Commercial Space Transportation Study

3.7 NEW MISSIONS

3.7.1 Introduction

3.7.1.1 Results Summary

1. Space debris management, examining the market potential of mitigating the impact of orbital debris.
2. Space medical facilities, looking at the use of in-space facilities to provide unique medical treatments.
3. Space hospitals, examining the potential of an in-space site to treat and cure patients, including extended stays.
4. Space settlements, capturing the popular idea of large human habitations in orbit.
5. Space agriculture, representing the potential for agricultural activities in space.
6. Space business park, representing a multiuse commercially oriented facility in Earth orbit.

Many of these new missions address uncertain markets, and while they may have worthwhile missions, they may require very low transportation costs (well less than $100/lb to LEO) to be commercial viable. The only mission area that was evaluated as having substantial commercial viability was the space business park, representing a commercially oriented, multiuse facility in LEO. The space business park was estimated to have a commercially viable market rate of return at about $560/lb to Earth orbit, achieving a 20% internal rate of return (IRR) after 10 years of operations.

1. Space Debris Management. Orbital debris is becoming more and more of a significant problem in space operations. As future space operations increase, this problem may be expected to grow. This market area examined the market potential of mitigating the impact of orbital debris, including the market viability of dedicated debris removal systems. However, the market assessment showed that for LEO operations, this market may most effectively be addressed by regulation and additional shielding on LEO systems. No significant space transportation demand was identified for this market area.
   
2. Space Medical Facilities. Based upon market contacts, several promising medical treatments that used the space environment (primarily microgravity) were identified. However, there is large level of uncertainty in the use of these treatments, based upon a lack of clinical or experimental data on them. Furthermore, to ship a patient to space and provide the treatment on orbit at rates equivalent to terrestrial costs would require launch costs, of $100/lb or less.
   
3. Space Hospitals. This market area was assessed to be very similar to the space medical facilities, except that long-term care would be provided to patients in an in-space facility. Again, to ship a patient into space and provide a long-term stay on orbit at costs equivalent to terrestrial costs would require launch costs of $100/lb or less.
   
4. Space Settlements. Representing the popular idea of large human habitations in space, this market had the weakness that the participants of the large habitats needed some occupation and the settlement needed some cash flow to justify market investment and support. Such cash flows could only be found if other large-scale space business activities, such as solar power satellite (SPS) construction in GEO, were underway. Based upon the market area potentials for these other areas, the assessed market for space settlements was determined to occur with transportation systems cost well under $100/lb to orbit.
   
5. Space Agriculture. Initially, this market area was conceptualized as a large in-space facility providing high-density and high-intensity agricultural production. As with the space settlements market, this venture would require other very large in-space business activities to occur before justifying this market area. Based upon the market area potentials for these other areas, the assessed market for space agriculture was determined to occur with transportation systems cost well under $100/lb to orbit.
   
6. Space Business Park. Conceptualized to represent a multiuse commercially oriented facility in Earth orbit, this market area was identified from the preliminary results of several market areas that did not generate enough revenues by themselves to justify a separate space facility. As an aggregate of this market area's demand, it was assessed that a multiuse, commercially oriented space facility could be a viable commercial venture at launch costs of greater than $560/lb to orbit.

The second prong of the assessment approach was to develop a business and technical feasibility model of potential ventures in this business area. In particular, these models were developed to answer the question, "Is this approach a good business deal?" (That is, Does this approach fit within current business ranges for investment size and returns?) As part of this approach, technical feasibility assessments were performed on the market concepts assessing if the project could be built and launched; identifying critical technology developments needed; and examining the production/engineering/technology resources needed for the business venture to see if they will be available in the time period considered.

To be included in the market projection, each market area assessed had to show business and technical feasibility for the market area - and match the market survey data such that there was some level of validation from the surveyed market data to establish credibility of the projections for the future market opportunities. From these assessments, sensitivities to market and technical assumptions were examined and a threshold cost, below which space transportation had to provide an acceptable rate or return, was determined.

