Thursday night was the first session of REAE 5315. We went over the normal first class session housekeeping issues, including grading elements and topic lists for each session from the syllabus. Students suggested a few additional topics for the semester, including LEED certification, environmental contamination, CMBS/derivatives, lease accounting standards changes, and New Urbanist developments.

Class members introduced themselves, and I was interested to note that I was the only planning student in the class. I hope that will allow me to provide an alternative perspective to the topics, as appropriate. I also hope that my fellow students have not endured such an extended orgy of number crunching that their lives are devoid of all but internal rates of return and GAAP. For those class members in real estate and (especially) accounting, I include the following diversion:

(As a caveat, this short film is - for all I know - standard fare in MPA orientation sessions. On the off chance it isn't, please enjoy the Crimson Permanent Assurance. Finish with Part II.)

http://www.youtube.com/watch?v=KX61PUZ3xkI

By way of introduction to the course, and as a means of sparking class discussion, Dr. Forgey presented information on two intriguing projects: Subtropolis in Kansas City and the new LEED Platinum Bank of America tower in New York.

Subtropolis (http://www.huntmidwest.com/subtropolis/index.html) is a former limestone quarry/mine in Kansas City that was adapted for warehouse/distribution and storage space by Hunt Midwest. Hunt installed a concrete floor and utilities to the large underground space (nearly 5 million sqft. of leaseable space according to the brochure.) This kind of space offers several distinct advantages. First, it utilizes otherwise vacant space. Second, conversion is less expensive than new construction which, coupled with the enormous utility savings due to constant underground temperature and humidity, allows for low lease rates.

The class discussed these advantages. Dr. Forgey indicated that his interest was in the creative adaptation of the space as well. I was curious about how replicable this project would be. However, the space is not as unique as I thought. Some research quickly revealed that the room and pillar method was common for limestone production throughout the Midwest, so there are many other such mines around. They may not be in a high growth area of the country, but the cost advantages they offer could make for more Subtroplises.

The Bank of America Tower is the first skyscraper to receive LEED Platinum status. It is the second tallest building in New York (though it relies on a spire to beat out the Chrysler Building. This seems like a dodge to me. Still, its good for BOA to spend on bragging rights. They certainly aren't rewarding their shareholders lately, so I guess the pride of knowing they own a little piece of the second tallest building in Manhattan will have to do for shareholders, in place of actual dividends or share price appreciation.) Water handling systems throughout the building are interesting, as they save on pumping costs through cisterns at various tower levels. Also present are non-flushing urinals, radiant cooling and heating, and slag infused concrete used to lower the carbon footprint. I look forward to more discussion on LEED, especially as it relates to lease rate premiums for LEED certified buildings serving to price the utility savings into the market.

Sustainability is becoming a very powerful force in business and real estate development. There are few identifiable potential catalytic industries on the horizon. The US and the world need the "next great thing" that will spark sustained economic growth, and Green seems to be one of a select handful of trends that holds that kind of economic potential. That is why the US government has been investing in renewable energy and providing tax credits for energy star appliances. This economic downturn appears to be very fundamental in nature - meaning that some basic trends that have driven the economy over the past quarter century no longer seem to be viable. Therefore, something must catalyze a genuine recovery. Perhaps green industry and sustainability will be the catalyst.