy Facilities Siting Board granted environmental approval to the project, though federal approvals remain and opponents have vowed to appeal the commonwealth’s decision. Offshore wind may offer particular potential in the Northeast, where electricity costs are high, demand is growing, and scarce land makes onshore development expensive. In the first contract for offshore wind power in the United States, Delaware-based utility Delmarva Power signed a 25-year contract in June 2008 with wind farm developer Bluewater Wind Delaware, LLC, for up to 200 MW from Bluewater’s proposed wind farm more than 11 miles (17.6 km) off Rehoboth Beach. The U.S. Minerals Management Service issued final regulations on Earth Day, April 22, guiding wind power development on the outer continental shelf, which should add predictability to the process. In a first for freshwater, also on Earth Day, the New York Power Authority asked for expressions of interest for projects in Lake Erie and Lake Ontario. While the iconic wind farm image may be of huge pinwheel towers in rural areas, there

also is potential in urban areas. Architects have designed buildings now under construction with integral wind energy generators. Mayor Michael Bloomberg of New York City advocates exploring the feasibility of installing wind turbines and other renewable energy generators on the city’s bridges, buildings, and waterfront. The city of Chicago is experimenting with roof-mounted windmills designed for urban areas, where the wind is typically too turbulent for rural-style windmills, on several buildings near downtown. These compact cylindrical structures resemble the cage and blades of an old-fashioned push lawn mower and can be mounted horizontally or vertically. In the last few years, demand for wind power has grown measurably as more states have adopted renewable standards, tax credits have become available, and prices have come down. Concern about climate change and enacting a national RES would further boost demand. The wind industry has responded by adding capacity at a record pace, but challenges remain, including building transmission capacity and access. UL Jerry W. Szatan is a Chicago-based consultant and writer on corporate site selection and community economic and real estate development.

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r o b Ly n c h a n D r a L f E L s a E s s E r

Developing

Research

Facilities The convergence of environmental awareness, scientific innovation, political will, and entrepreneurship has pushed forward the development of alternative-fuel technologies. As capital markets tighten and competition in the alternative-fuels industry intensifies, accelerating the transition from the test tube to the gas tank, biofuel research and prototype facilities are quickly coming online throughout the industrialized world and, in particular, in the San Francisco Bay Area. Driven by federal and state incentives and carbon-reduction requirements, the Bay Area is among the world’s leaders in researching alternative energy sources. Scientists and entrepreneurs in this area are developing energy sources by using microbes derived from synthetic biology techniques or harvested from termite intestines to convert feedstock such as switchgrass, sugar cane, and other forms of cellulosic biomass into biofuels. Building the laboratories and support facilities for the discovery, prototyping, and production of alternative fuels can be a challenge for developers, architects, engineers, and construction companies since very few models exist in this emerging, experimental field.

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Pioneering biotechnology companies require design and construction partners that have an appreciation for scientific applications— and teams that reflect this commitment. These projects require specific expertise in working on science-based projects. Many biofuel clients are funded with limited venture capital or closely watched government funds, which requires identifying creative ways to construct these facilities in the most costefficient manner possible. Given the urgency in developing clean fuel technologies as quickly as possible, completion deadlines can be aggressive, sometimes requiring facilities to be completed in phases that allow initial operations to commence long before completing the final components of the project, or installing complex equipment in the midst of ongoing laboratory operations, without adversely affecting research or production. All of this has to be done with virtually zero margins of error. Given the constantly evolving science and technologies associated with developing alter-

native fuels, the most critical factor of project execution is a thorough understanding of the science. Project teams need to work closely with the scientists at the initial stages of the project to comprehend the current state, as well as the future potential, of the research operations to develop cost- and scheduleeffective construction solutions for flexible and adaptable facilities. The Biofuel Research Center for the Joint BioEnergy Institute (JBEI), a partnership led by Lawrence Berkeley National Laboratory, which includes Sandia National Laboratories, the University of California campuses of Berkeley and Davis, the Carnegie Institution for Science, and Lawrence Livermore National Laboratory, is one of three new U.S. Department of Energy Bioenergy Research Centers. Headquartered in EmeryStation East, a new state-of-the-art laboratory building in Emeryville, California, JBEI’s primary scientific mission is to advance the development of the next generation of biofuels. The center will

focus its scientific effort in three key areas: feedstock production, deconstruction, and fuels synthesis in a multipronged approach to develop biomass-to-biofuel solutions. “JBEI was a design-build approach where program input from the users was accommodated throughout the design process,” explains Ken Leong, senior associate at DGA Architects, an architectural design firm based in Mountain View, California. “There were also building code issues for such a facility due to the increased use of hazardous materials. Since JBEI is dealing with larger quantities of hazardous materials due to the nature of its research, the city of Emeryville worked with the design team to provide fair interpretations of code criteria,” he notes. “Biofuel research facilities need to be flexible to respond to changing research directions quickly, so labs must be flexible,” says DGA Architects principal Nancy Escano. The JBEI project, like almost all projects of this nature, was challenged with an extremely aggressive schedule. To meet research deadlines, the project had to be constructed in phases, allowing for dedicated areas to come online to support research operations while adjacent areas were still under construction, with no adverse impact on any earlier research activities. When Emeryville-based Amyris Biotechnologies’ renewable diesel fuel science evolved from the research and development stage to pilot plant production, it was crucial that its complex mechanical, electrical, and piping requirements to support its fermentation process were well understood. From the design and permitting phase to the final installation and commissioning of Amyris’s process equipment, the project was executed under major cost and schedule pressure. To support Amyris’s goal of rapid commercialization of its renewable diesel fuel product, the team had to identify and select a suitable location for the pilot plant, design the facility, procure the specialized process equipment, obtain the necessary building permits, and construct and commission the facility within an extremely aggressive schedule for a facility of this complexity. To achieve the most cost-efficient delivery of the facility, the design-build construction team continually evaluated alternative design concepts and construction means

and methods, providing real-time cost and schedule information. Amyris’s technology of producing biodiesel made from sugarcane has the potential to lead the way to a future independent of fossil fuels. South San Francisco–based LS9 is moving ahead with development of synthetic fuels that are essentially indistinguishable from commercially available hydrocarbon-based fuels. The fuel production process calls for specialized fermentation equipment. The challenge was to install the equipment in an existing facility while operations were ongoing. Working closely

Building the laboratories and support facilities for the discovery, prototyping, and production of alternative fuels can be a challenge for developers, architects, engineers, and construction companies since very few models exist in this emerging, experimental field. with the LS9 scientists, the design and construction team had to evaluate the capacity of the existing facility and utility systems required to support the new equipment. Once the detailed requirements were identified, the team prepared the engineering documents, obtained the required building permits, and constructed the necessary modifications while the facility and utility systems were fully operational supporting ongoing research. When these modifications were complete, the specialized fermentation equipment was installed within the facility, connected to the operational utility systems, and commissioned without adversely affecting the ongoing operations of the LS9 scientists. “Our pilot plant is running and producing renewable transportation fuels,” says Wei Huang, LS9’s vice president of process development and engineering. The development of process technologies to support alternative-fuel development, including the raw materials used for the sci-

ence, as well as the end byproducts of the research, requires strong utility systems and code-mandated architectural features to support them. The ability to economically provide these systems and achieve compliance with all jurisdictional codes and ordinances ultimately determines the feasibility of a project within a given location. This evaluation also must be reconciled with the appropriate jurisdictional building codes and ordinances for life safety, environmental, and noise parameters to ensure that all requirements can be economically incorporated into the design and construction of the facility. The utility systems needed to support the scientific operations within these facilities require mechanical equipment—chillers, airhandling units, boilers, steam generators, and the like—all of which can generate elevated noise levels. Local jurisdictions often mandate detailed sound studies as a precondition to project approval to ensure that the appropriate design features to mitigate the generated noise are incorporated into the design and construction. In addition, the raw materials and end byproducts often require atypical architectural design and life safety components to ensure compliance with code provisions. The development of alternative-fuel technologies is of vital national interest from both an environmental and an economic perspective. Successfully meeting the challenges of constructing alternative-fuels facilities requires design and construction partners who understand this emerging, experimental field; appreciate the economic and schedule constraints of project delivery; and possess specific expertise in working on sciencebased projects. UL is chief operating officer and is project manager/biotech focus group leader at Dome Construction Corporation in San Francisco, California.

Ro b Lyn ch

RaLf ELsaEssER

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The Green Quotient

Q&a with Green Leaders the construction code for commercial and big residential buildings. If you don’t comply, you don’t get a permit.

How is Taiwan’s EEWH rating system evolving to meet new demands and market conditions?

Thomas mUELLEr , president/CEO, Canada Green Building Council

chiLin chEnG,

founder/CEO, Taiwan Green Building Council

“Worldwide, we will see more nations forming green building councils, and millions of buildings constructed or retrofitted to green standards. The financial and environmental benefits are too compelling for this not to happen.” Fourteen countries have green building councils, a number that is expected to rise in coming years. The leaders of three green building councils—Thomas Mueller of Canada, Chilin Cheng of Taiwan, and Mario Seneviratne of the United Arab Emirates (U.A.E.)—discuss how they have addressed the issues of formation of green building councils, choice of a rating system, local incentives or mandates, roadblocks, supporters, and expectations for the future.

Why was the Emirates Green Building Council (GBC) formed in 2006? Seneviratne: Before the widespread talk about green building in this country [the U.A.E.], some professionals and property developers knew we had to improve the

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mario sEnEviraTnE , founder, Emirates Green Building Council (GBC)]

buildings that were being constructed here. In particular, we wanted to reduce energy and water use and their costs. We thought the best way to achieve that objective was a green building council, particularly because we knew the success of such councils in the United States, India, and Australia at that time. Now, we are pleased that our market is beginning to value the cost savings and health benefits of green buildings. Actually, it’s all part of a global trend. People are always striving to live and work in better conditions. The public is becoming more aware about green and its value in their lives.

The Taiwan Green Building Council adopted its own Ecology Energy Waste Reduction and Health [EEWH] system in 1999 because it wanted a Taiwan-specific program. What are its key components? Cheng: Our EEWH program has nine indicators. The prerequisites are energy and water savings. If structures cannot meet those two, they will not be certified. Then, a building must satisfy two of the remaining seven indicators to be certified. That’s the minimum. Since the start of EEWH, our government has promoted this green building movement. All the government buildings with budgets above $2 million must file for certification. In 2005, the government made it a law for private buildings, and it became part of

Cheng: The original goal was energy savings. Now, that is expanding. The healthy building materials criteria, for example, say that 5 percent of the interior materials by area should be green construction materials. That requirement went to 30 percent in July. The requirement will increase 10 percent every year until it reaches 80 percent. Regulations only calculate the interior materials now. We recommend that they also use environmentally friendly materials in the facade, the driveways, and the walkways.

Why did the Emirates GBC adopt the U.S. Green Building Council’s Leadership in Energy and Environmental Design [LEED] rating system rather than create its own program? Seneviratne: The market trend in the U.A.E. was such that developers were adopting the LEED rating system in their projects. Our council, in keeping with that market trend, worked with the U.S. Green Building Council to adapt it to the local situation, bringing regional climatic conditions into consideration within the localized rating system.

How does LEED work in Dubai’s desert climate? Seneviratne: Some people think that LEED could not work in Dubai, but they are misinformed. Much of LEED is based on known international standards like ASHRAE [American Society of Heating, Refrigerating, and Air-Conditioning Engineers]. Dubai has been using ASHRAE standards for several decades. That’s just one example where we had already adopted core LEED principles. LEED offers another advantage—its constant evolution and adaptability. Like many green building advocates, for example, we wanted a great emphasis on water conservation. Previously, LEED had only five possible points for water in new construction. Now, the 2009 version of LEED raised the number of possible water credits to ten points.

In Canada, green buildings are gaining widespread acceptance. Why? Mueller: Yes, the market is swinging in our direction. It’s being driven by the proven benefits of green buildings and by corporate social responsibility. Buildings have been identified as a ready opportunity to reduce carbon emissions, reduce energy consumption, and save money. That’s a great package —environmental, social, and financial. Developers and investors have become supporters, too. When you look at our council’s board, you see our major supporters like the Real Property Association of Canada, which represents the 100 biggest owners, developers, and pension funds. Big homebuilders, too, are board members. Pension funds, in particular, recognize the value of green building. They don’t want to invest in buildings with lesser operating and environmental performance; they don’t want to invest in obsolete buildings. Unlike some U.S. cities and counties, we don’t have green mandates for privately owned construction. We don’t have as many incentives, either. That’s been a bit of a problem to get the market moving faster. But any incentives must be very targeted, and they must have a sunset clause. Otherwise, you are giving a free ride.

Which Canadian building sectors are leading, and which ones are lagging? Mueller: Our leaders are office buildings, schools, universities, and mid- and high-rise residential. As far as a lagging sector, we have no LEED Canada hotels. There’s lots of talk—lots of ecobranding—but that’s it.

In Taiwan, what are the hindrances to green buildings? Cheng: Our green materials industry is not really strong at this point. In the earliest EEWH standards, only 5 percent of building materials had to be green. Now that the requirement is 30 percent, we have the big demand, but the industry has not caught up yet. Often, the prices are still too high because the market is too small. That will

change with time as EEWH requires everlarger percentages of green materials and as mass production takes over, increases the volume, and reduces the costs.

In Canada, what are the major roadblocks to green buildings? Mueller: One big roadblock is proper maintenance of building systems to achieve the expected green benefits. Plus, we need performance measurement, verification, and reporting. We are doing that benchmarking. Two years ago, we started performance audits of the best [-performing] buildings to understand why they worked so well. Now, we give workshops to teach how to measure and improve operational and recommissioning practices, retrofits or upgrades, and improve tenant knowledge about the best practices. Existing buildings can reduce their energy use by 50 percent. We want a green building performance system online that allows a building manager to make improvements. We want a database of performance, which becomes a performance management tool for building managers.

The U.A.E. has experienced an extraordinary surge in green building construction. It’s unprecedented. Why did it happen? Seneviratne: Throughout 2005, 2006, and 2007, property market leaders were registering their buildings for certification. Then in October 2007, his Highness Sheikh Mohammed, ruler of Dubai, announced that all new commercial and residential buildings must meet one of the internationally recognized standards for green buildings. Most of our leading developers and architects were already familiar with the LEED system, and they adopted LEED for new projects.