3.7.2.1 Introduction/Statement of Problem

The market for space debris management appears primarily driven by:

1. Removal or negation of space debris that could pose a hazard to other space assets.
   
2. Removal or negation of other systems that could develop into a space debris hazard, such as spent rocket stages or satellites that have exhausted their attitude-control propellant.

The sizing of the market for space debris management is determined by several factors, including:

1. The amount of activity in regimes affected by debris.
   
2. The effectiveness of international regulatory controls upon space debris-producing events.
   
3. The technical capability of removing debris or negating possible debris sources, including use of terrestrial-based systems.

The assessed primary customer for this market area is governmental organizations, although the possibility of an insurance-funded system has been raised. This future market is highly dependent upon the above market factors.

1. Use of brainstorming sessions to generate market concepts and customers.
   
2. Review of current literature to establish rough market sizing, forces, and prior data for market areas.
   
3. ROM market analysis to establish preliminary market impacts.
   
4. Examination of how a future low-cost space transportation system could affect these markets, including the size of the projected demand.

The primary driving force in this market is the desire of space operators to remove potential threats to their space systems. As economic activity increases in space (including for governmental purposes), risks also increase. Sources of debris multiply, greatly increasing the debris flux experienced by assets in orbit. This creates an economic risk from space debris, which is in turn dependent upon the debris flux and the amount of assets placed in the regions at risk. Other market forces include the ability to control events that contribute to space debris, such as regulation of space systems to prevent events that might cause an increase in debris and the technical cost and relative capability of a technical solution to remove or negate debris risks.

3.7.2.3 Market Infrastructure

Prospective users contacted in this market survey included :

First, general statistics were gathered concerning illnesses and injuries that affect a large portion of the population and/or require long hospital stay times, expensive surgery, or expensive simulations of the zero-gravity environment of space. Then, those areas were further examined to predict the benefits and drawbacks to treating those patients in space. Some of the areas that are promising enough for further consideration are heart disease, pulmonary diseases, orthopedics, burn patients, physical therapy, rehabilitation, and quality of life (retirement in space). Each of these areas requires extensive research, which may also prove to be beneficial to patients on the ground. Pure medical research is the most promising area to apply to space, especially in cancer research and HIV research.

The field of medicine is quite extensive with an overwhelming number of areas to consider. To obtain a broad spectrum of medical applications for space, it was necessary to be in contact with many different specialties of medical personnel. Several excursions were made to hospital facilities and general statistics were obtained from major insurance companies and local hospitals. In this way, it was possible to estimate costs for running a medical facility in space and compare this to treating patients on the ground.

There are several adverse effects on the human body from space flight, such as muscle atrophy and calcium loss, that can be counteracted to some extent by exercises and conditioning. Several opinions have been obtained about the benefits for patients who are treated in space, assuming that proper countermeasures for the adverse effects are applied. Some areas, such as treating AIDS patients, were not extensively considered because it was reasoned that those patients would not benefit from a space hospital any more than a ground-based one.

Spine and disk - One area that may be helped by the 0g environment of space is in spine and disk injuries or diseases and bone quality.

1. Symptoms and Treatment. Some spine or disk problems may take a year to heal with physical therapy sessions two or three times a week. In particular, many of these treatments deal with building up muscles and spinal tissue to handle the full forces from the terrestrial 1-g field. Physical therapy includes posture and stabilization exercises and low-impact aerobics. Often the conditions of 0g environment are mimicked in order to reduce the stress on the spine from a person's body weight.
   
2. Support personnel required. A physical therapist and nurse's aide would be needed.
   
3. Space Application. In a space medical facility it would be possible to have that same person doing physical therapy and exercise to increase the support strength of the back muscles while allowing the trauma of the injury to heal without the pressure of 1g. Part of the physical therapy regime is low-impact aerobics, which could easily be carried out in a wide variety of ways if the patient could undergo treatment in space.

Fractures - It is not yet known whether weightlessness impedes or helps the healing process. Recent Spacelab life science experiments (yet unpublished) will provide initial data in this area.

