Climate Change and Rising Sea Levels: Taking a Local Look at a Global Problem

Written by: Peter Friedenberg

The Boston Harbor Association recently released a sobering report entitled “Preparing for the Rising Tide” which assesses Boston’s vulnerability to the coastal flooding we are likely to experience as a result of ongoing climate change.  Some of the “matter of fact” statements in the report are chilling to read:

• Current climate change evidence indicates that sea levels may rise by up to 2’ in Boston by 2050 and by up to 6’ by 2100.
• “If Superstorm Sandy” had hit Boston at high tide (as it did in New York City), rather than at low tide, up to 6% of Boston would have been flooded that day.
• What is now a “100-year storm surge” is likely, because of increased climate change and rising sea levels, to be merely a “5-year storm surge” by 2050, and may be a daily high tide occurrence by 2100.

The report looks at the impact on the City of Boston of potential flooding at levels either 5’ above current high tide or 7.5’ above current high tide.  Although the first of these scenarios would already occur during a “100-year storm” which hits Boston during high tide, this could become a daily high tide event by the year 2100.  The second of these scenarios approximates the coastal storm surge which Boston would experience during a “100-year storm” which hits during high tide after sea levels have risen by approximately 2.5’  (as is projected to be the case around 2050). The report concludes:

• In broad terms, in the first of these scenarios (a flood level approx. 5’ above current high tide):
  • Almost 7% of the land area of the city would be flooded, with industrial, commercial, and tax-exempt developed properties the hardest hit (in some cases with more than 10% of the total land use class in the city flooded), while residential uses would be least affected.  This breakdown is not surprising given the current concentration of industrial and government-owned properties along the waterfront.
  • All of the coastal neighborhoods and all of the harbor islands (totaling almost 83 million sf) would be flooded.
  • Some of the more significant developed properties anticipated to be flooded under these conditions are the Charlestown Navy Yard, Bayside Expo Center, Gillette plant, South Bay shopping center, and Boston Fish Pier.
• Again in broad terms, in the second of these scenarios (a “100 year storm” hitting Boston during high tide after the sea level rises approx. 2.5’ above today’s level, causing a flood level approx. 7.5’ above current high tide):
  • 30% of the entire city would be flooded, with industrial (40%), commercial (40%), and tax-exempt (42%) developed properties the hardest hit, while residential properties would be least affected (<7%).
  • In this scenario, almost every neighborhood in the city (except Hyde Park, Jamaica Plain, Mattapan, Roslindale, and West Roxbury) would experience some flooding.  Looking at some neighborhood figures, more than 90% of the South End, more than 80% of East Boston, Back Bay and the Fenway, almost 60% or more of South Boston, Chinatown, Charlestown, and the North End, and almost half of downtown Boston would be flooded.
  • Some of the more significant developed properties anticipated to be flooded under these conditions (in addition to those listed above) are Logan Airport, the Boston Convention and Exhibition Center, Boston Marine Industrial Park, Harbor Point Apartments, and Harvard Stadium. 

The report does not address the impact of such flooding on subsurface structures, such as subway tunnels and utility conduits – which have proven to be some of the most enduring problems left by Sandy in New York City.  The report also notes that most storm drain outlets around the city are currently at or only slightly above current high tides, so that it will not take a major rise in sea level or storm surge to cause major backups in these drain lines into otherwise landlocked areas.

Among the most interesting sections of the report are case studies of anticipated flooding and possible preventive measures to be taken with respect to Long and Central Wharves (Marriott Hotel, New England Aquarium, Aquarium MBTA station, Harbor Towers Garage), and UMass Boston.  These make for fascinating, and ultimately slightly unsettling, reading.  Most property owners in these areas are concerned about the effect of climate change on their holdings, but reading these portions of the report dramatically demonstrates the gulf between how conditions at these locations will change over time and the steps currently being taken to address these changes (largely property-specific flood-proofing with stand-by pumps and sandbags).  Clearly, more systematic planning is required, and not just on a property-by-property basis. 

