Month: February 2015

Welcome to Sustainable Benefits – Let’s begin with the benefits of doing a commercial building sustainable retrofit….

Posted on February 19, 2015February 19, 2015 by abrahamwien18

2/12/15

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

“Who is more foolish: The child afraid of the dark or the man afraid of the light?” (Maurice Freehill, British WW I flying ace).

Figure 1 Empire State Building – LEED Gold

Throughout my 36-year career in commercial real estate, commercial buildings have generally been classified from A to C based on location, construction quality and tenancy. Class A buildings represent the cream of the crop. They secure credit-quality tenants, command the highest rents, enjoy premium occupancies, are professionally managed and have a risk profile that supports lower cap rates and higher values. Class B buildings are similar to Class A but are dated yet not functionally obsolete. Class C buildings are generally over 20 years old, are architecturally unattractive, in secondary or tertiary locations and have some functional obsolescence with out-dated building systems and technology. NOTE: No formal international standard exists for classifying a building, but one of the most important things to consider about building classifications is that buildings should be viewed in context and relative to other buildings within the sub-market; a Class A building in one market may not be a Class A building in another.

Based on years analyzing investments in income properties, it appears to me that in the recovery from the Great Recession the commercial real estate market has evolved to include energy efficiency and environmental design as a requirement for improving the marketability of a building – not to mention optimizing its operating income and value.

COMMERCIAL OFFICE BUILDINGS

On December 1, 2014, Buildings.com, in an article entitled “GSA Verifies Impact of Green Facilities,” reported that a study conducted by GSA and the Pacific Northwest Laboratory conducted a post-occupancy study of Federal office buildings, which varied in age and size and had been retrofit to reduce energy and water consumption. The following results were based on a review of one year of operating data and surveys of the occupants which was compared to the national average of commercial buildings: High performance, green buildings:

cost 19% less to maintain
Use 25% less energy and water
Emit 36% fewer carbon dioxide emissions
Have a 27% higher rate of occupant satisfaction.

One of the most famous sustainable retrofit projects undertaken was the updating of the 2.85 msf Empire State Building whose ownership directed that sustainability be at the core of the building operations and upgrades implemented as part of the $550 million Empire State ReBuilding program. According to Craig Bloomfield, of Jones Lang LaSalle (JLL), “After the energy efficiency retrofit was underway, JLL led a separate study of the feasibility study of LEED certification” which “showed that LEED Gold certification was within reach at an incremental cost of about $0.25 psf.

Graphics on financial benefits of high-performance buildings

Source: Institute for Market Transformation: Studies consistently show that ENERGY STAR and LEED-certified commercial buildings achieve higher rental rates, sales prices and occupancy rates.

According to the report “Green Building and Property Value” published by the Institute for Market Transformation and the Appraisal Institute, a trend is emerging where green buildings are both capturing higher quality tenants and commanding rent premiums. As indicated by the above graph summarizing four national studies for commercial office buildings back up this trend on rents and occupancy, as “certified green buildings outperform their conventional peers by a wide margin.”

According to the EnergyStar.gov website, “Transwestern Commercial Services, a national full-service real estate firm, has generated impressive returns through sound energy management. In 2006, Transwestern invested over $12 million in efficiency upgrades, for an average 25% energy savings. The Company estimates that dedication to energy management has increased the portfolio’s value by at least $344 million.”
According to John Bonnell and Jackie Hines of JLL – Phoenix, “In Phoenix, owners of LEED-certified buildings can capture a premium of 29 percent over buildings without this distinction.” The premium for Green buildings had disappeared during the Great Recession and reemergence in the first quarter of 2014 as a result of improving Phoenix market dynamics which is being realized in other major markets as well.

RETAIL

For retail buildings, the tenants are driving the shift to sustainability with green building as consumers become increasingly aware of the environment and the need to reduce, reuse and recycle. According to the “LEED in Motion: Retail” report published by the USGBC in October 2014, “LEED-certified retail locations prioritize human health: among their many health benefits, they have better indoor environmental quality, meaning customers and staff breathe easier and are more comfortable. In a business where customer experience is everything, this is particularly valuable.’ Green retail buildings also out-perform conventional buildings and generate financial savings:

On average, Starbucks, which just opened their 500th LEED-certified store, has realized an average savings of 30% in energy usage and 60% less water consumption.
McGraw-Hill Construction, which surveyed retail owners, found that green retail buildings realized an average 8% annual savings in operating expenses and a 7% increase in asset value.

It is noteworthy that, according to the third annual Solar Means Business report published by the Solar Energy Industries Association, the top corporate solar user in the United States is Walmart. In fact, almost half of the top-25 solar users are retailers (the others are Kohl’s, Costco, IKEA (9 out of 10 stores are solar powered), Macy’s, Target, Staples, Bed Bath & Beyond, Walgreens, Safeway, Toys ‘R’ Us, and White Rose Foods). Other Top-25 solar users with a significant retail footprint include Apple, L’Oreal, Verizon and AT&T.

In the competitive retail market, the study also noted that being distinguished for pro-active and responsible corporate social responsibility attracts customers and investors.

MULTI-FAMILY BUILDINGS

In a study of 236 apartment complexes conducted by Bright Power and The Stewards of Affordable Housing released last July, 236 properties in two programs, HUD’s nationwide Green Retrofit Program and the Energy Savers program available from Illinois’ Elevate Energy and the Community Investment Corp. One year of pre- and post-retrofit utility bills were analyzed. The researchers found the following:

Properties in the Green Retrofit Program had realized a 26% reduction in water consumption – or $95/unit annually.
The energy consumption in the Green Retrofit Program was reduced by 18% representing an annual savings of $213/unit.
Surveyed buildings in the Energy Savers program had reduced gas consumption by 26% and had reduced excess waste by an average of 47%.
The water saving measures in the Green Retrofit program reflected a simple payback period of one year while the energy savings measures had a simple payback period of 15 years.