1. Symptoms and Treatment. Clinically it has been found a bone will heal itself faster if it has to carry weight (Wolff's law). However, in many cases, placing the full weight of the patient upon the fracture will produce further injury until the bone achieves some level of healing. In ground-based hospitals, the broken bone is often immobilized in bed rest because the weight of the person is too much for it to handle. Patients are also treated by supporting the fracture to allow mobility. The bone is only slightly stressed in this case and tends to heal better. The advantage of a space-based treatment is that the amount of weight placed upon the fracture may be varied over a complete range from 0g to full weight.
   
2. Support Personnel Required. A technician trained in setting fractures, an orthopedic doctor, and a physical therapist are required.
   
3. Space Application. If that same fracture were to be treated in 0g or reduced-g in space, then it is hypothesized that the person would be able to keep up mobility and a small amount of stress on the bone without overwhelming it, to encourage a faster healing time.

1. Symptoms and Treatment. Burn patients with severe burns over a large percentage of their bodies need immediate fluid resuscitation to replace the fluid that their bodies lose rapidly with skin loss. Some patients are flown into burn units from remote areas in order to receive adequate care. After about 72 hours, when they have been stabilized, the patients begin physical therapy to keep up their mobility. The discomfort of burn patients with severe burns over a large percentage of their body is immense. Special particle beds are used to apply as little pressure to the patient's body as possible. Skin grafting procedures also begin right away, grafting approximately 10% of the body in one session. These surgical procedures continue about once a week until the burned area has been adequately grafted. Physical therapy continues during this period in order to maintain the range of motion of the patients as the skin grafts "take."
   Because circulation is poor in the extremities of a burn patient, the blood often pools, causing discomfort and sometimes bleeding under the skin grafts. Once bleeding occurs under a graft, the graft will usually not take. More surgery is then required to repair the damage. After several weeks of grafting surgery, and once the grafts have taken, physical therapy is intensified to keep the new-forming scar tissue supple and stretched out. For a few months, the painful process of stretching out new scar tissue must be strictly implemented. Patients must see a physical therapist two to five times weekly in order to keep up mobility and range of motion. Special pressure garments are worn to shape the scar tissue correctly and provide support for the internal structure.
   
2. Support Personnel Required. A surgeon, physical therapist, dietitian, psychologist, and nurse's aide are required. Burn patients pay up to $2,500/day in the burn intensive-care unit.
   
3. Space Application. In the 0g environment of space, the first benefit that is realized is the increased comfort of the patient. Burn patients could be anchored in place with minimum surface area touching anything but air. Once the patients are stabilized and the skin grafting is begun, 0g will allow the surgeon to manipulate the patient much easier and less harmfully during surgery. In space, it has been noted that the blood comes up into the chest area rather than staying in the lower extremities, so patients would not have the trouble of blood pooling in the lower legs and causing bleeding under grafts. It is hypothesized that more grafts will take, requiring fewer surgical procedures, and the grafts will cause less scarring because they will stay on with less stitching. In 0g, patients can begin physical therapy at once, beginning with mostly range-of-motion exercises while the patient is still extremely weak, and then doing cardiovascular exercise soon after. When scarring begins, the patient could stay in 0g for continued physical therapy or go to a reduced gravity module and then to a full-earth gravity module in preparation for the return to Earth.

In all the categories above, the main market drivers are cost and patient needs. The cost to treat patients in space must be compared to the cost on the ground, and then it must be determined if the patient benefits are great enough to justify the extra cost. That is, would insurance companies pay the extra money for clients to have better medical treatment in space? But, as stated previously, the main difficulty with assessing the potential for this market is the very limited database upon treatment of ill persons in space. It is hoped, however, that this study will be able to target potential markets where additional research in space medicine can be performed.

By taking it out of the Earth's gravity field, a new wealth of information about the human body can aid doctors in treating diseases on Earth. A second enabler in the market for space medicine is the backing of the medical community. At this time, there is very little interest or knowledge in the medical community in space medicine and a lot of skepticism. However, the initial market contacts conducted in this survey indicated this level of interest is driven by unawareness of the potential advantages from the space environment, and by the lack of data on the impact of the space environment upon ill or injured persons. If the medical community at large can be educated to begin thinking in terms of a microgravity hospital facility, then there will be an increased pool of ideas for space applications, in addition to informed opinions on the direction space medicine should take.

