Leslie Berliant: First, I want to congratulate you on winning our Celsias project of the month with the Hotel Diaries project. You are our first winner!
Tom Rand: That's great.
LB: So for those that don't know, what is the Hotel Diaries Project about?
TR: Essentially, it's been my way of getting engaged in the real estate sector. My primary professional goal is in carbon reduction technology. I'm an engineer and I like to get my hands dirty and see what happens in a practical way. The hotel idea belongs to a friend of mine, Anthony Aarts, but he needed money to get it done. My financial backing of the project came with the caveat that we would make this hotel run at 80% below standard carbon emission rates while using only technologies for which we could make a strong economic case. While I'm learning about the real estate sector, I'm also giving a practical example to other builders, showing them that they can do this too because we are doing this solely based on the economic case for each decision we make. The private benefit is in discovering interesting technologies. The public benefit is that I'm creating a model for others to follow. We are doing it without any of the LEED or any other agency certifications. Basically, we are opting to lower the carbon impact while showing others how to do it cheaply
LB: Why did a software entrepreneur and venture capitalist decide to get into not just the building industry, but the green hotel business?
TR: It started around the family dinner table. My parents are very scientifically literate and aware. Discussions at our dinner table have often been about what's coming in terms of climate change and a shared consternation that nobody seemed to care to do anything about it. These discussions started something like 15 years ago in our house. Having sold the software company, I had a chance to rethink my career and get engaged in this process instead of being an over-educated observer. It was part of my maturation as an adult to look for a more meaningful career having been successful at one. But it really started at the family dinner table over some apocalyptic discussions.
LB: After seeing the Greening of Southie, one of the things I really appreciate about your project is the idea that everything has to make economic sense, because it seems like if we aren't making sure that green building is economically feasible and even economically advantageous, it is never going to happen on a mass scale.
TR: Absolutely. This is where economics and policy meet. Renewable technologies are becoming economically viable now because oil is hitting $140 a barrel and going nowhere but up. But you still need strong, hard carbon pricing on a global basis. That's the only way the production of energy will become carbon neutral. Right now, buildings are low hanging fruit on the carbon tree. The technologies are there and make economic sense. There aren't the same easy answers in transport, for example, when we're doing things like shipping lettuce from Mexico to Canada in July. Building is one area we don't need a price on carbon to make this thing fly. It's nice to say we can just make economic decisions, but that's true only in a few industrial sectors. And it makes sense to me in this case because I'm the owner and operator. If I were building it and then handing it off to someone else, it would be different. I'm showing from an economic and engineering standpoint, however, that this is feasible. If it's not economically sustainable, we're just pissing in the wind. There are huge economic barriers in other sectors, though. In those cases, it's incumbent on the economic system to meet us half way, that's where carbon pricing comes in.
LB: You came in with some pretty aggressive goals; reducing the building's carbon footprint by 80%, having it up and running in a year and a half, have you changed plans much since you originally started this project?
TR: No, not really. We're late. Like many building projects, we have had some permit problems. We'll be done by late fall now, we think. One really interesting thing that happened though was that in the City of Toronto, when we went for approval to use a city lane-way next to the building - this lane-way was city owned property - to access the geothermal pipes, everyone said the city wouldn't let us because they're too bureaucratic, nobody would listen to us, etc. But they did grant us permission, and without any political pressure. Not only did they grant us permission, but they have recommended that the City Council come up with guidelines so that anyone can apply for approval to use city owned property to install geothermal through a standard application process. It is exciting that this project has got the city to act as an enabler for geothermal drilling. As far as I know, Toronto is the first city in the world to do this. So the project has been very successful in opening up that door. And having the city make a commitment to standardize this procedure is a huge breakthrough for the project. It won't actually affect the hotel, but it is a big success, nonetheless. We want to work with the City now to let people know about the opportunity. We're looking to do a lot of PR around it.
LB: Have you received any helpful input from people?
TR: Yes, I have had a lot of people who have been really interested, and have approached us with all kinds of ideas in areas that are important but not our core concern. People have been pitching lots of stuff about eco friendly carpets and pillows and grey water capture. Those things are great, but our focus is on the carbon reduction. It turns out that there are only 3 or 4 technologies that need to be put into the building to make it work in terms of carbon reduction, but some of those certainly came from outsiders
LB: Have you been surprised by any of the "green" or carbon reducing solutions that you have found?
TR: What really blew me away was how much of the lion's share of reduction will go to geothermal. Of the 80% reduction, geothermal will account for ¾ of that. I made an investment in a geothermal company once I discovered that and I sit on their board now. That was a big discovery for me; that it was just one key technology that would let us meet our goals. I thought it would be 9 or 10 technologies. If we didn't get permission to get the drilling for the geothermal, we wouldn't have been successful. Without geothermal, we wouldn't get close to our goal and would just be chipping away at it.
LB: I know geothermal is big in Canada, is it available everywhere or only in certain areas? I know it's not very common here in California, for example
TR: It's available everywhere, but in some places it can be more expensive to drill than others. There are really two kinds; geothermal versus deep geothermal. Deep geothermal is accessing the earth's core for energy in large scale energy production. The kind we are using is sometimes called geothermal exchange. You only need to go down about 8 feet and then you can exchange heat with the ground. It's most efficient in northern climates because of the temperature differential. The only reason it's not really prevalent - although there are a million installations world wide - is it has a high capital cost. You have to think about it from the get go, it's a little more difficult to do as a retrofit. For a standard house, you're looking at spending an extra $20,000 to go geothermal. If you put that in a mortgage, you can be cash flow positive on day one, but you have to think like that from the start and people are only beginning to consider these technologies early on.
LB: Do you feel like a full-fledged contractor at this point?
TR: No, my partner does though. All I'm doing is feeding him the green stuff, he's putting up walls and digging basements. Anthony is the guy that knows what he's doing. I'm providing an engineering perspective and motivation to look at the green stuff. I'm a dilettante, he's a contractor.
LB: Is it still going to be 100 beds?
TR: Yes. It's a hostel for young people called Planet Travel. It will have 24 rooms, some with 6 beds and some with 2 beds.
LB: Do you think you will do more projects like these?
TR: Yes. I don't know that I will get involved in real estate development again, but I'm thoroughly engaged in the geothermal space now. My role will be to leverage geothermal into more and larger projects. I'm an advocate for the technology and will be able to provide data from this building. I'm going to be a media whore for geothermal!
Further Reading:
This is a truly inspiring project, Tom, witness the City of Toronto even getting behind it. You mentioned that you may not do another real estate project, but you have also created a precedent so perhaps your genius could be next applied to encouraging and coaching others to follow in your footsteps to construct their own environmentally-friendly buildings? Could offer a lecture series at U of T, or ask Radio Canada or the CBC to cover your story? Others should learn from your learnings! Well done, mate.
Written in August 2008