Current Benefits

A Green Lease Overcomes a Primary Obstacle to Commercial Properties Going Green

Posted on by abrahamwien18

PJ Pictureby Paul L. Jones, CPA, LEED Green Associate, Principal, Emerald Skyline Corporation

One key obstacle to overcome for commercial buildings is the incongruous lease structure. Under the most common commercial lease structures (Modified Gross and Net), the costs of a sustainable retrofit are borne by the owner while the cost savings from reduced utility bills and maintenance costs as well as the improved indoor environment inure to the benefit of the tenant.

The solution is to create a lease structure that equitably aligns the costs and benefits of efficiency, sustainability and/or resiliency between building owners and tenants, known as a Green Lease (also known as an aligned lease, a high performance lease or an energy efficient lease). In short, a green lease facilitates cooperation between landlords and tenants to make their buildings and individual spaces energy and water efficient.

Last month, the US Department of Energy acknowledged property owners, tenants and brokers who are leaders in using green leases to save energy and water in commercial buildings. In a July 2nd National Real Estate Investor article entitled “The Greening of Leasing,” Susan Piperato interviewed Jonathan Saltberg and Jaxon Love of Shorenstein Properties which was one of the “Green Lease Leader” honorees.

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Figure 1 Source: National Real Estate Investor, 7/2/2015; Institute for Market Transformation

According to Jaxon Love: “We survey our tenants annually on sustainability and track interest and satisfaction with our program. In 2014, 66 percent of our tenants indicated that green building operation is important or very important to their company; 68 percent of tenants indicated that our green building operation is good or excellent.”

Further Ms. Piperato reports that Shorenstein Properties has cut energy use by 16.2% and cut carbon emissions by almost 15% which is in-line with industry expectations of a 10% to 20% savings in energy and water monthly.

According to Meaghan Farrell, energy and sustainability service, Jones Lang LaSalle (JLL), “Green leases combine the productivity, comfort and sustainability features that tenants are looking for in office space while supporting landlord priorities of improving the triple bottom line and occupancy rates. In addition to achieving both tenant and landlord objectives, green leases have social, economic and environmental implications for companies operating in today’s global economy. Green leases truly are the future of commercial real estate.” (10 Reasons to Sign a Green Office Lease, Meaghan Farrell, Environmental Leader, 10/22/2014. http://www.environmentalleader.com/2014/10/22/10-reasons-to-sign-a-green-office-lease/#ixzz3GtXfESRz)

Green leases not only bring congruity to the financial requirements necessary to do a sustainable retrofit of a building but also to encourage owners, tenants and their employees who occupy the building to employ sustainable building operations.

The JLL Energy and Sustainability Services team has identified that collaboration by tenants and landlords in negotiating and executing a Green Lease results in the following ten benefits (Shorenstein Properties notes that the collaboration required to create a green lease is the first benefit of the program):

  1. Reduce the utility (power and water) consumption, reduce maintenance costs and save money
  2. Improve working relationships between landlord and tenant
  3. Support tenant and landlord corporate sustainability initiatives
  4. Enhance corporate image/brand (especially important for retailers, manufacturers and large public companies and financial institutions)
  5. Demonstrate vision and thought-leadership
  6. Improve civic relations – with climate change, municipalities appreciate buildings and companies that help the community become sustainable and resilient
  7. Contribute to LEED and other green certifications which is increasingly important for buildings to maintain and improve their competitive position
  8. Improve employee productivity, recruitment and retention through proven that daylighting and other sustainable strategies
  9. Generate additional savings and benefits through waste stream diversions
  10. Do the right thing for the earth and humanity in order by reducing the building’s carbon footprint

As stated by Adam Siegel, VP – Retail Industry Leaders Association (RILA), “Green leasing is a process to identify lease provisions that can potentially be modified to address both landlords’ and tenants’ sustainability goals. These provisions tend to foster efficiency improvements that can save both parties money.”

As reported by the RILA Retail Green Lease Primer, lease provisions that modify a standard lease agreement to a green lease fall into five primary areas:

  1. Provide for improvements to the base building shell and common areas;
  2. Provide for improvements to the tenants’ interior spaces consistent with the building’s permitted uses;
  3. Encourage efficiency investments by allocating the benefits derived to the party that is making the investment;
  4. Facilitate the sharing of energy and water usage and waste generation data increasing required for compliance with municipal benchmarking regulations or LEED/Energy Star certification guidelines; and
  5. Clarify who has the rights and responsibilities to make sustainable improvements in spaces like the rooftop.

According to the Shorenstein Properties team, the Green Lease provisions that they are working to incorporate into all of their leases include: Energy alignment; tenant sub-metering, energy information sharing, building performance certifications and green building standards.

