Portland, OR: 4.00

New York City: 4.60

Phoenix, AR: 6.50

Tokyo, Japan: 3.26

Berlin, Germany: 3.06

As you can see, Portland gets more sunshine than Tokyo and Berlin, and Germany and Japan are the two leading countries in regards to solar generating capacity and leasing of roof tops.

Regardless of where you might be in the spectrum of solar worship, it’s good to be educated about the issues relating to roof top leasing so you know what to watch out for if a solar developer hands you a form lease to sign.

Here are a few tips:

• You will want to have the company check the structural integrity of your roof for photovoltaics (PVs). You shouldn’t have to foot the bill for this, and try to include an agreement that they’ll provide you with a report from the testing. This way, even if they don’t end up leasing space, you’ll have a recent report about your roof.
• You will need to keep in mind that a roof top lease is just like any other lease for space in your building. Look for provisions in your current lease and see if the same landlord protections are included, e.g. indemnities, maintenance responsibilities, and defaults regarding late payment.
• You need to know what the solar developer’s ownership interest is in the PVs. In most cases, the developer will either lease them or finance to purchase them. If financed, the developer may have to provide collateral security for its lender. This will affect your rights as a landlord and you want to make sure you are not left holding the bag when the lender comes to rip the panels off the roof and your roof is badly damaged due to the lender exercising its rights.

Really, though, you should just call us when a solar developer comes knocking with a form lease to sign.

Members of the audience were particularly interested in the panel’s success in negotiating certain hot-button provisions with landlords.  According to the panel, almost all lease provision are negotiable depending on the parties’ bargaining positions.  That said, tenants should be mindful of landlord’s concerns and risk assessments when asking for concessions from landlord’s standard form of lease.  In most cases, there are compromise provisions which can address tenant’s concerns while not creating additional risk—or at least not unreasonable risk—to landlord.  According to Mr. Inanaga, this is where leasing experience (and good tenant checklists) can come in handy to get tenants the protection they might need.

For example, the panel discussed the concept of “permitting risk” in discussing when rent should commence under a lease. Given most landlord’s lease forms, rent would commence upon expiration of a certain number of days (the fixturing period) after execution of the lease.  Thus, a tenant usually bears the risk that it will not obtain permits and be able to complete construction prior to the date rent commences under the Lease.  If, on the other hand, a lease specified that rent commences a certain number of days after tenant receives all of the permits necessary for it to construct its improvements and open for business, the “permitting risk” is shifted to landlord—because rent will not commence unless and until tenant is unable to obtain the necessary permits.  This is a favorable result to the tenant (especially where tenant is operating in an unfamiliar jurisdiction and unsure of the local permitting timelines), but may not be acceptable to the landlord given the new risk.  The panel discussed various ways in which to minimize this risk to landlord—requiring tenant to submit for permits within a certain number of days after execution, requiring tenant to engage landlord’s permit expediter and giving landlord a termination right if tenant is unable to obtain permits within a certain number of days after lease execution.

The discussion was so lively that the panel was unable to cover all of the issues originally intended.  If any attendees (or any readers) would like a copy of the panel’s handout, please contact John Benazzi, at johnbenazzi@dwt.com.