The third biggest market enabler in the field of space medicine is public will. The medical field is one of the most prestigious and giving fields. If it can be made known to the public that there are benefits to patients if only they can be treated in the space environment, then the public support could initiate much-needed funding for a space medical facility. (Many people are more likely to support such a humanitarian effort.)

Specific CSTS contacts in this market area included:

1. Harborview Medical Center, Seattle, Washington.
   1. Tracy Varga - Physical Therapist/ Orthopedics.
   2. Merilyn Moore - Physical Therapist/ Burns.
2. University of Washington Medical Center, Seattle, Washington.
   1. Dr. Greenlee - Orthopedics.
   2. Dr. Bassingthwaighte - Center for Bioengineering.
   3. Dr. Kushmeric - Professor Radiology, Physiology, and Biophysics.
3. University of Southern California Medical School, Los Angeles, California.
   1. Ken Hayashida - USC Medical Student.
4. Baylor College of Medicine, San Antonio, Texas.
   1. Dr. Michael DeBakey - Baylor College of Medicine.

General statistics were gathered concerning illnesses and injuries that affect a large portion of the population, require long hospital stay times, expensive surgery, or expensive simulations of the 0g environment of space. Then those areas were further examined to predict the benefits and drawbacks to treating those patients in space. Some of the areas that are promising enough for further consideration are heart disease, pulmonary diseases, orthopedics, burn patients, physical therapy, rehabilitation, and quality of life (retirement in space). Each of these areas requires extensive research, which may also prove to be beneficial to patients on the ground. Pure medical research is the most promising area to apply to space especially in cancer research and HIV research.

The field of medicine is quite extensive with an overwhelming number of areas to consider. In order to obtain as broad a spectrum of medical applications for space as possible, it was necessary to be in contact with as many different specialties of medical personnel. Several excursions were made to hospital facilities and general statistics were obtained from major insurance companies and local hospitals. In this way, it was possible to estimate costs for running a medical facility in space and compare this to treating them on the ground.

There are several adverse affects on the human body from space flight, such as muscle atrophy and calcium loss, that can be counteracted to some extent by exercises and conditioning. Several opinions have been obtained about the benefits to patients who are treated in space, assuming that proper countermeasures for the adverse effects are applied. Some areas such as AIDS patients were not extensively considered because it was reasoned that those patients would not benefit from a space hospital any more than a ground-based one.

1. Retirement in Space - It has been postulated that the elderly could benefit by retiring to space in order to increase mobility, ability to care for oneself, and general quality of life.
   1. Market Size. Approximately 1 million Americans are admitted to nursing homes each year. Nursing home costs generally run $50 to $100/day for room, board, and services. About half of this money is paid by Medicaid.
   2. Symptoms and Treatment. Generally, the elderly find that they do not have the energy and strength to carry out everyday tasks for survival, so they have to retire to a home where adequate care (i.e., cooking, cleaning, maintenance, and transportation) is provided for them. Up to 50% of the people who are being taken care of in a retirement center also have neurological problems and are not able mentally to take care of themselves either. Elderly people tend to keep the friends they have had all their lives rather than make new ones at the retirement center. However, the staff has found that the more tenants get out of their rooms, for meals for example, and talk with people and ambulate, the better they do both physically and mentally.
   3. Personnel. A staff consisting of cooks, food servers, maintenance crew, cleaning personnel, and others would be required. Their numbers approximate 20% of the people in the retirement center.
   4. Space Applications. For long-term residences in space, the elderly may be some of the people who could benefit from living in reduced gravity conditions. Because of the bone calcium loss in a 0g environment, the reduced gravity environment may be healthier in terms of calcium loss for long-term stays. Without the heavy weight of gravity pulling down on them, elderly people may find themselves far more self-sufficient than they were on Earth. If they were only able to get around a little in their room and dress themselves while on the ground, they may find that they are able to get around enough to completely take care of cleaning, cooking, or other chores. In some cases, they may want to perform some type of job. It is possible that very little staff would be required to maintain a retirement center in space because the tenants could care for themselves.
      Additional benefits to living in space would be the novelty of it, the great view, and the experience of renewed health because of reduced gravity. Psychologically, it would be necessary to screen tenants in order to avoid those with neurological problems. Another disadvantage would be proximity to friends and relations. It would be hoped that at least one close friend or relative could make the transfer to space living also, or that communications would be adequate for satisfying the tenant's need for old friends on Earth.

