The Changing Face of Waste Management and the Shift Toward a Circular Economy

Posted on by abrahamwien18

KG ResizeBy: Kendall Gillen, LEED Process Management,
Emerald Skyline Corporation

The concept of waste is well known in today’s linear consumerist society. Once a material or substance is no longer considered useful, it is discarded and left in the hands of waste management. The conversion of waste materials into reusable materials helps to reduce the amount of waste and the consumption of raw materials, otherwise known as recycling. Since both of these concepts have been around for most of human history, and we are still producing alarming amounts of waste, 251 million tons of which only 34.5% is recycled in the U.S. according to the EPA, it is clear that responsible management of waste is essential to sustainable building.

Designing for responsible waste management and sustainable building requires a plan so that it can be carried through from construction/renovation to operations and maintenance. The LEED credit(s) on solid waste management call for diversion of both construction and demolition debris from landfills and incineration facilities. Instead, these materials should be properly redirected back into the manufacturing process or sent to the proper facilities for sorting and reuse. In addition, regular building operations must include a recycling plan to sort materials by category such as paper, plastic, glass, cardboard, food waste, and metals. For more information on the intent and requirements of the solid waste management credit, please visit the USGBC website. Not only does having a plan have a better impact on the environment, sustainable waste management has many other incentives such as valuable resources found in waste, taxes, reduced transportation costs, and growing public awareness of environmental stewardship.

Image Credit: The Ellen MacArthur Foundation

Image Credit: The Ellen MacArthur Foundation


Reducing waste and increasing reuse and recycling are critical, but some have even posed the question whether or not we could change the way we view waste altogether. The circular economy concept is gaining momentum which accentuates keeping resources in use for as long as possible, extract maximum value from products, and repurpose them at the end of their life. To quote Stacy Glass of Cradle to Cradle Products Innovation Institute, whose aim is to eliminate the concept of waste rather than just reduce waste:

“For too long, the value has been simply put on recycling with no concern for what that material is and if it has a valuable second or even third life. Recycling is dealing with the problems of past design. We need to change the emphasis to be: safe ingredients, perpetually cycled, design in ways that harmonize with humans and the environment. The future is nutrient management, not waste management.”

The Ellen MacArthur Foundation has wonderful educational resources pertaining to the circular economy, including this aesthetic and informative General Resources Map.

As a graduate with a Bachelor’s degree in Biological Science, I find the circular economy concept to be brilliant as it emphasizes Biomimicry, or mimicking the processes already found in nature. However, our existing linear economy will require a changing mindset that ultimately lies with the demand by individual consumers as well as the supply side that must switch from cheaply made goods to goods designed with the intent of “made to be made again,” meaning quality ‘nutrients’ or materials.

Since construction and demolition waste constitutes nearly one-third of all waste, it is necessary that the industry be methodically directed toward a circular economy, minimizing waste and maximizing value. Using the following methods and many others, construction waste can be limited by:

  • Developing a construction waste management plan
  • Identifying and sorting materials such as drywall, lumber, concrete, plastics, etc. that can be reused or recycled
  • Salvaging materials such as doors and windows for future use
  • Chipping branches and trees to use as landscaping mulch
  • Purchasing in bulk to reduce packaging waste

Buildings should be dismantled and sorted rather than demolished, which is a core principle of the LEED program. Emerald Skyline Corporation can handle the management of this process. Please visit the website for more information. The same goes for construction in that the building materials themselves need to be designed for eventual disassembly. What do you think it will require for the industry to make this shift?

One point is evident, and that is the fact that the future of waste management, recycling, reuse, and how we view these constructs is changing to meet the demands of our global economy as well as preserve our natural resources. As professionals in the sustainable building industry, we must all do our part to encourage the responsible disposable of solid waste by redirecting recyclable resources back to the manufacturing process and reusable materials to appropriate sites.

 

 
Sources: http://www.environmentalleader.com/2015/11/06/the-future-of-recycling-waste-management-is-resource-management-experts-say/#ixzz3yNPIryJl

http://www.wm.com/thinkgreen/pdfs/2014_Sustainability_Report.pdf

http://www3.epa.gov/epawaste/nonhaz/municipal/pubs/2012_msw_fs.pdf

http://www.ellenmacarthurfoundation.org/

www.usgbc.org

 

Shoreline Adaptation Land Trusts “SALT” – new concept for adaptation

Posted on by abrahamwien18

John EnglanderBy John Englander
www.johnenglander.net

 

 

Shoreline Adaptation Land Trusts – “SALT” «««« DOWNLOAD HERE

At a conference today in St. Petersburg Florida I have put forth a new concept: Shoreline Adaptation Land Trusts. “SALT” The 3-page paper was published by the Institute of Science for Global Policy and can be downloaded above or from their web site www.scienceforglobalpolicy.org

I developed the concept in response to their challenge to come up with something specific that could be based on science and help the adaptation of policy to deal with rising sea level. This two day forum is: “Sea Level Rise: What’s Our Next Move?”

Similar to the concept of conservation land trusts which have been well established, a SALT could create a vehicle to facilitate the migration of vulnerable private lands. If you are interested, please download the short paper with the description.

Why Florida Developers and Business Interests Need To Understand and Embrace “Adaptation Action Areas.”

Posted on by abrahamwien18

 

Mitch Chester

By Mitchell A. Chester, Esq.

The latest projections of anticipated sea level rise (SLR) in Southeastern Florida offer a stark and compelling reminder that commercial and residential adaptation planning should be a priority concern for developers, building and unit owners and operators, businesses and even tenants.

In October, 2015, the Southeast Florida Regional Climate Change Compact Sea Level Rise Work Group released a document which projects by the year 2030, sea level rise in the region can increase 6 to 10 inches (above 1992 mean sea level) by 2030, just a mere 14 years away. That’s only about half way through a 30 year mortgage. By 2060, the increase above 1992 levels is anticipated to be, based upon present peer-reviewed scientific projections, 34 inches.

To put that in to another context, according to the Work Group, between 1992 and 2015, based upon NASA satellite measurements, the ocean in this part of the planet has heightened by almost 3 inches. That is a significant rise in very short period of time.

As SLR science evaluates and warns of complex dynamic factors such as thermal expansion of ocean water, changing oceanic currents, as well as melting rates of ice sheets and glaciers, society needs to responsibly plan for and adapt to the reality of climate change by developing planning and operational tools which will extend the life of vulnerable areas. This includes preparing existing and planned commercial and residential structures on threatened properties.

An initial effort to plan for such adaptation was created by the Florida Legislature in 2011. Tallahassee adopted the Community Planning Act, which currently provides for “Adaptation Action Areas” (“AAA’s). One of the few actions taken by state lawmakers to address SLR concerns to date, Section 163.3164 (1) of the Florida Statutes defines AAA’s as “a designation in the coastal management element of a local government’s comprehensive plan which identifies one or more areas that experience coastal flooding due to extreme high tides and storm surge, and that are vulnerable to the related impacts of rising sea levels for the purpose of prioritizing funding for infrastructure needs and adaptation planning.”

Without understanding if there is adequate public infrastructure in specific areas, such as resilient water treatment facilities, storm drain systems, roads and bridges, developers and other business stakeholders may make costly and risky decisions to build or upgrade facilities which will be adversely and perhaps prematurely impacted by the verified threat of rising seas.

The failure to thoroughly understand the menace ocean dynamics presents to specific construction projects can ultimately lead to negligence and errors and omissions lawsuits against proponents of the projects, land owners, architects, engineers and construction companies.

Pursuant to Florida Statute Section 163.3177 (6) (g) (10), local governments have the current option to develop AAA boundary areas. These AAA zones can vary in shape and size, and are carefully being implemented in certain areas, such as within portions of the City of Fort Lauderdale.

Inclusion within properly funded Adaptation Action Areas have the potential to increase the value and useful lives of properties to be built or which are being revitalized.

