The first volume of the United Nations’ Global Compact Cities Programme has been published.  You can read the whole document by clicking here.  The program, which currently has forty cities participating, is a broad-reaching effort that acknowledges the increasing urbanization of our planet and explores ways of managing that fact.  It explores the four areas of human rights, labor rights, environment and anti-corruption and arrives at ten principles as a guiding framework.

In the wake of our historic flood here in Nashville, one item caught my eye in the report and that was the city of Milwaukee’s efforts to manage freshwater.  Upon embarking on this effort, they discovered that there were  some 120 agencies, businesses, non-profits and the like exploring the management, treatment and delivery of freshwater in a city of 680,000 souls.  This type of wasted effort abounds everywhere, including right here in our fair city.

Metro Nashville waste water treatment facility

Looking at water alone, we have the Cumberland River Compact, the Urban Land Institute, the Cumberland Region Tomorrow,  the Civic Design Center and numerous other outside agencies looking at growth patterns and the necessary infrastructure that will be required to sustain our population.   Not to mention the noble work being done by our Metropolitan Planning Organization and the numerous government agencies all working on the same topics.  Perhaps in the wake of the flood, we need to take a more regional look at our systems and look to create more interconnectivity across city/county/regional lines.  We have the added layer of heavy Federal involvement through such entities as the Army Corps of Engineers.

Certainly there is an opportunity for public/private partnership structures to address current and future needs.  There also needs to be a more centralized operational and communications structure for the government entities.  While no one can anticipate an act of God (like a stationary weather front that drops 18″ of water on you!), we can start to put in place the framework to minimize the toll of future events. Government working together with non-profits and bringing in the best and brightest minds from business in a cooperative framework is a good place to start.  Perhaps it’s time for Nashville to become a participatory city in the Sustainable Cities Programme?


After a fairly gloomy week, we are blessed with a spectacular Spring day in Nashville.  The only thing that could improve the crystalline blue sky would be a plume of applewood smoke tinted with the succulent smell of simmering sausages.  Oh, I know, we are not supposed to laud carbon emissions, so to compensate for my lustful vision, here are some links to sites of green retrofits.  I got onto this subject because of a wonderful presentation that our ULI Sustainability Committee put on a couple of weeks ago where they brought in the group that was working on the renovation of the Empire State Building…bon apetit!

  1. Empire State Building renovation – go here and spend some time looking at the videos and interactive exhibits.  This was a renovation done with care and passion.
  2. Jean Vollum Natural Capital Center – this was the first building to get a LEED Gold certification as a historic renovation.  I visited the building several years ago and was impressed by the care they took in preserving the beauty of the original architecture while achieving a sustainable goal.
  3. The Old Mint Building – San Francisco’s “Granite Lady” is getting a facelift and conversion into a historical museum.  This is a good summary article about the scope of the project, complete with a cool slide show.
  4. Madison Children’s Museum – This is a fascinating adaptive reuse and sustainable project in Madison, Wisconsin.
  5. Ford Rouge Factory –  how about taking a 1915 auto production facility and bringing it up to LEED standards a century later?  That’s what is happening at the Ford Rouge factory in Detroit.

That ought to get your green ideas flowing!  Come to think of it, I might try some wasabi mustard on that bratwurst…

Following up on an earlier post about the USGBC and the LEED “police,” I couldn’t help but get a chuckle out of this Audi ad during the Superbowl:

Let me be clear up front – I do not believe in anthropomorphic climate change – the notion that man, in our industrial wonder, is ruining the earth with global warming.  I am a skeptic and my hackles come up when anyone in the scientific community (or political community) utters phrases like “it’s settled,” and “there can be no denying it.”  Science by its very nature of being “science” is always in pursuit of the truth and if data exists that challenges a theory, the theory must be re-examined.  My natural skepticism is being rewarded by the recent scandals at the University of East Anglia and NASA and now new findings that hundreds of data points that didn’t “fit the model” were left off the charts so that the global warming theory would be left intact.  The Russians have been saying for some time that we had better be buying furs and not sunscreen for several years.

Now, before I get the pointing finger, “Night of the Living Dead” outing, let me follow by saying that I heartily support “green” building practices.  I support them from the position of stewardship – we should minimize any impact we have, it is the right thing to do.  Reduce the amount of forests cleared? You bet! Re-use existing buildings? Absolutely – done that. Reduce heat impact in a neighborhood? Of course – white and green roofs.  And on it goes.  I believe this is the responsible way to develop and manage real estate. Transit oriented development to reduce man’s footprint? YES. Somewhere deep in my core is a Celtic Druidic gene that enervates my sense that trees and forests are sacred.  I am at peace paddling in a pristine river and I want those things to be there for my children, their children and beyond.  We are stewards of this incredible planet, and for those reasons, I support the green movement.