Taiwan has some very good incentives for green buildings. Give an example of one of the most successful ones. Cheng: We have a government program called the Urban Regeneration Program, started in 2008. If a condominium developer applies the EEWH system and gets Silver certification, you can get 6 percent

extra FAR [floor/area ratio], which is worth a lot of money in densely built Taipei. You get 8 percent extra for Gold and 10 percent extra for Diamond, our top rating. Builders have been eager to get that incentive and the greater profits.

In most nations today, new construction has slowed greatly because of the recession. How can green buildings make a difference now? Cheng: The greatest need is renovation of existing buildings everywhere. In Taiwan, we have a program, the Existing Building Improvement Remodeling Program. It’s being used for federal buildings first: they are the pilot projects. Energy savings, sun shading, and water savings are the main portion of the improvements. Soon, we will expand the program to housing—particularly in Taipei, where land is scarce, where many office buildings are high rises, and most residential areas are very compact with condominium-type housing. Green upgrades of these buildings will provide so many benefits.

Do you have any predictions for green buildings in Canada? Around the world? Mueller: First, the recession will end, and green buildings will probably lead the real estate comeback. By 2015, Canada will have 100,000 LEED-certified green buildings. One million homes, including condos, will use half the energy they use today. Worldwide, we will see more nations forming green building councils, and millions of buildings constructed or retrofitted to green standards. The financial and environmental benefits are too compelling for this not to happen. UL chaRLEs Lo ck wo o d is a green real estate authority and consultant in southern California and New York City.

The Green Quotient: Insights from Leading Experts on Sustainability, written by Charles Lockwood, is a ULI published book available at www.uli.org/bookstore, or call 800-321-5011.

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landwri The Greening of Egypt S a m a L i

Egypt intends to create a nationwide green building code and to join the World Green Building Council, an effort that presents daunting challenges— and the possibility of substantial rewards—to a developing country that wants to follow the path of sustainability.

Because developing nations, by their very definition, are starting at a much lower standard of living than developed countries, they have a much greater distance to cover in implementing sustainable measures. Egypt to­ day faces daunting challenges: a rapidly grow­ ing population; water and energy shortages; soil, water, and air contamination; and a se­ vere shortage of affordable housing. Estimates place its current population at close to 100 million, with a growth rate of 1.3 million per year. More environmental degradation is in­ evitable in the face of such rapid growth. Most Egyptians live in two regions that ac­ count for just 5 percent of the country’s total area—Cairo and Alexandria along the Nile River, the nation’s major water source. The Egyptian government is planning to build more than 3 million residences in new communities in the desert west and east of the Nile. Encroaching further into the desert will require utility infra­ structure, water pipelines, and roads to criss­

cross the desert to connect the new develop­ ment to the cities along the Nile. With the rapid population growth, water demand for domestic and agricultural use has increased significantly. This, in turn, has placed increased demands on the nation’s energy resources to pump and treat water from deep aquifers and the Nile. Adding to energy demand are the inefficient appliances used by Egyptians, such as air­conditioning units imported from China. Most of the na­ tion’s energy is generated by hydroelectric facilities built on the dams on the Nile and by the burning of coal and oil. The primary conventional option for increasing energy resources is to build nuclear plants— not feasible economically or politically. Soil, water, and air contamination is reach­ ing critical levels. Soil contamination in Egypt is severe due to sewage system leakage, use of pesticides and chemicals, factory dump­ ing, and garbage disposal. The air is contam­ inated by emissions from vehicles, factories, and crop burning. The contamination of the Nile has increased in recent years due to fac­ tory discharge, dumping of untreated sewage, contaminated drainage from farms, and the dumping of trash. This is especially sad for the Egyptian people who regard the Nile as a major artery keeping their country alive. The country’s housing shortage is evident in the major cities, which teem with slums. There is no affordable housing in urban areas, and growth at the edge of the cities has cre­ ated even more environmental problems be­ cause of the lack of sanitary infrastructure to support slums in the new development areas. The majority of Egyptians live in either Cairo or Alexandria and there is no affordable housing in these urban areas. Growth at the edge of cities has caused additional environmental problems due to the lack of sanitary infrastructure to support slums in the new development areas.

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tes Given the stark reality of the challenges facing the country, sustainable solutions be­ come even more important. This January, a group of international experts in sustainabil­ ity traveled to Cairo for the kickoff meeting of the Egypt Green Building Council—a gath­ ering seen as a signal of the country’s deter­ mination to move forward in initiating green building standards. More than 100 engineers and architects attended the conference, which was sponsored by the Housing and Build­ ing Research Center, an arm of the Minis­ try of Housing, Utilities, and Community De­ velopment. Presenters were predominantly from the United States, but a number of other countries were represented, including Brazil, Russia, and Saudi Arabia. Sustainability was a new concept for the developing country. Egypt is starting from scratch in establishing green building codes, and significant obstacles exist. During the three­day conference, the international partici­ pants emphasized a number of challenges that need to be addressed to ensure success of the fledgling effort: l The critical need for private sector involve­ ment. As is the norm in most developing na­ tions, the Egyptian government is not ac­ customed to involvement of a volunteer­run organization in setting rules and regulations. The U.S. team strongly encouraged the inclusion of private consultants, planners, engineers, archi­ tects, and contractors in this process. l The perception among Egyptian technocrats that green design applies solely to expensive projects for the wealthy. l The need for education at all levels con­ cerning the principles underlying sustainabil­ ity. Many of those attending the conference did not understand the concept of sustainabil­ ity, thinking it pertained to measures to keep a building running. An education campaign to promote green building concepts will be

needed for professionals, in the schools, and for the general public. To move forward, the Egyptians are creat­ ing their own version of the U.S. Green Build­ ing Council’s Leadership in Energy and Envi­ ronmental Design (LEED) certification program, which they call the Green Pyramid. Officials are creating their own green building codes, choosing what they want to implement from the LEED palette. Because tourism is a ma­ jor revenue generator for Egypt, the ministry plans to establish the first green design pilot project at a high­profile archeological site in order to not only help protect the site’s trea­ sures, but also provide a showcase for tour­ ists, demonstrating Egypt’s commitment to sustainability. The rewards for adopting green building principles are expected to be significant for Egypt. With more than 3 million residential units planned in the Egyptian desert, the con­ cepts underlying community building embed­ ded in the LEED for New Development pro­ gram should be valuable for the country’s

Egypt faces a rapidly growing population, water and energy shortages, and soil, water, and air contamination. The Nile River, shown here in a northeastern Egyptian city near the Suez Canal, is the nation’s major water source.

planners, architects, and builders. Implemen­ tation of sustainable measures should help effect major improvements in sanitation, es­ pecially for the poor. Use of renewable energy, such as solar and wind power, to replace cur­ rent fuel sources will help reduce long­term air pollution and energy costs. With this effort, it is possible that the Egyptians, builders of the pyramids—the first sustainable structures—will be able to set an example for developing nations worldwide. UL is an engineering consultant. Recently, as a vice president of civil engineering services and a LEED coordinator at Los Angeles–based engineering firm Psomas, he traveled to Cairo to assist with formation of the Egypt Green Building Council.

Sam ali

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landwrites China’s new real Estate Opportunities m a LC O L m r i D D E L L

China presents new opportunities for foreigners to invest in Chinese real estate and for U.S. and western property owners to sell to Chinese investors. Foreign investors are finding opportunities not only in Chinese property and operating companies but also in the assets owned by cash-strapped western firms. At the same time, sellers in sagging western markets are encountering Chinese individuals and institutions searching for real estate investments outside China.

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China’s real estate market is recovering quickly, due in large part to the Chinese gov­ ernment’s swift and effective actions. Besides a $586 billion stimulus package, it has loos­ ened many restrictions on home purchases and on land sales and development. It also has ordered banks to lend heavily to real es­ tate companies and has given permission to insurance companies to invest in real estate. The market has gained confidence and seems to have found its bottom. Home sales are up, and Chinese developers are once again buy­ ing land to replenish their land banks. Un­ derlying all this is a strengthening economy— analysts, both foreign and domestic, have raised their estimates of Chinese 2009 gross domestic product to between 7 and 9 percent. As the market recovers, foreign investors are finding a landscape very different from the past. In the boom years of the China real estate mar­ ket, immediately before the economic downturn, foreign investors put billions of dollars into the market buying Chinese properties, developing projects, and investing in Chinese development companies that were preparing to go public. They made these investments with little equity and a lot of credit. Then, several years ago, dur­ ing the boom, the Chinese government, seeking to rein in the market and stamp out speculation and dubious practices, implemented a series of restrictive regulations and taxes, aimed at both domestic and foreign players. As a result, foreign investment directly in properties and their sale in China became difficult and expensive. In response, many foreign investors estab­ lished offshore companies with complex hold­ ing and financial structures to own properties. In this way, investors could exit their deals by selling their shares in the offshore company to other investors outside China and avoid Chi­ nese taxes and problems of capital repatria­ tion. In addition, they could increase returns through leverage by adding on more debt off­ shore than was allowed onshore in China. Those who exited their investments, held ei­ ther directly or through offshore companies, be­ fore or at the height of the market two years ago generally made money, often with excellent returns. Those who came in at the height of the market or continued to hold their interests are, for the most part, stuck without an exit: l Although property values have fallen, few want to buy their assets.

l Those who invested heavily in Chinese devel­ opers, who then failed to go public when the initial public offering (IPO) market shut down, have seen the value of their shares dwindle. l For those with interests in offshore holdings, there is practically no market for their shares, and the huge debts these offshore companies took on to leverage returns will begin to come due in 2010. Today, scarce equity and expensive credit, if available at all, combined with the downturn in the China market, have brought most for­ eign investment to a halt—but, perhaps, not for long. “The period of standstill in foreign in­ vestment in China real estate is over. Although no one is rushing to do new deals, people are looking at the market again. If you are a global real estate player, you cannot dismiss the world’s third­largest economy,” says Joel Rothstein, partner at the Paul Hastings law firm in Beijing. As foreign investors look to return, they are finding that the investment process is becom­ ing easier as the Chinese government loosens restrictions on foreign investment and stream­ lines the investment process. “Serious long­ term foreign investors will find that the trans­ action approval process has become easier,” points out Jianbo Lou, director of the Center for Real Estate Law at Peking University. “For­ get the restrictions,” adds Brad Markoff, part­ ner at the DLA Piper law firm in Hong Kong. “With the right partner, right deal, right struc­ ture, right city, and right relationships— and if all this conforms to Chinese policy objectives—you can now do almost anything.” They are also finding new opportunities that include: l Directly investing in properties or projects. As the market stabilizes, appropriately priced properties are becoming attractive for invest­ ment. But note that while many foreign com­ petitors have retreated, new domestic com­ petitors have taken some of their places. One major cash­rich Chinese developer has set aside $2 billion to buy properties in Beijing and Shanghai from foreign private equity firms eager to exit. l Partnering with Chinese developers. Foreign investors are now finding two distinct types of Chinese developers: those who are cash strapped and hungry for equity, and those who are cash rich with full access to bank

lending—and not interested in a foreign or a domestic partner. To do a deal with the latter, “the foreign investor has to bring more than money; he must bring soft skills that the Chi­ nese side needs and lacks,” advises David Hand, international director, head of China Property Investment, at Jones Lang LaSalle. “He must leverage his expertise in develop­ ment, management, strategic planning, de­ sign, implementation, and so on,” he adds. l Investing in Chinese developers. Foreign investors can find bargains in the shares of other foreign firms that invested in pre­IPO de­ velopers who then failed to go public. Also, as the industry consolidates, high­quality, cash­ strapped developers have become acquisi­ tion targets of the large, cash­rich develop­ ers. Many of these targeted developers would prefer an equity infusion from a foreign inves­ tor who allows them to continue to own and run their companies. Many also have access to bank loans for new projects, and, when the IPO market opens again, they may be strong candidates for going public. l Purchasing the shares of offshore companies. Many investors in offshore companies are looking for buyers for their shares. Prices have fallen because the value of the under­ lying properties has fallen and because their debt will begin to become due in 2010. l Refinancing offshore companies. There is an opportunity to refinance offshore companies before that debt comes due. Some foreign firms are already gathering resources to step in as mezzanine or senior lenders at very at­ tractive terms. At the same time, in a dramatic reversal of capital flows, the Chinese are poised to make investments in overseas real estate, both resi­ dential and commercial. “The Chinese have an affinity for investment in real estate as an as­ set class. So when they look abroad for invest­ ments, they look at real estate,” Hand says. Yet, “because China’s outbound real es­ tate investment relies not only on the mar­ ket alone but also on the political processes of the Chinese government, it is difficult to say how much or how quickly it will find its way into real estate investments,” notes Xiaoping Zheng, principal at BAZO in Shanghai, a China­focused real estate advisory and invest­ ment management company. But, there ap­ pear to be few who doubt that Chinese out­

“What motivates Chinese real estate investors, besides stability of the investment environment where the assets are held, are pricing and the currency play. Chinese see an opportunity in London, for example, because prices have fallen and the currency has weakened.” —David Hand, international director, head of China Property Investment, Jones Lang LaSalle bound investment in real estate is coming and that it will create new opportunities for sellers in markets outside China. Foreign residential real estate is currently the primary target. China has about 400,000 millionaires, according to the Boston Consult­ ing Group, and just below that a developing and increasingly well­to­do middle class. With falling prices and a weak dollar, their interest in buying U.S. residential property is high, as evinced by the following: l Homebuying trips to the United States have become one of China’s most popular pack­ age tours—so popular that they are over­ subscribed, and operators have had to put hundreds on waiting lists. l The “America for Sale” expo of U.S. residen­ tial real estate in Beijing attracted over 7,500 potential Chinese buyers. l Delegations of U.S. residential brokers going to China to showcase their properties consis­ tently attract large audiences. The Chinese have also begun competing for U.S. commercial real estate. “Now interna­ tional markets are open to Chinese investors to pick commercial properties in prime loca­ tions with a good history of performance, fa­ mous addresses, some at ‘once in a lifetime’

prices. They can diversify their portfolios over­ night,” says Hand. “What motivates Chinese real estate investors, besides stability of the investment environment where the assets are held, are pricing and the currency play. Chi­ nese see an opportunity in London, for exam­ ple, because prices have fallen and the cur­ rency has weakened,” adds Hand. Furthermore, in a recent policy reversal, the Chinese government has begun encour­ aging Chinese companies to establish off­ shore enterprises and to invest in or buy over­ seas companies. These corporations will need buildings for their own use, as well as housing for their Chinese expatriate staff. China’s sovereign wealth fund, the China Investment Corporation (CIC), with $200 bil­ lion under management and another $200 bil­ lion likely on its way, has begun to focus on real estate investment outside China and has hired a six­person, in­house real estate team. “Having seen other sovereign wealth funds come to grief in real estate investment, the CIC will likely invest initially with a leading in­ ternational real estate fund. Then, after the CIC gains experience, it will begin to make direct investments,” says Rothstein. Along with these new opportunities are new challenges. For foreign investors, this means identifying the new categories of in­ vestment and accurately assessing the new mood and needs of Chinese developers. For sellers to the Chinese, this means understand­ ing, according to Hand, that “Chinese inves­ tors are looking for a certain type of seller. A seller they can communicate with, but not just in terms of language; someone who under­ stands the art of the transaction or partnering, as the case may be; who shows a willingness to compromise and be flexible about how things are done; who doesn’t just say this is London or New York and this is how we do it here.” For both, this means embracing new market realities, new strategies, and new ways of doing deals. UL is president of RiddellTseng, a boutique investment bank that advises on China real estate, and academic leader and instructor for China real estate executive education programs at the Harvard Graduate School of Design.

malco lm Riddell

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landwrites Global investing: Keep it Simple Pa U L P h i L L i P S

While the long-term strengths of regional economies may not be clear, the short-term reality of pricing core opportunities at value-added prices is clear.