In an article be Chrissa Pagitsas, Director – Multi-family Green Initiative for Fannie Mae, reports that 17 multifamily properties have achieved Energy Star^® certification with two of them, Jeffrey Parkway Apartments in Chicago and ECO Modern Flats in Fayetteville, Arkansas, receiving financing from Fannie Mae.

The Eco Modern Flats complex is over 40 years old. With the goal of reducing operating expenses, the project was retrofit in 2010 with energy and water efficiency improvements including low-flow showerheads and faucets, dual flush toilets, ENERGY STAR^®certified appliances, efficient lighting, closed-cell insulation, white roofing, solar hot water and low-e windows. As a result of the retrofit, the property achieved a 45% reduction in water consumption, a 23% drop in annual electricity use including a 50% savings in summer electricity consumption while increasing the in-unit amenities, obtaining LEED Platinum certification and increasing occupancy by 30% resulting in a significant increase to Net Operating Income.

Multi-family properties made sustainable gain a competitive advantage in marketing to young professionals and other target audiences who prefer to live in an environment that is healthy and energy-efficient which saves money on utilities.

HOTELS

In a 2014 study conducted by Cornel University, researchers compared the earnings of 93 LEED-certified hotels in the US to 514 non-certified competitors. The study included a mix of franchised, chain and independent facilities in urban and suburban markets with three-quarters of the properties having between 75 and 299 rooms.

The results show that green or sustainable hotels had increased both their Average Daily Rate (ADR) and revenue per available room (RevPAR) with LEED properties reporting an ADR that was $20.00 higher than the non-certified properties (prior to certification, they reported an ADR premium of $169 vs. $160).

The researchers noted that these premiums were realized in price-competitive markets and that the amount of the premium was unexpected. From the results, they concluded that Eco-minded travelers were willing to pay a modest premium to stay at a verified green facility.

Further, the savings realized in electricity and water usage as well as reductions in waste disposal fees and costs as well as reduced maintenance costs go straight to the bottom line resulting in increased Net Operating Income. Here are some examples:

The Hampton Inn & Suites, a 94-room facility in Bakersfield, had REC Solar install carport-mounted solar panels which is offsetting 44% of the electricity costs, or up to $8,800/month – adding over $100,000 to the property’s bottom-line.
The 80-room Chatwall Hotel in New York completed an LED lighting retrofit project mid-year 2014 which will result in a first year savings of almost $125,000. The cost: just about $1.00 per LED light after rebates.

According to Flex Your Power and ENERGY STAR^® statistics, the hospitality industry spends approximately $4 billion on energy annually with electricity, including the HVAC system, accounting for 60% to 70% of utility costs. In fact, excluding labor, energy is typically the largest expense that hoteliers encounter and the fastest growing operating expense in the industry (www.cpr-energy.com). The EPA has concluded that even a 10% improvement in energy efficiency is comparable to realizing a $0.62 and $1.35 increase in ADR for limited service and full service hotels, respectively.

Many studies show that hotels do not realize the full benefit of many energy efficiency measures as guests feel no obligation to employ sustainable practices and wastes the opportunity for savings afforded by the hotel’s energy efficiency measures; however, almost half realize savings in excess of 20% reflecting that many operators have found ways to enlist guest cooperation in saving electricity and water.

According to the US Energy Information Administration (EIA) 2012 Commercial Buildings Survey, the United States had approx. 87.4 billion square feet of floorspace in 5.6 million buildings that were larger than 1,000 sf which also excluded heavy industrial manufacturing facilities. Ninety percent of the buildings that will exist in2035 have already been built – and buildings consume 80% of energy used in cities worldwide and represents almost 20% of all energy consumption in the United States.

Source: US Department of Energy 2013 Renewable Energy Data Book, 1/22/2015

The evidence is clear – building and operating sustainably pays dividends – in improved NOI from cost savings and increased revenues. Attracting higher quality tenants, improving market perception and reducing risk indicates that going Green is becoming a key for maintaining the Class of a building – keys to improving long-term values through lower cap rates.

So, why aren’t more building owners and managers going green? We will seek to discern this matter in our next Sustainable Benefits.

Has the Increase of Human Knowledge given us Wisdom? Let’s start the dialogue

Posted on February 19, 2015 by abrahamwien18

11/25/14

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

Muhammad Ali is quoted as saying: “The man who views the world at 50 the same as he did at 20 has wasted 30 years of his life.”

It makes sense that as we experience life, we learn from our experiences which changes our view of the world – we call it many things – like growing up or becoming mature. Throughout each of the stages of our lives, we experience life differently which causes us to act differently. Those changes can be infused from our personal lives through the loss of a loved one, the survival of a major illness, the overcoming of addictions or the recovery from a bad marriage or relationship. Or they may be through our education and career, through the rise and fall of a business, the lessons of a new course of study, the influence of colleagues and clients. And they may be spiritual – developing a deeper relationship with our God – however we conceive Him/Her to be, and what becomes important in the service of God and humanity. Ideally, we mature through all of these experiences and we move into Wisdom.

Wisdom is defined as “the quality of having experience, knowledge and good judgment; the quality of being wise; the soundness of an action or decision with regard to the application of experience, knowledge and good judgment; or the body of knowledge and principles that develops within a specified society or period.”

The process of maturation in an individual can be viewed as the evolution of a person. And just as a person evolves, so does society: humanity as a species is dramatically different now than it was just 30 years ago – pre-internet, pre-smart phone, pre-nanotechnology, pre so many things that have changed how we experience and view the world.

In fact, the pace of human advancement has been accelerating throughout time. you can select many gauges by which to measure progress and change, patents for instance; but, there is one yard stick that I think gives us the greatest insight into the pace of change which is R. Buckminster Fuller’s Knowledge Doubling Curve which he introduced in his 1982 book, Critical Path.