The aforementioned RILA Retail Green Lease Primer (available here: http://www.rila.org/sustainability/issues/Pages/RetailGreenLeasePrimer.aspx) lists 13 specific areas of focus which are provided with the caveat that “Each company should assess the costs and benefits of each term before including in their contracts:”

  1. Extend/lengthen the lease term which reduces waste associated with tenant replacement and improvements;
  2. Expense reimbursement methodology (.In an article published in the September/October 2010 issue of The Leader, Elizabeth King Fortsneger, a CPA and LEED AP, states: “If the goal is to keep both owners and tenants motivated to support the building’s green initiatives, the modified gross lease, net utilities with sub-metering and possibly an expense stop (full service except the tenant pays utilities) may be a viable alternative.”);
  3. Permitted use that define allowable/restricted uses for the leased premises;
  4. Leased premises tenant build-out specifications;
  5. Capital improvement provisions that allow the landlord to amortize and recover capital costs associated with qualifying sustainable improvements to building and common areas;
  6. Include low-cost efficiency project expenditures in the definition of operating expenses for tenant reimbursement;
  7. Align tax benefits and other monetary incentives for building improvements with the investing party (landlord or tenant);
  8. Submeter each tenant space for electricity, natural gas and water with billing of tenants based on the submeter readings where state codes and utility tariffs allow it (According to Mr. Love, “…submetering…gives the tenant direct responsibility for and control over their energy (and water) cost. The economic incentive to save energy is a powerful motivator.”);
  9. Utility data sharing whereby the tenant provides energy and water consumption data to the landlord monthly while the landlord provides the tenant with periodic reports on the performance of the whole building.   As more cities require benchmarking information from landlords, the ability to gather the necessary information from tenants is a necessary condition for regulatory compliance;
  10. Specify sustainable maintenance policies, procedures and materials for use in tenant spaces;
  11. Specify sustainable maintenance policies, procedures and materials for use in common areas;
  12. Define tenant obligations to participate in recycling programs which facilitates the sustainability objective of reducing waste that goes into a landfill; and
  13. Allow rooftop or general access and control to install energy generation systems (solar power) and/or other sustainable improvements.

NOTE: For existing tenants, green lease provisions can be added to the existing lease through a “green lease addendum” that replaces or supplements portions of the lease by adding terms and incentives.

As with every lease, both landlords and tenants need to work together to develop the green provisions appropriate to the property, its use and the tenant space. Quantifying the costs and benefits may require a green diagnostic review/assessment which provides a baseline understanding of the current property operations for inclusion as benchmarked sustainability criteria in green leases, or current lease addenda.

Working with an advisor like Emerald Skyline Corporation whose principals understand both commercial leasing and sustainability can help facilitate the negotiations and the accomplishment of both your investment objectives and your sustainability goals.

Using Daylighting to Save Energy and Enhance Views

Posted on by abrahamwien18

JulieBy Julie Lundin, NCIDQ, LEED AP ID+C, ASID, Director, Emerald Skyline Corporation

My post on the design and progress of our commercial building focused on an overview of what sustainable design is and how it impacts a building’s design and construction and on-going building operations. You can see that post here. A sustainable building utilizes many concepts, solutions and products to incorporate the six fundamental principles of sustainable design:

  • Optimize Site Potential
  • Optimize Energy Use
  • Protect and Conserve Water
  • Optimize Building Space and Material Use
  • Enhance Indoor Environmental Quality (IEQ)
  • Optimize Operational and Maintenance Practices

This post explores the concept of Daylighting and Views, which impacts two areas of the fundamental principles of sustainable design: Optimization of Energy Use and Enhance Indoor Environmental Quality (IEQ).

Daylighting is the ability to maximize or control the use of natural daylight in a building in order to reduce the need for artificial lighting and reduce energy use. Access to daylight inside a building helps create a healthy, comfortable and productive environment for its occupants while reducing as much as one-third of total building energy costs.

Implementing daylighting on a project goes beyond simply listing components to be gathered and installed. Daylighting requires an integrated design approach to be successful. It can involve decisions about the building layout, site, climate, building components such as windows and skylights, lighting controls and lighting design criteria.

The science of daylighting design is not just how to provide enough direct daylight to an occupied space, but how to do so without any undesirable side effects. Beyond adding windows or skylights to a space, it involves carefully balancing heat gain and loss, glare control, and variations in daylight availability.