Strategic core investment opportunities in logistics and industrial properties along the supply chains in key markets are compelling. In the inflationary economies that are likely to emerge in the intermediate term, real estate in these areas should perform well.

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There is a pall shrouding property in­ vestment conferences these days as consul­ tants, advisers, and investors commiserate and deal with the decline of global real es­ tate markets. Tom Barrack, chairman of Los Angeles–based Colony Capital and investment real estate guru, has graphically described eq­ uity capital market behavior as “lemmings hurtling themselves off the efficient frontier.” Regardless of what has happened, portfolios will seek global diversification, and markets will find a fundamental balance in due course. In the meantime, investors should embrace the short­ to intermediate­term changes in global investing, including capital allocation, the role of operators and advisers, and shifting markets. Overall, a re­ turn to fundamentals must be sought. So, what are the fundamentals of real es­ tate investment? Those who gain the courage to recommence their investment activities will have the luxury of using the framework of val­ uation, structuring, and management. From a valuation perspective, investors can focus on current income to drive value, instead of growth assumptions, since most are not brave enough to model high rates of growth at this

point in time. The scarcity of global debt cap­ ital has diminished the role of leverage in de­ termining total returns and, thankfully, has re­ duced bloated expectations. Current returns from most property sectors are adequate to meet benchmark actuarial return requirements for institutional portfolios. Replacement cost is an important assess­ ment of fundamental value. Significant discounts to replacement cost for hard­to­access properties should not be ignored. In the inflationary econ­ omies that are likely to emerge in the interme­ diate term, real estate should perform well. As commodity prices escalate, those properties ac­ quired at significant discounts to replacement cost ought to perform even better. Scarcity is the foundation of value. In a re­ turn to a fundamentally sound longer­term view, investors can focus on traditionally hard­to­get properties in hard­to­access markets. These kinds of investments can be viewed as founda­ tion investments whose purpose is to provide an anchor in a portfolio seeking to match its long­term assets and liabilities. This will allow for less focus for short­term engineered strate­ gies that depend upon leverage, high rates of

short­term growth, and short holding periods to generate high rates of internal return. History has served up a lesson on these strategies. In the end, the principal benefi­ ciaries of short­term strategies have been the brokers and bankers who managed the place­ ment of debt and equity at formation, exit, and redeployment. At present, there is no need to take exces­ sive risk to get core­plus to value­added real estate returns. Keep it simple. Return to fun­ damentals. Take advantage of the supply of properties that were not available or accessi­ ble in the past. While capital is likely to be in short supply for some time, it must still be allocated in a log­ ical way—or in a completely different manner than what has been seen in the past few years. While global diversification will still drive long­ term allocation decisions, investors may need to take another view with short­term investment decisions until debt and equity capital markets have stabilized. In the short term, investments will be made in product that has been hard to acquire for institutional portfolios and in mar­ kets posing historical barriers to entry. Traditional allocation strategies are often illustrated in pie charts that divide the world into North America, Europe, and Asia, and oc­ casionally include Latin America and the Mid­ dle East/North Africa. Analysts customarily are prone to simplify and categorize risk by geog­ raphy. However, experience tells us that the United States is drastically different by culture, values, and economic productivity across the different regions of the country; Europe and Asia are no different. To oversimplify these markets downplays the significant cultural differences across each continent, and therefore it is not wise to make diversification decisions simply based on geo­ graphical boundaries. Allocations need to be focused by country, and investors must try to understand inherent limitations to transpar­ ency, liquidity, and the rule of law for each. In choosing countries for allocations, it is fun­ damentally important to first grade individ­ ual country risk, followed by individual mar­ ket risk, and then individual property risk. If a country risk measurement does not grade high enough, do not go there. Not all countries de­ serve capital allocations, so always think stra­ tegically when making these decisions.

As markets shift, there is much discussion about the appropriate roles of managers and operators working for institutional portfolios. In talking with plan sponsors, it is clear that there will be change. How much change is not clear since understaffed plan sponsors need the rep­ resentation of investment advisers on the com­ mittees and boards of their investment vehi­ cles. One thing is clear, however: the role of the operator manager as a direct provider of service to institutional portfolios is likely to increase. Those who invest in research, compliance, and portfolio services that meet institutional stan­ dards are likely to win investment management business on a direct basis with plan sponsors and sovereign wealth funds. The industry is now embracing many of these operator managers and refers to them as “emerging managers.” To call them emerging managers belittles their longstanding presence and importance in the investment world. Oper­ ator managers are the entrepreneurial univer­ sal joints in the real estate investment system, taking primary risk in focused strategies, timing markets, and feeding institutional demand for property. Plan sponsors are now realizing that they do not need the middlemen in the roles they have been playing for the last 15 years— they can go directly to the operator managers. Local markets have changed as regional economies have evolved and, therefore, the rel­ ative strengths of markets will remain unknown for some time. For example, we will not see the effects of increased government intervention in the economies of the United States and United Kingdom immediately. We will not know what the Chinese economic stimulus package will do to promote internal consumption, and what that will mean for the rest of the world’s exports to China. In the long term, inflation and domes­ tic consumption in developing economies and, most notably, China, will be key drivers for in­ vestment decision making. But while the long­term strengths of re­ gional economies may not be clear, the short­ term reality of pricing core opportunities at value­added prices is clear. Investments in technology and infrastructure to promote world supply chains have been made. Stra­ tegic core investment opportunities in logis­ tics and industrial properties along the sup­ ply chains of world markets are compelling and should include Shanghai, Amsterdam/

Strategic core investment opportunities in logistics and industrial properties along the supply chains of world markets are compelling and should include Shanghai, Amsterdam/ Rotterdam, Dubai, Los Angeles, Dallas, Chicago, Singapore, and Frankfurt. Rotterdam, Dubai, Los Angeles, Dallas, Chicago, Singapore, and Frankfurt. Likewise, strategic opportunities in tradi­ tional world financial centers should not be overlooked. Given current pricing relative to historic pricing and replacement cost, London, New York, Singapore, and Sydney are compel­ ling prospects. Lastly, middle­income strategies for retail and residential investment in emerging econ­ omies should perform well for many years. Middle­market strategies for retail in Sin­ gapore, Kuala Lumpur, Sao Paolo, and Rio de Janeiro are worthy considerations as are middle­income residential properties in Bei­ jing, Shanghai, Rio de Janeiro, and Sao Paolo. The big question on everyone’s mind is market timing. People ask, “Are we at the bot­ tom?” or say things such as, “We will only start investing once we have hit the bottom,” as if all investing is a mapped roller­coaster ride of ups and downs. Both the top and bot­ tom of the market are fictitious as finite points of value defined by capitalization rates. They are spans of time during which the predom­ inant flow of capital either leaves or enters the market. The “top” or “bottom” of the mar­ ket is determined by the relative value plays in the market, whether it is spread over debt rates or premiums over actuarial benchmark returns. The process is entirely one of self­ determinism. You do not wait for it to happen; it happens when you act. UL is senior vice president of IDI Investment Management at IDI, a full-service industrial real estate company headquartered in Atlanta, Georgia, offering development, investment, property management, and leasing services.

Paul P hilliPS

august 2009

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proactive

capital markets

KirK SyKeS

Applying Responsible Investing to Green Building A recent real estate investment strategy emerging out of the smart growth and sustainability movements takes green to the next level by marrying business interests with environmental and social goals.

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Last October at the Urban Land Institute’s annual fall meeting, ULI’s Responsible Property Investing Council made an official entrance with the purpose of providing a forum for industry leaders to discuss responsible property investment (RPI) and how growth can be catalyzed in today’s market. Shortly afterward, the economic climate changed significantly. Now more than ever, the investment community’s goal is to get higher returns on their investments while using RPI fundamentals that minimize operating expenses. [See “Responsible Investing,” Urban Land Green, Spring 2007, page 108.] However, defining the premium for RPI is somewhat esoteric. RPI has entered the investment arena on two distinct investment paths: investing in cash-flowing properties and then upgrading them to be green, or investing in the development of new green buildings. From an investment perspective, the key is to have a diversified approach and to appropriately pursue both options when the timing is appropriate. [See “Responsible Property Investment Criteria,” Urban Land Green, Spring 2009, and “Doing Good— and Doing Well,” 2007, page 118.] There are greenspecific funds with equity in place, including the Urban Strategy America Fund (USA Fund), which are currently seeking investment opportunities in existing green buildings. The challenge with acquiring existing structures is the limited amount of product on the market. Another investment approach is to focus on cash-flow-

ing assets that can be converted to green by changing systems, fuels, use, and property management. The overarching questions that investors are asking include the following: Will the building recapture its investment? Will its return be higher than its less sustainable competition? Or does it make more sense to just invest in run-of-the-mill acquisitions and developments? RPI properties do provide clear investment opportunities for a return on investment (ROI). A study from last year that was revised this past March titled, “Investment Returns from Responsible Property Investments: Energy-Efficient, TransitOriented, and Urban Regeneration Office Properties in the United States from 1998–2008,” by Gary Pivo and Jeffrey Fisher of the University of Arizona, analyzed 1,114 nongreen or “brown” buildings and 336 green structures and found that, “with few exceptions, RPI properties had incomes, values per square foot, price appreciation, and total returns that were either higher or insignificantly different from conventional properties with lower or insignificantly different cap rates.” Specifically, the study found that Energy Star office properties have: l 5.9 percent higher net incomes per square foot (due to 9.8 percent lower utility expenditures, 4.8 percent higher rents, and 0.9 percent higher occupancy rates); l 13.5 percent higher market values per square foot; and l 0.5 percent lower cap rates and appreciation and total returns similar to other office properties. Pivo’s and Fisher’s study also points to higher returns for both smart growth locations and green buildings. Other studies have offered additional proof that green buildings tend to obtain higher rents than their nonsustainable counterparts. Despite

these higher rents, tenants are eager to move into them, mainly for the benefits they bring to employees’ health and productivity. This, in turn, creates less churn as the tenants who are able to secure a lease in a green structure are more likely to renew. In fact, a study published by the U.S. General Services Administration found that postoccupant satisfaction was 29 percent higher in the U.S. Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED) and Energy Star buildings compared to other structures. “Doing Well by Doing Good? Green Office Buildings,” by Piet Eichholtz and Nils Kok of Maastricht University and John M. Quigley of the University of California at Berkeley, found that on average a green building brings in $5 million more in market value than its nongreen counterpart. In addition to providing evidence that rents are 2 percent higher in green buildings, their research shows that the effective rents are about 6 percent higher in green structures than in similar office buildings located nearby. An additional study by Franz Fuerst and Patrick McAllister of the University of Reading titled, “Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings,” found a rent premium of 11.8 percent for green buildings versus nongreen structures, as well as a 31 percent increased value difference between LEED and non-LEED buildings and a 10 percent increased price difference between Energy Star and non–Energy Star structures. The investment community understands that buildings with sustainable design demonstrate lower operating costs and lower vacancies, thus increasing the overall value of a building. This evidence marks the intersection between the concept of RPI and

August 2009

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the actual profitability of greening and approving green projects in assets by implementing Energy Star this economy to be executed as appliances, adding additional insuthe economy recovers. Reducing lation, introducing green cleaning operating costs and increasing NOI methods, or through the reevaluhas value at any time in a market ation of the type of heating and cycle. Different markets have difcooling systems and power source ferent strengths and weaknesses; used in a building. Studies have attention needs to be paid to an shown that the value creation from area’s employment, economic greening buildings can increase their stimulus potential, and the econet operating income (NOI) through nomic drivers of a community—and operational and energy savings. most of all the right market timing. Some companies are even turning The market is, at the moment, nontraditional green policies such treating existing cash-flowing as the use of vehicles by paying preassets more favorably, and market riddelltseng-ad-rev.ai 7/31/09 PM miums for Zipcar accounts or other2:43:00fundamentals require that current car-sharing services, rather than purproduct be absorbed. However, chasing company vehicles, as a way the wise investors and developers to drive results. will be those who are fully permitAlthough there will be significant ted and entitled and have their opportunities to invest in cash-flowing shovels ready to get their green assets and then make them greener, development projects underway there is still value to permitting when the market returns.

(,--.//01.23 a boutique investment bank advising leading real estate and financial services firms on investments and transactions in China since 1988

The RPI Council is committed to evaluating projects and analyzing opportunities, exploring best practices in this new genre, and evaluating the metrics that make projects successful. It also is creating a forum for those who are interested in RPI, including developers, architects, fund managers, and investors. There are financial benefits to be gained through RPI for developers, tenants, residents, and investors. RPI balances economic returns with environmental and economic sustainability; promotes upzoning, or increased density, not solely because it is better for the environment, but because it can increase profitability; emphasizes the premium pricing that transit-oriented development leverages—again, not just for the environment, but for the value of the assets or rents being

China’s

KirK SyKeS is president of the Urban Strategy

America (USA) Fund, a private New Boston real estate investment fund. He also is on the Steering Committee of the Responsible Property Investing Center and is membership chairman of the newly formed ULI Responsible Property Investment Council (RPIC).