A futurist and inventor, Fuller estimated that if we took all the knowledge that mankind had accumulated at the time of AD One, or One CE (Common Era), as equal to one unit of information, which took hum curve ans nearly 198,000 years to accumulate, and used that as the benchmark; the amount of human knowledge would take another 1,500 years to double. With the introduction of the printing press, the pace of growth in human knowledge started to accelerate with another doubling occurring in about 250 years. By 1900 (around 150 years), human knowledge had doubled again. By the end of World War II, knowledge was doubling every 25 years. At the time Critical Path was published, Fuller estimated that human knowledge was doubling every 18 months. Now, Human knowledge is estimated to double every 13 months. With the internet and other advances in human communication and data storage, IBM predicts that human knowledge is soon to double every 12 hours.

This growth in human knowledge has lead to great advancements in the quality of life for much of humanity with scientific and technological advancements leading to improved hygiene, literacy, agricultural production, mass production, and medicine.

Further, these advancements lead to the first real increase in global per capita GDP which has been estimated to average $158 per annum (adjusted to 2013 dollars) from pre-history until the Industrial Revolution. (According to a 1998 academic paper entitled “Estimates of World GDP, One Million BC to Present” by J. Bradford De Long of the UC Berkeley Department of Economics, GDP per capital started escalating around AD 1600 with consistent growth occurring after 1800).

The growth of knowledge and information accelerated in the 18^th and 19^thCenturies with a doubling of human knowledge translated into improved opportunities for a better life: People were empowered with knowledge which lead to the end of the feudal system and the introduction of democracy in politics, social structures and economics.

With the pace of human knowledge and the changes that it brings to our daily lives increasing exponentially, the natural reaction is to hold onto the bar and try to slow down the ride – like we do in a roller coaster or a vehicle traveling faster than is comfortable….

All this information and knowledge and experience should also lead to wisdom, right?

Unfortunately, however, billions of people – including many of our political, religious and social leaders – still live as if they were in the Middle Ages.

The changes have made our lives better in many ways – but they have come with a price. The following diagram from Wiki-books on “Economic History” is a diagram of societal development: hunter/gatherer, pastoralist/horticulturalist, agrarian, industrial, and post-industrial. It also ties each stage of development to the important consequences of societal development, namely: surplus, denser populations, specialization, technology and inequality (As a dramatic example of this inequality, the Toilet Board Coalition just reported that over one billion people live with no alternative to open defecation while 2.5 billion people in the world do not have access to proper sanitation which is in stark contrast to the standard of living experienced in the First World.) See: http://www.theguardian.com/sustainable-business/2014/nov/19/world-toilet-day-business-coalition-open-defecation?CMP=new_1194

(http://en.wikibooks.org/wiki/Economic_History)

As noted in an October 2012 article by Samuel Arbesman in BBC Future, “our lives are governed by centuries of advances that haven’t been random….there’s a pattern that reveals how our knowledge has changed over time….”

Understanding this pattern, Mr. Arbesman states, “helps us to understand something fundamental to our success as a species.”

In technology, Gordon Moore, a retired chemist and physicist who was a co-creator of the Intel Corporation, wrote a paper in 1965 entitled, Cramming More Components onto Integrated Circuits. In this short paper, Moore predicted that the number of possible components that can be placed on a single circuit for a fixed cost would double every year. This thesis, based on just four data points, has been proven true and is known as “Moore’s Law.”

If you generalize Moore’s Law from integrated circuits and chips to information technology, it explains extremely regular changes in technology over the past few centuries.

A primary reason that everything from the growth in knowledge to the advances in science and technology follows this pattern is related to the concept of cumulative knowledge. All advances are built on the information available already. Like this article is based on the information and research that has been done by many people and is available now on the internet.

Mr. Arbresman continues:

” So, while exponential growth is not a self-fulfilling proposition, there is feedback, which leads to a sort of technological imperative: as there is more technological or scientific knowledge on which to grow, new technologies increase the speed at which they grow. But why does this continue to happen? Technological or scientific change doesn’t happen automatically; people are needed to create new ideas and concepts. The answer is that in addition to knowledge accumulation, we need to understand another factor that’s important to knowledge progression: population growth.”

In an August 1993 academic article published in The Quarterly Journal of Economics, Michael Kremer presents the case that the growth in knowledge and technology is directly linked to population growth and that technological growth is proportional to population growth.

There are now over seven billion humans on this earth – which both fuels innovation, the growth of knowledge, scientific discovery and technology while also causing an extreme demand on natural capital – the stock of finite resources which includes geology, soil, air, water and all living things from which humans use to sustain life.

Now, the question is – with 200,000 years of history and all this data, information and knowledge, have we grown wise?

What would Ali think? What do you think?

To be continued…..

Perhaps the Scientists are sounding too much like Chicken Little

Posted on February 19, 2015February 19, 2015 by abrahamwien18

11/5/14

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

This week, the United Nations’ Intergovernmental Panel on Climate Change issued its latest report on the effects of climate change on the world if corrective action is not taken. The headline in the Miami Herald read “Scientists’ warning is most alarming yet.”

A review of articles on climate change reflects similar headlines and worse – like “Goodbye Miami” or “Florida developers facing environmental woes.”

The alarm bell is ringing – and the headlines are starting to sound like Chicken Little crying “The sky is falling, the sky is falling!” in the children’s books. I know it does to me – and I know that the scientists have done their homework which is the opposite of Chicken Little and all his furry friends – Hen Pen, Duck Luck, Goose Loose and Turkey Lurkey.

