Greenbridge, A Model For Green Development, Faces Foreclosure


Image credit Greenbridge
This post was co-written by Sami Grover and Lloyd Alter. Lloyd writes:

There are a couple of fundamental rules that I learned during my real estate development career that ended a decade ago:

1. Everyone is a genius in a rising market; avoid downturns.
2. Originality is for suckers; copy other successes instead of breaking new ground.
3. Sell your units for more than it costs you to build them.
4. Be an asshole. Nice guys finish broke.

Now these may seem blindingly obvious, but I only learned them in hindsight. Thus I was really saddened to read in Reuters that Greenbridge, the McDonough-designed uber-green condo in Chapel Hill, North Carolina, was circling the drain.

TreeHugger's Sami Grover has covered this project before in Greenbridge Developments: Bringing LEED Gold to North Carolina, and interviewed developer Tim Toben here. He added this disclaimer to another post:

I should note at this point that since my interview with Tim Toben - co-founder of Greenbridge - we have become friends, and I brew biodiesel at a co-op based on Tim's farm. Anything I write is inevitably colored by my personal experience of Tim.

I forwarded the Reuters article to him, and he found it too personal to write about alone, so we are doing a joint post. In the article, Ned Barnett asks:

If such a building can't succeed in progressive Chapel Hill, home to the University of North Carolina and part of a regional economy driven by high-tech research, can large-scale green designs succeed anywhere?

But the question, and the answer, is not so simple. And it has everything to do with a different kind of green. Let's look again at the four rules of real estate development:

1. Everyone is a genius in a rising market; avoid downturns.

The project got caught up in the mother of all real estate downturns, the complete meltdown of the American real estate banking industry. In 2008, the head of the Bank of America called the project " an example of his bank's commitment to green building." When the project opened six months ago, Tim Toben said "Bank of America stayed with us through the (economic) crisis, and we're grateful to them for that."

But that was then. Now they have called the loan, and Toben says "The bank holds all the cards at this point," he says. "If they wish to foreclose...then they will foreclose."


Image credit Sami Grover

2. Originality is for suckers; copy other successes instead of breaking new ground.

This project broke a lot of new ground, which leads to a lot of uncertainty. Nobody had built anything this size in downtown Chapel Hill; some accused the project of blockbusting and " gentrification of a neighboring historically African-American neighborhood." Sami did a spirited defence in his post Must the Greens Hate the Rich? Class War in NC, asking:

What would be better? That the rich keep buying McMansions in gated communities? That expensive condos without all the cutting-edge green tech went up instead? Or that the plot be used for a big box store or multiscreen cinema?

Whatever the rights and wrongs of the gentrification debate, Greenbridge took considerable moves to involve leading members of the local community. The design of the building was modified—including losing one whole story—so as not to overshadow a neighboring church, and a number of affordable units were included in the development as a stipulation of the planning process. (Greenbridge developers had offered to create an alternative community program, whereby funds would be channeled into greening and rennovating neighborhood homes.) Then there was the pioneering design.

3. Sell your units for more than it costs you to build them.

This was a cutting edge design, by the greenest of cutting-edge architects. Most developers build the same thing over and over again so that they get to know their costs really accurately; when you are the first, you don't. You build in contingencies, and may even benefit from the fact that in a downturn, construction costs drop significantly, but green roofs, solar thermal hot water and other green features cost money. Purchasers are not often willing to pay their full value because they are thinking about investment and resale, and banks don't make it easy to get mortgages on the green goodies, so your margins on a green, innovative or different building are often smaller.

So when the contractor comes to you for extras and you don't have the cash to pay them, he puts on a lien to protect his rights, which starts a cascade of events that Toben correctly calls a "death spiral"- customers run for the exit, the project becomes tainted, and lenders? What lenders? At this point there are only vultures. Toben says "It feeds on itself. The liens begin to scare the real estate community and the number of showings decline and you can't close anything."

4. Be an asshole. Nice guys finish broke.
Sami writes:

Whatever certain campaigners made of the rights and wrongs of the Greenbridge project in practice, their questioning of the motives and morality of the developer always saddened me. Every interaction I have had with Toben and his partners suggests that this was a venture that was undertaken out of a sincere belief in urban density, thriving downtowns, and innovative green design. They also approached the planning process with an openness that - to my eyes at least - gave a broad cross ection of the community a seat at the table. As the Reuters article relates, Toben made a fortune in the 1990s after selling his share of the data mining company, KnowledgeBase Marketing, for $10 million after taxes. The failure of Greenbridge means he's likely to lose most of it. And this, he tells Barnett, has him rethinking his focus:

"I've ridden the roller coaster of capitalism," he said. "I'm ready to get off."
More on Greenbridge
Greenbridge Developments: Bringing LEED Gold to North Carolina
The TH Interview: Tim Toben of Greenbridge and Pickards Mountain Eco-Institute
Must the Greens Hate the Rich? Class War in NC
America's 10-Best Eco Neighborhoods

Tags: Green Building | North Carolina