Local governmental discretion to create and manage AAA’s is a potentially powerful tool which can be employed as a part of Florida’s growth management laws. When established for a part of a municipality, AAA’s are designed to promote adaptation to SLR and other coastal hazards, including rising water tables, tidal flooding and storm surge. The AAA strategy allows for funding, on a priority basis, for government infrastructure improvements within the defined boundaries of the AAA.

In November, 2013, the South Florida Regional Planning Council (SFRPC) made it clear, “This is the time for all Floridians, the majority of whom live less than 60 miles from the Atlantic Ocean or Gulf of Mexico, to question the long-term effects of sea level rise on more than 1,350 miles of our coastline, 4,500 of our estuaries and bays, and over 6,700 square miles of our other coastal waters.”

The SFRPC highlighted high-stakes economic concerns. According to the report Adaptation Action Areas: Policy Options for Adaptive Planning for Rising Sea Levels, “Three-fourths of Florida’s population resides in coastal counties that generate 79 percent of the state’s total annual economy. These counties represent a built-environment and infrastructure whose replacement value in 2010 is $2.0 trillion and which by 2030 is estimated to be $3.0 trillion.”

As Southeastern Florida grows in population and with new projects, clearly, there’s a lot at stake. Those planning to build new condominiums, offices, facilities and other “built environment” developments cannot responsibly do so without an understanding of the meaning of AAA’s. Furthermore, even those desiring to re-build structures need to recognize the critical conceivable importance of AAA’s in their planning process.

As usual, money is key. This means corporate financial adaptation in real estate development is just as important as any other aspect of proposing, and building structures.

In certain coastal and nearby inland areas, fiscal consequences have already profoundly impacted shoreline and adjacent lands. Take for example, the City of Miami Beach, which is spending in excess of a reported $400 million to place pumping facilities throughout the city and the intense and costly focus on climate related issues within the City of Fort Lauderdale and surrounding communities.

Understanding the potential benefits of inclusion in coastal community adaptation action areas can provide is a part of a responsible private sector hazard exposure management strategy. The key is early, intelligent and probing due diligence.

For example, developers considering new coastal projects, on either side of Florida’s Coastal Construction Control Line, will want to know several key issues prior to proceeding with a project so they can financially adapt:

  1. Is the property to be developed included within the boundary of an existing AAA? If not, is a AAA zone being considered for the subject property?
  2. What public infrastructure projects are planned for the immediate area around the proposed construction site? Is the existing or planned governmental infrastructure adequate to serve the development’s anticipated life-span?
  3. Is the AAA funded, and if so, what public projects within the zone are prioritized? How will early AAA projects affect the subject property? What funding mechanisms will power the AAA? For example, federal programs, increased taxes, a variation of development impact fees or bond issuances?
  4. What future plans does the municipality have within the specific designated AAA boundaries? Is the AAA in the planning or operational stage?
  5. What are the flooding risks for the developer’s site footprint over time?
  6. What political challenges are there to the full and proper implementation of an effective AAA?
  7. Will inclusion in an AAA zone enhance the property value of the project? One thought is that being situated within a AAA can potentially increase market value over a limited period of time.
  8. What area protection measures are being considered or are already underway to mitigate against sea level rise?
  9. What construction design requirements are being considered or mandated for the specific AAA? For example, is structure elevation required? To what extent? Will use of such tools help to reduce environmental exposure to the structure?
  10. Is the long-term AAA goal one of retreat as opposed to adaptation? “Managed retreat” is defined by the SFRPC as, “Strategies that involve the actual removal of existing development, their possible relocation to other areas, and/or the prevention of future development in high-risk areas. Retreat strategies usually involve the acquisition of vulnerable land for public ownership, but may include other strategies such as transfer of development rights, purchase of development rights, and rolling or conservation easements.”
  11. Is the AAA in an area where no development will be allowed in the near-term? Are restricted development rights on the horizon in the specific sector?
  12. What new technologies and strategies can be used within the boundaries of the AAA to help lengthen the productive life of the zone?
  13. Will buyers, renters, visitors and tenants be attracted to the property because of its inclusion in a AAA? In other words, can the zone have the same significance as a sea level rise equivalent of LEED-certified buildings?
  14. What can the county and municipality tell you about any adverse consequences for building and developing in a specific AAA?

Peer-reviewed science is clear. Even if we eliminate all greenhouse gasses over the coming years, sea level rise will continue. That’s the blunt reality. Properly planned and funded, Adaptation Action Areas can extend, for some finite period of time, those lands which are most at risk to the ever encroaching ocean waters.

Understanding the sustainable benefits of Adaptation Action Areas is key to responsible planning and development in coastal regions. Much more needs to be done in Congress and at the State Legislature to help engender constructive adaptation to sea level rise, but responsible implementation of AAA’s, with a strong public-private partnership, is a good starting point.

Mitchell A. Chester, Esq. is a civil trial lawyer practicing in South Florida. He is a member of the American Board of Trial Advocates and an AV rated attorney. In practice for over 36 years, he is deeply concerned about developing legal and monetary adaptation strategies and solutions for communities threatened by swelling oceans. Mr. Chester is editor of RaisingFields.org (how agriculture can adapt to sea level rise and increased heat), SLRAmerica.org (which explores legal and practical financial issues pertaining to sea level rise), FinancialAdaptation.org (monetary tools for sea level rise), Sea Level Rise Radio.com (a podcast which discusses topics to examine key societal issues and opportunities presented by encroaching waters) and MySeaLevelRise.org (SLR issues). His focus is on people, including homeowners, renters and business owners as we jointly prepare for altered coastlines. He is one of the directors of the CLEO Institute, which educates government leaders and students in Southeastern Florida about sea level rise and climate issues. Mr. Chester has presented SLR and climate issues in Southeastern Florida including events at the University of Miami, Florida Atlantic University, Miami-Dade College, Vizcaya Museum and Gardens, the Arthur R. Marshall Foundation for the Everglades, the Environmental Coalition for Miami and the Beaches, the Coral Gables Museum, and other venues.

How Greed and Capitalism Can Solve the Climate Crisis

Posted on by abrahamwien18

By Greg Hamra, LEED AP BD+C, O+M
Climate Solutionist, Education & Advocacy
Guest Author

 GH1

You’re about to learn of a fiscally conservative, market based solution to the climate crisis that reduces government regulations, boosts economic growth, creates millions of jobs, save thousands of lives per year and reduces greenhouse gases and has the endorsement of leading economists and world-famous scientists.

But first, a disclaimer: I think Naomi Klein makes some very good points in her book, “This Changes Everything: Capitalism vs. The Climate.” Naomi Klein first landed on my radar with this hard-hitting quote:

“Climate change detonates the ideological scaffolding on which contemporary conservatism rests. A belief system that vilifies collective action and declares war on all corporate regulation and all things public simply cannot be reconciled with a problem that demands collective action on an unprecedented scale and a dramatic reining in of the market forces that are largely responsible for creating and deepening the crisis.”

I find it very difficult to argue with her statement. However, many experts believe solution exists somewhere in between Naomi Klein and Milton Friedman, in fixing capitalism, not overthrowing it. Don’t be so quick to dismiss capitalism as a tremendously powerful force to drive human behavior and major financial moves. Right now capitalism is very broken. It’s being misused, mismanaged, and even hijacked. And when it comes to our energy economy, it is completely bastardized. Milton Friedman is turning over in his grave.

“It is easier to imagine the end of the world than to imagine the end of capitalism.” – Fredric Jameson

And if you think all this is just a scam – part of a liberal conspiracy, I say to you: “You can ignore reality, but you can’t ignore the consequences of ignoring reality.” – Ayn Rand

Please take a moment to consider the benefits being put forth, an economic boost, job creation, and restoration of free-market capitalism! The issues at hand are of such great urgency and importance that none of us can enjoy the luxury of expecting everyone to do what needs to be done for the same reasons you or I have.

So what’s the problem?