In fact, a group of industry experts and sustainability professionals met in London last summer to dialogue about a report being issued by DNV GL, a leading ship and offshore classification, a leading technical advisor to the global oil and gas energy and a leading expert for the energy value chain including renewables and energy efficiency. The report, entitled, A Safe and Sustainable Future: Enabling the Transition, provides an analysis of challenges to sustainability in the global economy, societal well-being and governmental and corporate governance.

In an article published in Maritime Executive (http://www.maritime-executive.com/article/Too-Much-Climate-Change-Doom-and-Gloom-2014-07-12), entitled “To Much Climate Change Doom and Gloom,” participants expressed concern that the messaging around climate change is too much “doom and gloom” and not enough on the opportunities that are arising from addressing the effects of a warming world. Bjorn Haugland, executive vice president and chief sustainability officer at DNV GL was quoted:

“We believe there is a need to put the focus on the opportunities. For corporate leaders and politicians to speak a positive narrative is so important as it directs so much activity in society.

“We believe it is possible to create a thriving economy, it is possible to stay within the limits of the planet and it is possible to create a society for nine billion people to live well if we want to. It is human activity that has taken us into this situation and it is human activity that will take us out of it.”

Much of our perspective on the world, including our economic systems, is based on the belief that the world has an infinite supply of natural capital and a warming planet; however, the headlines about water shortages, famines, super storms, flooding, the hottest year on record, rising sea levels, ice caps melting and other calamities highlight that the scientists are not Chicken Little – the evidence is all around us.

Whether or not the global warming is man-made or from natural causes does not really matter, it is affecting the future for man-kind. Further, resource limitations can be extended – like the Green Revolution in agriculture where research, development and new technology between the 1940s and the 1980s increased agricultural production around the world – saving hundreds of millions of people from starvation.

Challenges abound everywhere, but where there are challenges, opportunity also exists.

DNV GL’s research report highlights 36 “barriers to sustainability” which range from economic and market hurdles to policy, societal and behavioral attitudes and habits – including reactive and short-term thinking, “denialism” and a lack of urgency. (available here: http://dnvgl.com/Images/DNV%20GL%20SSF_20_aug2014_tcm212-595432.pdf)

The Report concludes with Pathways to a Sustainable Future, which is summarized as follows:

“Our vision for a safe and sustainable future is within reach. Humanity has faced, and overcome, grand challenges in the past. Undoubtedly, we can surmount our present challenges too – if we choose to. Changing course will depend on our ability to work together, to act quickly and to harvest opportunities both today and tomorrow.

“We can develop an economy that is sustainable and regenerative, we can rejuvenate our ecosystems, and we can build the stable, equitable and thriving societies that we desire for the future. We are at a moment in time where there is a unique opportunity to shape the future we want.”

The scientists are not Chicken Little. It is time to stop ignoring the headlines which are designed to instill a sense of urgency and realize that the time is now for each of us to act.

It is real estate owners and investors who have the most to lose as the effects of climate change will most definitely be seen in utility bills, property taxes and insurance premiums. With the new building management technologies, energy efficiency, water conservation capabilities and waste management programs, building owners and managers have the ability to reduce operating costs while making the building sustainable. We know. We see it being done – in both new and existing buildings.

As Glenn Pickett reports in his article on “the Drumbeat for Climate Action Grows,” published in Environmental Leader on 11/3/2014,

“The appetite is all but gone for hearing more about our frightening global forecast and who’s at fault for it. The more time the environmental and sustainability movement spends sharing solutions, the more mainstream these choices will have the chance of becoming….. It’s time for action, and leaders will be rewarded.”

May we all become good stewards of this earth.

Now, let me tell you about this…

Posted on February 19, 2015 by abrahamwien18

10/22/14

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

I freeze…become paralyzed in the face of danger or uncertainty. It is something that I am getting better at as I age but I still tend to become a deer in the headlights from time to time. In heated discussions, I never come up with the one line “Buzzinga” response until later – sometimes days later – when it is too late to be effective.

Does this happen to you? Or, are you one of the blessed people who know just the right response to any situation without giving it a second thought? Do you see a situation and instantly know and take the correct action to save the person from going into the undertow or stop the bleeding from a kitchen knife cut or have just the right response to win the debate?

We all respond to new circumstances differently. Some freeze, some panic and run, others deny what is happening like a child who pretends people cannot see him when he pulls his “magical” covers over his head. And, then, there are some charge forward full speed ahead.

Again, if you are like me, once you get over the shock of “is this really happening?” you assess the situation, spring into action and work feverishly to correct, or save, the situation….

Based on the muted reaction, or the “I am not a scientist so it does not exist” position of a significant number of our civic, community and business leaders, either they are in shock that the world’s climate can change so rapidly or they are in complete denial which is worse. The fact that many large American cities ranging from Galveston and New Orleans to Tampa, Miami and even as far north as New York City will be faced with significant issues from the rising sea level is still being debated among politicians reflects a similar approach to reality as the child with the magic blanket.

The news of global warming, now more appropriately referred to as Climate Change, is not new. Scientists have been ringing the warning bell for at least two decades. And yet we still do not want to believe.

Well, we are now starting to see the effects. Storms like Hurricanes Katrina and Sandy, increased flooding in cities like Miami Beach, increased tornado activity, the hottest year on record, and shrinking shorelines caused by sea level rise are now featured in the news on a regular basis.

Many government officials responsible for protecting the public from such events are joining in the chorus to raise awareness in order to make their job of obtaining public approval for a budget to install and maintain systems and equipment to reduce the damage from the effects of climate change feasible.

Yet, it is the real estate community that seems to most want to stick their head in the sand….For instance, last July, the Miami-Dade Sea Level Rise Task Force issued its report and recommendations. Shortly afterwards, the Miami Chapter of the American Institute of Architects held a meeting with Harvey Ruvin, Miami-Dade Clerk of Courts and Chairman of the Task Force, presenting the report. The meeting, which was broadly announced, had fewer than 100 attendees and almost no one from the real estate community was in attendance.