Responsible Sustainable Property Investment is an InfoPacket available at www.uli.org/ bookstore, or call 800-321-5011.

!"#$%#&'()**+## Principal,'(,--.//01.23

New Real Estate Opportunities by Malcolm Riddell

charged; and finds subsidies or gap financing for the use of energy efficiency or improved infrastructure. The variables are too numerous to define an absolute delta between properties that subscribe to the RPI doctrine and those that do not. But the failure to understand the impact of RPI not only will have an effect on the planet but also could influence the value of portfolios. UL

,nvestment banker and lawyer with 20 years’ experience in China real estate and financial services Senior Visiting Fellow, Center for Real Estate Law, Peking University Academic Leader for China real estate exec programs, Harvard University, Graduate School of Design

in this issue of DISCUSS YOUR CHINA PLANS AND QUESTIONS

URBANLAND

1.941.330.9998 malcolm.riddell@ riddell-tseng.com

(,--.//01.23 August 2009

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at issue

J e r r y W. S z aTa n

Initiatives to Set Up Cap-and-Trade Programs While federal legislation is being debated, coalitions of states and provinces have been developing and implementing regional cap-andtrade programs to control greenhouse gas emissions.

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A number of states and provinces have created or are planning three regional cap-and-trade programs. These work by capping the maximum emissions allowed and auctioning or distributing emission allowances equal to the cap, and then creating a market for auctions and trades to determine prices for emission allowances. If an emitting entity’s emissions exceed its allowances, it has to buy more allowances; if it has been efficient in reducing emissions and has excess allowances, it can sell them. Proponents of cap-and-trade programs generally cite the advantages of clear, enforceable caps on emissions, tightened over time, and a market-determined price for allowances. An alternative is to tax greenhouse gas (GHG) emissions, giving emitters an incentive to reduce them, whose proponents cite simplicity and potential broad effect on all carbon-emitting sources. [See “The Carbon Solution: Cap-andTrade or Tax,” June 2008, page 127.]

August 2009

The regional cap-and-trade programs have broadly similar goals: reducing greenhouse gas emissions at the lowest possible cost, protecting the environment, expanding energy efficiency and renewable energy efforts, and promoting clean energy technologies and jobs. Their differences in scope and process illustrate some of the issues facing the proposed national program.

The regional Greenhouse Gas initiative The Regional Greenhouse Gas Initiative (RGGI), the first mandatory, market-based CO2 emissionsreduction program in the United States, is an effort by ten northeastern and mid-Atlantic states (initially Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont; joined in 2007 by Maryland, Massachusetts, and Rhode Island) to limit GHGs by reducing CO2 emissions from the electric power sector by 10 percent by 2018. RGGI estimates that covered power plants account for approximately 95 percent of the region’s total CO2 emissions from electricity generation, and for more than one-fourth of the region’s total annual CO2 emissions. Governors in the original seven states began discussions in 2003, agreed in 2005 to implement the program, and in 2006 published a model rule for participating states to guide implementation. Each state sets and enforces its regulations and retains authority for its auction activity, but they function as a single regional market for carbon emission compliance; an emission allowance from any member state can be used to satisfy compliance in any state. The New York City–based nonprofit RGGI, Inc., provides technical and administrative support to the states in setting caps; maintains the auc-

tion system and trading platform; and keeps records of emissions, allowances, and offsets. RGGI’s goal is to first stabilize power sector CO2 emissions by 2014, beginning with the first three-year compliance period, which started this past January, at a level roughly equal to current emissions. The emissions cap will then be cut by 2.5 percent annually from 2014 thru 2018, resulting in emissions 10 percent lower than 2009 by year-end 2018. This phased approach is intended to give power plants time to adjust while market prices are established. A key issue is whether to distribute allowances to existing emitters; i.e., give them allowances for free or to auction all the allowances. States are required to auction at least a quarter of the allowances and use the proceeds for consumer benefits such as energy efficiency, though most states have decided to auction almost all allowances, according to RGGI officials. RGGI permits offsets (credits for actions taken to reduce or mitigate carbon emissions outside the covered sector and/or region), but initially limits them to 3.3 percent of a power plant’s total compliance obligation. Five categories of offset-eligible activities have been defined, including “reduction or avoidance of CO2 emissions from natural gas, oil, or propane end-use combustion due to end-use energy efficiency in the building sector,” perhaps providing an opportunity for building owners who reduce energy use to sell offsets. In the first auction last September, almost 12.6 million allowances were offered and sold at $3.07 each (each allowance is for one ton of emissions during the compliance period, though companies can bank unused allowances for future use). The fourth auction in June offered and sold

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at issue approximately 31.9 million allowances for the 2009-to-2011 compliance period at $3.23 each; and almost 2.2 million allowances for the 2012 compliance period at $2.06 each. Since the program inception’s, almost 111 million allowances have been auctioned for more than $360 million; a secondary market is developing and future auctions will be held quarterly.

The Western Climate initiative The Western Climate Initiative (WCI), launched in February 2007, comprises seven U.S. states and four Canadian provinces: initially Arizona, California, New Mexico, Oregon, and Washington, later joined by Montana and Utah; and British Columbia, Manitoba, Ontario, and Quebec. Six more U.S. states, one province, and six Mexican states are formal observers. Together, the members represent more than 70 percent of the Canadian economy and 20 percent of the U.S. economy, according to the WCI. The WCI calls its program the most comprehensive to date, covering the six most common GHGs (carbon dioxide, methane, nitrous oxide, hydro-

fluorocarbons, perfluorocarbons, and sulfur hexafluoride) and eventually covering “nearly 90 percent of the region’s emissions.” The goal is to reduce GHG emissions 15 percent below 2005 levels by 2020. WCI partners will begin reporting emissions in 2011 and the first three-year phase of the cap-andtrade program begins on January 1, 2012, covering emissions from electricity generation, industrial combustion at large sources, and industrial process emissions for which adequate measurement methods exist. The second phase will begin in 2015 with expanding coverage to transportation fuels and residential, commercial, and industrial fuels not covered in the first phase. The plan calls for a minimum 10 percent of allowances to be auctioned at the start, increasing to 25 percent by 2020; members can choose to auction more. The work plan for 2009 to 2010, released this past February, calls for developing auction procedures, a GHG-emissions reporting system, methodologies for establishing partner caps, economic modeling of policy and design options, and

Regional Cap-and-Trade Program Members and Observers The Regional Greenhouse Gas Initiative (RGGI) MeMbers: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, rhode Island, and Vermont. ObserVer: Pennsylvania. Western Climate Initiative MeMbers: Arizona, California, Montana, New Mexico, Oregon, Washington, Utah, and british Columbia, Manitoba, Ontario, and Quebec, Canada. ObserVers: United states: Alaska, Colorado, Idaho, Kansas, Nevada, and Wyoming. MexICO: baja California, Chihuahua, Coahuila, Nuevo Leon, sonora, and Tamaulipas. CANADA: saskatchewan. Midwestern Greenhouse Gas Reduction Accord (MGGRA) MeMbers: Iowa, Illinois, Kansas, Michigan, Minnesota, Wisconsin, and Manitoba, Canada. ObserVers: Indiana, Ohio, south Dakota, and Ontario, Canada.

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other steps. Individual states and provinces are at different stages of enacting enabling legislation.

Midwestern Greenhouse Gas reduction accord (aCCOrD) Six midwestern governors and one Canadian premier (Illinois, Iowa, Kansas, Manitoba, Michigan, Minnesota, and Wisconsin; observers are Indiana, Ohio, Ontario, and South Dakota) agreed in November 2007 to establish the Midwestern Greenhouse Gas Reduction Accord (ACCORD) reduction targets and time frames and develop a marketbased and multisector cap-andtrade mechanism. Controlling emissions in Midwest states will require more aggressive efforts because it is the “most coaldependent region in North America,” according to ACCORD, and a carbon price potentially has greater impact on regional residents and businesses. Moreover, the manufacturing- and agriculture-based economy tends to produce more GHGs, according to Jesse Heier, Washington director of the D.C.-based Midwest Governors Conference of the Council of State Governments. The governors and premiers recognize that carbon-burning business as usual is not sustainable, want to find ways to use green energy development to transform the regional economy, and want to be at the table when federal policy is debated, according to Heier. The ACCORD advisory group’s recommendations issued in July call for reducing, beginning in 2012, emissions of the six major GHGs 20 percent below 2005 levels by 2020, and 80 percent by 2050. They also recommend that allowance value be put toward climate-related purposes in transformational investment such as low-carbon technology, mitigating adverse transitional impacts, and addressing harmful impacts due to climate change. On June 26, the U.S. House passed 219-212, the American Clean

Energy and Security Act (ACES, or the Waxman-Markey Act), providing wide-ranging renewable energy, efficiency and climate control measures, including a national greenhouse gas cap-and-trade system. The bill sets caps for covered entities (large stationary sources emitting 25,000 tons of GHGs annually and others) to reduce aggregate GHGs—it adds a seventh gas: nitrogen trifluoride—3 percent below their 2005 levels in 2012, 17 percent by 2020, 42 percent by 2030, and 83 percent by 2050. It sets minimum prices for carbon at initial auctions. It gives allowances to distributors of energy and to consumers, trade-exposed businesses, and others to mitigate potential price hikes for energy. Initially, only about 20 percent of allowances will be auctioned, according to the Washington, D.C.–based Pew Center on Global Climate Change. Critically for the regional programs, ACES preempts state programs from 2012 to 2017, placing them on hold while the federal program is established; after which states can enact more stringent measures if they choose. Companies holding state allowances will be able to exchange them for federal ones if the bill becomes law. While the federal government has been debating controlling GHGs, groups of states and provinces have joined together to create regional capand-trade programs. RGGI has shown that a multistate auction system can be developed and other regions have proposed broader plans. Potential federal legislation now has significant momentum and may supplant the regional programs, but these programs have led the way. UL Jerry W. Szatan is a Chicago-based

consultant and writer on corporate site selection and community economic and real estate development.

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JOan CapeLin

Sustainable Development at the Graduate Level Everyone’s talking about “green,” but who’s teaching it—and what’s being taught?

Training in green development is not a bonus for the current crop of graduates, it has become a necessity. “It used to be that all you needed was a site and a vision to become a developer,” says Ryc Loope, founder and, until this past May, director of the master of real estate development (MRED) program at Arizona State University (ASU). “Today, you need much more, including a ‘green strategy.’ ” A developer, trained architect, and design/builder as well as a real estate educator, Loope initiated the MRED program at ASU three years ago with a growing focus on sustainability. “Everyone’s talking about ‘green,’ but who’s teaching it? And how do you teach it?” he asks. “Students must understand the science, economics, ethics, and strategies of sustainability before developing a building or planning a new community.” Loope has taught sustainability, drawing

from his own master’s degree in environmental design; experience as head of Taliesin, the design firm started by Frank Lloyd Wright; and his years in the solar energy field, including service as chairman of the Washington, D.C.–based Solar Energy Industries Association. In the past, Loope has brought in Jerry Yudelson, principal of Yudelson Associates, based in Tucson, Arizona, and Charlie Popeck, president and founding principal of Green Ideas, based in Phoenix, Arizona, to prepare all students to take and pass the Leadership in Energy and Environmental Design (LEED) accredited professional exam, to achieve the LEED AP, a national designation of the U.S. Green Building Council (USGBC). The Arizona State master of real estate development program has required every student to train for and to pass the exam. While the certification is important, Loope

points out, “A development’s total sustainability—at the economic and community levels, as well as at the environmental level—hinges on the developer’s leadership and skill.” “The information from professors and guest lecturers is not enough,” says Loope. “To learn ‘green,’ you have to get out there and experience how to do it yourself.” Thus, to expand beyond the desert focus offered in Arizona, he has taken his class to New York City and Boston, where they speak directly with East Coast developers about challenges in their sustainable commercial and residential developments. This past year, they visited the New York Times Building, New York City’s first green skyscraper, designed by Renzo Piano and developed by Forest City Ratner, based in New York City. Real estate investor, planner, and developer Mark Stapp, founding principal of Phoenix-based Pyramid

Oxford University and the Prince’s Foundation for the Built Environment to Offer a New Master’s Program in Sustainable Urban Development A new master’s program in sustainable urban development was created in mid-May by Oxford University’s department for continuing education and the Prince’s Foundation for the built environment. The Msc in sustainable urban development, a part-time program scheduled to begin in september 2010, will provide an analytical and integrated study of urban sustainability, urban design, and the management of urban development. The two-year program is aimed at professionals in the fields of development, sustainability, architecture, engineering, surveying, and planning—including architects, planners, land economists, landscape architects, property developers, urbanists, and those working in the property finance sector. “sustainability is becoming a goal of many city plans, and is increasingly informing the practice of architecture, urbanism, landscape design, and environmental planning,” notes Johnathan Michie, director of Oxford University’s department for continuing education. “Given the growing worldwide pressure for identifiable change in this crucial area, this is an appropriate time to launch an applied postgraduate course aimed at early and mid-career practitioners currently working [in] these sectors.” The program, says Hank Dittmar, chief executive of the Prince’s Foundation for the built environment, “will give professionals in any of the key disciplines the multidisciplinary skills they need to plan and development sustainable cities, towns, and districts.” For more information about the master’s program in sustainable urban development: http://cpd.conted.ox.ac.uk/msud/ default.asp.

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nyu’s school of continuing and professional studies

The NYU Schack Institute: Sustainable Design, Construction, and Development The green building market is projected to double over the next five years. For virtually all real estate and construction professionals, knowledge of the latest principles and practices in sustainable design, construction, and development is now essential. The NYU Schack Institute of Real Estate offers a variety of sustainability-focused programs, through Master’s degrees, professional certificates, and a wide range of continuing education courses.

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• The School of Architecture’s faculty provides outstanding experience in urban architecture, place making and community building. The School of Architecture was ranked number one in the nation for the study of New Urbanism in a survey conducted by New Urban News, and in 2007 was awarded the John Nolen Medal for Contributions to Urbanism in Florida. • The program combines the strengths of the University of Miami’s School of Architecture, School of Business Administration, Law School, and College of Engineering.