Our need power our world by continually burning of fossil fuels results in serious consequences for our planet, our economy, and the way we live. Our very way of life is threatened. Burning of fossil fuels results in the release of heat-trapping gases to our atmosphere. This is not disputed.

The costs associated with this are immense. They include: downwind emissions that shorten people’s lives, sea-level rise (SLR), extreme weather, increased wildfires, ecosystem and biodiversity loss (including crop loss), dying coral, famine, floods, mudslides, damaged fisheries, and a national security risk in the form of climate refugees. (See documentary: “Climate Refugees” with Newt Gingrich – trailer).

The big issue for us in South Florida is clearly sea-level rise. In fact, Miami is ground-zero for the economic impacts of sea-level rise with the greatest value of assets at risk in the world. SLR is the result of a warming planet. Over 93% of the Earth’s trapped surface heat goes straight to the oceans. Thermal expansion of ocean water and melting of land-based ice results in sea-level rise. Here in S. FL, the seas have risen nearly 9 inches in the past 100 years, as measured by the Naval Air Station in Key West. During super high-tides, sea water is delivered into our streets through the storm sewers. (Sea-level rise in action) The City of Miami Beach is undertaking major infrastructure improvements, raising sea-walls, roads and sidewalks, and installing pumps to return seawater back to Biscayne Bay. The first phase of this project included four pumps at a cost of $15 Million. The entire project will involve 60-70 pumps with a whopping price-tag.

Estimated cost: $500 MILLION

Prices reflected in our cost of good or fuels: $0

With assets in the trillions to be protected, we need to do this, but we also need to fix a big accounting error.

Our broken energy economy bears little resemblance to a free-market economic model.

Three predominant market distortions that must be remedied:

  • The price on fossil fuels does not reflect the social costs.
  • Energy subsidies (picking winners and losers) serve to create deeper market distortions.
  • Top-down government regulations can be inefficient and costly, and receive consistent pushback from ‘free-market’ purists and industry groups.

The President’s new Clean Power Plan is an aggressive and effort to tackle GHG emissions. So what’s the problem? Half of the states are already protesting it.
GH2

Our energy economy is broken. Very broken. Nobody argues with this.

Another problem we have are elected leaders who are driven by fear, short-term interests, and often re-elected by low-information, similarly fearful voters. I submit that most of these punters, these ‘slow-lane’ Americans who waffle somewhere between “let’s keep it in neutral” and “more CO2 release is good for us” are actually quite scared. But they’re not afraid of the science. They’re afraid of the solutions. They fear that anything we do to reduce greenhouse gas emissions will tank our economy. Many people truly believe this, conservatives and many liberals too. And they’re wrong.

What we have at hand is potentially the biggest job-creating economic stimulus ever seen… if we get it right. But what if we don’t? It’s not like it’s the end of the world, right? Wrong That’s exactly what it means. Our survival on this planet depends on getting this right, and fast. We can’t afford to punt. We need a big play.

We need to fix the accounting error. The moment we begin to account for the social and environmental costs of carbon based fuels, the markets will shift.

To my conservative friends:

Our energy economy is nothing at all like the “free-market” Milton Friedman envisioned. Would you help to restore true, free-market principles, remove the socialism from the system, help restore capitalism and fix our energy economy? Consider dealing with this issue the Reagan way.

To my more liberal, and potentially anti-capitalist friends:

Capitalism is a big word, with many flavors. Leading economists realize we’re getting it wrong and that a correction is in order. Experts think more plausible, and certainly more politically viable to plug the holes in capitalism rather than swap it for an entirely different economic system. That would require nothing short of a revolution. Are you ready for that? Me neither.

There’s one plan that could put us on the right track. The Washington Post called it the most politically viable solution to reducing greenhouse gasses, and it is consistent conservative economic principles.

The carbon fee + dividend (CF&D) plan was written by a Republican icon, George Shultz, President Reagan’s Treasury Secretary and Secretary of State, and Nobel laureate Gary Becker.

It calls for a steadily-rising revenue-neutral carbon tax collected at the most upstream point — the mine, well, frack pad — (about 1600 points of collection in the U.S.) and rebating those fees back to American households. All of it. This is not a big government plan. In fact, it trades in current big government regulations and subsidies for a simple, more honest, market-based plan that fixes the accounting error.

This plan is consistent with conservative economic principles by embedding the true cost into the price we pay for our direct and embodied energy. When happens, market actors change behavior almost immediately. When the markets move in this direction we’ll be on our way. Suddenly all those green jobs we’ve wanted start taking off. American ingenuity and competition is unleashed.

This plan has the endorsement of leading economists, top scientists, and top economic policy analysts. George Shultz says: “You shouldn’t call it a tax if the government doesn’t keep it!”

Read about the Shultz-Becker Carbon Tax proposal in this WSJ article (or see PDF).

In summary the Carbon Fee and Dividend plan:

  • reduces government intervention
  • leverages the incredible power of the market
  • is revenue-neutral; rebates all funds to taxpayers
  • unleashes American ingenuity and innovation, and spurs competition
  • will create millions of jobs, benefiting our economy (REMI report)
  • would eliminate costly fossil-fuel subsidies
  • would result in thousands of lives saved
  • would reduce GHGs by over 50% by 2035

From a performance standpoint, the Carbon Fee & Dividend would outperform the Clean Power Plan. Look:

  • CPP aims for a 32% emissions reduction by 2030 (and some call it a job killer)
  • CFD would reduce CO2 emissions by 52% by 2035 (and it creates 2.8 million jobs)

So the solution is simple:

  1. Put an HONEST price on carbon
  2. Rebate all fees to American households
  3. Get out of the way and let the free market work

This is a call to my fellow Americans. Let’s fix capitalism! Let’s restore some honesty into the system.

Economist Robert Reich explains in 3-minutes:

GH3

What we need is political will for a livable world. We need a price on carbon, a carbon fee & dividend.

To be part of the solution, contact Citizens’ Climate Lobby, the most effective organization driving sane climate policy in this country. www.citizensclimatelobby.org

The world’s most famous climate scientist says…
GH4

Learn more:

 

The Financial Analysis of a Deep Sustainable and Resilient Retrofit

Posted on by abrahamwien18

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

According to a guide to the energy retrofit market entitled “Deep Energy Retrofits: An Emerging Opportunity” and published by the American Institute of Architects (AIA) in conjunction with the Rocky Mountain Institute (RMI), “Energy efficiency in existing buildings is most often addressed by upgrading dated engineering systems such as lighting and HVAC systems with better performing technologies… A design-centered, holistic approach to a retrofit, in which all the interactions in a building’s systems are considered can yield substantially higher energy savings. Retrofits of this type, called deep energy retrofits, aim for energy savings upwards of 50%.”

A green or sustainable building refers to both the real estate (land, building, fixtures, furniture and equipment) and its maintenance, or the use of processes that are environmentally responsible and resource-efficient throughout its life cycle (e.g., site planning, building design, construction, occupancy and operation including maintenance and renovation, and, finally, demolition. In our corporate brochure, we state that “A facility made sustainable by Emerald Skyline Corporation will have a small carbon footprint, high occupant comfort, limited environmental impact and conserved natural resources.”
Accordingly, a deep sustainable retrofit, hereinafter referred to as a “Deep Retrofit,” is designed to lower energy, water and waste disposal bills as well as operating, maintenance and insurance costs with increased marketability and higher long-term values due to a higher tenant capture rate resulting in premium occupancies and rental rates as well as reduced risk resulting in a lower cap rate upon sale. Other benefits include improved employee health, productivity and satisfaction from improved indoor environmental quality.

With recognition of the increasing importance of resiliency in the ability of a building to survive and recover from a catastrophic event, any Deep Retrofit should also include improvements that reduce a building’s vulnerability and risk due to stronger winds, higher storm surge, more frequent flooding, wild fires and other natural hazards that threaten our families, livelihoods, businesses and properties.