The Sacketts, who disputed that their property is subject to the CWA, asked the EPA for a hearing on the compliance order. The EPA denied the request. The Sacketts then brought an action in federal court under the APA provision that provides for judicial review of final agency action for which there is no other adequate remedy in a court, claiming that the compliance order was arbitrary and capricious and violated due process. Both the District Court and Ninth Circuit dismissed the Sacketts’ lawsuit for lack of jurisdiction, concluding that the CWA precludes pre-enforcement judicial review of compliance orders and that this does not violate due process. The Supreme Court reversed, concluding: (1) that the compliance order is final agency action that determines the Sacketts’ rights and obligations and exposes them to double penalties in future enforcement proceedings; (2) that the Sacketts had no other adequate remedy in a court, and (3) that the CWA does not preclude review of compliance orders. In so doing, the Court rejected EPA’s claim that judicial review of an enforcement action provides an adequate remedy. As the Court pointed out, the Sacketts could not initiate an enforcement action, only EPA could, and each day they waited for EPA to do so, they accrued an additional $75,000 in potential liability. The Court also rejected EPA’s claim of an adequate remedy from applying for a wetlands permit from the Army Corps of Engineers and, if denied, appealing to court. As the Court noted, the Corps’ regulations do not allow for the processing of permits for which a compliance order has been issued by EPA unless doing so is “clearly appropriate,” but that in any event, the remedy for denial of action that may be sought from one agency does not provide an adequate remedy for action already taken by another. Consequently, the Court remanded the case for consideration of the Sacketts’ substantive claims regarding CWA jurisdiction.

The earmark allocates state funds to Douglas, Jackson, and Josephine counties to conduct technical studies and mapping exercises necessary to petition the Oregon Land Conservation and Development Commission (“LCDC”) to adopt regional definitions of agricultural and forest lands. It also provides money for LCDC rulemaking activities described as “an anticipated Governor’s directive to pilot a regional land use planning project.” See 2012 Senate Bill 5701 (a budget reconciliation measure).

This earmark effectively implements a bill that the Legislature has declined to adopt during the past two legislative sessions. In 2009, the Oregon Legislature passed a measure that allows counties to comprehensively review and correct historic mapping errors that have resulted in restrictive farm and forest zoning on parcels that do not meet the state definitions of agricultural land and forest land. Under LCDC’s statewide planning goals, farm land is generally defined by soil class and forest land is generally defined as land suitable for commercial timber production. The southern Oregon counties believed that the 2009 law did not go far enough to remove rural land use restrictions because it did not allow them to rezone lands that actually qualify as farm or forest land under the statewide planning goals. The counties and property rights advocates therefore sought additional legislation to redefine what constitutes farm and forest land in southern Oregon.

The result was 2011 House Bill 3615 and 2012 House Bill 4095, which both would have allowed the three counties to petition LCDC to adopt rules creating regional farm and forest land definitions. Both of these bills were controversial and died in committee. These bills, however, were not necessary to allow a rulemaking process at LCDC, so in the final days of the 2012 legislative session the sponsors of the bills simply earmarked money to fund the rulemaking.

At this point, neither the supporters nor the opponents of the proposal have offered a compelling case for their respective positions. Supporters claim that the state law definitions of farm and forest lands are too broad and therefore hurt local economies by unnecessarily restricting development of lands that are not well suited for farming or forestry. It is not clear, however, that this outcome is actually a function of the state’s legal definitions and not simply the result of mapping errors caused by a lack of information at the time that the counties drew their zoning maps. The opponents are similarly hyperbolic in asserting that the counties’ plan will lead to a patchwork of rural subdivisions that pave farmland and create urban sprawl. Such a result is unlikely because additional state law prevents the development of urban infrastructure outside of urban growth boundaries.

The counties’ rulemaking petition will hopefully shift the debate away from ideological posturing and toward practical, fact-based decision-making. The technical and mapping work funded by the 2012 earmark should allow the counties to develop data that either proves or disproves the theory that significant amounts of land in southern Oregon cannot be used productively as a result of farm and forest zoning.

If the counties’ petition persuades LCDC to begin rulemaking, this will set in motion a complex process that could have significant implications across the state. The state rulemaking would be subject to public comment and may or may not result in significant changes to the current farm and forest definitions. If LCDC did adopt regional land definitions, then the three counties would each begin additional local public processes to redesignate lands within their respective counties. This would in turn put pressure on the state to allow regional land definitions in other parts of the state.

Ultimately, adoption of regional farm and forest land definitions could create economic opportunities by allowing some new rural residential, commercial and industrial land uses. These uses, however, could create conflict with local farming and forestry activities. Rural land development also presents natural resource issues such as water supply, wetland conservation, and waste management. LCDC and the southern Oregon counties will need to consider carefully how to manage these issues as the rulemaking process moves forward.