To implement daylighting into a project it requires systems, technologies and architecture. Below are some of the typical components that are utilized:

  • Daylight-optimized building footprint
  • Climate-responsive window-to-wall area ratio
  • High-performance glazing
  • Daylighting-optimized fenestration design
  • Skylights
  • Tubular daylight devices
  • Solar shading devices
  • Daylight redirection devices
  • Daylight-responsive electric lighting controls
  • Daylight-optimized interior design (furniture, space planning, room surface finishes)

Since daylighting components are normally integrated with the original building design, it may not be possible to consider them for a retrofit project. We are fortunate that the retrofit of our building in Boca Raton lends itself to use daylighting to positively impact two of the fundamental principles of sustainable design. Below are some of the components that our project will utilize:

  • Optimized Building Footprint – Although usually limited to new construction, our building and site enables us to make design decisions that will allow us to create a daylight-optimized footprint. The redesign of our building will maximize south and north exposures, and minimize east and west exposures. Our new façade will face due south which is the optimal orientation for best solar access and ease of control.
  • Climate-Responsive Window-to-Wall Area – With the building sited facing south, we are specifying high-performance glazing (windows). The area is being designed to be a careful balance between admission of daylight and summertime heat gain since our project is located in South Florida.
  • High-Performance Glazing – High performance windows will generally admit more light and less heat than a typical window, allowing for daylighting without negatively impacting the building cooling load in the summer. For our project, being located in South Florida, high performance glazing is very important.
  • Daylighting-Optimized Fenestration Design – An optimized fenestration design will increase the system performance. Windows have two essential functions in a building. 1) Daylight delivery or admittance, and 2) provide a view to the occupants. Daylight admittance requires a window with high visible light transmittance and windows for view need to be clear. Our daylighting fenestration design will be composed of both of these with correct height requirements.
  • Skylights and Tubular Daylight Devices – Both of these devices utilize what is called toplighting, or admitting daylight from above. We are incorporating the use of tubular devices in our building design. These devices employ a highly reflective film on the interior of a tube to channel light from a lens at the roof to a lens at the ceiling plane. They tend to be much smaller than a typical skylight, yet still deliver sufficient daylight for the purpose of dimming the electric lighting. They will be used on the second floor where there will be interior spaces that do not have access to any windows due to our north side zero lot line site.
  • Daylight Redirection Devices – Redirection devices take incoming direct beam sunlight and redirect it. These devices serve two functions: glare control, where the sun is directed away from the eyes of the occupants, and daylight penetration, where sunlight is distributed deeper into a space that would not be allowed otherwise. We will be utilizing both of these methods in our project.   Lightshelves will be used on the south façade of the building, on both floors. The second floor interior will contain clerestory glass components that will distribute light into rooms that have no access to daylight.
  • Electric Lighting Controls – Lighting controls are essential to any daylighting system. No daylighting design will save any energy unless the electric lights are dimmed or turned off when there is sufficient illumination from daylight. If daylighting features such as windows and tubes are not paired with daylight-responsive dimming controls, then the daylighting-enhanced building will likely use more energy, not less, than a comparable building without any daylighting features. Lighting controls consist of continuous dimming or stepped-ballasts in the light fixtures, and photocells to sense the available light or turn off the electric lighting in response. We will incorporate a lighting control system in our building to take full advantage of our daylighting design and the energy savings it will provide.
  • Interior Design – An often-overlooked element in a successful daylighting design is the interior design. The interior design should consider furniture design, placement, and room surface finishes and how they relate to daylight performance. Interior walls may interfere with daylight transmission into a space. The south facing façade of our project, on the first floor will have an open concept so that daylight can penetrate and distribute more fully into the interior space. Walls and ceilings will be as reflective as possible.

To design and implement a daylighting strategy into a project requires a collaborative design process and the daylighting strategies must balance with other project design goals. Access to daylight inside buildings provides a healthier and comfortable environment for its occupants and is also linked to greater productivity. When designed with proper glare control and minimized solar heat gain, daylighting provides high-quality light while reducing energy use for lighting and for cooling.

 

 

http://www.wbdg.org/resources/daylighting.php  

New Law to Allow Tenants to Showcase Their Energy Efficiency Efforts

Posted on by abrahamwien18

By Robert Carr, National Real Estate Investor, 5/15/2015

{ View the original article here. }

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Office tenants who became believers in energy conservation in the heyday of the building sustainability movement about two decades ago only to watch building owners take all the credit have cheered a recent new law that will support, track and promote their efforts at being green.

President Barack Obama signed the Energy Efficiency Improvement Act of 2015 on April 30. The bipartisan-sponsored law promises to align the interests of building owners and tenants with regard to investments in cost-effective energy efficiency and water conservation measures, create studies that will examine successful sustainable practices, enact data-tracking systems and provide ways to promote voluntary tenant compliance.

The law, also known as the “Tenant Star” act, includes a new federally-sponsored green building designation that’s similar to the U.S. Environmental Protection Agency’s (EPA) popular Energy Star system. Energy Star, enacted in 1992, provides an energy-efficient rating system for building products, residential homes and commercial buildings. In a recent report, the EPA said the Energy Star system reduced utility bills for residents and businesses by $34 billion in 2014.