As a Deep Retrofit represents a significant modernization of a facility during which over 50% of the building is renovated, the optimum time to implement a Deep Retrofit is upon acquisition, to improve a building that suffers from significant vacancies, to reposition or repurpose a building, pursuant to a new lease (or renewal thereof) to a major tenant or timed to certain events in a property’s life cycle. A Deep Retrofit is a tremendous catalyst for a building’s comeback.

According to Jack Davis in a 6/14/2012 article entitled “Energy-saving Deep Retrofits published by the Urban Land Institute, “Deep retrofits are part energy efficiency project, part real estate project, and can be daunting in their cohesive nature. However, in a 2011 study the New Buildings Institute found that “in most projects, the cost of the efficiency portion was not distinguishable due to the renovation nature of the work.“

Mr. Davis makes another valid point: “Psychologically, Deep Retrofits are simply more inspiring that a piecemeal approach. They they do not occur by accident; they imply the involvement of a capable team with a plan and the technical abilities to pull it off. They grab our attention in a unique way. In the competition to secure and retain tenants, with buildings certified under the LEED program becoming the norm in some markets, deep retrofits offer a gut-level indicator that this building is different.”

Study after study (see our Sustainable Benefits article “Welcome to Sustainable Benefits – Let’s begin with the benefits of doing a commercial building sustainable retrofit” February 2015) provides evidence that a LEED (Leadership in Energy and Environmental Design) or Energy Star certified building produces returns beyond those realized from energy savings alone. Therefore, it only makes sense that the financial analysis of a Deep Retrofit should extend beyond the capital budgeting approaches presented in our September eNewsletter.

RMI defines Deep Retrofit Value (DRV) as “the net present value of all of the benefits of a deep energy or sustainability investment.” In the case of a Deep Sustainable Retrofit, the analysis includes a calculation of the change in market value resulting from the implementation of the Deep Retrofit, which is based on the income approach to value in a full property valuation.

The first step in the analysis of a Deep Retrofit is to perform a diagnostic assessment of the Building. The assessment will include:

  • Gain an understanding of the building’s historical performance through an analysis of existing usage of, and expenditures for, energy, water, building maintenance and cleaning supplies as well as tenant behavior
  • Perform a sustainability audit of mechanical, electrical, plumbing and other building systems as deemed appropriate which includes an estimate of the capital investment required as well as a forecast of future utility, maintenance and operating cost savings,
  • Evaluate internal environmental quality, waste disposal practices, purchasing and other operating policies, procedures and practices which will also include a calculation of any savings or incremental costs realized as a result of the Deep Retrofit; and
  • Determine the resiliency of the property by ascertaining the building’s ability to absorb and recover from actual or potential adverse effects of stronger storms, higher storm surge, wildfires and more frequent flooding.

The next step is to complete what RMI refers to as a “Value Element Assessment” which is designed to identify the potential types of value that may be created by the Deep Retrofit. The four key elements of added value are:

  1. Retrofit Development Costs: As noted in the capital budgeting process in our article on the Capital Budgeting Analysis of a Sustainability Project, any direct and indirect savings are measured against the capital cost to be incurred. The Retrofit Capital Cost Equation is as follows: Gross capital cost less avoided capital costs less cost savings through design less cost subsidies, rebates and incentives equals Retrofit Capital Costs
  2. Energy and Non-Energy Operating Costs: The first financial benefit from a Deep Retrofit will appear in the utility bills as both the wattage consumed and the amount of peak-demand billing that is avoided will result in an immediate reduction in the electric and gas bills as well as the water bill. Non-energy operating cost savings are realized from new technology, improved performance information and operating savings from reduced maintenance requirements, and, including resiliency measures in the Deep Retrofit is anticipated to result in reduced property, flood and hazard insurance expenses. Also, a Deep Retrofit will enable a building owner to comply with current and future regulatory reporting requirements due to automated benchmarking data collection.
  3. Rental Revenues: According to a primer for building owners and developers published by the Appraisal Institute in conjunction with The Institute for Market Transformation, Deep Retrofits have the potential to improve tenant-based revenues which are those revenues generated when building owners are able to monetize enhanced demand resulting from the Deep Retrofit.
    • “In many markets, rental premiums are emerging in green buildings as many of today’s best tenants are increasingly willing to pay a premium for green spaces… 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 recent studies, the premium can range from 2% to 17%).
    • “Occupancy premiums can lead the case for green investments. If it can be determined that the green features will result in higher occupancy (through market research) than an otherwise similar building, a significant argument can be built for increases in value (from a reduced vacancy factor). Further, a LEED-certified building will attract demand from governmental agencies, Fortune 500 companies, major banks and insurance companies and other tenants who have corporate sustainability guidelines.
    • “Savings may be experienced as a result of tenant retention and the corresponding reduction in lost rents, reduced retrofit costs upon releasing spacer, lower vacancy at turnover and improved lease terms.
    • “Along with this improved occupancy premium, quicker absorption may be experienced in new properties or those that have been repositioned as green.”

While the calculation of the increased income is the same as for a traditional building investment analysis, the determination of the key assumptions requires extensive market research to support the assumptions which are input into a discounted cash flow model, like ARGUS® Valuation DCF.

  1. Sales Revenue Premium: Increased property values are realized from the higher net operating income realized due to reduced expenses and increased tenant revenues, lower capitalization and discount rates which result from risk-mitigating protections sustainable and resilient buildings provide property owners and banks, higher quality tenants, and increased investor demand. Recent surveys show that green commercial buildings trade at a premium ranging from 6% to 35% depending on the certification and the market. Studies have shown that capitalization rates for Energy Star and LEED-certified buildings are between 50 and 100 basis points lower than those for brown buildings.

Since the analysis is to determine the premium due to sustainability and resiliency improvements made to a commercial building. To complete this analysis, it requires the creation of a Cash flow projection under two scenarios:

  1. Baseline: A baseline projection is prepared based on the property in its current operating condition and market position; and
  2. Post-retrofit: This projection incorporates the retrofit development costs, the reduced operating expenses, the premium rental revenue and the any anticipated reduction in cap rate.

The difference in net operating income and the reversionary value is discounted based on the risk profile of the property and the investment to determine the value add from completing the Deep Retrofit.

The benefits of a Deep Retrofit can be significant!

With over 30 years of experience in acquisition due diligence, property valuation and cash flow forecasting as well as the ability to conduct the diagnostic assessment and create a Deep Retrofit program and budget, Emerald Skyline is uniquely qualified to be your advocate in planning, analyzing and executing your sustainable and resilient retrofit project.

Commercial Building Project Update

Posted on by abrahamwien18

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

Emerald Skyline’s repurposing of our commercial building located in Boca Raton, FL is progressing and changing as we go through the development process. We have concluded the Planning Advisory Review and are now working on the Site Plan Application. As with any project, basic requirements must be met. These may include zoning, future land use designation, and city codes. One city code we were hoping to get an exception for is the Floor Area Ratio (FAR). The FAR is governed by the zoning district regulations applicable to each property. Based on our property’s zoning our “floor area ratio” – the floor area of our building divided by the lot area in square feet, cannot exceed 0.4. Since our project is registered as a LEED project we were hopeful that an exception to the 0.4 FAR could be made. The response regarding this issue during the Planning Advisory Review is that according to City Code, no variance may be granted which has the effect of increasing the intensity/FAR on a plot or parcel.

The adherence to the required FAR has presented us with design challenges resulting in both positive and negative impacts for the project. The property on which our building is located and it’s required setbacks is not large enough to accommodate any outward (horizontal) added square footage. Therefore, our option to increase the building size is by building up (vertical). This requires that a structural engineer is engaged to beef up the existing foundation and wall structure under the new space to ensure that it can support the added weight. With the addition of a second story, a stairwell has to be utilized which will use some of our already limited square footage. We have also decided to include an elevator which impacts the design and available square footage of the building. The height restrictions of 30’ based on the zoning district does not impact the addition of a second floor including the elevator shaft. The elevator component is a key design element to the exterior elevations.