As reported in the June 2014 report “Risky Business: A Climate Risk Assessment for the United States”, it is apparent that climate change and sea level rise are going to have significant effects on the American global business community – and real estate, which has a particular distinction of being immovable, is going to be more impacted than most industries.

And yet. And yet the real estate community is acting as if it is business as usual. The level of interest in doing a sustainable retrofit has yet to make a significant impact on the market – especially for properties that are not seeking credit-quality tenants whose corporate sustainability policies encourage occupancy in LEED-certified buildings. (According to an article entitled “What’s Sustainability Wroth to Tenants?” by Paul Bubny of Cushman & Wakefield in the 10/28/2014 GlobeSt.com national eMagazine, ” Among the 37 real estate and sustainability directors at 23 US-based corporations surveyed by C&W, 74% see value in going to a sustainable building compared to a non-sustainable one.”¹

With the obvious costs to upgrade and improve the infrastructure – especially electrical and water and sewer utilities, as well as expected increase in insurance costs, a prudent reaction to the reality of climate change and sea level rise would be to put improvements in place now that reduce the consumption of water and power as well as to make a building less susceptible to damage from major hurricanes, storms and other weather events (like flooding).

We can only hope that real estate owners, investors, managers and tenants will soon realize that the future is now, overcome their “shock” of the impending calamity and start to take action. It is time to take action. The economic, environmental and operational benefits will be immediate and, if done right, sustainable.

And, as in any crisis situation, if you wait too long to take action, the results can be devastating. Let me know if I can be of service.

¹See (http://www.globest.com/news/12_975/national/office/Whats-Sustainability-Worth-to-Tenants-351877.html?ET=globest:e44644:11970a:&st=email&s=&cmp=gst:National_AM_20141027:editorial).

Miami weather forecast …rising tides, flooding and heat

Posted on February 19, 2015February 19, 2015 by abrahamwien18

8/13/14

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

I live in Miami – it is my home. The other night I was watching the weather forecast. The August full moon, a “super” moon, was on Sunday. The forecaster gave us the news that the weather was going to continue to being in the mid-90s with afternoon thunder storms – summer in Miami, no news there (NOTE: All of the record high monthly record temperatures in Miami have been recorded since 1971). However, the forecaster continued to advise viewers who live on Miami Beach and other low-level areas that they may need their rubber boots in order to get to their cars in parking lots and to watch for flooding along the roadways….This is a fairly recent phenomenon – but one that is going to be a part of the forecast for years to come.

It has been a year since Rolling Stone published its article entitled “Goodbye, Miami” written by James Goodell (7/4/2013 Read more: http://www.rollingstone.com/politics/news/why-the-city-of-miami-is-doomed-to-drown-20130620?page=3#ixzz3A6oXVFId).

When the article was first published, most of Miami’s leaders scoffed at the article and the idea that Miami may not exist in 100 years. Perhaps it was the publication in which it was published or wishful thinking, but most of Miami’s (and Florida’s) business and political leaders decided to stick their head in the sand and ignore the increasing number of days in which our streets are flooded.

As reflected in numerous studies and many reports and articles, the world is warming. It does not really matter if it is natural or man-made – the facts are the facts – and this one will not be ignored for long. Along with the warming of the earth’s surface is a rising of the sea level resulting from both the melting of the ice caps and the expansion of the water as it warms….It has already risen almost one foot in the past century – and the pace at which it is rising is hastening.

Predictions are that the sea level will rise by two feet within 35 years and by up to one foot per decade thereafter – until the earth’s temperature stabilizes. At these levels – and with no actions put into place – Mr. Goodell’s prediction will surely come true.

The implications are immense: According to the report, Risky Business: The Economic Risks of Climate change in the United States, produced by the Risky Business Project led by former New York Mayor Michael Bloomberg and published in June:

“In Florida, because of porous limestone on which the major southern cities were build, even modest sea level rise comes at significant economic cost. Under current projections, between $15 billion and $23 billion (in today’s dollars) of existing property will likely be underwater by 2050, a number that grows to between $53 billion and $208 billion by the end of the century…An additional $240 billion in property will likely be at risk during high tide that is not at risk today.”

The impact of rising sea levels goes beyond flooded streets and imminent threat to property – and the impacts will grow exponentially as the sea rises and our leaders and citizenry remain immobilized – whether out of denial, ignorance or apathy.

Miami especially is vulnerable because of our low ground level (one quarter of Miami-Dade County is at less than 3′ above sea level) and our porous limestone plateau which Glenn Landers, senior engineer at the US Army Corps of Engineers likens to a block of Swiss cheese in Mr. Goodels’ article. A good analogy for the ground on which Miami (and all of South Florida) is built; but troublesome in the development of global solutions.

To its credit, Miami Beach has started to build pumping stations to reduce flooding – but this is only a stop-gap measure AND is being contested by home owners who feel it reduces the value of their property. This Stormwater Master Plan began with $206 million budget which is estimated to be half of the actual monies needed. The City is starting to raise fees and rates in order to pay for this program.

According to information in the website Sea Level Rise America, (www.slramerica.org), “Property owners of all types including developers, need to understand sea level rise issues and adaptation strategies. Those seeking to sell their properties will have to disclose to potential purchasers that their real property will be impacted by sea level rise and possibly higher taxes imposed by governments seeking to update public infrastructure projects such as storm sewers. Such adaptation projects will be necessary, but some will be controversial.”

SLR America identifies 26 legal and financial implications of rising sea levels on coastal communities – and many of these implications need to be addressed NOW: For instance, let’s take the disclosures in real property sales. “Simply stated, residential (and commercial) property purchasers in sea level rise threatened zones need informed notice and protection.” Just like sellers and real estate agents must disclose hazards due to asbestos and radon and lead-based paint, in order for sellers to be protected from future claims, property sales in 2013, when sea level rise is a known scientific fact, need to be accompanied by the disclosure of the potential impacts of sea level rise on the property.