However, tenants, the backbone of energy use in commercial buildings, have neither had a consistent national program to measure efficient energy use, nor a way to tout their specific efforts. Allison Porter, vice president of sustainability services for commercial real estate services firm DTZ, says tenants will now have the same kind of opportunities as Energy Star provides for owners to turn data into a basis for action. The new law will allow space occupiers to take responsibility for their usage and receive recognition for conservation efforts, she says.

“Although whole-building measures like Energy Star are a valuable tool, it’s also crucial to acknowledge that tenants’ use of a space has a huge impact on how a building performs,” Porter says. “By encouraging tenants to design and build energy-efficient spaces, Tenant Star will help align the interests of tenant and landlord. I expect that this alignment will clear a path for a new wave of investment in energy-efficient office space, especially coming at a time when the cost of efficient technologies commonly used in office interiors, such as LED lighting and occupancy sensors, has decreased significantly.”

Porter is joined by many other tenant sustainability supporters in her praise of the new law. Anthony Malkin, chairman, president and CEO of New York City-based Empire State Realty Trust Inc., said in a statement that the new law will align office tenants with their landlords to make smart, cost-effective investments in energy-efficient leased spaces. “Broad adoption will save businesses billions of dollars on energy costs in the coming years,” he said.

Jeffrey DeBoer, president and CEO of the Washington, D.C.-based Real Estate Roundtable, which brings together commercial property owners, developers and managers to address national policy issues, called the legislation “a triple win that will spur the economy by creating jobs, enhancing energy security and preserving our environment by cutting greenhouse gases.”

Implementation

The General Services Administration (GSA), responsible for all federal government leasing in the country, will take responsibility for the first section of the law, also known as the Better Buildings Act of 2015. According to the act, the GSA will create model commercial leasing provisions for energy efficiency by Oct. 31, and may begin enacting these provisions in federal leases. The GSA will also publish these provisions and share them with state, county and municipal governments.

The Secretary of Energy is responsible, under this law, to create a study within one year on the feasibility of significantly improving energy efficiency in commercial buildings through design and construction, by owners and tenants, of spaces that will use energy efficient measures. The study will include, among other requirements, such metrics as return on investment and payback analyses, comparisons of spaces that use these measures and those that don’t, impact on employment and actual case studies and data on the spaces where these measures are implemented. The department will start seeking input on this study after Aug. 1.

In addition, to allow tenants to start touting their green policies, the EPA will create the Tenant Star designation as an offshoot of Energy Star. Not only will tenant data be added into the 23-year-old collection program already in place, the new designation will recognize tenants in commercial buildings who voluntarily achieve high levels of energy efficiency in their leased spaces. The EPA will also create a voluntary program to recognize owners and tenants that use energy efficiency in designing and creating new and retrofit space.

Al Skodowski, director of sustainability with commercial real estate services firm Transwestern, says this new law will help those companies that have been fully engaged in driving green practices for many years.

“The birth of Tenant Star, as another tool to help our tenants understand their use, reduce energy consumption and to save money, is a very exciting opportunity that will help us continue to improve efficiency in the industry,” he says.

Going green – Fifty free or low cost ways for commercial property owners, managers and tenants to begin

Posted on by abrahamwien18

PJ PictureBy Paul L. Jones, CPA, LEED Green Associate,
Principal, Emerald Skyline Corporation

Bloomberg CoverCommercial 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) in order to save on operating expenses and improve the marketability of their property. 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?

Good news. We have done the research for you and assembled a host of ideas and tips on free or low cost ways to start you on the Path to Sustainable Benefits (Please note that all figures and percentages are approximate and based on published sources; your results may vary):