The FAR of 0.4 has required us to significantly reduce the size of the second floor addition than we originally designed and wanted. This has impacted the layout of both floors and require that we re-think what is important to be included and where. As designers we have learned that what initially is perceived as negative impacts can actually lead to a better designed project. The second floor is now smaller but the green terrace is larger. This allows for more roof top vegetation and promotes a peaceful, connected to the environment space for the occupants. For more in-depth information on the benefits of a green roof please see Kendall Gillens’s post from last month’s newsletter “Vegetation is Not Solely for Landscape: The Benefits of a Green Roof”.

We are now preparing the drawings and documentation for the Site Plan Application. The site plan requires many issues to be addressed; parking, ingress and egress, landscaping, exterior lighting, ADA requirements, water and sewer, fire and life safety, etc. One of requirements of the site plan is to provide the design of the dumpster enclosures and their location on the property. Our property has very limited space which must accommodate many different elements to meet codes. The project is LEED registered with the intent to obtain the highest level of LEED certification that is possible. Sustainable design and LEED certification should positively impact all phases of a building including its design, construction and operation. We are proposing our building will be a zero waste facility in which no trash is sent to landfills or incinerators. Our goal is to send no garbage to the landfill. We will utilize new avenues for any waste and think creatively in terms of reducing, reusing and recycling. An example of this initiative will be the creation of an organic garden located at the rear of the building to process and compost organic materials to create a product that can be used to enrich the soil. Additionally, we will send materials that can be repurposed to innovative companies that will use the waste to create new products. We also plan to install portable carts with several recycling receptacles to facilitate the collection and sorting of waste materials. Our company will transport the recyclables to the recycling facilities. No commercial waste hauling will be contracted and there will be no dumpsters on the property.

We will pursue a dumpster deviation request from the City of Boca Raton and a Zero Waste Facility Certification. This is a third-party certification and we will need to meet all of its requirements. One requirement which is important is that our policy meets all federal, state, and local solid waste and recycling regulations. A zero waste facility will meet criteria to earn points toward LEED certification.

Our site plan will also contain a bicycle rack, an electric charging station for cars and pervious pavement rather than asphalt. For more information on pervious pavements please see our post “Exploring Permeable Pavement Options for LEED Projects”.

ZWS

 

 

 

 

 

 

 

Zero Waste Business Facility Certification

Inspired by the Zero Waste business community, the U.S. Zero Waste Business Council and its Certification Development Committee have created the first third-party Zero Waste Business Certification program for facilities that meets the Zero Waste Principles of the Zero Waste International Alliance (ZWIA). Our facility certification program goes beyond diversion numbers and focuses on the upstream policies and practices that make Zero Waste successful in an organization. We have crafted the facility certification to meet the requests of Zero Waste Businesses for a valid, comprehensive verification of their Zero Waste achievements.

Objectives

The USZWBC 3rd Party Zero Waste Business Certification does the following:

  • Supports ZWIA definition of no waste to landfill, incineration and the environment
  • Drives the development of new markets and new ideas towards a Zero Waste Economy
  • Meets Zero Waste Businesses request for valid and comprehensive third party certification
  • Focuses on upstream policies and practices beyond diversion or recycling
  • Emphasizes strong Total Participation: Training of all employees, ZW relationships with Vendors and customers


Requirements for Certification

1. Zero Waste policy in place
2. 90% overall diversion from landfill and incineration for non-hazardous wastes

-Discarded materials are reduced, reused, recycled, composted or recovered for productive use in nature or the economy at biological temperatures and pressures
-Materials can be processed above ambient biological temperatures (>200° F) to recover energy from the 10% residual, but they do not count as part of the 90% diversion
-Reused materials (office furniture, pallets, paper, etc.) are eligible to count as part of the 90% diversion requirement

3. Meet all federal, state/provincial, and local solid waste and recycling regulations
4. Data provided to USZWBC has been published formally
5. Data documents a base year and measurements since the base year
6. Commit to submit 12 months of data to USZWBC annually (Data submitted will be public and published on the USZWBC website)
7. Case Study of Zero Waste initiatives can be published on USZWBC website
8. Recertification is required every three years
9. Contamination is not to exceed 10% of each material once it leaves the company site

Exploring Permeable Pavement Options for LEED Projects

Posted on by abrahamwien18

By Julie Lundin, NCIDQ, LEED AP ID+C, Principal
Emerald Skyline Corporation

As business owners and designers of our renovation project in Boca Raton, there are many decisions and variables involved in the design of both the building and the site. This project is a LEED registered project which impacts our design decisions and materials selected to incorporate sustainable goals. It gave us the opportunity to explore sustainable pavement options rather than the traditional blacktop used in most projects. The size of the project, location, cost, financial incentives to explore alternatives, and local city requirements all impact decisions to be made. When a pervious pavement is used in building site design, it can aid in the process of qualifying for LEED Green Building Rating System credits.

Leadership in Energy and Environmental Design (LEED®) is a rating system developed by the United States Green Building Council (USGBC) to evaluate the environmental performance of a building. LEED is a voluntary, consensus-based national standard for developing high-performance, sustainable buildings.

LEED provides a framework for evaluating building performance and meeting sustainability goals through five credit categories: sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. It should be noted, however, that LEED points are not gained directly by the use of a product but by meeting a specific sustainability goal of the rating program.

Pervious pavement options can contribute to many LEED categories including: Sustainable Sites, Water Efficiency, Materials and Resources, and Innovation in Design. Pervious pavement choices are unique and innovative ways to manage storm water and as a method of delaying roof runoff from entering city sewers. Considering these gives environmentally conscious business owners options to use in parking lots and walkways. When they are used in the building site design they function like storm water retention basins and allow the storm water to infiltrate the soil over a large area and recharge the groundwater supplies.

Why consider pervious pavement options?

Storm water is polluted

  • Oils and greases
  • Metals
  • Sediments
  • Fertilizers

Sustainability Factors

  • Low-Impact Development
  • Pollution Treatment
  • Recharging Ground Water
  • Tree Protection
  • LEED Requirements
  • Cool Communities

Meets LEED Requirements

  • Reduce Storm Water Runoff
  • Improve Storm Water Quality
  • Reduce Urban Heat Islands
  • Recycled Materials
  • Regional Materials

Description of specific credits where pervious pavement can aid the business owner or designer include:

 LEED Credit SS-C6.1 Storm Water Design – Quantity Control

LEED Credit SS-C6.2 Storm Water Design – Quantity Control

The intent of these credits is to limit disruption and pollution of natural water flows by managing storm water runoff, increasing on-site infiltration and eliminating contaminants. Pervious pavement can contribute to this credit by reducing storm water flow by allowing water to soak through and infiltrate to the ground below. Pervious choices can also reduce the pollutant loads by filtering contaminants as the water is transferred through the pavement.

 LEED Credit SS-C7.1 Heat Island Effect- Non-Roof

 Pervious pavement acts to reduce the heat island effect by absorbing less heat from solar radiation than darker pavements. The relatively open pore structure and the light color of pervious pavements store less heat, therefore, reducing the heat reflected back into the environment and helping to lower heat island effects in urban areas. The heat island effect can be further minimized by the addition of trees planted in parking lots. The trees offer shade and produce a cooling effect for the paving. Pervious pavement is ideal for protecting trees in a paved environment (many plants have difficulty growing in areas covered by impervious pavements, sidewalks and landscaping, because air and water have difficulty getting to the roots). Pervious pavements or sidewalks allow adjacent trees to receive more air and water and still permit full use of the pavement.

LEED Credit WE C1.1 Water Efficient Landscaping

 The intent of this credit is to limit or eliminate the use of potable water, or other natural surface or subsurface water resources available on or near the project site, for landscape irrigation. The gravel sub-base under pervious pavements can be used to store storm water for irrigation, helping to satisfy this credit. If no irrigation is required for a project, two points may be earned.

