NYU Schack Special Report: Innovators in Sustainable Building

Many multifamily developers and owners are now building with sustainability in mind, with some experimenting with truly innovative strategies. Several of these innovators shared their unique approaches to sustainable development, and the lessons they’ve learned along the way, at the NYU School of Professional Studies Schack Institute of Real Estate 6th Annual Conference on Sustainable Real Estate.

For Charlotte, N.C.-based workforce housing developer Ginkgo Residential, sustainability has been a focus since the 1990s, noted Principal & CEO Philip Payne. He recalled purchasing the firm’s first compact fluorescent light bulbs in 1991 for a cost of more than $18 a piece. Despite the high price, the bulbs paid for themselves in two years because of their efficiency.

From there, the firm’s focus has been on “people, planet and profit” as Payne got introduced to the concept of Responsible Property Investing, which “is an attempt to reconcile the environmental, the social and the economics of real estate…into a unified profit-based model.” Using this strategy, the firm turns to investors to attract capital and then can use the money to develop more environmentally friendly buildings.

San Antonio-based Alternivest CEO David Komet shared his firm’s strategy, which focuses on “doing more with less” and finding ways to use materials “in a more intelligent fashion.” His firm looks for new ways to design buildings and new materials to use, and has achieved higher rents at its properties because of these innovations.

The Hudson Cos., a New York City-based developer, has also grown its focus on sustainable buildings, having developed LEED and Enterprise Green Communities certified properties. The firm is also working on the largest Passive House building in the world, which will soon open on Roosevelt Island.

“I’ve seen the evolution of the company itself coming out of the people that work there and what’s important to them,” said Arianna Sacks Rosenberg, senior project manager.

Crossroads of Sustainability?

In addition to their strategies, panelists offered their thoughts on the central question the conference posed: “Are we at a crossroads of sustainability?”

Rosenberg emphasized what was discussed on the first panel of the day, which is that many of the advancements in sustainable building were not due to government intervention, but because “people like us saw something that was important and either had a mission-driven or economic-driven bottom line to do this type of work.” She added that while there is uncertainty under the new administration, innovators like Hudson are still working to promote sustainable development nationwide.

Payne added that the discussion surrounding sustainability has “dynamically changed,” in that the “business case is really coming to the fore now.” Today, there is proof that sustainable development is economically valid, and many investors today look for companies with sustainability programs when considering where to invest.

He also expressed some optimism despite the uncertainty around any rollbacks in environmental policy by the federal government. “We’re too far along…once people find things they can make money at, they’re going to do them whether the government is involved or not.”

Lessons Learned

Panelists we’re also asked to discuss anything they would do differently when they look back at their careers. Ginkgo Residential has been doing rehab projects for 27 years, and at the beginning, the firm was only investing a few thousand dollars in upgrades per unit, Payne said. He regrets letting people talk him out of completing more substantial rehabs, because today he sees the benefit of making $30,000 to $40,000 per unit improvements.

“We just hadn’t thought enough about what we should be doing,” he said. The firm has advanced rapidly since then, and Ginkgo is currently working on the first solar project in Charlotte, with the goal of making the property’s common area net zero energy.

Komet encountered similar obstacles of people telling him why he couldn’t execute his vision for building his 3050 Eisenhauer project with earthen materials. He initially listened to many of the negative comments from architects, engineers and others, but he learned to challenge these views and figure out how he could build with the materials cost efficiently and effectively.

“We figured out how to make a high-performance, high-thermal mass wall… it worked and our rents went up dramatically,” he said. “The big takeaway is not listening to conventional wisdom and figuring out how do you practically get materials from point A to point B. We learned a lot and were able to drive down costs dramatically.”

For Hudson, the company has learned to protect its risk side when incorporating sustainability, Rosenberg said. For its 26-story Passive House project Cornell Tech, Hudson waited to announce publicly that it was developing a Passive House building until the groundbreaking in 2015, to make sure the firm could actually afford it. The firm also went to the Buildings Department early on in the process and had a consulting team that was willing to work on “out of the box ideas” and target what requirements Hudson needed to meet in the city building codes, she said.

“Being strong and sticking to your guns and fighting tooth and nail for your vision is really critical,” Payne said.

Future Outlooks

Using renewable energy sources in its housing developments whenever possible is main focus for Hudson, Rosenberg said, including implementing solar panels or cogeneration (producing heat and electricity from a single source.)

“With incentive, it’s extremely beneficial to the property and it’s a great way to generate energy in a much more sustainable fashion,” she said. “We’re always looking for ways to innovate.”

Komet stressed the need to find innovative ways to deal with a community’s hyper-local challenges. In San Antonio, water usage and humidity are challenges for the area, so Alternivest focuses on building with earthen materials because they are known to be great ways of balancing and leveling out humidity and providing better indoor air quality.

In term’s of what’s next for the firm, Alternivest is looking at ways to incorporate sustainability in the design and construction processes and use other non-traditional materials like mass timber, which is an Austrian innovation, Komet said.

“You might have an outdoor environment with somewhat radical temperature swings, but inside you maintain a very tight curve, which allows you to use a lot less mechanical equipment and energy, and mass timber has a lot of those features,” he said.

In addition to using new materials and strategies, building the business case for sustainability will be a crucial next step for the industry, Payne said. “As that model gets built, you’re going to start seeing more and more interest and more and more money becoming available, which will then allow creative people to start thinking of other things that might be the next thing.”

While the investment community has been slower to adopt sustainable building because of its focus on the numbers, we now have metrics available showing that “buildings that are sustainable have a higher resale value, command higher rents, higher occupancy, and lower turnovers” Payne added. “And as this gets more and more proven, I think you’ll find that (sustainability) jumps into the forefront and it will become standard.”