I have concerns, however, when property rights and values are jeopardized by fluctuating standards either by government or non-government organizations.  Such is the chilling case cited in an article this morning in the San Antonio Business Journal: “Risk of LEED Decertification Looms Large for Real Estate:”

As reported by the Villas County News-Review, a group of Wisconsin residents filed a 125-page complaint with the USGBC challenging the award of the LEED Gold certification to Northland Pines, which is generally credited as the first certified LEED Gold high school. The challenge was based on a little discussed provision in LEED 2009, which reserves the USGBC’s ability to revoke certification a project that fails to meet the program’s “Minimum Program Requirements,” which include requirements for minimum occupancy rates, site boundaries, and information-sharing about the project’s energy and water usage for five years after certification. It was reported that the USGBC sent independent examiners to Wisconsin to conduct on-site tests at Northland Pines to determine the project’s qualifications for LEED, and that a final determination on the school’s eligibility for LEED would be decided in early 2010.

Who are the “residents” who filed this complaint that got the ball rolling on potential decertification?  Now this is for a public high school, but consider the impact on commercial property.  This behavior opens the door for an irritated tenant to truly hurt the value of a building by filing a complaint with the USGBC over whether the owner is behaving properly green to maintain their LEED status.  It is widely viewed in our industry that there will be a premium for LEED certified buildings over time (this is unproven so far), but I believe it will be a deal enhancer as our practices become greener.  In an already badly roiled and potentially worsening market, we didn’t need this:

The ramifications of decertification pose significant threats to every party involved in a LEED project, including the owners, lenders, insurers, tenants, architects, engineers, consultants, contractors, and lawyers. As the LEED 2009 program is currently written, a project that achieved LEED certification today would never have absolute certainty that it could maintain that certification in perpetuity. That risk could threaten the validity of many of laws (like building codes), tax incentives, or financings that are currently tied to the LEED program. Given the many things that can change as buildings age — like air quality and energy efficiency — a LEED-certified building may perform as designed for years, only to lose certification many years later. This could result in buildings becoming unexpectedly out of compliance with building codes or with tax or incentive clawbacks (where incentives need to be paid back), and owners who find themselves in default under their leases and loans … overnight, without fair warning. Uncooperative tenants or failures in routine maintenance could lead to disastrous consequences.

The mission of the USGBC should be to promote responsible development, construction and operating practices for real estate.

This is best achieved with training and certification.  They will hurt their reputation immensely if they decide to go into the snitching and inspection business.  It also becomes enormously problematic if the rules are going to change year to year…that’s what “grandfathering” is for.  Perhaps the solution is to date the certifications so the consumer will know, i.e. “LEED Silver 2009.”  We don’t need shadowy figures taking tips from the neighbors on a foggy night – we need advocates and training to help us build a better product that has less impact on the environment…USGBC can do that.

Folks, this time of year I am up to my elbows in teaching over at the Owen School of Management at Vanderbilt.  I am blessed with the opportunity to work with some truly wonderful minds over there and I have to work very hard just to keep up.  This year, I have adjusted the syllabus a little to reflect the real world.  The course I teach is “Real Estate Finance,” and in times past, the focus has been on learning the basics of the craft with models and cases centered around real estate development.  In honor of the current times, I am shifting the discussion and case work to look more at the acquisition business.  Having done this now for five years, I have to admit I have a lot of respect for those teachers that energized a class room when I was in school…I am embarrassed they had to put up with me!

So, with my whining preamble, I must tend to matters at hand and share  some links for you to slap on your grill (or at least the screen of your laptop).  Put on a bib, these are juicy!

1. Ever wonder why man started planting and harvesting grain?  Don’t tell me you thought it was for bread!  Why it was for good old Pabst Blue Ribbon!  Now you know why beer is so good.  Just think, we can attribute by proxy all our current real estate problems to beer: a)man started farming for beer  b) man needed to establish property rights to protect his crop so he could have his beer c)modern real estate evolves so we can have our beer!

2. I am hearing a lot of gloom and doom these days – various interpretations on the general theme that America is finished.  I don’t think so, and neither does James Fallows over at the Atlantic magazine.  Read his thoughts here, it will cheer you up.

3. A corollary to the “America is finished” meme is that China is going to eat our lunch.  There is no question that China is an emerging international force and that we will be engaged with the Middle Kingdom for as long as both our systems survive.  But China has serious problems, not the least of which is an environmental nightmare they are creating.  Take a look at these pictures – not for the faint of heart – and you will start to understand that our problems are pretty manageable by comparison.

4. Do you feel guilty if you don’t recycle?  If so, then you need to peruse this article: “Green Guilt.”  I am all for protecting the environment and developing responsibly, but honestly, some of the green movement folks are starting to act like jihadis…environmentalism has replaced their religion, if they ever had any.

5. Here’s a little inspiration for you – if you think times are tough, imagine if you had no arms or legs.  How would you cope?  Here’s a video that shows the power of the human spirit:

Have a great weekend everybody!

I get the sense sometimes that our national policies are being crafted on the “ready, shoot, aim” principle.  Regardless of where you stand on the health care issue, for example, you cannot be happy with the way this process is being conducted: instead of reasoned analysis of the problem, a careful consideration of the alternatives and an exploration of what has been tried, we’re getting a kielbasi that no one is going to like.