Reduce, reuse and recycle

  1. Implement a recycling program (be sure to check local recycling and waste reduction guidelines for materials that are eligible to recycle);
  2. Establish a location in the building to recycle used batteries, toner cartridges and miscellaneous hazardous products and partner with a charitable organization to donate used toner cartridges, batteries and other products,
  3. Set up a cell phone recycling drive (contact ReCellular) or partner with a charitable organization to donate used cell phones.
  4. Recycle old or unused furniture whenever
  5. Post signs in production rooms, mail rooms and kitchens as a reminder to reduce, reuse and recycle and the 3 Include information in new tenant welcome packages.
  6. Purchase refurbished or environmentally-friendly new furniture.
  7. Source locally-manufactured/produced products to lower transportation and delivery costs.
  8. Encourage and educate building management personnel and tenants on how they can improve their recycling efforts including:
    • Provide individual paper recycle bins or cardboard boxes at each desk,
    • Provide recycle bins at each copier/printer/fax (more bins than trash cans increases use),
    • Reuse shipping boxes in the mailroom and use shredded waste paper as packing material,
    • Switch to refillable pens and pencils made from recycled materials,
    • Use envelopes a second time with a new address label,
    • Encourage staff who cannot recycle certain items at home to bring these to the office for recycling,
    • Establish a common space for reusable office products,
    • Establish a policy that employees shut down their computers when leaving for the day (“standby” draws power when not in use),
    • Turn off devices besides fax machines that are not in use afterhours before leaving the office,
    • Utilize remanufactured/recycled toner cartridges for printers and fax machines,
    • Save paper with the blank side to b used for scrap/scratch/drafts (reuse) before recycling,
    • Encourage printing on used paper if one side remains clean (use old reports from exiting or outdated hardcopy files to print new data for updated files),
    • Use document scanning and email technology to reduce printing of documents,
    • Encourage employees to read email and files without printing,
    • Set up and use electronic filing rather than a paper filing system,
    • Take the time to redirect undelivered mail with “no longer at this address” written on the envelope,
    • Contact advertisers directly to quit sending unsolicited marketing and catalog products,
    • Notify staff who receive unwanted mail to be removed from mailing lists by contacting Mail Reference Service, Direct Marketing Association, P.O. Box 3861, New York, NY 10163-3861,
    • Use ceramic/glass dishware to reduce wasted paper, plastics and foam cups, and
    • Discontinue the use of individually-bottled water.
    • Use on-demand printing processes rather than push printing that requires bulk ordering of marketing materials (e.g. brochures).

Conserve Energy

  1. Benchmark energy and water consumption through ENERGY STAR® Portfolio Manager.
  2. Perform regular energy audits to identify opportunities for cost-effective energy reduction. Remember to perform midnight evaluations to make sure lighting and HVAC are not running when the building is unoccupied.
  3. Make sure a/c vents, heaters and radiators are unobstructed by office furniture.
  4. Understand your energy bills and consult your energy supplier(s) to understand the billing rates and any peak-time charges and how they be reduced or avoided.
  5. Adjust the thermostat to be one degree higher during the cooling season and one degree lower during the heating season;
    • Reduce the thermostat in unoccupied rooms or in busy concourse spaces and corridors where people move quickly through anyway
  6. Set thermostats to energy-efficient heating/cooling levels during weekends and evenings,
  7. Inspect all thermostats semi-annually to ensure that they are working properly,
  8. Adopt on-demand HVAC,
  9. Ensure switches are labeled so tenants and staff are aware of switches that are relevant for use and won’t be switching on too many appliances or too much lighting.
  10. Leaving the lighting in vacant spaces off except during use and encourage tenants to turn off lights when departing a conference room or unused space (Better yet: install occupancy sensors (timers are another option) which ensures that even occupied spaces are lit when there is a person the room and off when vacant, further reducing energy consumption;
  11. Install solar shades to block heat.
  12. Switch to day cleaning so lights can be turned off at night rather than at 2:00 am when the cleaning crew is done.
  13. Establish a pro-active HVAC systems and building envelope maintenance programs. Something as simple as replacing worn door seals can cost around $100 per doo, but lead to thousands of dollars in annual savings;
  14. As lightbulbs are replaced, use LED bulbs to help reduce energy consumption;
  15. Install VFD (Variable Frequency Drive) on pumps and water features which minimizes energy use during low demand times;
  16. Vending machines carrying non-perishable items can be set on a timer or switched off during non-work hours (nights and weekends) when the building is closed.
  17. Power flushing your central heating system can reduce fuel wastage by a third as it can remove undesirable corrosion residues, replace aggressive water, quickly restoring circulation, efficiency, and increase the lifespan of your system.
  18. Institute a tenant energy awareness program – use your company newsletter and/or building announcements to keep tenants and their employees informed about energy management goals and how they can help.
    • Provide tenants with energy saving tips
    • Recommend that tenants keep the blinds in the office closed (or almost closed) during peak sun hours and especially on weekends,
    • Recommend that building occupants avoid placing lamps near the thermostats in your space (heat generated by the light causes the HVAC to turn on when not needed to cool the entire office),

Conserve Water

27. Install aerators on faucets (especially in older buildings) to reduce the demand for hot water;

28. Put water heaters on a timer that shuts them off at night and on weekends and add water heater blankets,

29. Insure all hot water piping, including water return piping, is insulated which reduces the amount of time the user waits for hot water and ensures warmer water will be returned to the water plant.

30. Place cistern displacement devices in toilets to reduce flush volume.

31. Use dyes to check and fix toilet cistern leaks.

32. Use native or drought-tolerant plants and landscaping;

33. Use reclaimed water (through the use of rainwater harvesting tanks), irrigation sensors, timers and green products for landscaping, common area amenities and pest control.

34. Add a rain sensor designed to identify when precipitation is present and lock-out a controller so it does not run its program and irrigate when watering is unnecessary. After the rain event, the sensor automatically resets, allowing the controller to resume its schedule without losing any program information.