On the first issue, the Court found an easement was created based on an analysis of the dedication at issue, as well as the presumption “that a statutory dedication of land for highway purposes constitutes only a public easement.” On the second issue, the Court held that a Washington statute (namely, RCW 7.28.090) prevents adverse possession not only of land owned outright by certain government entities, but also of land in which a government entity holds only an easement. That is, the City’s easement rights in the alley prevented the claimant from adversely possessing the underlying fee interest in the property. This ruling is all the more significant because it seems to overturn a 1995 Court of Appeals case—Erickson Bushling—in which the court suggested a property owner could, in fact, gain fee simple title to land by adverse possession despite the existence of a public easement. See Erickson Bushling, Inc. v. Manke Lumber Co., 77 Wn. App. 495, 891 P.2d 750 (1995). In any event, this ruling brings Washington into line with a number of other states, where courts have held that a private party cannot adversely possess land in a public easement.

Three years after the start of the Great Recession, the U.S. real estate markets remain sluggish at best. Businesses have not resumed hiring, resulting in stubbornly high unemployment and dismal rates of absorption of vacant office space. (The Seattle CBD is faring much better than most, however.)

Consumer debt loads, job worries and general anxiety have curbed consumer demand, hurting shopping centers and industrial space. The housing markets continue to fall; only in the multifamily sector are there signs of life.

Instead of a normal rebound from the 2008 crash in real estate values, the market cycle has flattened into an ongoing malaise, without any prospect of meaningful improvement in the near future. Businesses are surviving with less commercial space, homes are being given up for apartments, and the remaining homeowners cannot afford to move up. A leading real estate trade association, The Urban Land Institute, has pronounced this as “the era of less.”

However, one real estate market sector is showing vigor: health care.

Indeed, in the last 18 months we have seen an extraordinary number of medical campus expansions in the Puget Sound area:

• Commencement of a huge expansion of Seattle Children’s main hospital campus (from 22 to 28 acres), which will double both the hospital’s square footage and number of beds and expand its emergency department.
• The opening of Virginia Mason’s Jones Pavilion, containing a new emergency department and other patient care spaces.
• Swedish Medical Center’s Issaquah Hospital, which opened in July as the first new full-scale hospital complex built in the Puget Sound area in 25 years.
• A nine-story, 275,000-square-foot hospital tower at MultiCare’s Good Samaritan Hospital in Puyallup.
• A $500 million, 12-story medical tower at Providence Regional Medical Center in Everett.

In addition, health-care systems have been aggressively purchasing or building off-campus clinics, ambulatory surgery centers, and other kinds of facilities to expand their geographic footprint, grab market share, or roll out new technologies. Notable recent examples:

• Completion of a Bellevue clinic and surgery center in 2010 by Seattle Children’s Hospital.
• Group Health’s announced plans to build “clinics of the future” in Burien (43,000 square feet) and Puyallup (58,000 square feet).
• Evergreen Health’s joint-venture development of a three-story multi-specialty clinic and urgent care center in Redmond (46,000 square feet).
• Swedish Medical Center’s redevelopment of the former Ballard Hospital campus to contain a five-story medical office building, emergency department and radiation treatment cancer center.
• Seattle Cancer Care Alliance’s current construction of a 60,000-square-foot proton-beam radiation therapy cancer treatment center on the campus of Northwest Hospital.

What is going on? How can there be this level of capital investment in new medical real estate in light of current economic conditions?

To be sure, most of the major campus capital projects were planned and funded before the Great Recession, and those projects reflect dated forecasts and a confidence not currently seen in other sectors of the economy.

But that is only a small part of the story. Strong economic, societal and regulatory forces are bearing down on the health-care industry. These pressures will transform the industry and, with it, the real estate that serves it.