The report recounts initiatives undertaken by the City of Boston and the Commonwealth to identify, quantify, and try to address impacts of climate change and associated sea level rise, and contains a number of suggestions and recommendations for further action by both governmental and private parties.  With information of the quality contained in this report now publicly available in a concise format, there is no longer any reason to delay taking these steps. 

Peter Friedenberg is chair of the firm's Real Estate Department. Read his bio and connect with him LinkedIn and Google+

Upcoming Real Estate Industry Events

 

NAIOP Massachusetts	March 7, 2013 - Boston's South End: What's New and What's Next?
NEWiRE	March 7, 2013 - NEWiRE Legacy Luncheon Series with Kristin Blount
Real Estate Finance Association	March 6, 2013 - REFA Fundamentals: Interest Rate Hedging - What You Need to Know About Using Derivatives

Massachusetts "LEEDs" the Way

Written by: Deborah Howitt Easton

In 2007, when I became a Leadership in Energy and Environmental Design (LEED) Accredited Professional, many wondered if the green building movement was going to end up as more than a passing trend.  It is clear now that green construction principles are here to stay and are increasingly becoming the norm.  As the cost premiums for building green have declined, the viability of sustainable construction methods has been validated and the market demand for green buildings has increased we are seeing more construction projects seeking LEED certification and Massachusetts leads the way on that front.

At the end of January 2013, the U.S. Green Building Council (USGBC) released its annual list of the top ten states (including the District of Columbia) for new LEED certifications for 2012.  Massachusetts moved up 3 positions from 2011 to a 4^th place ranking behind the District of Columbia, Virginia and Colorado.  According to the USGBC, in 2012, 106 projects in Massachusetts (totaling just under 13.4 million square feet of space) obtained LEED certification.  While many of the LEED certifications in Massachusetts last year, and historically, were obtained in connection with public building projects (not surprising, given the governmental requirements that certain projects obtain specified levels of certification), the number of private development projects seeking certification is on the rise (literally).  The year 2012 saw the first LEED Platinum skyscraper in Boston at Atlantic Wharf.  As costs to build green continue to drop and consumer demand for green buildings continues to increase we can expect the number of private development LEED projects to continue to rise. 

According to The Boston Business Journal (BBJ), as of mid-February 2013, there were 479 projects in Massachusetts pending LEED certification.  The BBJ also culled additional interesting figures from the USGBC detailing the variety of Massachusetts projects - some of which are noted below:

• 11: The number of LEED-certified properties owned by privately held companies
• 12: The number of LEED certified properties at non-profit companies
• 12: The number of LEED certified projects at Harvard University, including 3 Platinum and 2 Gold certified properties
• 13: The number of LEED certified properties in Boston
• 17: The number of LEED certified properties in Cambridge, the most of any municipality in the state
• 19: The number of construction projects which will  ultimately house local or state government offices that applied for LEED certification last year.
• 19: The number of private construction projects that applied for LEED certification
• 22: The number of LEED certified properties owned by publicly traded companies
• 29: The number of construction projects in Massachusetts that applied for LEED certification and are managed by educational institutions
• 1.17 million: The square footage of One International Place in Boston, the third-largest LEED-certified property in Massachusetts last year
• 1.18 million: The square footage of Atlantic Wharf in Boston, the second-largest LEED-certified property in Massachusetts in 2012
• 1.6 million: The square footage of the Clarendon and Berkeley Buildings in Boston, the largest LEED-certified property in Massachusetts
• 19.8 million: The total square footage of the projects that applied for LEED certification in Massachusetts in 2012
• 80.8 million: The square footage of pending LEED-certified development projects in Massachusetts (Source: Green state: Massachusetts' huge pipeline of LEED construction projects (BBJ DataCenter))

Clearly, LEED-certified buildings are here to stay!

 

Debbie Howitt Easton is Of Counsel to the firm's Real Estate Department. Read her bio and connect with her on LinkedIn and Google+

Gap Closings: A Commercial Real Estate Necessity

Written by: Seth A. Malamut

Looking forward into 2013 and beyond, one element of commercial real estate transactions will undoubtedly be used with greater frequency:  Behold, the gap closing.  Though existing for some decades, and frequently called a “New York” style closing, the gap closing is a mechanism that allows real estate to be easily conveyed by parties who never leave the comfort of their own desks.  As business becomes more globalized, as Registries of Deeds suffer greater filing backlogs, as attorneys and clients close deals from across the country, the “traditional” commercial real estate closing may be going the way of the dodo.  In the face of changing conditions it is vital that commercial real estate attorneys, and their clients, understand the gap closing -- its virtues as well as the issues it may entail. 