2. Physically Impaired - It has been postulated that the physically impaired elderly could benefit by retiring to space in order to increase mobility, ability to care for oneself, and general quality of life.
   1. Market Size. In 1990, approximately 14,164,000 U.S. citizens had work disabilities that either prevented them from working or limited the kind or amount of work they performed. This was about 8.9% of the total U.S. population. For permanent and total disability, Medicaid payments averaged about $6,600 per person, with almost another $12 billion spent from private insurance on disability payments.
   2. Symptoms and Treatment. The work disabilities can range from physical impairments such as loss of use of limbs or sensation to significant illnesses or mental impairments. In many cases, these can be treated through rehabilitation, and the person returned to gainful employment. In 1990, about 146,000 categorized as "seriously disabled" were rehabilitated into gainful employment. (For the seriously disabled, the wages earned from gainful employment are usually less than those of the able employed. This is particularly true for job-related accidents and work-related disabling events.) For many impairments, such as loss of use of a limb, the space environment may provide a better environment for work and other physical activities. This is particularly true if the impairment is related to the organs that provide support or locomotion on the Earth, such as muscular or limb disabilities.
   3. Personnel. Given a mix of physical impairments, the support personnel required for an in-space facility (cooks, food servers, maintenance crew, cleaning personnel, etc.) could be staffed from the physically impaired inhabitants. Furthermore, these personnel could provide the support personnel for entire space facility, such as the space business park described below.
   4. Space Applications. An in-space facility could provide improved quality of life and productive uses for physically disabled persons. These persons could also provide the staffing for other in-space facilities. In all the categories above, the main market drivers are cost and patient needs. The costs of transporting and sustaining a person in space must be compared to the cost to treat and sustain and maintain the same person on the ground, with sufficient additional benefits to justify the extra cost. That is, would insurance companies pay the extra money for clients to have better quality of life in space? There are no data on the impact of the space environment upon the elderly and the physically disabled. Therefore, the benefits for long-term patient care or hospitalization in space are hard to predict. It is hoped, however, that this study will be able to generate interest in research in these areas for aerospace medicine research.

The market assessment for these market areas is primarily driven by the needs for supporting long-term working and living in space. Elderly people who need to be taken care of in a retirement center tend to be depressed and bored. If a space retirement center could offer mobility in a reduced gravity environment and entertainment (views in space, work to do, being independent), then it is possible that some people would want to spend the money to retire in space. However, at approximately $10,000 per day to stay in space, it is unlikely that the market of those who could afford to retire in space would be large. (Half the people in nursing homes rely on Medicaid to pay half the present cost.) And the number of severely physically disabled who could afford this (or whose insurance could afford this) would also be small.

No market was assessed from this area due to the lack of real market demand quantified for any probability demand market through the 2010 to 2020 time period.

1. Harborview Medical Center, Seattle, Washington.
   1. Tracy Varga - Physical Therapist/ Orthopedics.
   2. Merilyn Moore - Physical Therapist/ Burns.
2. University of Washington Medical Center, Seattle, Washington.
   1. Dr. Greenlee - Orthopedics.
   2. Dr. Bassingthwaighte - Center for Bioengineering.
   3. Dr. Kushmeric - Professor Radiology, Physiology, and Biophysics.
3. University of Southern California Medical School, Los Angeles, California.
   1. Ken Hayashida - USC Medical Student.
4. Baylor College of Medicine, San Antonio, Texas.
   1. Dr. Michael DeBakey - Baylor College of Medicine.