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in practice Developers, has taught green construction technology at ASU’s MRED program; in mid-July, he was named director of ASU’s master of real estate development program, replacing Loope. The MRED program, which was started within ASU’s College of Design, recently was moved to the school’s W.P. Carey School of Business. Terrence Farris, director of the Clemson University MRED program

in Clemson, South Carolina, and the former director of the development division for the city of St. Louis, Missouri, incorporates green development, brownfields, financing, and tax incentives into a course on public/private partnerships. At both Clemson and the University of Maryland in College Park, a common standard in sustainability is the triple bottom line,

University of Colorado at Boulder Leeds School of Business Working on New Green Development Standards Research, along with Vail Resorts The University of Colorado at boulder Leeds school of business and Vail resorts, Inc., are partnering on research that will create new green development standards. Faculty and graduate student leaders from the real estate Center at Leeds will collaborate with the Initiative for sustainable Development and the school of engineering and Applied science on the project. The research collaboration is expected to provide a comprehensive resource for integrating green design and sustainable building methods into both residential and commercial developments, and create a more holistic approach to internal green building codes for all stakeholders such as developers. Development teams, executives, and managers across the development industry will have access to resources from the research including a searchable database that will provide access to advanced real estate development solutions. These research materials will cover all aspects of development, giving designers and builders the framework to plan and execute green projects from initial due diligence to operations. Dennis Ahlburg, dean of the business school, says the project is an avenue for educating students about emerging sustainable practices. “Our students will have a firsthand look at current and emerging best practices in sustainability in the real estate development industry. They will have a hand in creating the comprehensive resources to be made available to all development professionals; this takes them way beyond the classroom.” Information about the Colorado University Real Estate Center at the Leeds School of Business, University of Colorado at Boulder, can be found at http://leeds.colorado.edu/realestate. University of Colorado’s Leeds School of Business also has a newly established Initiative for Sustainable Development that operates within the Real Estate Center, with the intent of crossing disciplines to pull together ideas in sustainable land use and real estate. For information, visit www.cufund.org.

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a term coined by corporate social responsibility expert John Elkington in 1994. Margaret McFarland, director of Maryland’s MRED program, tweaks it, she says, to become the “quadruple bottom line. According to the triple bottom line, we must be accountable socially, environmentally, and fiscally,” notes McFarland. “Students must learn a fourth element: the importance of a beautiful building, as the greenest building is the one we don’t have to tear down.” New York architect and developer Gregg Pasquarelli emphasized this fourth element at the Maryland program’s spring 2009 symposium, which focused on the complexities of “Sustainable Development: Smart, Adaptive, and Green.” Carl Bovill, a professor from Maryland’s architecture school, teaches a sustainable architecture course. James Cohen, a professor of planning, teaches growth management, which has been a required course for the MRED students. Maryland’s MRED will offer a new course this fall titled, “Practical Issues in Sustainability for Business, Finance, and Real Estate,” taught by Dan Winters, a member of the USGBC financing committee. Clemson students visit developments in Atlanta, Charlotte, and Savannah. Farris also accompanies his first-year students on a twoweek trip to the South Carolina coast, where they visit an array of smart growth developments and some of the first modern planned communities in the country. Students in Maryland’s MRED program also have the chance to participate in the Solar Decathlon, a competition staged in Washington, D.C., in which university students compete to design, build, and operate the best solar-powered house. Maryland’s MRED students who want to participate in the competition can take the energy policy and practice course taught by Matthew Ferguson, head of the energy practice at the Reznick Group, a national accounting and consulting practice headquartered

in Bethesda, Maryland. This fall, CoStar, a commercial real estate research provider, also based in Bethesda, will be beta-testing a course on the enhanced value in commercial buildings with Energy Star or LEED ratings. To cap off the degree program at each of the three universities given as examples here, the directors challenge the students with cumulative projects that incorporate all aspects of the curriculum. These are referred to as synthesis projects at ASU, where students create viable plans for development, including financial backing and feasibility studies, all with respect to sustainability. Mixed-use and transit-oriented developments are recent additions to project typologies. Two similar practicum courses, as they are called at Clemson, are taught by Jeff Randolph, head of the green building sector at the Randolph Group, a residential development firm in South Carolina, and Robert Benedict, a former developer pursuing a PhD in environmental design and planning. “We try to present one commercial and one residential challenge to the students in their last semester,” Farris explains. “Four teams compete to prepare feasibility analyses that meet the triple bottom line for real deals in Atlanta, Charlotte, or South Carolina, and the winning team receives a fellowship.” As a research-based institution, Maryland requires a graduate thesis. The focus is on a full project feasibility study, not just a single topic. During the final capstone course, students work in small groups with a developer to plan the redevelopment and positioning of a site. Each student is required to incorporate the quadruple bottom line and all aspects of sustainability into the plans. Taking advantage of their training in sustainability, a number of graduates from programs such as these have already found themselves green careers. Even before graduating, Philip Beere, ASU MRED

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in practice MacArthur Foundation to Support New Master’s in Development Practice Programs Grants totaling $7.6 million will be awarded by the John D. and Catherine T. MacArthur Foundation to nine universities in seven countries to establish master’s in development practice (MDP) programs. Another $15 million has been committed to help create MDP programs at up to 15 universities worldwide over the next three years. The first of these programs will launch this fall at Columbia University in New York City. The universities slated to establish MDP programs are: l emory University, Atlanta, Georgia; l The energy resources Institute University, New Delhi, India; l James Cook University, Cairns and Townsville, Queensland, Australia; l Tsinghua University, beijing, China; l University of Cheikh Anta Diop, Dakar, senegal; l University of botswana, Gaborone, botswana; l University of Florida, Gainesville, Florida; and l University of Ibadan, Ibadan, Nigeria. Additional information at www.macfund.org. ODU-CollegeBusinessAdmin-AUG09:Layout 1

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2008, launched Green Street Development, which provides development and consulting services for green building, and built the third LEED-certified home in the country. He is currently working on a 50-unit sustainable community in Phoenix. Bambi Tran, UMD MRED 2008, has started a consulting firm of her own. “Doing it Green” works with developers to teach them how to “do it [green building] right.” Before graduating, Charles Rulick, Clemson MRED 2007 and LEED AP, joined Forest City Enterprises to lead research on retail tenant sustainability practices. After graduating, he returned to Forest City to work on various sustainability projects. He is currently a senior consultant with Australia-based GHD in Charlotte, working with developers to Page create 1new value through sustain-

able practices and integrated urban planning solutions. Whether through green training, networking opportunities with developers, or the outcome of a final thesis, students in real estate development programs are learning how to be effective participants in green development. UL Joan Capelin is a New York–based public relations consultant to real estate developers; construction, architecture, and design firms.

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proactive

solution file

W i L L i a M p. M aC h T

Brewing Power The production of beer requires a large amount of uninterruptible heat and power. On a quest for stable and sustainable energy at reasonable prices, Chico, California– based Sierra Nevada Brewery has turned to stationary fuel cells for heat and power for its building and brewing operations. Earlier this decade, California’s antiquated electrical grid sent rolling blackouts throughout the state, forcing millions of homes and businesses to deal with unexpected power outages. “It was very important to have a reliable clean source of power,” says Bill Manley, communications director for brewery. “We brew batches of 800 barrels at a time. If we lose power at any point during the process, then we will have a significant loss on our hands.” The outages and California’s energy market deregulation combined to create unpredictable power and disruptive price fluctuations. Fossil fuel–based central power plants typically transform only about a third of their British thermal unit (BTU) input into electricity, losing the remaining potential energy output to heat and transmission losses. By generating its own power through distributed power generation technologies, the brewery could eliminate a large proportion of these losses and dramatically reduce its environmental impact. The 14-acre (5.7-ha) plant operates 24 hours a day, seven days a week, brewing 700,000 barrels of beer a year. The need for continuous power ruled out both solar photovoltaic and wind power, which require a steady source of sun or wind to maintain full power. The company initially turned to conventional gas-powered generators, but upon learning that the Danbury, Connecticut–based company FuelCell Energy had installed its first commercial stationary fuel cell to power the Kirin

brewery in Japan, Sierra Nevada decided to do the same. Fuel cells create electricity through an electrochemical process that produces energy by combining hydrogen and oxygen into water. Like gas engines, fuel cells can use natural gas or biogas hydrocarbons as the source of hydrogen fuel. Unlike those engines, however, they discharge very few harmful emissions. Invented by English physicist William Grove in 1839, the fuel cell has long been heralded as a nextgeneration power supply. Expensive components, limited hydrogen generation, and meager power output left the technology to scientists until the 1960s when NASA needed a power source for prolonged space missions. Fuel cells emerged as the best solution and were used to power Apollo and Gemini. The technology has matured and fuel cells have proven to be a reliable source of clean and quiet power. They are particularly viable for isolated locations without grid access or where installing new service is cost prohibitive or disruptive. In 2004, the brewery signed a five-year agreement with FuelCell Energy to install and operate four 250-kilowatt fuel cells. The fuel cells have since been improved to a 300-kilowatt rating, supplying 1.2 megawatts of power (enough to power 800 to 1,300 homes) and approximately 55 percent of the plant’s current power usage. The small shipping container– sized fuel cells have three main components. First, the natural or methane gas passes through a reformer, where the gas is separated into hydrogen and carbon waste. It is then piped into the stack, where the electrochemical reaction occurs. The fuel is oxidized at the anode electrode, releasing electrons that move to the cathode

electrode via an external circuit. These electrons meet the hydrogen and push charged ions across the electrolyte and cause hydrogen and oxygen to combine to form water. The direct current (DC) charge then passes through an inverter to become alternating current (AC), and is routed through the electric meter before powering the brewery’s equipment. The brewery’s fuel cells use carbonate, a melted mixture of lithium potassium salts, as the catalyst. Other types of fuel cells use different catalysts with different operating conditions. FuelCell Energy’s direct fuel cells operate at 47 percent efficiency with internal temperatures between 1,200 and 1,300 degrees Fahrenheit (649 to 704 degrees Celsius), which is necessary to separate the hydrogen from the gas fuel, producing waste heat at 650 to 750 degrees F (343 to 399 degrees C). They are called direct fuel cells because they create their own hydrogen from hydrocarbon gases. Vehicle manufacturers have invested heavily in proton exchange membrane (PEM) fuel cells, which operate at a low temperature but require pure hydrogen and expensive metals, like platinum. Carbonate cells are able to achieve higher efficiencies with cheaper

The largest California craft brewer cogenerates power and heat for its brewery from stationary gas-fueled hydrogen fuel cells.

The production of beer requires large amounts of uninterruptible heat and power. The need for continuous power at the Sierra Nevada Brewery in Chico, California, ruled out both solar photovoltaic and wind power, which require a steady source of sun or wind to maintain full power, or large battery arrays for storage. Stationary fuel cells provide continuous power and heat.

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solution file materials. “They are particularly well suited for applications that have a high-heat power system structure, like the brewery,” FuelCell Energy’s Joseph Heinzmann explains. To make use of the approximately 700-degree F (371-degree C) exhaust heat, the brewery installed heatrecovery units on each fuel cell. The exhaust is then piped into the brewery where it is used for boiling processes. By utilizing the heat created by the fuel cells, the brewery is able to extract much more of the BTU input of the hydrogen. They effectively operate at efficiency rates as high as 65 percent, versus conventional power plants that typically operate at efficiencies of 30 to 35 percent. “Fuel cells are the perfect application for us because they produce a constant and quantifiable source of power and heat,” Manley notes. “The brewery relies on pitch-perfect temperature control, both in the actual brewing process through heating water and the wort [a sugar-saturated liquid and hops], and most critically during fermentation when yeast is added to the wort. If the temperature is too hot, the yeast will be stressed and will produce drastic off-flavors; the yeast could even die off and leave the wort unfermented. On the other hand, if the yeast is too cold, it will go dormant and not consume any of the sugars.” The fuel cells also power heating and cooling systems for the plant’s large storage tanks. “We have capacity to house millions of gallons of beer at one time. Midday summer temperatures in Chico can reach over 110 degrees. If the temperature systems fail, that would be a cataclysmic loss of product,” Manley says. FuelCell Energy has installed fuel cells for bakeries, manufacturers, hotels, jails, hospitals, universities, and wastewater treatment plants. The company forecasts a general cost range of 10 to 16 cents per kilowatt-hour, depending on natural gas prices. The Sierra Nevada fuel cells were also fitted to use methane-rich

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The fuel is oxidized at the anode electrode, releasing electrons that move to the cathode electrode via an external circuit. These electrons meet the hydrogen and push charged ions across the electrolyte and cause hydrogen and oxygen to combine to form water. The direct current (DC) charge then passes through an inverter to become alternating current (AC), and is routed through the electric meter before powering the brewery’s equipment. Waste heat is captured and transferred to the brewery.

biogas created by the brewery’s on-site wastewater treatment facility. The brewery power plant is the first fuel cell installation that can operate on either fuel or a mixed blend. When using the biogas generated on site, the energy cost drops to below 7 cents per kilowatt-hour. Sierra Nevada used a combination of tax credits and incentive programs to cover almost two-thirds of the $7.1 million installation cost. The brewery received a little over $1 million through federal investment energy tax credits that offer 30 percent of capital cost, up to $3,000 per kilowatt. The largest single sum received was a $2.4 million rebate from Pacific Gas and Electric Company through the California Public Utilities Commission’s Self-Generation Incentive Program (SGIP). The program was established in 2000 to offer incentives to businesses to develop distributed power sources linked to the grid. Sierra Nevada also received a $1 million grant from the U.S. Department of Defense Climate Change Fuel Cell Program, a joint program set up in 1996 with the Department of Energy to promote fuel cell energy. The brewery paid the remaining $2.5 million out of pocket. The electricity bill was immediately halved, although the doubling of the natural gas bill reduced those savings. Since installation, the fuel cells

August 2009

have generated over 6.5 million kilowatts. With incentives, the brewery expects a six-year payback. The plant recycles 99.5 percent of its solid waste, processes its waste vegetable oil into bio-diesel, recycles wastewater, recovers CO2, and raises its own grass-fed cattle for its 350-seat restaurant. In 2006, the brewery installed photovoltaic panels over its rooftops and a mechanical sun-tracking array over its parking lot. Together, the nearly 10,000 solar panels complement the fuel cells with an additional 1.9 megawatts of energy. When generating more power than the brewery needs, Sierra Nevada sends excess electricity back to the grid and receives a credit from Pacific Gas and Electric. This often occurs during peak energy usage periods, so the brewery fetches a higher price for its generated power than the price it pays PGE when needing additional electricity on nights and overcast days. The plant now self-generates nearly 85 percent of its own power. Fuel cells that operate on pure hydrogen do not create any emissions but water, but direct fuel cells that take their hydrogen fuel from gases do create emissions during the reformer process when the hydrogen is separated. It is classified as hazardous waste because of the presence of

mercaptins, the sulfur chemicals that are added as a safety precaution to natural gas to give it an odor. Unlike hydrogen-powered vehicles, the technology for stationary applications is already here. Most of the country has the existing natural gas infrastructure to supply hydrogen, and early-adopter companies like Sierra Nevada have now shown its reliability. Though still a small part of the market, stationary fuel cells have proven to be economical for projects with high power and heat needs. They now power hotels, supermarkets, data centers, hospitals, universities, jails, call centers, post offices, and numerous industrial plants. The self-contained modules are easily transported where needed and can be linked to provide as much power as needed. Since buildings consume 40 percent of all U.S. energy and 70 percent of its electricity, building developers, owners, and tenants may begin to choose distributed generation systems for stable clean energy and heat. UL William p. maCht is a professor of urban planning and development at the Center for Real Estate at Portland State University (PSU) in Oregon and a development consultant. PSU graduate student Shadrach Pilip-Florea researched and initially drafted this profile. (Comments and proposals for future profiles can be directed to the author at [email protected].)