LEED Credits MR-C4.1 and MR-C4-2 Recycled Content

The intent of this credit is to increase the demand for building products that have incorporated recycled content material reducing the impacts resulting from the extraction of new material. Almost all ready mixed concrete contains recycled materials in the form supplementary cementitious materials (SCM) such as fly ash, slag, or silica fume. The use of SCMs or recycled aggregate in pervious concrete or base material contributes to recycled content needed for this credit.

LEED Credit MR-C5.1 and MR-C5.2 Regional Materials

The intent of this credit is to increase demand for building products that are extracted and manufactured locally, thereby reducing the environmental impacts resulting from their transportation and supporting the local economy. The majority of materials in pervious concrete and pavements are considered regional materials. In addition to aiding in gaining LEED certification points, pervious concrete can provide a safe and durable surface for most pavement needs. Light colored pervious pavements require less site lighting to provide safe night-time illumination levels, whether on parking lots, driveways, or sidewalks.

Types of Pervious Pavements

  • Porous Asphalt (Blacktop)
    • Low Cost
    • Effective Porosity
    • High Maintenance – Biannual cleaning to prevent clogging
    • Does not allow for plant growth
    • Contributor to heat island effect but better than standard ashphalt
    • Alternative for large projects
  • Pervious Concrete
    • Same concept as porous asphalt, except it is concrete
    • Easy to order and have installed
    • Light in color and not contribute to heat island effect
    • Higher Cost than Asphalt
    • Request use of local or reclaimed aggregates
    • Use highest amount of Fly Ash and/or Slag (both are reclaimed waste products)
    • Requires cleaning to prevent clogging
    • Can serve as a retention basin for storing rainwater during a storm
  • Pervious Block Pavers
    • Many different types on the market
    • Can look like traditional pavers for aesthetics
    • Filled in with grass or gravel
    • Allows for plant growth
    • Pavers are pricey
    • Installation requires laying of individual small blocks
    • May settle or become misplaced after use
  • Drivable Grass
    • Unique product
    • 2” x 2” mats that are more affordable individual pavers
    • Good infiltration for grass growth or ground cover
    • Plants remain cooler and receive uniform watering
    • Greener parking surface than other plantable systems
    • Low maintenance
  • Plastic Grid Systems
    • Made of recycled plastic and fully recyclable themselves
    • Low maintenance
    • Easy installation
    • Can provide a fully sodded surface if desired
    • Use only appropriate for light or occasional use parking lots

Decision making is a critical process for any project. Well informed choices and decisions can help keep a project timeline on track. Decisions in all areas including design and specifications need to be clearly and fully described. There should be at least three options to choose from that include how, what, where and how much? All the implications and impact of each option must be considered. Will it delay the project? Will it increase the cost?   A LEED project also needs to incorporate the analysis of products and design and their sustainable impacts. We are considering 3 categories of pervious pavement products for our project; pervious concrete, pervious block pavers, and drivable grass. With the ever evolving development of sustainable products, there may also be a hybrid solution available that will meet all of our project goals.

http://www.epa.gov/region02/njgiforum/pdf/08justice.pdf

http://www.perviouspavement.org/benefits/leed.html

http://www.100khouse.com/2010/12/08/permeable-pavement-options-for-leed-projects/

Vegetation is Not Solely for Landscape: The Benefits of a Green Roof

Posted on by abrahamwien18

By Kendall Gillen, Biologist
Emerald Skyline Corporation

greenroofOn a hot summer day when it is 90º on the street, it can be twice as hot on the roof of most commercial buildings with a significant number of them made of black tar. Black roofs result in higher utility bills due to the higher HVAC costs. An alternative that is increasingly available is a “green” roof.

Further, green roofs can provide useable outdoor patio spaces which, according to a an article entitled “10 Most Wanted Office Amenities” in the 9/3/2015 National Real Estate Investor, is the seventh most desired amenity based on a survey conducted by Colliers International Group Inc.

A green roof is built like traditional roofs except a final layer of vegetation and soil, or a growing medium, is planted over a waterproofing membrane. Additional layers, such as a root barrier and drainage and irrigation systems may also be included.

According to the GSA Green Roof Report green roofs consist of a waterproofing membrane, growing medium (soil), and vegetation (plants) overlying a traditional roof. Green roofs are used to achieve environmental benefits including reducing storm water runoff, energy use, and the heat island effect. They are sometimes referred to as vegetated roofs or eco-roofs.

The history of green roofs started in ancient Mesopotamia where rooftop plants were grown from the Ziggurat of Nanna to the fabled Hanging Gardens of Babylon, one of the Seven Wonders of the World. The most recognizable green roofs in America were installed on Rockefeller Center in New York City. They continue to flourish today (see photo). More recent examples are the Gap Headquarters in San Bruno, CA and the Ford Motor Co. headquarters in Dearborn, MI.

 

Green roofs can be either “Intensive” or “Extensive.” Intensive roofs have thick soil depths with elaborate plantings that include shrubs and trees that require heavy load-bearing roof structures and regular maintenance. Extensive green roofs are mush lighter with shallow soils with low-growing ground cover plants that are extremely sun and drought tolerant. Extensive green roofs can be installed over various roof decks and require periodic maintenance.

The environmental benefits of a well-designed and well-maintained Green Roof are summarized as follows:

  • Stormwater Management
    • Most urban and suburban areas contain large amounts of paved or constructed surfaces which prevent stormwater from being absorbed into the ground. The resulting excess runoff damages water quality by sweeping pollutants into water bodies. Green roofs can reduce the flow of stormwater from a roof and delay the flow rate.
  • Energy
    • Green roofs reduce building energy demand by cooling roofs and providing shade, thermal mass and insulation.
  • Biodiversity and Habitat
    • Green roofs provide new urban habitat for plants and animals, birds and insects, thereby increasing biodiversity
  • Urban Heat Islands
    • Cities are generally warmer than other areas, as concrete and asphalt absorb solar radiation, leading to increased energy consumption, heat-related illness, and air pollution. Green roofs can help reduce this effect
  • Roof Longevity
    • Green roofs are expected to last twice as long as conventional roofs
  • Aesthetics
    • Green roofs can add beauty and value to buildings

 

Green roofs can earn LEED points in several credit categories. The total points achieved will depend upon the size of the roof and the degree to which various features are incorporated into the overall building design. These include but are not limited to storm water design, reduced heat island effect, habitat provided for wildlife, reduced cooling load, and many others. Green roofs help to reclaim green space and promote biodiversity.

LEED is a rating system developed by the U.S. Green Building Council (USGBC). It provides a standard certification process with five key areas of human and environmental health. It provides a roadmap to measuring and documenting success for every building type and phase of building lifecycle. LEED certification is achieved by earning points for a variety of credits.

Of the five major LEED categories and subcategories, below are the ones that have potential to earn credit from a green roof

Sustainable Sites

  • Protect or restore habitat and maximize open space
    • Adding vegetation on a green roof reclaims green space that has been taken up by the built environment
  • Storm Water Design
    • Green roofs help to reduce excess storm water discharge through evapotranspiration, periods of longer infiltration, or capture and reuse.
    • Pollutants and other toxins are filtered out of storm water by the green roof
  • Heat Island Effect
    • Green roofs significantly reduce roof temperature, particularly in summer months
    • Vegetated roofs and high-reflectance roofs now have equal weight when calculating LEED compliance

Water Efficiency

  • Water-efficient landscaping
    • When vegetated with local or native vegetation, drought-tolerant plants require little irrigation
    • The growing medium or soil can act as a sponge to collect rainfall, feed the vegetation, evaporate and filter excess rainwater
    • Runoff may occur in heavy rains, which can be channeled to an on-site cistern for collection and reuse in irrigation, ground-level landscape, and non-potable water usage within the building

Energy and Atmosphere

  • Optimize Energy Performance
    • Green roofs can provide varying degrees of reduced energy costs based on climate zone, building type, site, exposure, atmospheric conditions, and moisture content of the roof soil

Materials and Resources

  • Recycled Content
    • If green roof materials contain recycled content such as compost or reclaimed mineral aggregate, they can count toward recycled content credits
  • Materials and products that contain multiple environmental attributes can have a synergistic effect on LEED points earned

Innovation in Design

  • Having a green roof on a building can contribute to increased workplace productivity
  • Green roofs can be used in various building types for
    • Meetings and relaxation, education, creating beautiful views, fostering better health, reduced healing time, and increased positive social interaction
  • Green roofs can be integrated with patios and outdoor kitchens which expands the building space
  • An advanced green roof may even grow herbs, vegetables, and other consumables for the property

 

Summary of the Benefits of a Green Roof

 In addition to reduced utility costs, the benefits of a green roof include: (a) reduction of water runoff; (b) reduced sewage system loads by assimilating large amounts of rainwater (3” to 5” of soil absorbs 75% of rain events that are on-half inch or less); (c) protects the underlying roof material by eliminating exposure to UV radiation and extreme temperature fluctuations resulting in a longer lasting roof system. Other benefits include reduction of air and noise pollution, creation of urban living environments for birds, provision of useable outdoor patio spaces, as previously mentioned, and enhancement of a property’s marketability (especially when multiple elevations are incorporated into a project resulting in views overlooking other rooftops).