Indoor Environmental Quality

35. Use sustainable cleaning products and building materials for any tenant improvements or repairs;

36. Have cleaning crews use mircrofiber towels for cleaning rather than wasteful paper towels.

37. Replace bathroom paper products with recycled or post-consumer content paper.

38. Use high-efficiency HVAC filters and change them often.

39. When repainting an area, require the use of low VOC paint or paint that meets Green Seal 11 standards.

40. Paint work areas in lighter colors and use brighter surface design materials to maximize the effect of natural lighting.

41. Ensure remodeled include environmentally-friendly or recycled carpet.

42. Use a plant service to promote clean air and natural cooling.

43. Encourage tenants to position desks closer to natural light to reduce the onset of seasonal depression (aka SAD).

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44. Provide incentives, such as free or preferred parking, for building occupants who carpool.

45. Create a message board (either digital or physical) where building occupants can sign-up and find carpool mates.

46. Provide preferred parking for building occupants who drive low emission, fuel-efficient vehicles.

47. Encourage the use of public transportation

48. Provide bicycle storage to encourage building occupants to ride their bikes to work.

49. Hold long-distance meetings via NetMeeting, Live-meeting or other services.

50. Install electronic vehicle chargers

LEED Project Update

Posted on by abrahamwien18

4/19/15

Julie

 

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

Existing

Proposed

Proposed

 

 

 

 

 

 

 

 

 

 

Proposed LEED Certified Building

For general information on this project please Click Here to see our last post.

We have been busy working on the design and drawings in preparation for submission to the City of Boca Raton Development Services Department. The design of the building has taken many twists and turns over the last few months. Since we are doing a major renovation and constructing a second floor, the design and location of the stairs and an elevator have been instrumental in our building’s design. As with any project, the site plan and its setbacks limit the building footprint that will be utilized.

Based on our site plan, we do have the space to bump the front of the building out to accommodate our new staircase. This allows us to construct the stairs without having to penetrate the existing building ceiling membrane. In addition, it creates an interesting design element that does not deduct precious square footage for the stairs construction.

We have also decided to locate the elevator on the outside of the building. Again, an exterior location will not deduct square footage from the base building plan. Since the elevator shaft will be located on the exterior, building fire codes will be different than if the elevator was located internally. We are anticipating that the elevator will be a prominent design feature and contribute to the aesthetics of our project.

As stated in our previous post, this project is a proposed LEED certified building. A key component of a LEED project is its reduced energy use. Our initial design utilized solar rooftop panels to generate power for the building even with the hopes of generating enough power to sell back to the grid. Florida’s large utility monopolies and lawmakers have worked successfully to block and control who can generate solar energy and what it can be used for; thereby restricting its use by homeowners and businesses. The Florida legislature, at the direction of the utility companies, have gutted the state’s energy savings goals and entirely eliminated Florida’s solar-rebate program. Due to this situation, we are now exploring alternative methods of energy including fuel cell technology powered by natural gas.

There is a pro-solar group in Florida, Floridians for Solar Choice, that is seeking to make solar more accessible in the state. Their ballot petition seeks to expand solar choice by allowing customers the option to power their homes or businesses with solar power and chose who provides it to them. Please visit their website to learn about this initiative and sign the petition. www.FLsolarchoice.org.

If the benefits of a sustainable retrofit are so robust, why isn’t everyone doing one?

Posted on by abrahamwien18

PJ PicturePaul L. Jones, CPA, LEED Green Associate, Principle, Emerald Skyline Corporation

A sustainable retrofit includes replacements and upgrades that result in lower energy, operating and maintenance costs as well as improved occupant satisfaction. A sustainable facility will have a small carbon footprint, limited environmental impact and conserves natural resources. They can range from replacing conventional lights to LED bulbs, adding motion-control switches and installing low-flow water fixtures to installing a green roof, replacing the building skin and adding solar panels to all of the above.

When you fully understand the economic benefits of doing a sustainable retrofit which include lower expenses and rent and occupancy premiums resulting in higher NOI as well as reduced cap rates resulting in higher long-term values, you realize how few property owners, managers and tenants have actually made the decision to pursue an upgrade of their building(s), it initially does not compute a United Nations Environmental Program Finance Initiative Investor Briefing entitled “Unlocking the energy efficiency retrofit investment opportunity” reports:

  • Buildings with the Energy Star label had significantly stronger performance than similar unlabeled buildings: 13.5% higher market values, 10% lower utility costs, 5.9% higher Net Operating Income (NOI) per square foot, 4.8% higher rents and 1% higher occupancy rates.
  • A study using Co-star data concluded that LEED-certified buildings and Energy Star rated buildings versus non-rated buildings had 8% higher effective rents (a function of both the rental amount and the occupancy rate) and a 13% sales price premium.