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Making a Visible Difference in the Real Estate and Land Use Industry The ULI Foundation, the philanthropic arm of the Urban Land Institute, provides essential financial support for the core programs and initiatives (core research, education, and public service activities) that allow ULI to advance its mission of providing leadership in the responsible use of land. The ULI Foundation is able to provide meaningful support only because of the generosity of ULI members, other foundations, and industry firms. Please consider a contribution in 2009 to the ULI Foundation. For additional information, please visit the ULI Foundation online at www.foundation.uli.org AnnuAl Fund u Governors ProGrAm u PlAnned GivinG u mAjor GiFts u donor-directed endowed ProGrAms u corPorAte GivinG

For questions about giving opportunities or any of the programs supported by the ULI Foundation, please contact David Howard, Executive Vice President, 202-624-7055 or [email protected]

proactive

in print,etc. Why your World is about to Get a Whole Lot Smaller: Oil and the end of Globalization JeFF rUbIN rANDOM HOUse, 1745 brOADWAY, NeW YOrK, NY 10019; www.randomhouse.com 2009. 287 pages. $26.

Jeff Rubin, the energy expert and former chief economist at CIBC World Markets—a subsidiary of the Canadian Imperial Bank of Commerce— was among the first economists to predict soaring oil prices due to peak oil. In Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globilization, Rubin details what’s happening in the oil industry and argues that globalization will end as oil prices go up and oil availability goes down. No longer supported by abundant and cheap oil, the global economy, dependent on moving things around the world, will shrink to more local dimensions. More food will come from local fields and more products will come from local factories. We will drive less, walk more, and shop and work closer to home. Smart growth will be spurred by the high costs of transportation, as well as rising interest rates, and distant suburbs may be depopulated and reclaimed by nature. New work opportunities may arise as triple-digit oil prices reduce China’s wage advantage and make Western workers competitive once again. Rubin shows how cheap energy has powered our markets and shaped our tastes, and how its absence will upset much of contemporary daily life, starting with the things we eat. Atlan-

tic salmon is a case in point. Cheap shipping and Asian labor changed salmon from a local seafood to a global commodity. Caught off Norway, frozen, and shipped to China for processing and then refrozen and sent to U.S. supermarkets two months later, “fresh” salmon consumes much more energy in its production than it generates in its consumption. The service sector will decline because the United States will have to produce many goods that the country previously could afford to import, such as cars, televisions, clothing, and steel. The things that will continue to be imported, such as coffee, will cost a lot more. The technological innovations aimed at cutting down on both gasoline use and emissions, such as electric cars, will need major new sources of electricity that can come only from building new nuclear power plants as the United States turns away from burning coal. Even if North America and Europe meet their Kyoto Treaty obligations, the growth in oil consumption and greenhouse gas emissions in the developing world will dwarf any declines in the developed world. Three years ago, China passed the United States, becoming the largest single emitter country in the world, and India and developing countries also are producing more cars and building more coal-fired plants. Rubin believes that the answer to the worldwide problem of burgeoning emissions from the developing countries could be an appeal to their economic self-interest through imposing a carbon tariff. The first step is to enact a cap-and-trade policy at home, as the Obama Administration has proposed and the U.S. House approved in June. The second step is to impose a carbon tariff that goes up with increases in the emissions that have gone into producing goods for export. This would be more effective than another round of Kyoto talks calling for voluntary cuts. Not only will it give an incentive to developing countries to reduce their

emissions, it could also bring longlost jobs back to the United States, where manufactured goods can be produced for roughly half the carbon emissions. Meanwhile, the United States needs to lessen the economy’s dependence on oil. Instead of supporting the auto industry and building freeways, transit subsidies should be increased. Solar and geothermal energy should be substituted for coal and oil. Land use planning for greenbelts and farmland preservation should be supported. Rather than propping up a collapsing way of life based on car-dependent suburbs, investments should be made instead in redeveloping the country’s dense urban centers. DaviD r. GoDSChalK is professor

emeritus of city and regional planning at the University of North Carolina at Chapel Hill.

hungry City: how Food Shapes Our Lives CArOLYN sTeeL CHATTO & WINDUs/rANDOM HOUse 20 VAUxHALL brIDGe rOAD, LONDON sW1V 2sA; www.rbooks.co.uk 2008. 383 pages. $16.50.

In Hungry City: How Food Shapes Our Lives, author Carolyn Steel, an architect, researcher, and teacher, posits that if we are “to understand cities properly, we need to look at them through food.” Hungry City advises us in no uncertain terms that “if the global future is urban, as every indication suggests it is, we need to take an urgent look at what that means.” Steel examines the evolution of how we’ve fed ourselves from the beginning of man and ends the book by looking at the recent past and its idealized utopian settlements, then into the near future of a planned eco-city juxtaposed to a 31 million– person eco-disaster waiting to happen—Chongqing, China. Before the discovery of agriculture there were no cities; hunter-gatherers tracked and killed beasts as their

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in print, etc. basic sustenance. Fast-forward and put simply, man discovered how to grow and store grain, a means that provided a surplus food source to sustain an emerging and organized civil society. The city was born. Since that time, the rural, the land in nature, has always mirrored the way we live and treat the source of our food. The local market used to serve as the most convenient source of a family’s food, as well as a public center. Farmers grew crops and came to town to supply the demand. Although small farmers and producers, along with local suppliers and retailers, faded from view for quite some time with the rise of largescale grocery chains, farmers’ markets are now beginning to supply the demands of “locavores”—i.e., people who are dedicated to consuming food that is grown or produced

locally—in much of the Western world. Yet, even though a greater awareness of the benefits of supporting local growers and markets has come about in recent years, most of the food we

eat now is produced and distributed by huge agribusiness conglomerates. Along with the discussion of food supply and demand, Steel maintains that food insecurity in the developing world is directly connected to the abundance of food that is enjoyed in more developed countries. This connection stems from a “global food system gone mad,” a modern food industry that “is a law unto itself,” and a transnational cartel with more political clout than government. Food battles rage, not just due to the power of the conglomerate, but because in the city, food and where it is purchased—whether in a public market or in a sidewalk café— represent society itself. Modern supermarkets have weakened the social glue where public life serves to hold cities together. They do not serve

ULI WORKSHOP

Basic Pro-forma Modeling Using Excel Washington, D.C. October 12–13, 2009

as physical expressions of public life and public space, but as food “highways” where we rush through artificial light and air grabbing what we need as quickly as possible for the sake of convenience. Hungry City deftly shows how food has played a crucial role in the way society has evolved and the urgent need to act on its impact on the planet. Our environment is dangerously compromised to feed the world. While prices rise, irreplaceable Amazonian rain forests go up in smoke to make way for beef and soya. What we eat—and how we get it—should be our primary environmental concern, not so much for the health of our bodies, but urgently for the health of our planet. Debra hill is a writer who lives in Chapel Hill,

North Carolina.

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August 2009

proactive

trustee profile

rOberT KrUeGer

Charles R. Kendrick, Jr.: Changing Communities Having five years of experience running his own business by the age of 30, Charles Kendrick made his way quickly into commercial real estate. At the age of 24, after graduating from Princeton University with a BA degree in architecture, Kendrick was hired to run a small independent Maryland country school. “The head of an independent school, in contrast to a public school, hires the faculty, sets the budget, raises the money, enrolls the children, among many other responsibilities. You are, in effect, the CEO of a tiny business,” he acknowledges. After receiving an MBA degree in finance from George Washington University, Kendrick decided to leave the independent school in Maryland and pursue opportunities with real estate developer James Rouse. “I was incredibly lucky to get a start in the business with Jim Rouse,” he says. “It was because of Jim Rouse— and the way he did business—that taught me what is the true business of real estate, the business of companies building communities.” During his time at the Rouse Company, Kendrick was a development director. In the 1970s, he worked on multifamily housing in Columbia, Maryland. Later, he focused on the creation of major retail developments, including the development of downtown mixed-use projects as well as regional shopping centers and malls. Kendrick eventually left the Rouse Company to go work in the public sector. From 1979 to 1983, he worked in the Office of Urban Development Action Grants (UDAG) of the U.S. Department of Housing and Urban Development (HUD). In 1983, he was appointed the deputy director of UDAG. Kendrick eventually returned to the private sector as a partner of the First Winthrop Corporation, a real estate firm based in

Boston, where he managed a portfolio of more than 400 properties worth $6 billion. Kendrick has served as a trustee during 14 of his 25 years as a member of the Institute. During the past quarter of a century, he has served as a ULI vice chair overseeing the District Councils Chairs Advisory Group, was the founding chair of both the ULI Inner-City Council and the ULI Affordable Housing Council, has served on numerous Awards for Excellence committees, and was a juror of several Hines Urban Design Competitions. He has also been frequently selected to chair ULI advisory services panels. “My whole business life has been constructed around a doublebottom-line approach to real estate,” he explains. “This means not only making money, but also building and creating some kind of community value. One of the reasons I have spent so much time with ULI is because [the Institute] fits this idea very well. ULI is not only pursuing a mission, but it is also a collection of people surrounding land use and real estate and community development, who are real good at doing that as a business.” His advice to young people just starting their professional careers in today’s market: “Look for anomalies and see what needs to be changed. As bleak as it looks, real estate is not going to go away and people are not going to stop growing. The physical world is going to continue needing work and there are still things that have not yet been addressed.” While Kendrick highlights the importance of keeping an optimistic outlook, he emphasizes the value of an organization, such as ULI, to the professional development of young people. “ULI is the most likely place where the intellectual content of land and community development

exists. There is more talent packed into ULI over a broad set of real estate activities than any other organization in the United States,” he confides. “Not only is it the best place to learn about all of the facets of the real estate business, but over time it gives you time to build an extraordinary Rolodex and your circle gets bigger and bigger. That is the advantage of doing this at a younger age.” Kendrick says one of the most important leadership skills he possesses is “not only knowing your goal, but being able to communicate that goal to the people you work with.” This vital ability, he says, serves both old and young industry leaders: “You need to have people want to go with you, no matter where you lead. Effective leaders have to have people who want to follow them.” As for what he would like his legacy to be, Kendrick says there is no specific project he wishes to be remembered by. “It may go back to my time running a school, but I like being a mentor,” he says. “In the real estate business, people are driven by the physical part and changing the landscape. However, the thing that is most lasting is that you create an ongoing and growing set of people and ideas that can keep these communities thriving, growing, and changing.” UL

Being fortunate enough to have run a school and worked for James Rouse prepared Charles Kendrick for leadership in real estate.

Charles Kendrick, Jr., is founder and senior vice president of Boston-based Clarion Ventures, LLC. He has spent more than 30 years as a developer, investment banker, and strategic adviser specializing in urban redevelopment projects and portfolios.

robert KrueGer is a communications

associate at ULI.

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Regional Spotlight

New York/Massachusetts by Mike SheriDan

In lower Manhattan’s Battery Park City, Milstein Properties is building two green residential towers on the last parcels of land in the ground-breaking development. When the structures—Liberty Green and Liberty Lux, designed by Ehrenkrantz Eckstut & Kuhn Architects (EE&K) of New York—open in two years, they will contain 421 units as well as a state-of-the-art 65,000-squarefoot (6,038-sq-m) community center.

PhiPPs houses, Jonathan Rose ComPanies, DattneR aRChiteCts, GRimshaw

Via Verde, a new green affordable housing development in the south Bronx, will include simplexes, duplexes, and live/work units. The $100 million, 294,000-square-foot (27,313-sq-m) mixed-use development will serve residents with a range of incomes.

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95 95

Spotlight/New York/Massachusetts Further north, codevelopers Jonathan Rose Companies (JRCo) and Phipps Houses, in partnership with Dattner architects and grimshaw architects, hope to break ground later this year on Via Verde, an affordable housing development in the south Bronx that was the winning entry in New York City’s first juried design competition for affordable, sustainable housing, the New Housing New York Legacy Project (NHNY). Comprising traditional apartments, duplexes, and live/work units, the $100 million, 294,000-square-foot (27,313-sq-m) mixed-use development will serve residents with a range of incomes. and in Queens, Vornado Realty trust has begun construction on the $550 million Rego Park Center, a mixed-use development that is one of the first attempts to bring big-box retail to an urban infill location. three floors of retail space—694,000 square feet (64,474 sq m)—will supplement the existing malls in the area; a pedestrian promenade will link the Rego retail with surrounding residential streets. to paraphrase Mark twain, the reports of the death of New York City’s real estate market may be exaggerated. Real estate development is still occurring in the Big apple, notes Paul Madden, an associate and director of projects for New York City–based Kenneth Park architects. the difference nowadays, he adds, is more caution.

