Western Real Estate Business

MAY 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

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www.REBusinessOnline.com Western Real Estate Business • May 2018 • 53 On Jan. 1, 2018, Denver's Citizen Ballot Initiative 300 went into effect. The initiative mandates green roofs on all new buildings with more than 25,000 square feet of floor area and requires existing roofs on build- ings with more than 25,000 square feet of floor area to upgrade to a green roof upon roof replacement. What is a Green Roof? Generally, it's a living plant-material landscape above a structure, installed over a waterproofing membrane. They are developed for various reasons: reduce the heat island effect, address climate change, improve stormwater management and provide us- able amenity spaces. What Does This Mean for Denver Projects? For new Denver projects, green roofs will need to be incorporated into both the design and the construc- tion budget for underwriting. For existing properties, as roof repairs and improvements are evaluated, the cost of upgrading to a green roof needs to be consid- ered. Depending on building square footage, the percent- age of required rooftop coverage grows from 20 percent to 60 percent. Residential buildings up to four sto- ries are exempt. The green roof requirement may include a combination of green roof and solar, so long as the combina- tion is no less than 30 percent green roof and retains rainwater at specific levels. If a green roof is not possible, an exemption or variance may be available through the Denver Planning Board. Then, a cash-in-lieu payment is made (not required for ex- emption) calculated based on the average actual cost of green roof construction, currently $25 per square foot. Green roofs bring added up-front costs, however there is evidence they last longer than typical roofs. Hypothetical estimates were provided by the oppo- nent group during the Initiative process: • A grocery store of 42,800 square feet with a 20 per- cent mandate would have an added cost of $299,600. Water projects in California have become a major focus of public support, mostly due to drought or infrastructure development. One potential develop- ment trend attempting to tackle this issue is adaptive architecture that benefits from water flow. Heavy rains are lost to stormwater runoff because driveways, sidewalks, roadways and other surfaces are impervious rather than porous. Neighboring stream systems receiving this runoff are not equipped to handle the resulting high volumes of water flow- ing at high velocity that come their way. Almost three quarters of all rainwater in heavily paved cities cur- rently ends up in sewers rather than in the ground, as it would in a natural environment. This is why innovative building projects are attract- ing public interest and generating opportunity for architects, city planners and investors. While some workable models have been created, the prevalence of public-private partnerships has given rise to solutions that integrate the built environment with next-gener- ation technology that takes advantage of stormwater and other natural resources. The Sun Valley neighborhood of East Los Angeles is a great example of the success a community can experience through urban infrastructure and design projects aimed at absorbing and re-using a large per- centage of the rainwater it receives. Different design elements have been incorporated into this neighbor- hood. These include the curbside installation of bio- swales along Elmer Avenue, which collect and store rainwater, allowing rainwater to be treated like a valuable resource. Rain gardens and drought-tolerant landscaping have also replaced the grass that previ- ously appeared in many residential yards. State-of-the-art innovations can also make the ur- ban landscape more "sponge-like" and receptive to water inflow. Non-profit Arid Lands Institute is partnering with architects to improve real estate and other infrastructure in urban Los Angeles. Through this partnership, streets can be paved with permeable pavement to enable the soil beneath to act as an aqui- fer that absorbs and stores fresh water. Sidewalks can be built with bioswales so that rainwater flows into the ground instead of the sewer sys- tem. Buildings also include designs incorporating hydroponic gardens that are built into their walls. Going forward, plans for other architectural and technological advances can be achieved with the proper financing and partner- ships. Implementing fog-catcher nets that collect fresh water for drinking is being considered near San Francisco Bay. These devices are currently used in the driest place in the world, including the Atacama Desert in northern Chile. Water systems for urban commer- cial buildings could be installed where aquariums appear on mul- tiple floors, where fish can be used either for food or as décor, and where the water from these tanks is then pumped to the green roof atop the building, irrigating and fertilizing agriculture in gardens on the building's roof. A combination of forward-looking thinking, inno- vative design and adaptive architecture is a good an- swer for leveraging a water-rich environment so that water is treated as a valuable commodity, rather than the current system where water is discarded as run- off. Cultivating the ability to use excess water and finding creative ways to have urban and suburban residents benefit from it will strengthen California's cities. Redesigning the urban landscape to become more permeable will benefit the environment and help shift people's mindsets about adopting more sustainable approaches to cities. Creating public- private partnerships, backed by state or munici- pal funds, can present attractive opportunities for investors. It can also enable cities to upgrade their architecture and infrastructure, become more water resilient and transform into attractive, eco-friendly centers. ported being impacted by the proximity to the well and have not experienced incidents like gas leaks. However, DOGGR recently spent $367,000 re-plugging two orphaned wells, drilled as early as 1913, in the Granite Hill neighborhood of Echo Park when the wells began leaking methane. The California legislature recently passed legislation designed to prevent the creation of additional orphan wells and authorized DOGGR to spend additional money deal- ing with orphan wells in need of proper closure. SB 724, signed by the Governor in October 2017, increased the funds available to DOGGR for plugging orphan wells from $1 million to $3 million a year for the next three years. Meanwhile, AB 2729, which was enacted in 2016, deals with the inven- tory of idle wells in the state. As of January 2018, AB 2729 requires that oil well opera- tors submit an Idle Well Management Plan (IWMP) to DOGGR or pay annual fees for each idle well. The yearly fee for an idled well can be as great as $1,500 for each well if the well has been idle for 20 years or lon- ger. The IWMP requires operators to elimi- nate a certain number of idle wells each year depending on the total number of idle wells under the operator 's control. For ex- ample, operators with 1,251 or more idle wells are required to eliminate 6 percent of their long-term idle wells each year. Although states like California are increas- ing the resources necessary to deal with im- properly abandoned orphan wells, the num- ber of such wells is so vast that developers and residents will continue living among and above these wells for decades to come. In ad- dition to making sure they know about wells on existing properties, developers planning to construct on properties containing known abandoned wells must decide whether to leave the well as is, or investigate the status and integrity of the method of closure to see if additional work is necessary to ensure the well remains plugged and safe. Moreover, discovering a previously unknown well in the course of construction will cause a work stoppage and potential insurance issues, while the status of the well is evaluated. Fur- ther delays can occur if work is required to safely secure or plug the well, especially if it is an orphan well that the state must plug. Jurisdictions in areas of oil production often enact zoning and fire codes with provisions specifically addressing construction near ex- isting wells, including set back requirements, testing requirements for methane and other gases, and requirements for vapor barriers based on testing results. Developers need to make sure they comply with those special regulations and should be proactive in in- vestigating any wells located on sites slated for construction, even if the well is under- ground, plugged in some fashion with no recorded health or safety incidents. This is especially true if housing, schools or similar structures are planned for the location. SB 724 and AB 2729 will have the effect of in- creasing awareness among cities and other local jurisdictions about the status of wells in their jurisdictions. Developers should be pre- pared with similar knowledge in hand while proposing and moving forward with a devel- opment project. Gelb Diamond Quander PUBLIC-PRIVATE PARTNERSHIPS ASSIST WITH NEXT-GEN WATER INFRASTRUCTURE PROJECTS By Kimberly E. Diamond, Adjunct Professor of Energy Law, Fordham Law School in New York City, and Paul M. Gelb, Counsel, Drinker Biddle & Reath in Los Angeles GREEN ROOF INITIATIVES IN THE WEST — IS DENVER JUST THE FIRST? By Caitlin Quander, Shareholder, Brownstein Hyatt Farber Schreck in Denver

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