See also my article, “Welcome to Sustainable Benefits – Let’s begin with the benefits of doing a commercial building sustainable retrofit” for additional survey results and case studies that demonstrate the results building owners and managers have realized.

In a 2012 study by The Rockefeller Group and Deutsche Bank Climate Change Advisors, however, reported that approximately $72 billion in capital is needed to be invested in sustainable retrofits to effect profitable energy efficiency in the existing building stock. However, the total spent in 2012 was just $1.5 billion.

Once you understand the relative perspective of the stakeholders in both the investment and the benefits, the resistance to effecting a sustainable retrofit can be understood.   Let’s dissect the framework in which the decision to make sustainable improvements are made and the issues and motivations that cause a property owner not to update and improve their property which are:

  • Short-term investment horizon
  • Incongruous lease structure
  • Capital and operating budget limitations
  • Financing availability, complexity and/or cost
  • Limited knowledge, time and/or motivation to effect energy upgrades

Understanding these investment, operational and financial constraints is the first step in developing solutions that will result in making the sustainability and resiliency of the existing stock of commercial buildings feasible and practical.

Short term investment horizon:

In the era of REITs, CMBS, hedge funds, crowdfunding and private equity, investment hold periods are frequently in the 3 – 7 year range when investors can typically optimize the IRR and other profitability measures or bail on a bad investment and reallocate their capital. As a result, many investors will only consider sustainability measures that have a two-to-three year payback period. Deep energy retrofits with savings of 30% to 50% that result from retrofitting multiple building systems requiring more time and capital to effect are tabled and not done.

Solution: The current and prospective investment environment will continue to reflect hold periods that are relatively short; however, the solution is for investors, owners and managers to realize that a sustainable retrofit enhances the long-term value of the property and will cause investment returns to increase. Including the costs and benefits of upgrading a building is a common way for sponsors to demonstrate the inherent value of a property – especially one that is not fully leased or suffers from functional obsolescence or poor aesthetics and other physical limitations on its marketability to prospective tenants. Many business plans include upgrading a building from one class to a higher class which results in increased rents and lower cap rates. As evidenced by many studies, including sustainability and resilience in the business plan is an increasingly important component in any market-oriented building upgrade. The solution is for sponsors, investors and owners to realize this and to put it into practice.

Future articles will present sustainable ideas many of which can be implemented with no capital investment required.

Incongruous Lease structure

Commercial buildings, a/k/a income properties, are leased to tenants pursuant to a variety of lease structures with the four most common being as follows:

  1. Gross Lease, or full service gross, is a lease where the landlord/owner collects a stipulated rent amount and is pays all expenses including real estate taxes, insurance and operating expenses that are comprised of utilities, repairs and maintenance and management. The room rate paid for a night in a hotel and a lease for a self-storage unit are examples of gross leases.
    • Apartment leases are typically considered to be a gross lease as the landlord is usually responsible for all operating expenses including real estate taxes, building insurance, common area maintenance and utilities, and property management while the tenant is responsible for the unit’s electricity (and sometimes water) and interior maintenance.
  2. Modified Gross Lease is a gross lease where the landlord/owner collects a stipulated rent amount plus a reimbursement of real estate taxes, insurance and operating expenses which exceed an agreed upon amount which is typically an estimate of the building expenses for the initial lease or calendar year. Typically, at the end of the year, the actual expenses are reconciled to the estimate and any increase is passed to the tenant based on its pro-rata share. Most multi-tenanted office buildings are leased pursuant to modified gross leases.
  3. Net Lease is a lease where the landlord/owner collects a stipulated rent amount plus building expenses which include real estate taxes (net), taxes and insurance (double net); or taxes, insurance and operating expense (triple net) depending on the terms of the lease. If the building is multi-tenanted, the tenant pays its pro rata share.   Most net leases are currently triple net. Retail properties are typically leased using a triple net lease.

In a standard Full Service lease, there is no split incentive in the lease structure as any and all savings realized from a sustainable retrofit inure to the benefit of the owner; however, the property manager may not be incentivized to promote a retrofit as it would be responsible for supervising and effecting the improvements without any additional management fees. With regard to an apartment complex, the landlord’s incentive to invest in energy efficiency measures is limited to the common areas – or to improve the competitive position and marketability of the units to prospective tenants.

In a standard Modified Gross lease as well as a Net lease, the landlord/building owner is not incentivized to invest the time, money and personnel resources to effect a sustainable retrofit as the landlord receives no direct financial benefit as the tenant pays the operating expenses and receives all of the benefit of lower operating costs.

Solution: Creating a lease structure that equitably aligns the costs and benefits of efficiency, sustainability and/or resiliency between building owners and managers, known as a green lease, aligned lease, high performance lease or energy efficient lease, will create sustainable and substantial benefits, both quantitative and qualitative, for both tenants and owners/landlords.