Gap closings are those transactions where, after documents and funds are delivered, there remains an interval of time before recording of documents.  As with traditional closings, a title policy is issued insuring title typically from the date of the most recent title commitment.  The title insurance company insures the “gap” in time between the closing table and recording of documents.  The risk in any such scenario, and which party bears that risk, is that an intervening matter of record, or title, such as a tax lien or a judgment against the seller, may be recorded between the time of closing and when closing documents are recorded; the result being that the buyer may not receive the quality of title that it has negotiated, after which it will look to its title insurer for coverage. 

This “gap” may occur for any number of reasons.  For instance, several states have a recording lag – meaning that even if documents are presented for recording on the day of closing they may not be processed for several weeks.  More likely, the buyer is located in one state, the seller in another, and the property in yet another.  In such scenarios closing is typically run through buyer’s designated title company in the state where the buyer is located.  The title company is charged with shepherding all documents, receiving and disbursing funds, and putting closing documents to record.  However, as nationwide transactions become more common, as portfolio transactions increase (buyers acquiring multiple properties, perhaps in multiple states, from the same seller), the likelihood of getting to record on “closing day” becomes increasingly unlikely.  In the current climate of commercial real estate transactions the gap closing is not just an option -- it is a frequent necessity.  

So, who bears the risk?  In certain states it is merely customary for title companies to assume the risk.  This risk may be mitigated, in part, by updating title immediately prior to closing – thereby shortening the gap, and by the title company over-nighting documents to a local agent who records upon receipt.  In addition, title companies often seek to spread the risk by requiring a gap indemnity, whereby the seller indemnifies the title company for matters of record appearing between the date of the Commitment and recording. 

With respect to gap indemnities, it is important that the indemnitor be a financially responsible party.  Frequently the holder of commercial real estate is a single asset entity whose only asset is the underlying property.  Once that property has passed to the hands of the buyer anyone looking for recourse against the (now asset-less) seller may find nothing but empty pockets.  The better practice is to ask a seller’s parent company, or other financially viable party, to give the gap indemnity.

Lastly, it is important that buyer’s counsel carefully prepare their closing instruction letter to the title company.  Among other key elements, the closing instruction letter in a gap closing should bind the title company to issue the policy in the form of the marked commitment or pro forma “with no additional exceptions.”  Doing so will ensure that the title company is obligated to issue the same policy for which the buyer negotiated, regardless of intervening matters of record.  Taking these steps, understanding the process, and using quality title insurance companies combine to ensure that the gap closing runs smoothly and the parties receive the benefits of their bargain.

Seth Malamut is an associate in the firm's Real Estate Department. Read his bio and connect with him on LinkedIn and Google+

Congratulations Lowell Community Health Center!

Congratulations to the Lowell Community Health Center on their grand opening! The $42 million renovation project consolidated six of LCHC's outpatient locations into a state-of-the-art, 100,000-square-foot medical facility.  For more information, read the full story here.

Sherin and Lodgen partners Doug Henry and Bethany Bartlett, were involved in financing the new health center. The construction relied on federal grants, New Markets Tax Credits (NMTC), Federal Historic Tax Credits (FHTC), and federal construction guarantees.

For more information, read our blog post "4 Lessons on Funding a Community Health Center with New Markets Tax Credits."

Upcoming Real Estate Industry Events

 Boston Bar Association

	February 6th - The EPA and Sustainability Going Forward: A Lunch with Curt Spalding
NAIOP Massachusetts	February 13th - Battle of the Suburbs: Waltham and Burlington Compete for First Place

NEWiRE	February 14th - Meds and Eds Networking Group : A Conversation with Malaina Bowker and Paula Quan
Urban Land Institute	February 7th - “Green” Bag Lunch: Solar PV in Massachusetts

Are you attending? Any other Real Estate events in the Boston area? Let us know!