3.7.5.2 Study Approach

The hidden assumption in many of the past space settlement concepts proposed in the literature are that there are also large-scale space activities under way either in space-manufactured products or in the in-space production of solar power satellites. The CSTS assessment is that many of the underlying assumptions for these large markets have changed since the 1970s and that the rapid and highly profitable growth of these markets cannot be depended upon to driven space transportation demand in the next two decades. Without this high level of other in-space activities, the economic infrastructure, that can justify these large-scale investments in large habitations is not present.

We have tried to represent two communities during this process. The first is the facility developer, the entrepreneur who raises the venture capital, hires the facility manufacturer, arranges for the launch, and puts the privately owned research facility on orbit. The second is as the end user; that is, as the pharmaceutical company, the bioresearch company, the microchip producer, or the tour operator who pays for the goods and services offered at such a facility. We will discuss the issues related to developing the facility first, and then cover the issues with respect to end users. Real Estate Development in Low Earth Orbit (LEO). The best analogy to this type of development is the extension of traditional real estate development practices into space. In this type of business ventures, a new real estate development is planned, financed, constructed, and either sold or operated in exchange for returns to a body of investors.

The scale, scope, and complexity of large real estate development projects are analogous to what is required for space infrastructure development, with the one notable difference being that real estate projects are more often actually realized. Terrestrial business park developments manage budgets of up to billions of dollars contributed by many investors and lenders, over periods as long as decades, and coordinate the activities of hundreds of diverse suppliers to generate wealth and, along the way, physical infrastructure.

It is important to note that these ventures are highly market driven, and that the goals of successful investment by meeting user needs are in contrast to the usual aerospace approach of designing and building a system and then looking for commercial applications for it. Traditional aerospace goals, such as high performance and technology innovation, would be secondary to generating profit, because without significant assuredness of profit, potential investors would simply look elsewhere and such goals would forever remain moot measures of unrealized projects.

The approach of using a commercial "business park" is used instead of an international space station because the vast majority of commercial users want to deal with a service oriented private entity instead of a government bureaucracy. Contacts with potential users and developers specifically indicated this factor as part of their decision process. Government service providers have no need to meet demanding schedules, since they have no competition. In addition they are subject to the whims of congressional politics and users have little legal recourse when the services are arbitrarily changed or dropped completely. A commercial investor with significant monies at risk cannot accept this uncertainty. The key role of the government in the development of future space industrial facilities is to develop and demonstrate the technologies and operations needed for future commercial space operations through the international space station.

This analysis first compares the maturation of the real estate and aerospace industries, highlighting key differences. Terrestrial mixed-use business parks (the most applicable model for potential large-scale, space-based profit-making enterprises) are examined as a model for future space business park development, by analogy to the way they are developed on Earth. Next, this business model is applied to the development of research, production, and leisure facilities in LEO. The infrastructure services to be made available to industries in space are listed and discussed, and the enabling financial arrangements are specified. Finally the organizational requirements for developing such mixed-use LEO business parks are listed.

The economies of scale needed to control costs are generated at the component supplier level in the real estate development industry. Manufacturers of HVAC (heating, ventilation, air conditioning) systems, electrical equipment, lumber, structural steel, elevators, windows, and the like have developed lines of standardized building components useful in a wide variety of buildings and locations. Creativity in the real estate development industry is in how the standardized parts are integrated into unique (or not so unique) designs intended to meet specific market demands and price targets. Similarly, local and state building codes evolved to allow use of these standard components, without costly requirements for zoning and code variances and reviews.

In today's market, a significant difference between the aerospace and real estate industries is the highly fragmented business organization within the practice of real estate development when compared to aerospace. The aerospace industry is characterized by a few principal manufacturers (approximately a half dozen), and a limited number of principal players (about a dozen customers comprise over 80% of the total market). In contrast, the real estate industry has dozens of large players, hundreds of midsize players, and thousands of small players involved as principals in real estate deals. These firms in turn rely on thousands of small design, engineering, brokerage, and financial services firms, which all contribute to making deals happen.