  • For Building Owners
    • Increase roof life
    • Reduce HVAC costs
    • Government incentives
    • Storm water management tool
    • Contribute to earning LEED certification
    • Improve public relations
    • Transform roof into living space
  • For the Community
    • Reduce storm water runoff and pollutants
    • Reduce heat island effect
    • Improve air quality
    • Noise reduction
    • Lower energy demand
    • Provide green space
    • Improve aesthetics
  • For the Environment
    • Neutralize acid rain effect
    • Provide habitat for wildlife
    • Lowers the load on sewer capacity
    • Encourages biodiversity
    • Filters pollutants from the water supply

Up-front costs of an extensive roof in the US starts around $8 psf all-in. By comparison, a traditional roof starts at $1.25 with cool roof membranes starting at $1.50 psf. However, the additional installation costs are off-set by energy savings and the extended life of the roof and possible savings on the storm water infrastructure.   Finally, a property with a green roof will be more marketable to prospective tenants.

The benefits of a green roof are innumerable for building owners and occupants, the built environment, and the natural environment. Green roofs are a primary example of the advances in environmentally friendly systems that are available to enhance your commercial properties.

The Capital Budgeting Analysis of a Sustainability Project

Posted on by abrahamwien18

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

calcRegardless of whether you are building your ark and waiting for the sea level to rise or if you are a climate-change denier, the writing is on the wall: sooner or later, you will need to modernize your building to improve its sustainability and resiliency. Accounting for almost 40% of the world’s energy consumption and greenhouse gas emissions, buildings are considered a high-impact sector for urgent mitigation action on climate change.

Accordingly, building owners, managers and tenants need to assess the opportunities and possibilities for improving sustainability in order to optimize the benefits realized – both physically through reduced consumption and waste and financially through proper planning, budgeting and financing.

Let’s begin by recognizing that there is a robust business case for investing in sustainability and resiliency measures (see the Sustainable Benefits article “Welcome to Sustainable Benefits – Let’s begin with the benefits of doing a commercial building sustainable retrofit….”) which enables the stakeholders to improves profits, saves the planet and be socially responsible corporate citizen (the “Triple Bottom Line”).

The first step in creating a sustainable retrofit program is to benchmark the property. According to Ms. Clare Broderick in her article, Creating an Energy Efficient Plan – One Step at a Time, (GlobeSt.com, 3/4/2015), “There is much truth to the adage, “whatever you measure improves”.  Whether you are responsible for one building or a portfolio of properties you need to know your starting point in order to gather quantifiable results.”

Another step to facilitate the cooperation and sharing of costs and benefits between the landlord and the tenant is to align the interests through a Green Lease (for more on Green Leases, see the Sustainable Benefits article “Overcome Obstacles to Going Green with Green Leases“). Systematically including sustainability clauses at lease creation or renewal facilitates energy efficiency, sustainability and resiliency retrofit projects.

Sustainability and resiliency measures are not all capital-intensive. Many relate to building operations – like aligning operating hours with actual building occupancy or changing the time when cleaning crews work. Conventional wisdom states that the best way to start a sustainability program is to begin with free or low-cost measures which creates an environment where people who work or visit a building start thinking about reducing, reusing and recycling. (see the Sustainable Benefits article “Going green – Fifty free or low cost ways for commercial property owners, managers and tenants to begin.”).

While low cost measures and the replacement of energy-inefficient lighting and equipment occurs at the time of natural replacement as part of the annual capital budgeting process for property maintenance, the timing for a significant building sustainable retrofit is usually determined by the investment or occupancy cycle of the building:

  • To attract a new tenant or retain an existing one;
  • As part of the process to prepare a property for sale; and
  • Upon acquisition as part of a value-enhancement business plan.

Maximizing the benefits from investing in the modernization (sustainability) and risk-reduction (resiliency) of a building utilizes a capital budgeting approach and requires the diagnostic review of the building which provides an understanding of the current equipment in use and an assessment of the improvements that can be made to accomplish your sustainability goals and objectives. The key to stakeholder action is to use capital budgeting based on forward-looking investment plans that facilitates the decision-making process.

In addition to planned equipment replacement upgrades, the first type of upgrade which is typically analyzed and approved as part of the annual management plan involves low-impact initiatives which generally have a short payback and can be implemented in currently occupied/leased buildings. These measures include commissioning an energy audit, replacing lighting and installing occupancy sensors and mid-level building energy management and control systems with interval energy data monitoring among other programs. In the case of these types of improvements, the capital budgeting decision can be limited to the relevant costs and benefits as hereinafter described.

The second is referred to as a “deep refurbishment” or “deep retrofit” project that aim to achieve high energy performance of the whole building which may include upgrading the building envelope, replacing the base building lighting systems, installing next generation smart building automation systems, adding solar or other renewable energy systems that require significant capital investment that cannot be recovered solely through the energy savings of the first few years, and the financial analysis of investment opportunities needs to include the impact on asset values.

Simple capital budgeting measures that are commonly used by engineers and contractors in proposals are the Payback Period and the Return on Investment:

  • The Payback Period in capital budgeting is the amount of time necessary to recapture the investment in a retrofit project, or to reach the break-even point. For example, the cost to upgrade lighting to LED is $25,000 which is forecasted to generate $14,000 in energy and maintenance savings would have a 1.79 year payback period (Cost divided by annual savings or earnings).
  • The Return on Investment is the inverse of the Payback Period and calculates the percentage return on an investment relative to the investment’s cost. In our example, the Return on Investment would be 56% (annual savings or earnings divided by cost).

While both the Payback Period and Return on Investment provide a quick way to evaluate and compare capital projects, the next level of analysis is multi-year and involves the time value of money which are commonly used in analyzing real estate investments. They are the Discounted Cash Flow, Internal Rate of Return. Another method is the Profitability Index and, finally, the method that is recommended in evaluating alternative investments is Life Cycle Costing. For all of these measures, it is important to forecast anticipated savings, earnings and costs over the investment horizon (typically, the life of the equipment):

  • The Discounted Cash Flow (“DCF”) method “discounts” the estimates of future savings, earnings and costs using the cost of capital or other investment threshold to arrive at a present value estimate. The cost of the project is then deducted from the present value to arrive at the Net Present Value (“NPV”). The project is acceptable if the NPV is greater than zero. It can also then be used to compare to other projects.
  • The Internal Rate of Return (IRR) is the rate at which the NPV of cash flows of a project is zero (i. e, the rate at which the present value of the future cash flows equals the initial investment). This is a yield calculation and the project is acceptable if the project IRR is greater than the Cost of Capital or other investment return threshold.
  • The Profitability Index (“PI”) is calculated by dividing the present value of the project’s future savings, earnings and costs by the initial investment. A PI greater than 1.0 indicates that the profitability is positive while a PI of less than 1.0 indicates that the project will lose money (the NPV would be less than zero). It is a useful tool for ranking alternative projects because it allows for the quantification of the value created per unit of investment. Most of the time the PI will be consistent with the NPV methodology; however, they may be in conflict due to different project scale or different pattern of cash flows. Conventional wisdom is to use the NPV when the PI is in conflict with it.