We are not under water – yet! Last year, the Miami-Dade County Commissioners created a Sea Level Rise Task Force which issued its report on July 1st (Available here: http://www.miamidade.gov/planning/boards-sea-level-rise.asp) and provided six recommendations to the Commissioners. It is important that the real estate and business leaders support these recommendations and encourage the County government to dedicate the resources necessary to create and implement a plan that results in the survival of our fair City.

Meanwhile, building owners and managers can start now to make their properties more sustainable – which includes the ability to withstand increasingly harsh and violent storms with greater flooding from storm surge.

I have lived in tornado zones and earthquake zones and hurricane zones. The true benefit of living in a hurricane zone is that you have 3 – 7 days of advance notice. In those days, we prepare – we buy supplies and protect our properties against the coming storm. With climate change and the sea level rise, we are given just 40 years to prepare – it is time to start make our preparations – the weather forecast is not changing any time soon.

Why the Invisible Hand Works

Posted on February 19, 2015February 19, 2015 by abrahamwien18

7/23/14

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

This post has been over two weeks in the writing. Yes, two weeks. For me, the anniversary of the adoption of the Declaration of Independence has always been a source for inspiration as the principles on which the United States of America is based continue to be a source of pride and reflection as well as a call to action.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

By these words, the Continental Congress established a moral standard that became the cornerstone of the US Constitution – our contract with each other that establishes the basis for our governance.

Of course, we have not realized these goals and they continue to be a guideline for our actions – as individuals and as a country. It is the mutual respect of our individual Rights that enables this pact among men and women to provide the freedom Americans enjoy.

In the same year the British-American Colonies declared their independence from England by establishing a new standard for the governance of a nation-state, Adam Smith published his A Wealth of Nations which provided the basis for modern free market economics. This was serendipity for sure.

As discussed in an earlier post, Smith introduced the concept of the Invisible Hand wherein he states that the market had an “automatic mechanism that allocated resources with great efficiency.”

It is difficult to realize how radical this concept was in 1776. Prior to the formation of the United States with an economy based on a free market, the allocation of labor was established either by tradition wherein the son was expected to follow in the trade of the father, or by command whereby an autocratic ruler (e.g., a king, pharaoh, emperor, etc.) dictates the economic activity to be pursued and the allocation of labor. In this way, humanity made sure there were enough farmers, carpenters, bakers, fishermen.

In describing the Invisible Hand, Smith says: “it is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

Accordingly, the Invisible hand facilitates the interdependence of human workers while maintaining their independence. The precarious nature of human survival – and the ability of individuals to enjoy the unalienable Rights the Founding Fathers so bravely declared – would be exposed if the invisible hand had not worked.

It works because we are both independent and interdependent.

I, like most Americans, was raised to believe that America was built by rugged individuals who were as driven and as hardened as John Galt, Francisco d”Anconia, Hank Reardon and Dagny Taggart in Atlas Shrugged, the 1957 novel written by Ayn Rand.

The American history that I was taught told me that it was the titans of industry that built this country alone and the rest of us were along for the ride. Just like the characters in Ayn Rand’s famous novel, this is a myth and a fiction. To quote John Donne from Meditation #17 written in 1623:

“No man is an Island; every man is a piece of the continent, a part of the main.”

It seems that in the propagation of the myth of the rugged individualist, we have forgotten that we are all in this together….America became an economic force because it had rich and abundant natural resources, a governmental model that promoted trade, an ever-expanding labor force by immigrants drawn from every nation on earth, scientific advances that led to the industrial revolution among other contributing factors.

Especially in this post-industrialized era of specialization when each of us have one primary trade or profession from which we earn a living. I would not have my breakfast if not for the farmer, the trucker, the grocer, the clerk and all the people who facilitate the production, processing, shipping and distribution of the food I ate. The market works because there is both a seller and a buyer. Without a buyer (market), no enterprise can survive.

America is built on our interdependence as well as our independence. I have thought about this seeming paradox. Here is what I have concluded: We are independent in what we offer the world as God has endowed each of us with a unique set of talents and capabilities which we then refine through education and experience to become skills and proficiencies that sustain us. But, we are interdependent in what we need or take from the world.

We each are an individual with a unique life, values, talents, capabilities, perspectives, relationships, but like a drop of water in the ocean or a snowflake in a snow drift, we quickly join with other droplets or flakes and become greater, and better, than we could alone. Individual contribution and group synergy form the basis for the modern business enterprise, the sports team, the nation-state and most human endeavors.

Therefore, the basis for all civilized human interaction has to be respect for our human dignity and our personal right to our identity, our ideas, and the fruits of our labor.

As stated above: the Invisible Hand works because we are both independent and interdependent. So, as we celebrate our independence, it is right and good that we also celebrate our interdependence – an American tradition since 1945.

Original Declaration of INTERdependence

By Will Durant, 1945

Human progress having reached a high level through respect for liberty and dignity of men, it has become desirable to re-affirm these evident truths:

The differences of race, color and creed are natural, and that diverse groups, institutions and ideas are stimulating factors in the development of man;
That to promote harmony in diversity is a responsible task of religion and statesmanship;
That since no individual can express the whole truth, it is essential to treat with understanding and good will those whose views differ from our own;
That, by the testimony of history, intolerance is the door to violence, brutality, and dictatorship; and
That the realization of human interdependence and solidarity is the best guard of civilization.

Therefore, we solemnly resolve, and invite everyone to join in united action,

To uphold and promote human fellowship through mutual consideration and respect;
To champion human dignity and decency, and to safeguard those without distinction of race or color or creed;
To strive in concert with others to discourage all animosities arising from these differences, and to unite all groups in the fair play of civilized life.