A second principal difference between the two industries is in the fundamental premise in how the business operates. Members of the aerospace industry, and in fact most manufacturing companies, operate with a more or less consistent level of business activity. The airlines will always need a certain percentage of the fleet replaced in any given year, more so when markets are growing or increased fuel or operational efficiency can enhance operating margins. The aircraft and engine manufacturers can count on some level of continued new orders and service work on the existing fleet even during lean economic times, and the entire industry benefits from reducing costs and servicing an expanding market.

Terrestrial Mixed-Use Business Parks. The best analogy to the space business park concept developed in this study is the terrestrial mixed-use business park. Terrestrial mixed-use real estate development projects are among the most difficult of all types of projects to develop due to the large scale of the investment and the political, design, and market positioning complexities of the various uses. Mixed-use projects are typically done on the largest available parcels in a given market in order to minimize absorption (selling) time and to spread the cost of common infrastructure over as wide a revenue base as possible. In addition, political considera-tions will often dictate some degree of mixed use development where a single use such as office or industrial may be the preference of the developer.

Business parks can range in size from 100 acres to 10,000 acres. The largest developments, such as the Irvine Ranch (California) and Columbia (Maryland) are more closely related to British New Town projects than to traditional U.S. developments. Total investment in land, infrastructure, buildings, and ameni-ties can range from $50 million to over $2 billion, depending on size and location. The period of active development and construction can range from 5 years to 20 years, with ownership and management of rental properties within a development continuing for another 10 to 20 years after completion of construction. Ultimately, rental properties are sold, syndicated, or refinanced to return the original equity investment and generate "back-end" profits.

Business park uses typically include land for sale for owner-occupied office research, and light manufacturing buildings; single-tenant and multitenant rental buildings for the same uses; a hotel or some type of transient or short-stay housing; varying degrees of commercial and retail space; and recreational amenities. Larger projects will also generally include single-family and multifamily residential neighborhoods, with both rental and ownership units, child care facilities, and, in the largest projects, schools and medical facilities.

When a developer is planning out and doing the financial analysis on such projects, there is little or no idea of who the actual users will be or what the specific building projects will look like. However, the requirements for the core infrastructure do not require specific users, only general market targets. Road systems; sewer, water, and utility service; site amenities; preservation of significant natural features; political realities of maximum allowable density; municipal impact fees; upgrading of sewer and water treatment plants when needed; local tax incentives for new business attraction; and similar issues are all considered when large scale mixed-use projects are designed and developed.

Once the overall project design and market mix are established, one of the key factors in financial success lies in the phasing plan for the infrastructure development. Ideally, the initial presales will cover the costs of the first phase of the infrastructure development, and the amount of nega-tive cash flow required to bring the project to market will be minimized. Subsequent phases of development are financed through "recycling" of the same investment used to open the project, so the amount of additional cash required to finish the project is kept to a minimum. The true profit from the development activities does not actually begin to show until the project is typically 80% or more complete, although fee and management income to the developer is usually available throughout the life of a project.

An early and highly elastic market segment is tourism. Terrestrial mixed-use business parks commonly include hotel facilities to service the businesses in the business park or to cater to tourists into the region. For the initial market, the space business park should include facilities for short-term stays of researchers working at the business park.

Based upon discussions with potential users, a 51.6 degree inclination was selected for the space business park. This inclination was to maximize the Earth viewing opportunities for the space business park, and to place it into the vicinity of the international space station, which will maximize the possibility of access. This assumption may be revisited in later analyses if it is determined the payload capability to the system should be maximized, which would push for a lower inclination orbit.