  • According to Jones Lang LaSalle, “A green lease need not be complicated. Often it merely requires structuring terms and agreements already in place, such as temperature settings and building operating hours, in a fashion that provides sustainable cost savings with negatively impacting building performance.”

To effect a green leasing program that includes both current and prospective tenants, engaging a consultant that understands both commercial lease structures and efficiency and sustainability retrofits to maximize the sustainable benefits to be derived therefrom.

Green leases will be addressed in detail in a future article.

Capital and operating budget limitations

Many properties suffer from a breakdown in communication and financial planning between building managers and building owners.   Building managers typically operate a facility pursuant to a one-year budget which causes them to budget and implement projects with a short term (1- 2 years) payback period. Consequently, capital improvements that have a longer payback period are not often recommended by management, or if recommended, not implemented by ownership due to a combination of knowledge, time or motivation to consider an energy upgrade or a perceived lack of available capital. This short-term horizon again limits the nature and extent of any efficiency or sustainable upgrades and prevents ownership from reaping all of the economic benefits that inure from a building retrofit.

Further, many times neither building ownership nor building management understand the nature and availability of financing options, tax credits, utility and local government rebate programs. Some of the programs, or a combination of programs, can result in building owners not having to come out of pocket to fund the improvements; however, the unique nature of them requires time which is typically focused on achieving the primary business goals of the organization.

Solution: Engage a sustainability consultant with knowledge of property operations and management as well as the nature of the available financing, credits and rebates – and how to source and evaluate alternatives in order to minimize actual investment dollars and the cost of any financing incurred.  Conducting a life-cycle analysis in addition to other financial analyses will provide ownership with the information needed to make the business decision.

Future posts will present investment analysis tools and methodologies with examples of the real economics of sustainable retrofits.

Financing availability, complexity and/or cost

Contrary to popular belief, energy efficiency and sustainability retrofits benefit from a variety of financing alternatives. However, for real property professionals who work with mortgage loans, mezzanine loans, preferred equity and similar forms of financing, retrofit financing options ranging from equipment leases to ESCO (Energy Service Company) contracts and PACE (Property Assessed Clean Energy) liens is a whole new world. When you add in the variety of tax credits, utility rebates and vendor financing, the options become complex.

Further, the sources for financing a retrofit are not usually the same ones that provide mortgage financing so it is a new arena which makes accessing sources and evaluating options time consuming and prohibitive.

Solution: Engaging a professional who is familiar with the types and sources of retrofit financing as well as the typical structures and issues of which owners should be aware is the easiest and most efficient way to determine and evaluate the options based on the financial and non-financial objectives of the owner.

The various retrofit financing options, examples of tax credits and utility and municipal rebates will be described and explained in future posts.

Limited knowledge, time and/or motivation to effect energy upgrades

In today’s competitive commercial real estate environment that is still recovering from the devastatingly harsh Great Recession of 2007, keeping your focus on the primary business of keeping space leased (as hoteliers say – heads in the beds) and watching every penny to the bottom-line is the first priority of owners and managers.

Even though the results of an efficiency, sustainability and/or resiliency retrofit provide a substantial boost to the net operating income (and cash flow) of a property, it does not become a high priority item due to lack of understanding of the process, the capital, management and labor requirements, the extent of the potential disruption to operations and tenants as well as knowledge of the additional value (rent premiums, occupancy premiums, higher quality tenancy, lower cap rate, increased investment value) and business benefits (reputation, image, goodwill) to be derived therefrom.

Also, many times building management staff, who may have the understanding of the sustainability technology will not have the financial literacy to present a compelling case to ownership.

Further, many energy service providers (who are typically considered to be the expert in facilitating a retrofit) do not know or understand the financing options that are available to building owners. Accordingly, these professionals are not able to property advise an owner on energy project financing.  Accordingly, many owners are not aware of, nor understand, the variety of financing mechanisms available to them.

Solution: Learn enough to realize that it is worth the time to learn about the options that are available, hire a sustainability consultant, architect or engineer to analyze the property, benchmark its energy and water usage and understand other maintenance practices, have the systems retro-commissioned to determine how well they are performing and develop an efficiency, sustainability and/or resiliency retrofit plan. Implement the plan and start realizing the benefits.

Our Sustainable Benefits blog will be your resource to learn and understand the new world we are transitioning into – one in which we leave the world better off for having lived (Emerson).

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

Posted on by abrahamwien18

2/12/15

PJ Picture
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

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.

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

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.

Why the Invisible Hand Works

Posted on by abrahamwien18

7/23/14

PJ Picture
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 by abrahamwien18

PJ Picture
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

Making a Difference

Posted on 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