What are these forces? There are several:

• The baby boom generation is aging, and entering the years when its demand for medical services will triple, so providers will see a surge in demand for medical services from this bulge in the U.S. population.
• Recent federal health-care reform will add about 32 million more Americans to the insured population rolls, a new source of demand for medical services.
• Technology advances have created many new medical procedures, and made existing procedures more effective and affordable, stimulating further demand for state-of-the-art care.
• Government policymakers struggle to contain costs, but the political will to curb use of health-care services will, in the short term, be tempered because this is one sector of the economy that creates jobs. (Health care, high-tech and energy industries accounted for 35 percent of the 1.8 million new jobs added since February, 2010.)

These and other forces will lead to substantially greater demand for health-care services. Meanwhile, new cost-containment initiatives (from both private insurers and governments) will focus on curbing expensive inpatient procedures and emphasizing outpatient services and wellness programs. Technology gains will facilitate this shift, by permitting more and more sophisticated services in outpatient settings. MRI, CT and PET scans, colonoscopies, knee and hip replacements, laser eye surgery, and soon spine surgery will all be routinely available at off-campus clinics.

These pressures will cause health-care providers not just to expand their facilities but to reconfigure and relocate them to meet demand, achieve cost efficiencies and maximize revenues.

Future health-care real estate strategies will emphasize:

• Consolidation of physician groups (formerly independent practitioners, now employees) deployed in strategically placed campus medical office buildings and off-campus clinics and specialty care centers (eliminating doctor-owned real estate, and jeopardizing small, investor-owned medical office buildings).
• New kinds of off-campus medical facilities, designed to have low costs of construction but high use efficiencies (such as patient flow and energy usage), flexibility to permit easy reconfiguration, and customer-friendly features that will support a new emphasis on wellness programs.
• Facilities that allow a higher acuity care (while still qualifying as “outpatient care” for reimbursement), which will permit transfer of certain procedures from a central hospital to an off-campus setting.

Looking forward, we should expect to see continued expansion of health-care infrastructure, and the development of new kinds of health-care real estate stock, in new locations, and with new functions and appearances. As is certainly true for the rest of the health-care industry, big changes are coming to health-care real estate.

Folks in the hotel or restaurant industry are probably very familiar by now with “radius restrictions.” These requests are increasingly being included in contracts by landlords in commercial leases, owners in management agreements (such as for hotels, restaurants, theaters or other venues operated on behalf of the owner for a fee), and licensees in brand franchise agreements.

The restrictions typically limit the tenant, manager or licensor from opening, operating, permitting or otherwise engaging in their business in another location within a certain radius or area, known as the area of protection (or AOP).

When encountering a proposed radius restriction clause, negotiate carefully. While many radius restrictions are reasonable, they can easily become overbroad. A savvy “restricted party” will think beyond only present operations to how the radius restriction may impact other business opportunities.

Following are some of the questions you should ask.

Who is restricted?

Be wary of restrictions on not only the restricted party, but also “affiliates” who may not be direct parties to the contract. Affiliates could include upstream entities (such as investors and parent companies), downstream entities (including new ventures and “mini concepts”), or sister entities that have a common parent with the restricted party, and possibly others.

For example, a restaurant operator could have many investors – including one that also owns a bookstore within the AOP. The bookstore, by means of the affiliate investor, could violate the radius restriction, placing the restaurant operator (the restricted party) in default.

Consider creating carve-outs in the agreement to account for the possibility of future mergers or acquisitions.

When is the restriction in force?

A radius restriction does not need to live as long as the contract. In fact, one can burn off after a period of years or upon certain milestones or events, such as the achievement of financial thresholds.

Also, consider when the restriction goes into effect. Does it start when the parties execute the contract or when the property opens? These nuances could add several weeks or years to the radius restriction’s term.

If the restricting party is adamant on a radius restriction, consider stepping back the terms: for example, five miles for the first five years and one mile for the remainder of the term. Also, consider scaling back the type of restriction. Go from an agreement to not “own or operate” to just “not own.” Additionally, know your wiggle room. Can the restricted party be in development during the term of the restriction and just not open until the term expires?

