Property Management: By the Numbers

By Keith Loria, Contributing Editor

Two of the buzziest phrases in real estate development since the turn of the 21st Century have been LEED certified and ENERGY STAR, as almost anyone associated with multifamily housing is thinking green and wanting to do what’s best for the environment. The problem is, once a decision is made to explore either of these planet-saving devices, not everyone is sure where to find the data to see if making a switch is economically feasible.

Sure, the U.S. Green Building Council has plenty of case studies, facts and figures on its website for developers to peruse, but just how much those numbers tell the story is anyone’s guess. Are those numbers really going to help an owner or manager make a decision to pursue such a drastic switch?

Gayathri Vijayakumar, vice president, senior building systems engineer for Steven Winter Associates, Inc., notes that a multifamily operator is not usually looking to general data/analytics to decide whether or not to make improvements to their building or to pursue ENERGY STAR or LEED.

“If they perceive their energy bills to be high and their building to be uncomfortable or in need of capital improvements, they generally seek an energy audit,” she said. “The first step is always benchmarking—looking at the specific energy bills for that building, normalizing them, and comparing to other similar buildings in the region or within their portfolio.”

Using their specific building data lets them know whether or not the building is a good candidate for improvements, as only an energy audit will pinpoint what measures to actually pursue that will be cost effective. “We would look to the specific data for the specific building or use case studies to demonstrate appropriate examples,” Vijayakumar said. “Seeing your building’s numbers helps you make decisions that will be cost effective for your building. If you spend $100,000 per year on gas, and can upgrade your heating boiler for $75,000 and it saves you $20,000, you understand the payback and impact on cash flow for your specific building.”

Elam Hall, director of development for Eller Capital Partners, a multifamily developer and property management company based in Chapel Hill, N.C., notes in a multifamily community, the individual resident benefits, oftentimes greatly, from energy savings.

“As an owner, programming decisions are largely budget driven but also based on what the market from customers to multifamily investors demand,” he said. “An owner often works in concert with an energy consultant for support in reviewing options and determining which building upgrades are most effective from both an energy savings and cost standpoint.”

The energy savings analysis in a multifamily community is different from other asset classes because the owner doesn’t normally directly benefit from the energy savings; it’s a resident benefit. “Since decisions based on resident and investor preference have both a basis in data and a subjective component there’s undoubtedly internal discussion as to what is most important,” Hall said.

Understanding Energy Star

Christopher Mylan, communications director for the Energy Star Commercial & Industrial Branch of the U.S. Environmental Protection Agency, notes the best resource for owners/operators of multifamily housing is to use the ENERGY STAR score, which provides a percentile ranking relative to the national population.  “The score provides an excellent way to benchmark an individual property, set energy targets, and improve performance,” he said. “Those properties that receive a 75 or higher can earn ENERGY STAR certification. Since the score was launched last fall, 47 properties have earned certification.”

The ENERGY STAR score is based on data collected by Fannie Mae’s Multifamily Energy and Water Market Research Survey, which was part of Fannie Mae’s Multifamily Green Initiative to improve energy and water efficiency while enhancing the environmental and financial sustainability of multifamily housing properties. Any multifamily building in the country that is at least 20 units or larger can assess its performance using the ENERGY STAR score in the portfolio manager system at www.energystar.gov/PortfolioManager. Even if you don’t get an ENERGY STAR score, you can still compare your property to other similar properties within your portfolio or track your performance over time. Fannie Mae also published a detailed report with cost and energy performance information for multifamily properties, which can be read at www.fanniemae.com/content/fact_sheet/energy-star-for-multifamily.pdf.

“Because Fannie Mae has published their raw data, any building owner/operator can review that data to see how their property compares to others,” Mylan said. “However, the ENERGY STAR score makes this process easier because it provides a normalized percentile ranking. Those multifamily properties that earn a score of 75 or higher are performing better than 75 percent of multifamily properties nationwide, when accounting for climate and operation.” Vijayakumar said multifamily operators tend to inquire about ENERGY STAR because its bills are high and they want to do something about it. “For an existing building, we’ll look at their actual data and that’s where benchmarking comes in, to compare how they are doing with other multifamily buildings in the area,” she says. “When you include an actual energy audit, you can figure out what in their building can work better.”

LEED data

Cecilia Shutters, data and policy communications specialist for the U.S. Green Building Council, recommends to those apartment communities looking for data and analytics about whether they should make improvements to go to LEED, the organization offers state by state data and strategies to help get the building to its goals. The LEED for Homes Market brief examines the number of projects currently registered for LEED certification in each state, those that are certified, the type of achievement (silver, gold, platinum), and the providers. What it does not do, however, is include multifamily projects that register and certify under its other rating systems like LEED for New Construction.

Also, the US Green Business Council has a link on its site (usgbc.com) that provides some numbers to look at as a guide for certification and a credit library to see what each change calculates to. Be sure to check out USGBC’s LEED project directory for a closer look at LEED projects in your area. You can also visit the Green Building Information Gateway to analyze LEED trends around the world.

New construction

For owners developing new multifamily properties, it’s more likely that they will pursue LEED and/or ENERGY STAR improvements. “Even for affordable housing, everyone wants to do it because it makes the property more energy efficient and helps in financing,” Vijayakumar said. “In terms of data, we can provide an energy model but really the only thing you can do is look at case studies for similar properties.”

As with just about anything, there are numbers available that can help you make a decision about whether to go LEED or try for ENERGY STAR improvements. It’s a matter of knowing what to look for and conducting the right research.