Rooted in freedom, children of the same Divine Father, sharing everywhere a common human blood, we declare again that all men are brothers, and that mutual tolerance is the price of liberty.

On Questioning Assumptions/Making an Immediate Impact

Posted on February 19, 2015 by abrahamwien18

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

The nature of our education system is for us to believe that once we learn a topic or draw a conclusion on an issue, we move on to the next subject and never look in the rear view mirror except to use that knowledge to advance in the next course, subject or project. It is easy to fall into this routine, but life and reality do not fit neatly into this sequential thinking process.

For too many people, we have drawn a conclusion on a topic at one point in our lives and never revisit it with an open mind and the benefit of more time and knowledge and wisdom which leads to false beliefs and poor decisions but, the British philosopher and Nobel Laureate, Bertrand Russell, advises us: “In all affairs, it’s a healthy thing now and then to hand a question mark on the things you have long taken for granted.”

Of course, we know this is the case with making the existing building stock sustainable. A common pre-conception is that it costs a lot of money to reduce a property’s impact on the environment and improve the operating performance of a commercial building. Yes, replacing inefficient lighting and HVAC systems, adding solar panels, installing a green roof and changing the windows and/or skin of a building are definitely investments that will save money, but there are many ways to achieve savings without a major investment. YOU CAN MAKE AN IMMEDIATE IMPACT NOW.

Jennifer McConkey, Operations & Sustainability Director at Principal Global Investors, reports in a recently published White Paper: “It seems clear that running efficient building operations, sometimes with no-cost and low-cost improvements, can be the quickest way to implement sustainability into your properties or property investments. Operations can provide the foundation for ‘green’ no matter how old the building.”

An article in the 6/10/2014 issue of EDC (Environmental Design & Construction) Magazine reports, “Implementing green building practices will help reduce environmental problems caused by building construction, use and demolition, as well as the manufacturing of building materials. It also has tangible economic and public health benefits such as lower operating costs and improved occupant health and comfort.”

So, we know that commercial properties consume approximately 20% of the total energy used by the United States. We also know that commercial buildings consume a large portion of water, produce greenhouse gas emissions and generate significant waste. Further, we know that building owners and managers will seek to reduce energy and water consumption as well as greenhouse gas emissions and waste that is taken to a landfill (or the ocean). But, we also know, owners and managers are budget conscious and want to time replacements with the deterioration or functional obsolescence of their systems and equipment. So, what can an owner, manager or tenant do?

Plenty. For ways to start your road toward sustainability and improved operating performance, Jennifer McConkey of Principal Global and BAMCO courtesy of EDC gives us the following free or low cost ideas:

Adjust the thermostat to be one degree higher during the cooling season and one degree lower during the heating season;
Leaving the lighting in vacant spaces off except during use or installing occupancy sensors which “ensures that even occupied spaces are lit when there is a person the room, further reducing energy consumption;”
Establish a pro-active HVAC systems and building envelope maintenance programs. Ms. McConkey reports that “something as simple as replacing worn door seals can cost around $100 per doo, but lead to thousands of dollars in annual savings;”
As lightbulbs are replaced, use LED bulbs to help reduce energy consumption;
Install VFD (Variable Frequency Drive) on pumps and water features which minimizes energy use during low demand times;
Use native or drought-tolerant plants and landscaping;
Implement a recycling program (be sure to check local recycling and waste reduction guidelines for materials that are eligible to recycle); and
Use sustainable cleaning products and building materials for any tenant improvements or repairs.

Ms. McConkey’s White Paper can be found at the following link: www.principalglobal.com/us/download.aspx?id=96043

The EDC post can be found at the following link: http://www.edcmag.com/blogs/14-edc-blog/post/95677-building-green-5-ways-to-reduce-your-impact-on-the-environment

Remember, reduce, reuse and recycle.

Seek to make a difference! Be well and be blessed, Paul

The Invisible Hand

Posted on February 19, 2015February 19, 2015 by abrahamwien18

6/10/14

PJ Picture

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

Adam Smith, author of The Wealth of Nations, gave definition and meaning to the economics and laid out the foundation for the economic system on which the U.S. was based. As noted in the introduction to the Condensed Wealth of Nations published by the Adam Smith Research Trust, “It took the outdated, received wisdom about trade, commerce, and public policy, and re-stated them according to completely new principles that we still use fruitfully today.” (http://www.adamsmith.org/sites/default/files/resources/condensed-WoN.pdf)

The economic system we have come to know as capitalism facilitates a free market economy built on the concept that both sides benefit from trade and that the market had an “automatic mechanism that allocated resources with great efficiency” which we know as the Invisible Hand. According to Smith,

“Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” The Wealth of Nations, Book IV, Chapter II, p. 456.

It is the invisible hand on which we continue to rely as we count on the developers, owners, managers and tenants of commercial real estate to act in their own best interests – which, undoubtedly, is to improve operating cash flow and maximize the value of their properties.

In my first two posts, I highlighted some of the economic benefits to eradicating functional obsolescence in an existing building and avoiding it in a new building. The studies that have been performed all indicate that a sustainable retrofit puts money into the pockets of all of the stakeholders in a property. Now, here are some more statistics that hopefully get your attention (as reported by Rob Roth, , Ph.D., Chief Executive Officer, EnergyActio, in the recently released “2014 INSIDER Knowledge” published by Environmental Leader (www.environmentalleader.com) :

“In the United States, the average commercial building wastes approximately 30% of the energy that owners and tenants pay for. On an annual basis, energy waste costs owners and tenants more than $60 billion which is equivalent to:

$60 billion in lost business profits
$857 billion in lost capitalized asset value (at a 7.0% cap rate)
Funding for 1.3 million jobs (at the 2013 average wage of $45,790).”