Take note if the restricting party has an early termination right. If the restricted party is prohibited from developing opportunities during the radius restriction’s term, and then the agreement is terminated early, the restricted party is stuck with no current agreement in the market and nothing in the pipeline to replace the terminated agreement.

How are the lines drawn?

Though radius restrictions are commonly expressed in terms of a circle, with the real estate or front door at its center, this is not the only approach. It’s far better to put the compass down and plan radius restrictions on a street-by-street basis.

It’s better with more specifics. Phrases like “within the central business district” or “Lloyd Center” can be confusing, while language like “bounded by the northwest corner of Main Street and Second Avenue” can improve contracts and leave little gray area for potential disputes.

What is restricted?

Some radius restrictions try to preclude a restricted party from doing anything conceivable (“… shall not own, operate, control, have control over, invest, brand, co-brand, permit, market or otherwise consort with another business or location within the territory …”).

Fair restrictions limit the restricted party from only those activities that could harm or negatively influence the business of the restricting party. For example, if a licensor licenses its full-service restaurant brand to a licensee, it may not be necessary to restrict a similarly named coffee shop across town, because the two ventures likely are not competitive.

Regardless of the size or nature of a company or its growth potential, radius restriction provisions require attention to detail. As always, negotiation strength depends on the relative power of the parties, but be careful to not excessively limit chances for future growth in order to get one deal.

There are some good tidings for developers even in the gloom of a sluggish economy. Permit turnaround times are generally quick in local planning departments, and many contractors, builders and design professionals are eager to take on new projects at competitive prices.

Barring any financing issues, all this can help developers and owners get their projects built more quickly and efficiently.

But one risk is as strong as ever: having your project appealed by a neighbor, citizen group or even a competitor.

In my work defending land use approvals I have seen appeals by neighborhood groups and associations flourish, even during this recession.

In many cases the impetus — if not the funding — behind these appeals is really a competitor of the developer, a labor group or some other organization that is unnamed in the appeal.

In Washington, standing requirements are relatively lax and that allows just about anyone with even a minor interest in a project to appeal. The wise developer approaches every project approval as one that later could go under a microscope.

So how do you keep your project from being derailed?

Here are some important early steps you can take, as well as tips for deciding how much time and money to expend in the effort.

Start with the basics

Project approvals are sometimes remanded on simple issues that should have been spotted early in the process, so be sure that your design professional or other consultant has read all the code provisions that apply to your project to verify that it complies with each of them. Here are some standards to consider:

• Use restrictions. Is your proposed wireless communications facility or urgent care clinic a permitted use in this neighborhood?

• Development standards. How far must a wireless facility be set back from the street and how high can you build?

• Approval process requirements. Who decides whether the permit gets issued and when, and have the required public notices been issued?

The importance of these basics cannot be overstated. Failure to comply with a simple development standard or a procedural defect in processing the applications can easily become the basis for getting an approval overturned on appeal.

City or county planners can be a valuable resource for understanding how a local government interprets and applies its codes. But Washington’s case law is full of cautionary tales of approvals that were overturned because the court found that the local government had misinterpreted or failed to follow the letter of its own code, or used the wrong approval process.

Thus, when faced with a code provision that is unclear, have an attorney or consultant provide input. In some cases, it may be worth asking the local government for an administrative interpretation or some other written assurance to clear up the issue.

Make a record

Some of the standards local governments apply when considering a land use application are clearly defined and objective, relating to facts that can be readily proven or disproven, such as height, bulk and scale regulations. Other standards, however, are open to a broad range of interpretations relating to fact, degree and value.

For example, decision makers are often called upon to determine whether a proposal is “consistent” with the jurisdiction’s land use policies — which can be a long list of vague, somewhat contradictory, goals and aspirational statements. Generally, the more subjective the standards, the more critical it is to make a record for your project by submitting studies, project documents and similar materials so that the decision makers can fully evaluate possible impacts, mitigation and other factual matters relating to the approval standards.