The initial launch cost for a LEO space business park is determined by the mass required, and the price at which these launches are tendered. (Continuing the analogy to terrestrial development, a purchasing agent buying a million pound trucking contract would be indifferent to whether the trucks were Peterbilt or Kenworth, or whether the loads came in 20-ton or 50-ton increments, as long as the total cost is as low as pos-sible and delivery is as fast as possible. Similarly, the commercial developer of a space industrial park buying a million-pound launch contract would be indifferent to the make of the launch system, assuming the system could deliver his systems at as low a price as possible, and with delivery as fast as possible.)

High confidence must be provided in the financial returns for the project before significant project financing can be obtained. The current catch-phrase used to describe the real estate industry is "market driven.Ó Practically speaking, this means that a project must be largely preleased or presold before significant debt and/or equity financing can be procured. Users of space (either rental or sale) are courted and in-duced to sign "soft" letters or letters of intent that are then used to finalize designs and procure political and financial approvals. For larger users of office or research space, the process of eval-uating locations and size requirements can take several years before any binding agreements are executed, with implementations taking several more years.

The LEO space business park concept evaluated in the CSTS was built in conjunction with several commercial real estate developers, architects, and entrepreneurs experienced in commercial space activities. To reduce cost and technical risk, the systems assumed are based upon space station technology and subsystems, which also allows reasonable confidence in the cost and development numbers.

Real estate investment trusts (REIT) have become much more active in the last few years as traditional lending has become less available. These publicly traded stocks acquire and hold real estate assets and are sold on the yields generated from rental income after all expenses. Cur-rently, REIT offer yields of from 7% to 12%, plus whatever returns are generated from the ap-preciated value of the stock. Future profits from sale or refinancing of individual real estate assets are considered as part of the overall investment decision but are not as heavily weighted as current yield. While REITs were not considered by professionals in the real estate development field as suitable sources for initial financing, once an operating history in LEO is established, REIT could be excellent long-term financing sources for continuing LEO development. This is particularly true if initial returns are high enough and stabilized returns hold at or above casino/resort returns (13% to 16%).

The unknown status of tax laws was identified as a potential roadblock to the space business park. One of the largest operating expenses in terrestrial real estate is property taxes. Multibillion dol-lar development at LEO will be impossible to finance until a clear determination is made as to the jurisdiction and tax status of the investment. While initial steps towards clarifying this issue have been made through legislative actions and tax code clarification, substantial uncertainties remain.

One of the standard clauses in all U.S. real estate contracts is a statement saying, "This contract shall be governed by the laws of the State of ______." This clause needs to be clarified for a space business park development. It should be noted this state-ment has both positive and negative implications for business considerations, such as the tax status of income earned in orbit, banking and securities regulations, gambling and vice laws, building code requirements, and security positions for the mortgage lenders who will be financ-ing the infrastructure development. Some of these implications (such as a potential favorable tax treatment for commerce transacted in space versus commerce transacted on the Earth) may be positive.

An equivalent of a county register of deeds will be needed in order to provide a mecha-nism for recording mortgages and Uniform Commercial Code (UCC) filings for personal prop-erty financing. This is important to reduce the risk of mortgage positions through insurance of financial positions. Any title insurance com-pany requested to insure a lender's mortgage position would need all of these jurisdictional is-sues resolved before it would be in a position to insure a mortgage loan.

3.7.6.5.1 Transportation System Characteristics

3.7.6.5.2 Transportation System Capabilities

1. Capability of launching and returning payloads.
2. Payloads of 15-foot diameter and up to 60 feet long. This capability is driven by the use of space station technology to reduce development and cost risks. The diameter volume is driven by the use of space station orbital modules and subsystems, and the use of space station logistics modules for resupply.
3. Payloads of up to 30,000 lb into a 51.6-degree orbit at 220 nmi. For the medium-probability demand case, this value seemed to provide an optimum enough demand per flight to meet the schedule flight rates at about 7 to 10 day intervals.

3.7.6.7 Conclusions and Recommendations

It is recommended that further analysis be peformed to develop a more complete preliminary design of a commercially procured space business park. This would answer specific questions about the subsystems design and systems cost, based upon space station technologies and operational experience. Similarly, further market analysis should be performed to reduce the uncertainty in the research/manufacturing markets and the space tourism markets.

Footnotes