In each of the NPV, IRR and PI, the future savings are determined using the difference in future consumption/expenditures based on the economy of the new equipment or process over the anticipated costs of continuing use of the existing equipment.

  • Life Cycle Costing (“LCC”) is a tool to determine the most cost-effective option among different competing alternatives to purchase, own, operate, maintain and, finally, dispose of an investment in property, plant, equipment or process. According to BusinessDictionary.com, it is the “Sum of all recurring and one-time (non-recurring) costs over the full life span or a specified period of a good, service, structure or system. It includes purchase price, installation cost, operating costs, maintenance and upgrade costs, and remaining (residual or salvage) value at the end of ownership or its useful life.”

Consider the following example in the selection between two air handling units (from “Sustainability/LEED and Life Cycle Costing – Their Role in Value Based Design and Decision-Making” by Stephen Kirk, PhD, and Alphonse J. Dell’Isola, PE, date unknown):

Consider the selection between two air handling units. A 10% discount rate, a 24-year life cycle and a differential energy rate escalation of 2% per year are assumed. Other relevant data (NOTE: For all capital budgeting decisions, only incremental cash flows are included. Accordingly, sunk costs – those costs that have already been incurred – cannot be a part of the incremental cash flows used in the financial analysis of a capital project.) are:

Type of Cost Alternative 1 Alternative 2
Energy Efficient Economy
Initial cost $15,000 $10,000
Energy (annual) 1,800 2,200
Maintenance (annual) 500 800
Useful life 12 years 8 years

 

The solution begins by converting all annual or recurring costs to the present time. Using the present worth annuity factor, the recurring costs of maintenance would be:

Alternative One: maintenance (present worth) = $500 x (8.985) = $4,492

Alternative Two: maintenance (present worth) = $800 x (8.985) = $7,188

According to the discount rate tables, the present worth of the energy costs for each alternative would be:

Alternative One: energy (escal. @ 2%) = $1800 x (10.668) = $19,202

Alternative Two: energy (escal. @ 2%) = $2200 x (10.668) = $23,470

 

Replacement or nonrecurring costs are considered next. When one or more alternatives has a shorter or longer life than the life cycle specified, an adjustment for the unequal life is necessary. If the life of an alternative is shorter than the project’s life cycle, the item continues to be replaced until the life cycle is reached. On the other hand, if the item life is longer than the specified life cycle, then a terminal or salvage value for the item is recognized at the end of the life cycle. This treatment using the present value factors is illustrated as follows:

 

Alternative Two: replacement (n = 8) = $10,000 x (0.4665) = $4,665

Alternative One: replacement (n = 12) = $15,000 x (0.3186) = $4,779

Alternative Two: replacement (n = 16) = $10,000 x (0.2176) = $2,176

The salvage value for both systems equals zero since they both complete replacement cycles at the end of the twenty-four year life cycle. A summary of present worth life cycle costs follows:

 

Type of Cost Alternative 1 Alternative 2
Energy Efficient Economy
Initial cost $15,000 $10,000
Maintenance (recurring) cost 4,492 7,188
Energy (recurring) cost 19,202 23,470
Replacement (nonrecurring), year 8 0 4,665
Replacement (nonrecurring), year 12 4,779 0
Replacement (nonrecurring), year 16 0 2,176
Salvage, year 24 0 0
Total present worth life cycle costs $43,473 $47,499

 

The first alternative would be selected on the basis of this LCC analysis.

Of course, any analysis should reflect the rebates that are available from manufacturers, utilities and governmental agencies.

As you can tell, the simple Payback Period and ROI analyses may be appropriate for small projects, like replacing the lighting, but using the DCF, IRR and PI methods provide better information while Life Cycle Costing Analysis provides the best basis for evaluating a project, or alternatives among projects, in making the capital budgeting decision.

As a CPA, I know that these analyses require time and skill to accurately prepare, but making sound capital budgeting decisions when improving a property using these techniques is the lynchpin of profitability. Emerald Skyline Corporation is uniquely qualified to be your advocate in planning, analyzing and executing your sustainable and resilient retrofit project.

In my next article, I will present the investment analysis of a “Deep Retrofit” as pioneered by Rocky Mountain Institute.

Renovation Versus New Construction – Choosing the Right Path

Posted on by abrahamwien18

Julie

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

As both the owners and the designers of a commercial building in Boca Raton it was essential that we examine the pros and cons of renovation vs. new construction and the impact on our project. When considering renovation vs. new construction for any project, it is important to understand that both paths lead to different and unique results. Comparing the merits and challenges of each against the needs of a project is crucial in determining what the best options are. Our design team collaborated and brainstormed to determine the issues involved, document the issues and prioritize them. This process helped us to determine that a major renovation will make the most sense for our building and our sustainable goals.

The building is an unoccupied auto body shop located on a former brownfield. Whether to save or demolish an old building has always been a question for owners, developers and cities. We are applying the concept of adaptive reuse to this project. It is the idea of “twice green”, not just repurposing an older building, but also making it even more environmentally friendly in its new life. This project will convert an existing eyesore structure into a rehabilitated sustainable building.

How green is adaptive reuse?

The National Trust for Historic Preservation published a report on the environmental benefits of adaptive reuse. The Greenest Building: Qualifying the Environmental Value of Building Reuse, demonstrates through case studies that reusing buildings can save from between 4 to 46% over new construction.

These findings include:

  • Reuse Matters. Building reuse typically offers greater environmental savings than demolition and new construction. It can take between 10 to 80 years for a new energy efficient building to overcome, through efficient operations, the climate change impacts created by its construction.
  • Scale Matters. Collectively, building reuse and retrofits substantially reduce climate change impacts.
  • Design Matters. The environmental benefits of reuse are maximized by minimizing the input of new construction materials. Renovation projects that require many new materials can reduce or even negate the benefits of reuse.
  • The Bottom Line. Reusing existing buildings is good for the economy, the community and the environment. At a time when our country’s foreclosure and unemployment rates remain high, communities would be wise to reinvest in their existing building stock.

The U.S. Green Building Leadership in Environmental and Energy Design (LEED) strongly encourages reuse of an existing site and building. By using LEED principles during design and construction points toward LEED accreditation can be achieved. The incorporation of sustainable solutions into our design and materials will create a healthier building, reduce negative impacts on the environment, and utilize the economy of reuse. Every material has an impact, the fewer building materials used in a rehab project, the less environmental impact there will be.

The decision to renovate rather than build new has many challenges. Key factors typically considered in this decision could have easily sent us in a different direction if sustainability was not important to our project. The budget to accomplish a major renovation for this project may not cost less than new construction but the sustainable benefits are significant. The condition of the current structure will require many changes and improvements. The building needs updated technologies, energy efficiencies, and time challenges to complete. By renovating we are diverting waste from being placed in landfills, we are disturbing less native vegetation and contributing less erosion and adverse effects on the land. The decision to renovate this older structure will provide a safer and healthier environment for its users while creating an enhanced appearance.

The existing footprint allows only so much floor space. To overcome this, we are going vertical and building a partial second floor. Building above is less expensive than building outward. A key consideration in many designs should be on how to best utilize the building while using smaller spaces.

The age old question of whether to build new or renovate has become even more complex as we seek to determine which has the least amount of impact on our environment. While the ease of new construction may be preferred, the greater potential for reducing your carbon impact during renovation compared to a new construction is apparent over a 75 year life span of a building. As The National Trust for Historic Perseveration recently stated that the greenest building may be the one you already own – and this is the reason we selected to renovate rather than build new.

 

http://www.preservationnation.org/information-center/sustainable-communities/green-lab/valuing-building-reuse.html#.VehletJRFMM