Meet Sherin and Lodgen's LEED Accredited Professionals!

The United States Green Building Council (USGBC) released their "List of Top 10 States for LEED" today. Massachusetts ranked number 4 on the list, with 106 LEED certified projects completed in 2012. For the full list of rankings, click here.

Sherin and Lodgen is home to five LEED Accredited Professionals:

 

Ronald W. Ruth,

Managing Partner

 

 

 

 Peter Friedenberg

Chair of Real Estate Department

 

 

 

Paula Curry

Of Counsel

 

 

 

Deborah Howitt Easton

Of Counsel

 

 

 

Tracey Stockton

Of Counsel

 

 

 

For more information on our Environmental Practice, please click here.

Upcoming NEWiRE Event: Millennium Partners and the Transformation of Downtown Crossing

NAIOP

January 23, 2013 - Millennium Partners and the Transformation of Downtown Crossing

Christine Claffey is attending! Who else will we see there?

Streamlining Property Surveys – A Look at the ALTA/ACSM Table A Requirements

Written by: Andrew Royce

The property survey is typically a lead-time item in commercial real estate loans since it can often take several weeks to complete.  It is therefore crucial that the surveyor be told at the start of the project exactly what the lender will be requiring for the survey.  This is usually accomplished by reference to the ALTA/ACSM Table A Optional Survey Responsibilities and Specifications, which supplement the 2011 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys as adopted by the American Land Title Association and the National Society of Professional Surveyors. The forms can be found here.

Table A includes 22 optional items which the surveyor can be asked to depict on the survey – some are simple and won’t typically involve extra time or cost (such as Item 2 – property address, and Item 3 - flood zone classification), while others may involve substantial time and additional charges (such as Item 1 - placing of monuments at boundary corners, Item 5 – vertical relief with contour intervals, and Item 11(b) – evidence of utilities obtained from utility companies).

Many lenders have a list of the specific Table A items they require, which can then be passed on to the surveyor.  Other lenders may not; in such cases, the borrower should take the initiative to make sure that the Table A items which the surveyor will undertake will fully satisfy the lender and its attorney.  No one wants to find out later, when the survey is produced a few days before the closing, that the closing must be postponed because the surveyor has to perform additional work of which it wasn’t initially made aware.

When the Table A requirements were last revised in 2011, some seeds of confusion were sown.  Item 6 had always required the surveyor to specify building setback, height, and floor space area restrictions disclosed by applicable zoning or building codes.  In 2011 the words “as disclosed by applicable zoning or building codes” were replaced with the words “as provided by the insurer,” evidently because some surveyors thought it was inappropriate for them to review the applicable zoning or building codes.  Unfortunately, the insurer (meaning the title insurer) often will not have the pertinent zoning information.  While some surveyors may still be persuaded to obtain the zoning information themselves, others may insist that the information be provided to them.  In such situations, the borrower may need to either have its attorney provide the information to the surveyor or engage a third party zoning analysis company to perform a zoning compliance report for delivery to the surveyor (entailing, in either case, additional expense).

Another source of occasional confusion is Item 19, which was added in 2011, and calls for “location of wetland areas as delineated by appropriate authorities.”  Again, some surveyors may consider it outside their purview to obtain the necessary wetlands maps or materials from the applicable governmental entities.  In such cases, the borrower may need to engage a third party wetlands consultant to obtain the necessary materials and deliver them to the surveyor (resulting in additional expense).

To sum up, the lender, the borrower and the surveyor should all agree as early as possible on the specific Table A items to be depicted on the property survey.  If Item 6 (zoning) and/or Item 10 (wetlands) are to be included, and if the surveyor will not obtain the necessary underlying information, then an alternate source for such information will have to be established.  Settling these matters upfront should prevent delays in closing the loan.

 

Featured Deal: RBS Citizens, N.A. Financing of Mixed Use Project

Gary Markoff and Bethany Bartlett represented RBS Citizens on the financing of a mixed use project in Lowell, Massachusetts.

For more information on this deal, please click here.

Interested in learning more about New Markets Tax Credits?