In an article posted by NREI/Green Real Estate Strategies yesterday (6/9/2014), John Bonnell and Jackie Hines of Jones Lange LaSalle in Phoenix, report that “LEED-certified buildings can capture a premium of 29 percent over buildings without this distinction.” They further report that “It appears that a green building is no longer a luxury, but a requirement here to stay.”

As more owners, investors, managers and tenants pursue the Sustainable Benefits to be derived from remediating functional obsolescence through a sustainable retrofit, the invisible hand will enable us to achieve the societal goals of reducing our carbon footprint, minimizing our contribution to climate change and extending the life of our natural resources.

Remember, reuse, reduce and recycle.

Be well and be blessed, Paul

Making a Difference

Posted on February 19, 2015 by abrahamwien18

5/28/14

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

What is the purpose of life? Why are we alive?

These are questions I have asked myself off and on for all of my life – but especially in times of change….of transformation. Do you ever take a minute to ask yourself these questions? Are you living life to the fullest – and not in a hedonistic way?

We all get consumed by the world, with tending to the details at hand, with solving the problems that arise and with the people who mean the most to us. But what are we doing to fulfill our destiny here on earth. We are only given a short time – no more than 120 years and most between 60 and 80 years. It passes so quickly. So what will be our legacy?

Our top priority is to provide for our families. And, this is true. But providing for our family is more than putting a roof over the head and food in the stomach. More than providing a loving environment…even though these are great accomplishments in and of themselves, we also want to provide a better life for the next generation than we have experienced in ours.

We accomplish this by ensuring our families have what they need to survive and prosper – a good, moral code of ethics, a strong belief system, a quality education and as many opportunities as we can provide.

However, what if all of your efforts were for nothing, naught – because you and the rest of humanity failed to steward the resources that were at your disposal such that the life we seek on this planet is sustainable.

Yes, imagine a world where, because the prior generations were gluttonous in their need for comfort, lazy in their search for more efficient ways to provide modern amenities and greedy in their lust for profits that they squandered the rich bounty of resources that Mother Earth provides. This may not be the world we leave for our children but it could be for our children’s children’s children.

We do this by choosing to ignore the reality that all of our natural resources are limited. Yet, until we are able to populate space stations and other planets, these resources are to last until the end of time.

If we do not take to heart the teachings of all major religions and the cry of the scientists regarding climate change, we risk becoming known as the generation who failed to leave the world better off for having lived….we will have failed.

So, it is our responsibility to learn, think and act in a way that promotes the sustainability of our lives, of our businesses, of our planet….

For most, it is following the principles of reduce, reuse and recycle. Families will increasingly be able to use solar energy, buy local food at a farmer’s market, monitor their use of energy, recycle their plastic, glass and metals, and employ other ways to steward the resources at their disposal – which will simultaneously enable them to reduce their overhead leaving more funds for better things than leaving the air conditioning on high when no one is home.

For those of us in real estate, we have a greater opportunity – and responsibility -since commercial real estate accounts for almost 20% of the nation’s annual greenhouse gas emissions (Energy Star) and “the built environment accounts for 39% of total energy use in the US and 38% of total indirect CO2 emissions.” (From Energy efficiency and real estate: Opportunities for investors” commissioned from Mercer Family Fund by Ceres).

Consequently, owners, investors, developers, managers and advisors in real estate – commercial, residential, industrial, hospitality and institutional, have a significant opportunity to provide for their children and all life on this planet – simply by becoming good stewards of the real estate for which we are responsible or have the ability to improve.

Believe it or not, “a 10% decrease in energy use could lead to a 1.5% increase in net operating income (NOI) with even more impressive figures as the energy savings grow” (Energy Star). One of my mentors, Jim Klingeil, taught me over 30 years ago that a dollar saved is ten dollars earned (based on a 10% cap rate). The savings are better now – at today’s cap rates….

The benefits extend beyond the savings in utility costs, they influence tenant desirability and retention, employee morale and our good will in the community. So, becoming a good steward by making your real estate or your business or your home sustainable is now good business – and good for the soul.

Watch in the coming weeks for our Blog, Sustainable Benefits, with food for thought, practical ideas and news you can use….

Seek to make a difference! Be well and be blessed, Paul

Ugly Duckling to Become LEED Certified Building

Posted on February 4, 2015May 27, 2015 by abrahamwien18

2/4/2015

By Julie Lundin, Founder,
Director of LEED Process Management for Emerald Skyline Corporation

Emerald Skyline Corporation in conjunction with Golden Spiral Design, is designing, renovating and repurposing an unoccupied industrial building located in Boca Raton, FL. This distinctive commercial building will include many sustainable features with the intent to obtain LEED certification from the USGBC.

Existing Building

Proposed LEED Certified Building

We are in the process of renovating a 1,950 square foot warehouse located in Boca Raton, FL. The building was previously used for a towing company so the property is currently a brownfield which will require that we remediate the contamination. This building is a major renovation/new construction project. We will be demolishing the existing interior space and adding a second floor and green terrace. Our building renovations will include many sustainable features with the intent to obtain LEED certification. Here are just a few of our intended design elements:

A tank used for rainfall and condensate collection to flush toilets and irrigate native Florida landscaping
A green terrace
A metal reflective roof
Use of low-VOC paints, sealants and adhesives for building improvements
Occupancy sensors and photos sensors that monitor daylight and reduce energy needs
LED or CFL Lighting
Pervious Paver Parking Areas
Low Flow Toilets and Faucets
Daylight Harvesting to lower Lighting Costs
Impact Windows

LEED Certification provides third-party validation that our building was designed and built to improve energy savings, water efficiency, carbon dioxide emissions, resource conservation and indoor environmental quality.

We look forward to showcasing the progress of our much anticipated sustainable renovations.