Calculate risk

How much should you invest in consultants, studies and other strategies to make your project less vulnerable to appeal? That depends on what is at stake for your particular project.

If your project requires only an administrative approval that can be fully reviewed and issued in 90 days, and it’s possible to reapply if the first application is denied, less front-end spending on consultant and attorney time may be justified.

It’s a different matter if the final decision will be subject to public notice and comment, a fact-finding hearing before a hearing examiner or a hearing before the local legislative body, plus the possibility of a Superior Court appeal, which is available under state law for just about any land use decision.

Each of these processes could add six months or more to the process. Faced with such potentially costly delays, not to mention the cost of restarting the application process, the wise developer will seek to insure that his or her initial permit application has been thoroughly vetted.

Also try to gauge whether a neighbor or competitor is eagerly awaiting the chance to challenge your project. Certain types of uses are subject to challenge far more than others. These include prisons, landfills and high-traffic generators such as large retail stores. For these types of projects, hope for a smooth ride but prepare for an appeal.

The Portland Plan is coming, and people who recall the River Plan, which the city of Portland enacted last year, will find this one familiar. Like the River Plan, this new plan has been developed through a bottom-up planning process. This involved several years of community meetings and public outreach, resulting in more than 20,000 comments from residents and businesses.

And like the River Plan, which has been appealed to Oregon’s Land Use Board of Appeals and the Oregon Court of Appeals, the Portland Plan may have a negative impact on the family-wage jobs in the working harbor.

The Portland Plan will be adopted by City Council and used to guide the city’s land-use decision-making process over the next 25 years. Many of the policies adopted in the Portland Plan will eventually find their way into the city’s adopted comprehensive plan and zoning code, so now is the time to positively influence those decisions.

The Portland Planning and Sustainability Commission has already held two hearings on the draft plan this month, and will hold another today, at 1900 S.W. Fourth Ave., conference room 2500, from 5:30 to 9 p.m.

One of the guiding principles of the Portland Plan is advancement of social equity. To its credit, the plan recognizes that one of the key strategies needed to achieve this goal is creation of well-paying, family-wage jobs. In doing so, the plan tries to tailor specific strategies to “geographic districts that have distinct issues.”

In the Gateway neighborhood, for example, the plan proposes a special funding strategy to create an education center, based on a partnership between several local school districts, Portland Community College, Portland State University and the city. The education center will help provide students with better workforce skills and better access to family-wage jobs.

Like the River Plan, however, the Portland Plan could threaten the thousands of family-wage jobs in the working harbor. Much of the area is devoted to river-dependent industrial businesses, including heavy manufacturing and freight distribution facilities critical to the rest of the region’s economy and unable to move elsewhere.

The plan proposes to focus business development on only five industry clusters, including “advanced” manufacturing (which is not defined), athletic and outdoor equipment, clean technology, software, and research and commercialization.

By the city’s own measure, the harbor accounts for approximately 40,000 well-paying jobs and 900 private-sector businesses – approximately one out of eight jobs in the metro region. But it appears that most of the existing industries in the harbor will not be recognized and supported by specific policies in the Portland Plan. This is either an oversight or a policy choice that needs to be corrected.

In the end, the success of the Portland Plan will largely depend on the resources available to implement it. Without significant growth in family-wage jobs and per capita income, the city’s equity goals will largely become an exercise in trying to do more with less.

With that said, the Portland Plan acknowledges that the path forward requires the city to work smarter, be more practical and be more ready to take on difficult conversations. One of the keys to achieving this is for the city to more fully engage the business community, including the working harbor.

For purposes of the Portland Plan, it is important for the city to have a laser-like focus on job creation, education, infrastructure and the support of existing area businesses, because these are the critical investments that make job growth and equity possible. Now is the time for people in the business and industrial community to offer their views of the Portland Plan.