Affordable housing is one of those catch-phrases like “green development” and “smart growth” that we all want to feel good about, and feel we are part of the solution for, but is there really a problem?  Certainly from my perspective as someone that spent a large part of his growing years in the Third World, I can vouch for the depravity of housing conditions in many countries…the worst ghetto in St. Louis would look like luxury housing to a resident in one of Sao Paulo’s favellas (slums).   I’ve done some thinking on what affordable housing is, or should be, and figured out that if I had just started Googling the term, I would have gotten an answer quicker.  Fortunately, where I arrived at upon reflection was pretty close to accepted standards nationally and internationally.  I approached the definition from the perspective of needs and decided that a person’s base needs are food (first), shelter (second), clothing and ancillaries to allow one to be a productive member of society (third).  Thus, I decided that “affordable housing” should comprise no more than one-third of an individual/family’s ability to produce income.

The folks over at agree, and it is close to the standard we have used in leasing and selling housing these past twenty years. Here’s their formula – they call it the “Median Multiple,” and base it off of median income:

Now, with that as a standard, the folks at Demographia take a look at housing markets in the United States, Canada, Ireland, the United Kingdom, Australia and New Zealand and come up with some pretty interesting stats:

By this measure, ONLY Canada and the United States have affordable housing markets!  Fully 44% of our markets that were surveyed are “Affordable,” 78% are “Affordable” or “Moderately Unaffordable.”  Our median affordability at 3.2 is a full two points below the next most affordable, the UK.  This data reflects survey results from the 3rd Quarter of 2008 to boot, which means that the average 25-30% declines are not priced into these numbers.

Demographia’s agenda is to promote free market economy and to get rid of land restrictions and such…they are opposed to “smart growth” tagging that pattern of development with less affordable housing.  Here’s a chart they present on housing affordability versus land rationing which is interesting:

But that’s not my fight.  (To download the whole report, go to lean towards the pattern of smart growth development as a means of being good stewards of the land although the data provided does indicate that we need to be smarter about our smart growth.  No my fight is with policy folks at the national scale that got us into the financial mess we are struggling through.  A big part of the push for exotic lending instruments came from the Federal Government under the premise that housing was unaffordable.  The inconvenience of facts is that this premise was false.  And if we apply our old syllogistic logic skills, where A=B, B=C, Therefore A=C…if A does NOT equal B, it cannot equal C and all the measures that were put in place.  Initiatives like the Community Reinvestment Act of 1977 and it’s expansion in 1999 along with the pressure put on Fannie Mae and Freddie Mac to purchase subprime loans all under the rubric of “doing good,” has led to this disaster.

We have nurtured the belief that the American dream is for everyone to own their own home.  We have structured our tax policy around this belief and now we are paying the price for the mistaken belief that housing should be made affordable to EVERYONE, and that the U.S. taxpayer would subsidize any shortfall or failure.  It is time to push for a more sane housing policy.  One that acknowledges that renting is an extraordinarily good option.  We have culturally gotten away from the notion that you have to save up to buy the house with the white picket fence on the edge of town; we have made it a right, an entitlement. If we are going to recover with a robust economy, we had better get back to the basics and acknowledge that housing is not a “crisis” that needs intervention.  Housing is a matter of local preference, let’s get back to the place where each municipality determines their own housing policies and needs.

Here’s Ellen Greene in the 1986 movie, “Little Shop of Horrors,” to take us out with “Somewhere that’s Green:”


Busy week so far!  We got the newsletter out yesterday and have been in a lot of meetings with owners and asset managers of distressed assets.  But, we still manage to make time to peruse the cyber-universe and bring you the best of the web for our industry.  This week’s theme?  Well, I am in a Halloween mood, so let’s dress up and be Contrarian!

1. Limits of Transit – this is an intriguing study on the costs of transit.  I love the light rail systems in Denver and Dallas, but we need to be careful as we encourage and implement transit strategies around the country.  This article should make you think.

2. Self-Jiving Nation – if you were lulled into a sense of complacency that the economy is turning around and that the GDP numbers released yesterday were “great news,” this article is a bucket of ice-cold water to pour over your head.

3. Bloodhound Blog – what if we haven’t found the bottom of the housing market?  What if Fed policy has artificially inflated pricing by as much as 5%?  Read this analysis and find out.

4. Unsustainable – the Altos Research folks take a stern look at the Case-Schiller numbers recently released. Ouch.

5. Stanford Entrepreneur – OK, there’s only so much bad news I can take too…here’s a great useful link that features pod casts from leading lecturers at Stanford’s Entrepreneurship Center.  Tired of listening to your daughter’s Jonas Brothers tunes over and over? Replace them with a quality podcast from this site!

Well, the storms are moving in so the brats may have to be cooked in some dark ale and broiled for a little char…Happy Halloween!

Next Page »