“Many developers and designers are rethinking their projects and changing them in scope and size as dictated by current projected market needs,” Madden continues. “the developments are not going to be the same as when they were initially conceived a couple of years ago. Certain projects will move forward, but we’ll probably not see the same pace of development as we’ve seen in the recent past. Even in this economic environment, there are places that need to be developed and people who would love to develop them.” Paul Freitag, a regional director of development at Jonathan Rose Companies, the New York City–headquartered mission-based, multidisciplinary real estate development, planning, consulting, and investment firm, emphasizes that there is always a need for affordable housing in New York City. JRCo and its partners won an international design competition for the Via Vende site last year. “We were asked to create a model for the next generation of green affordable housing on a narrow, brownfield site that used to be a railroad right-of-way,” he explains. “It is an extremely challenging site, but we have been able to hold true to our competition proposal. We expect to close on the Via Verde development later in the fall and complete construction in two years.” Via Vende’s stepped design is intended to integrate city and nature, with connected green rooftops that will be used to harvest rainwater, grow fruits and vegetables, and provide open space for residents, he adds. “Within their own development, Via Verde residents will be able to have a wonderful connection back to nature in this very dense setting,” Freitag says. “Via Vende is designed to exceed LEED gold standards for environmentally responsible and energy-efficient design and will demonstrate New York City’s commitment to innovative development.” While the current real estate market is challenging, says Eric Fang, an associate principal at New York’s Ehrenkrantz Eckstut & Kuhn architects, it is providing opportunities for well-thought-out development by builders who have confidence in the city’s future. “We’ve always found this is the most opportune time for planning—a time to take a step back and make strategic decisions in preparation for the upturn,” he continues. “Rockefeller Center was developed in the middle of

VoRnaDo Realty tRust

Construction has begun on the $550 million Rego Park Center, a mixed-use development in Queens designed by Ehrenkrantz Eckstut & Kuhn Architects. It is one of the first attempts to bring big-box retail to an urban infill location.

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CBS HalfPgHoriz_V2:CBS HalfPgHoriz_V2 7/30/09 11:49 AM Page 1

The Paul Milstein Center for Real Estate and Columbia Business School express their appreciation to the following individuals and companies for the preparation of teaching cases prepared for Columbia CaseWorks, 2008–09: Jeffrey T. Blau, The Related Companies, LP

David Hodes, Hodes Weill & Associates

Tavis Cannell ’06, Goldman Sachs

Nancy Lashine ’81, Park Madison Partners LLC

Brian Carr, Morgan Stanley

Thomas McDonald, Equity International

Michael Coster, Lazard Freres

Paul Pariser ’78, Taconic Investment Partners LLC

Michael Fascitelli, Vornado Realty Trust

Glenn J. Rufrano, Centro Properties Group

Michelle Felman, Vornado Realty Trust

Edward Shugrue, Guggenheim Partners, LLC

Gary R. Garrabrant, Equity International

Brian R. Steinwurtzel ’04, Newmark Knight Frank

MaryAnne Gilmartin, Forest City Ratner Companies

Christopher Taube ’03, Aetos Capital, LLC

Patricia Goldstein, Emigrant Bank

ehRenkRantz eCkstut & kuhn aRChiteCts

Spotlight/New York/Massachusetts

Milstein Properties is building two green residential towers— Liberty Green and Liberty Lux—in lower Manhattan’s Battery Park City. The buildings were designed by Ehrenkrantz Eckstut & Kuhn Architects of New York. the great Depression. Battery Park City, which EE&K designed, was planned during a dark period in NYC history and it turned out, like Rockefeller Center, to be a very good investment.” sustainability is also becoming a good investment, Fang adds, noting that EE&K’s final two buildings in Battery Park City are green structures that attest to the staying power of sustainability. Designed to LEED gold certification standards, the towers will include photovoltaic panels on the bulkheads as well as a blackwater system to collect water from the buildings and reuse it for toilet flushing and the cooling tower. Developers are also seeking flexibility in starting new developments in case market conditions change. there are plans for Vornado’s mixed-use Rego project to have a residential tower that could be built when demand returns, Fang says. “We provided for a residential core, so it would fit neatly with the rest of the retail center when the time is right to build it,” he says. While federal stimulus money is also expected to benefit the New York real estate industry, says Madden, most developers are waiting to see when the economy improves. “there is not as much movement going on now as there was 18 months ago,” he says. “Developers of some large projects that will be delivered several years down the road are proceeding, but even retailers have become more cautious. KPa is working on several projects that are in the preliminary stages, but development is exceedingly slow and being undertaken with utmost caution.”

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Funding for development remains tight, but that is changing. Joshua Kahr, founder and principal of New York City–based Kahr Real Estate group, says that while the real estate credit markets for the most part remain frozen, there appears to be a slight thaw. “Money is available for multifamily because Fannie Mae and Freddie Mac are financing it,” he says. “But most of the banks are not really lending. It seems a little more positive, though, with people willing to have discussions about lending they weren’t having before. the tone of phone calls with financiers and developers has changed, becoming a little more friendly, so that’s a good, positive sign.” In New York City, he adds, there has been only one major office building sale—1540 Broadway—this year. “It involved 68 percent seller financing and reports said it was sold for 40 percent of what [New York real estate developer Harry] Macklowe paid for it three years ago,” Kahr continues. “When valuations drop that much, it’s not a good sign.” the u.s. treasury Department’s plans to stabilize the real estate financial markets—between $75 billion and $100 billion is anticipated to be funneled into the PublicPrivate Investment Program (PPIP) while the term asset Loan Facility (taLF) may eventually buy up to $1 trillion in financial assets including commercial and residential mortgages—is expected to have some positive effect on the market, says Kahr. “there are a lot of people still trying to get cash together to buy buildings,” he says. “We’re seeing lenders starting to sell off commercial assets to some extent, but as of yet, there have not been a lot of transactions. at some point, this will have to change. the banks can’t just ride this out.” Commercial tenants in the Big apple are waiting as long as they can before signing on the dotted line, says Raymond a. sanseverino, a partner in the New York office of international law firm Loeb & Loeb LLP. “Earlier this year, many brokers believed the market was continuing to decline and lower rents or better concessions could be had in the months ahead,” he adds. “But within the last couple of weeks, leasing activity is starting to increase very modestly. this may be because companies believe the market has hit bottom or firms that intend to stay in business can no longer defer their decisions.” sanseverino sees fewer transactions and slower development in the sector in the near term, since the need for additional office space in the region has lessened. “I believe we will see a trend to greener projects, in part to provide a competitive advantage to those marketing their space,” he adds. Fang of EE&K says that many large-scale developments planned for New York will be needed over time, adding that sustainability will remain as strong in the future as it is now. “I believe that developers who take the initiative now to lay the groundwork will be in the best position when downturn heads up,” he says. “Remember, Rockefeller Plaza was built in the middle of the great Depression.”—M.S.

Research and training for policy and practice

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Spotlight/New York/Massachusetts

Cubellis

Old Colony Square, a mixed-use, retail-anchored project outside Boston designed by Cubellis, is expected to be completed by next spring.

bay State builders adjusting to the new Market T h a n k s T o n i m b l e e n T r e p r e n e u r s adjusting quickly to the market by offering products that are needed and designers and architects who continue to stress sustainability, Massachusetts is experiencing real estate development. some agile developers have managed to stay ahead of the pack by surveying the industry and quickly changing their plans, says steven a. Heikin, vice president and senior principal at Boston-based ICON architecture, inc. “avenir, a transit-oriented development [tOD] directly above the MBta’s North station rapid transit station—across the street from the tD Banknorth garden and North station commuter rail terminal—was repositioned at the beginning of the real estate downtown from a condominium development to rental without skipping a beat in the planned construction schedule,” he says. “the fully permitted project was sold by the original developer, trinity Financial of Boston, to archstone, while trinity remained on the project to manage construction. the 242-unit structure, which includes 30,000 square feet [2,787-sq-m] of ground-floor retail, was completed in June.” In fact, the market for rental housing—which was never overbuilt in Massachusetts—seems to be regaining strength. “this is particularly true of affordable and workforce housing, which, in a high-cost area like Boston, remains in demand,” he continues. Earlier this year, governor Deval Patrick announced awards of $108 mil-

bonDy stuDio

ICON is the architect and planner for the Hamilton Canal District, a 15-acre (6-ha) mixed-use development in Lowell.

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lion from several state and federal affordable housing programs and tax credits to support 39 affordable rental housing projects with over 2,000 units. “He made the announcement at the site of spencer Row, a proposed 32-unit development of the nonprofit Chelsea Neighborhood Developers,” Heikin says. “the project is one of five projects funded through these awards for which ICON architecture, inc., which specializes in affordable housing design, is serving as architect.” ICON is also serving as architect and planner on two more trinity Financial projects. the Hamilton Canal District, a 15-acre (6-ha) mixed-use development site in Lowell, has received stimulus dollars to facilitate initial infrastructure design and construction, as well as tax credits to help finance the restoration of the historic appleton Mills into affordable artists’ live/work units, Heikin adds. similarly, the 206-unit Washington Beech HOPE VI development in Boston’s Roslindale neighborhood received both tax credits and stimulus dollars. “One of only five HOPE VI developments nationally to receive substantial HuD grants in the last year of the Bush administration, the new Washington Beech is already under construction,” he says. art stadig, vice president of Walker Parking Consultants in Boston, a full-service engineering and architecture firm, says Massachusetts developers, designers, and architects are more optimistic now compared to the past several months. “People are breathing a little easier and emotions are getting a little bit better in terms of actual activity,” he explains. “It has been slow in coming, but many believe we’re at or near the bottom, so we’re looking toward slow, steady growth this year—nothing rapid—but hopefully by this time next year, we’ll feel an improvement in the development sector.” Boston remains a “pretty solid” real estate market because forward-thinking entrepreneurs saw the dropoff in demand and adjusted the pace of development, stadig says. “a lot of people hit the pause button on building and slowed or stopped work on a lot of opportunities that had been out there,” he says. “Everyone thinks it will come back; probably by the end of next year, we’ll see an uptick and move forward again. Downtown Boston looks pretty solid. We’ve been hit by the

MassHousing is the leading provider of financing for affordable housing in Massachusetts. Learn more about our commitment to environmentally sustainable affordable housing in urban areas by visiting our website at

www.masshousing.com.

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Spotlight/New York/Massachusetts

Avenir, a recently completed transit-oriented development directly above the MBTA’s North Station rapid transit station in Boston, was designed by ICON architecture, inc. economy just as badly as anyone else, but it hasn’t been as devastating here yet.” Overall, the Massachusetts economy appears to be stabilizing, agrees Richard W. Rankin, principal at Bostonbased Cubellis, a national architecture, interior design, and engineering services firm. He adds that many strong retail real estate investment trusts (REIts) are raising capital and seeking opportunities to capitalize on the distressed market and position themselves for the expected development uptick. “Firms are positioning themselves for the future,” he says. “Currently, we’re seeing more repositioning of existing centers and many owners are spending dollars now to upgrade tired properties.” Connell Cohasset greenbush LLC has broken ground on Old Colony square at Cohasset station, a mixed-use, retail-anchored project in the heart of a tOD district, he points out. the development includes a two-story building with 32,000 square feet (2,972 sq m) of retail space on the ground and 16 luxury apartments above as well as a freestanding 3,400-square-foot (316-sq-m) retail pad. the site was formerly home to a boat storage yard and a small retail center. Old Colony square is expected to be completed by next spring. “New development is just inching along,” Rankin says. “there may be some tenta-

iCon aRChiteCtuRe, inC.

Spencer Row is a proposed 32-unit development of the nonprofit Chelsea Neighborhood Developers outside Boston. ICON architecture, inc., is the architect.

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tive optimism out there, and things may start to improve toward end of this year or the beginning of 2010, if credit markets loosen.” the state capital is experiencing leasing activity, although the velocity—signed lease activity—is modest, says Ronald K. Perry, executive vice president of Bostonbased brokerage firm Colliers Meredith & grew. He notes that annual lease velocity for each of the past three years has been roughly 5 million square feet (464,515 sq m), and was well below that pace through the first half of 2009. the bulk of leasing activity has come from small to mid-sized tenants (under 25,000 square feet [2,322 sq m]) or renewals, such as Deloitte & touche’s first-quarter renewal for 190,000 square feet (17,651 sq m) at 200 Berkeley street. tenants are seeking value with respect to rents and relocation alternatives, Perry adds. “the downward pressure on rents will continue until the addition of sublease inventory subsides,” he says. “the development pipeline for any sizable construction projects will be stalled until a sense of confidence and stability returns to the capital markets.” One of the hottest emerging trends in the Massachusetts real estate marketplace is acquiring mortgage debt from lenders at discounted prices, says andrew H. Kara, an attorney in the Boston office of full-service law firm of Hinckley, allen & snyder LLP. “Buyers of discounted debt can potentially achieve very high rates of return through either foreclosing a mortgage and obtaining ownership of the mortgaged property, collecting monthly mortgage payments at a default rate of interest, or being paid off at the original principal amount of the mortgage loan when it was purchased at a substantial discount,” he continues. While purchasing commercial mortgage loans at discounted prices seems like a great opportunity for investors, there are a number of legal issues to be considered, he cautions. “Buyers of commercial real estate mortgages are granted very short periods of time— sometimes as little as five to seven days—to conduct their due diligence,” he says. “In addition, lenders will provide only very limited due diligence information to prospective buyers and often will not let buyers visit the properties. Finally, lender liability under state laws and potential bankruptcy filings by the borrower can create other issues.” Kara says he isn’t worried about the future of real estate in the Bay state. “While the Massachusetts marketplace, like other marketplaces around the country, is currently challenged, Massachusetts possesses a number of unique attributes including historically limited new construction because of a stringent permitting process, one of the best college and university systems in the world, and a host of the top-tier hospitals, biotech companies, and pharmaceutical companies that will allow it to recover [more quickly] than other markets when the economy stops contracting and starts to grow again,” he says. Mike SheriDan ,

who studied real estate in Japan as a

Fulbright Scholar, is a freelance writer in Parsippany, New Jersey.

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WHAT MAKES A PL ACE MEMORABLE? Copley Wolff Design Group excels in the design of open spaces that create such memorable places in the urban landscape. The Boston-based firm specializes in parks, streetscapes, therapeutic and children’s discovery gardens, pedestrian amenities, public plazas, green roofs and sustainability for all real estate markets. In every project, CWDG’s staff of LEED-certified landscape architects, designers and planners considers all aspects to ensure and enhance active use. CWDG utilizes the integration of art and cultural and historic interpretation, environmental education, place-making and community participation to create landmark open space destinations. From the fountain at the First Church of Christ to the iconic Frog Pond in Boston Common, Copley Wolff tackles design challenges of all magnitudes to create the vision, and solve technical installations while cooperating with all involved to create a place that people feel compelled to come and enjoy. What is it about open space that makes a city truly livable – improving the quality of life for residents and visitors alike? Is it: g

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the diversity of people you encounter? the freedom to walk, sit, and gather in a safe and secure environment? the year-round activities that flexible outdoor space supports, such as skating, people watching, theatre, concerts, farmers markets, art? the walkable and accessible streetscapes? the nearby neighborhood parks and playgrounds? finding a place to sit quietly or join in a group activity? that place that you always want to walk through, sit in or pass by on your way to work?

Is it a place that you discover, experience and remember?

Copley Wolff Design Group’s ability to work with communities to make cities livable is most apparent in the Rose Kennedy Greenway project, the mile-long stretch reuniting Boston’s wharves, neighborhoods and downtown long separated by an elevated central artery. Participating in the design of the Wharf District Parks, Copley Wolff Design Group facilitated local input from 150 meetings for the $16 million, four-acre design covering four city blocks. The result? An outside great room for gathering, nooks for picnicking and reading, four-season plantings of native species, water features including a centerpiece interactive fountain, historic teachable moments corresponding to the adjacent neighborhoods, and pathway connections east to west and north to south that truly bring the city together. For more information about Copley Wolff Design Group, visit www.copley-wolff.com or call Tracy Smith at 617.654.9000. Copley Wolff Design Group making places memorable Copley Wolff Design Group produced this advertising report and is wholly responsible for its contents.

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LEEDing the Way In Sustainable Design

URBANLAND/Green Experts Resource Guide

As members of the US Green Building Council, Hurt & Proffi�’s LEED Accredited Professionals provide energy efficient, environmentallyresponsible designs. In our ongoing effort to integrate sustainable design into our everyday prac�ces, our LEED Accredited Professionals, demonstrate knowledge of green building prac�ces and principles. Call us today to find out more about how we can help on your next project. The Lynchburg Juvenile & Domes�c Rela�ons Courthouse - Lynchburg, VA

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consULtants

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Residential Resort Golf Restoration Conservation

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URBANLAND/Green Experts Resource Guide

Get the Natural Gas Advantage for your property by giving residents what they prefer. From endless hot water to gourmet cooking, clean-burning, efficient natural gas is not only the most economical choice for your residents, it makes your property more distinctive, environmentally-friendly and marketable. Natural Gas Advantage Multi-Family benefits: • Cash in on available incentives and attractive utility allowances. • Meet or exceed today’s green building standards. • Lower your property’s carbon footprint. Contact your multi-family professional to discover how using natural gas can optimize the value of your property.

Visit CenterPointEnergy.com/multi-family, or call 1-877-OPT-4GAS. ©2009 CenterPoint Energy 91890

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energy consULtants

interior Designers

environmentaL consULtants

LanDscape architects

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coming in october 2009

best Lenders, attorneys, accountants, consultants, brokers and investors guide Showcase your firm to the members of Urban Land, the leaders in real estate development……..the development firms who are initiating and developing new projects all over the world.

rates start at onLy $495! ***This Guide will be included in the October issue of Urban Land magazine which will be distributed at ULI’s Fall Meeting in November in San Francisco.*** To receive an advertising form and to find out more information on advertising in this Guide, call 202-624-7042; Email: [email protected]

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Business Card Pages 108

Business Card or (NEW) Informational Card in Color SpECIal OffEr

New Size and Color Now advertise your Business Card …. or Informational Card in a larger size…. and color at a special rate! For more information on this “Special Offer” and to reserve your space, call: 202-624-7042; Email: [email protected]

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THIS IS WHErE bUSInESS STarTS! Now more than ever, it is the RIGHT time. Showcasing your firm in the Business Card Pages is an affordable and effective way to highlight your firm’s services to ULI’s global membership. Especially at this time, marketing tools need to be effective, yet economical. The Business Card Pages in Urban Land Magazine are the answer to both those needs. Communicate your brand and services to ULI’s ever-broadening constituencies who value

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Put color in your business card! Business Card Ad Packages are offered in increments of 6 consecutive months or 12 consecutive months, with color or B&W. The size of each business card is 2-1/4” x 1-1/2”; Informational Card: 2-1/4” x 3-1/8. Don’t allow your firm to miss this magnificent opportunity to network with real estate’s top tier decision makers. For more information on rates call: 202-624-7042; Fax: 202-624-7140; email: [email protected] For “early bird” advertisers who place their business card before October 28, 2009, a SPECIAL RATE will be offered.

registry

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A.D. Makepeace. . . . . . . . . . . . . . . . . . . . . . . . . .101 www.admakepeace.com

Greenhaus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 www.greenhaus.com

Reznick Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 www.reznickgroup.com

Akerman Senterfitt . . . . . . . . . .Inside Back Cover www.akerman.com

Group RCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 www.theregistrycollection.com

Riddell Tseng . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77

Ameron International . . . . . . . . . . . . . . . . . . . . . .81 www.ameronpoles.com

IBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 www.ibm.com/think

Arrowstreet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 www.arrowstreet.com

Kenneth Park Architects. . . . . . . . Inside Front Cover www.kennethpark.com

Bank of America Merrill Lynch . . . . . . . . . . . . . . . 1

Lifescapes International, Inc. . . . . . . . . . . . . . . .81 www.lifescapesintl.com

BartonPartners. . . . . . . . . . . . . . . . . . . . . . . . . . . .18 www.bartonpartners.com Boomerang Automated Parking Systems . . . . . 33 www.boomerangsystems.com Bostonia Partners LLC . . . . . . . . . . . . . . . . . . . .103 www.bostonia.com The Business Card Pages . . . . . . . . . . . . . 108-110 Carol Johnson Associates . . . . . . . . . . . . . . . . . .27 www.crja.com Clemson University . . . . . . . . . . . . . . . . . . . . . . . 85 www.clemson.edu/mred/ Columbia Business School . . . . . . . . . . . . . . . . .97 Copley Wolff Design Group . . . . . . . . . . . . . . . .103 www.copley-wolff.com

Lincoln Institute of Land Policy. . . . . . . . . . . . . 99 www.lincolninst.edu LSG Landscape Architecture . . . . . . . . . . . . . . . 32 www.lsginc.com Mansfield, Texas . . . . . . . . . . . . . . . . . . . . . . . . . .18 www.Mansfield-Texas.com MassHousing . . . . . . . . . . . . . . . . . . . . . . . . . . . .101 www.masshousing.com Moffat & Nichol . . . . . . . . . . . . . . . . . . . . . . . . . . .79 www.moffattnichol.com New York University School of Continuing and Professional Studies. . . . . . . . . . . . . . . . . . 83 www.scps.nyu.edu/realestate OBM International. . . . . . . . . . . . . . . . . . . . . . . . .79 www.obmi.com

SK&I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 www.skiarch.com Spinnaker Real Estate Partners . . . . . . . . . . . . 29 Stantec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 www.stantec.com Steven Kratchman Architects, P.C.. . . . . . . . . . .97 www.KratchmanArchitects.com Syska Hennessy Group . . . . . . . . . . . . . . . . . . . .31 www.Syska.com/WateringCan Torti Gallas and Partners . . . . . . . . . . . . . . . . . . 89 www.tortigallas.com ULI Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 University of Maryland . . . . . . . . . . . . . . . . . . . . 85 University of Miami School of Architecture. . . . . . .83 http://mredu.arc.miami.edu/ USAA Real Estate Company. . . . . . . . . . . . . . . . .57 www.usrealco.com Victor Stanley, Inc. . . . . . . . . . . . . . . . . . . . . . . . .17 www.victorstanley.com

O’Connell Development Group . . . . . . . . . . . . . 99

The Wall Street Journal. . . . . . . . . . . . . . . . . . 6, 56 WSJ.com/CommercialRealEstate WSJ.com/RealEstate

EDSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 www.edsaplan.com

Old Dominion University . . . . . . . . . . . . . . . . . . 86 www.bpa.odu.edu/bpa/departments/finance.shtml

Wells Fargo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 www.wellsfargo.com/realestate

Goulston & Storrs . . . . . . . . . . . . . . . . . . . . . . . . . .7 www.goulstonstorrs.com

PNC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Back Cover www.pnc.com/realestate

WLS Lighting Systems . . . . . . . . . . . . . . . . . . . . .15

The Cordish Company . . . . . . . . . . . . . . . . . . . . . .5 www.cordish.com

Green Experts Resource Guide . . . . . . . . . 104-107

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backpage peter L. gray

Stimulus Package Recharges Renewable Energy

PPM EnErgy (Big Horn Wind PoWEr ProjEct nEar BickElton, WasHington)

The 2009 economic stimulus package has changed the ground rules for investors. projects considered unthinkable a year ago are now underway.

Peter L. Gray is a partner with the Washington, D.C., office of McKenna long & aldridge llp, where he is chair of the environment, energy, and product regulation department. His climate change blog is posted at www.climatechangeinsights.com.

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Much has been written about how the American Recovery and Investment Act of 2009—the economic stimulus package—will create green jobs, particularly in the renewable energy sector. Whether that happens remains to be seen. Clearly, when the government provides an economic incentive that closes the cost gap between renewable and conventional energy, the use of renewable energy grows. Germany’s solar industry offers a good example. Germany is hardly the sunniest place in the world. Yet in 2005, it overtook Japan as the world’s leading producer of photovoltaic (PV) electricity, with 39 percent of global capacity, compared with Japan’s 38 percent. Germany also became the fastest-growing market for PV products, like PV cells. Its PV industry generates more than 10,000 jobs in production, distribution, and installation. How did this happen? In 2000, Germany passed legislation requiring grid system operators to buy renewable energy at a fixed fee for 20 years from people who produce energy in their own homes. Although this “feed-in tariff” was designed to accelerate all forms of renewable energy, the solar power industry is by far the biggest beneficiary. Given the promise of a guaranteed return on their investment, tens of thousands of homeowners and businesses installed PV cells. As a result, demand for the cells climbed dramatically and margins on PV production costs dropped. Consequently, the cost per kilowatt of solar energy can compete favorably with conventional power. The 2009 stimulus package does not contain a feed-in tariff provision, but it does contain significant incentives to stimulate the growth and cost-competitiveness of renewable energy. For example, the legislation: l Establishes a 30 percent investment tax credit for projects that reequip, expand, or create a facility manufacturing equipment used in generating renewable energy, such as solar panels and wind turbines. l Renews the production tax credit, which provides a 2.1-cents-per-kilowatt-hour benefit for the first ten years of a renewable energy

facility’s operation. Project developers can use this or the 30 percent investment tax credit or they can forgo these tax credits and apply for a Treasury Department grant representing 30 percent of the cost of eligible energy projects. l Authorizes $1.6 billion in clean renewable energy bonds to finance facilities that generate electricity from various specified sources of renewable energy. l Establishes a $6 billion loan guarantee program for leading-edge biofuels projects that use pilot or demonstration-scale technologies to produce fuels with reduced lifecycle greenhouse gas emissions compared with conventional transportation fuels. l Funnels $3.2 billion to states and local governments for energy efficiency and conservation block grants to fund projects to develop, implement, and install renewable energy technology, such as for solar energy, in government buildings. Whether these incentives lead to the kind of growth in renewable energy in the United States that Germany experienced remains to be seen, but the new sources of funding can only help. Last year, dozens of U.S. renewable energy projects were shelved as liquidity reserves dried up and many institutional investors left the sector for more lucrative investment opportunities. Project developers were unable to use the attractive tax credits because they lacked profits against which to apply them. The stimulus package has changed the ground rules for investors. Projects considered unthinkable a year ago are now underway. For example, in April, Invenergy LLC and GE Energy announced a wind project in LaSalle County, Illinois, using stimulus funds. GE Energy is supplying 74 1.5-megawatt wind turbines to begin the Grand Ridge Energy Center expansion, which, when completed, will increase the country’s wind power capacity by over 110 megawatts—enough clean energy to power 30,000 U.S. households. More renewable energy projects are sure to follow. No disrespect to Gordon Gecko’s credo from the 1987 film Wall Street, “Greed is good,” but perhaps the new slogan on Wall Street should be “Green is good.” UL

Akerman Helping our clients better understand climate change risks and new energy opportunities, gets us all one step closer to a sustainable future. Akerman is proud to be one of the top 5* legal teams in the U.S. in number of LEED® accredited lawyers. With more than 140 real estate, land use, construction, environmental, and energy professionals, our team offers experience in development and redevelopment projects, public-private initiatives, complex real estate transactions, development incentives, green energy, Brownfields redevelopment, public policy, and dispute resolution.

Building a sustainable America.

Richard Bezold 305.982.5657 [email protected]

DALLAS DENVER FT. LAUDERDALE JACKSONVILLE LOS ANGELES mADISON mIAmI NEW YORK ORLANDO TALLAHASSEE TAmPA TYSONS CORNER WASHINGTON, D.C. WEST PALm BEACH

akerman.com ©2009 Akerman Senterfitt. All rights reserved. Prior results do not guarantee a similar outcome. * Green Building Certification Institute 2009.

RESULTS. *Why our clients keep relying on us.

Now more than ever, you’re seeking results. Despite today’s challenging environment, we continue to find ways to help our clients achieve their goals. Some solutions are straightforward. Some require a bit more ingenuity. But all reflect the resourcefulness of our experienced team of experts. And with the addition of RED CAPITAL GROUP, we have even more resources available. To discover how we can help you get results, call 1-877-762-7775 or visit pnc.com/realestate. We’re ready to get started.

WE ARE PNC REAL ESTATE

PNC is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). Lending products and services require credit approval and are provided by PNC Bank, National Association and PNC Bank, Delaware. ©2009 The PNC Financial Services Group, Inc. All rights reserved.