Top 10 Rules for Green Success

t has been nurturing a long list of sustainable initiatives from the recycling of carpets to the use of organic pesticides and cleaning products. Energy savings and water conservation are also top priorities at Post. For example, the company recently instituted an internal energy-savings awards program, and the results were dramatic.Twice a year, the company’s […]

t has been nurturing a long list of sustainable initiatives from the recycling of carpets to the use of organic pesticides and cleaning products. Energy savings and water conservation are also top priorities at Post. For example, the company recently instituted an internal energy-savings awards program, and the results were dramatic.Twice a year, the company’s Ancillary Services Group looks at energy-saving opportunities across all their properties, which include garden, mid-rise and high-rise buildings. Last year’s winner cut electrical consumption in its leasing and common areas by 18.6 percent.“All we had to do was educate and encourage people, and we got very good results,” said Sherrod. “It doesn’t require a significant investment from the company, either.” The savings were achieved mostly through the use of compact fluorescent lighting in office spaces and other common-sense conservation efforts. The company is also considering using LED lighting for parking garages.“For us, the biggest part of developing ‘green’ is high efficiency HVAC units and a ‘tight’ building envelope,” says Sherrod. “Developers don’t always monitor the build quality on every project, and we’ve found that to be very important.”Post weighs the costs and benefits of sustainable design on each and every project, but so far the company has found that renters are not willing to pay a premium for a LEED-certified building.“In a purchasing situation, buyers will pay a premium if it adds to the retail value of their home and saves on energy,” says Sherrod. “In the current economy, we need to see a long-term benefit in order to implement any green initiatives.”However, commercial clients may be more open to paying a premium for LEED-certified surroundings. According to “Green Space,” a pre-recession (2007) study of corporate commercial buyers by Jones Lang LaSalle of CoreNet, 77 percent would pay more for ‘green’ office space.“Unfortunately, any time the economy is bad, developers are tempted to cut rents or offer concessions to get renters into their apartments,” says Sherrod. “We’re seeing management companies offering several months of ‘free’ rent, but we don’t advertise these types of concessions. At most, we’ll offer some marketing initiatives or discounted fees on certain upscale floor plans at a property.”For Post, it’s the smaller sustainability initiatives that have had the greatest benefits. These include the deployment of water-saving toilet valves in common areas, the company’s award-winning recycling program, and the use of recycled wood floors and other sustainable building products. The company has also reduced paper consumption by using Internet billing instead of sending residents paper statements in the mail.“We agree that in areas where energy costs are very high, green building is an economic requirement,” says Sherrod. “We’ve found that even small utility savings can have a huge impact on our operating budgets.”Forest City follows green ‘roadmap’Cleveland, Oh.-based Forest City Enterprises Inc. continues to adopt the principals of sustainability into the projects it develops and the properties it manages. The goal is to balance environmental resources, economic objectives and social systems–-the so-called “triple bottom line” of people, planet and profit. Its efforts earned the company MHN’s Green Corporate Initiative Award last year.Forest City’s approach to sustainability evolved from its redevelopment of the Stapleton Airport in Denver, a 4,700-acre mixed-use project. Stapleton’s dramatic results inspired the company to adopt sustainability as a core value.In 2006, a Sustainability Department was established to drive progress. By reporting directly to the CFO, board of directors and investment committee, the department ensures executive commitment and accountability.Sustainability was called out as a key initiative in Forest City’s 2008-2011 strategic plan. In January 2007, Forest City began requiring new development project teams to submit a sustainability “dashboard” for internal review.Another objective is devoting green resources to the managed portfolio, including well over 45,000 residential units. A utility tracking system informs decisions across geographies and product types and allows calculation of Energy Star ratings and carbon footprints per property.The company’s Green House Web site (http://www.fcgreenhouse.net) offers a plethora of information for residents, including recycling, water conservation and Ride-Share programs. A monthly online newsletter, New Leaf, is also available for download and includes more tips for sustainable living.Green building: A powerful asset classWith the advent of investment funds funded on green buildings, green mortgage-backed securities and the new Dow Jones Sustainability Index, developers are taking sustainability seriously—even in a down economy.“There is now quantitative evidence that green buildings are more valuable, while conventional buildings are at risk of accelerated obsolescence and devaluation,” says Leanne Tobias, founder and principal of Malachite LLC in Bethesda, Md.Tobias, one of the few real estate investment and management professionals accredited by the U.S. Green Building Council’s LEED program, also sees green building costs becoming more competitive.“Because green products are new products, they tend to be more expensive, but that is changing,” agrees Abramson.In a presentation at the University of Toronto’s Rotman School of Management last May, Tobias shared several reasons why developers should go green, including:–Green building reduces annual operating costs–Sustainable construction is a sellable consumer amenity that enhances revenue streams–Green buildings produce higher and more predictable cash flows for developers and property managers–The investment potential of green buildings is superior, especially for a long-term hold.“This leaves ‘brown’ buildings in a state of functional obsolescence, with declining curb appeal, and at risk to regulatory changes,” says Tobias.For Cushman & Wakefield, a recent initiative to retrofit 64 buildings to LEED Platinum standards actually made the company money. According to the Green Building Council, the company spent an average of $1.64 million on each retrofit and received almost $400,000 in rebates. Each building yielded an average of $1.2 million in annual energy and maintenance savings, all in a 10-month payback cycle with an ROI of 121 percent.At the same time, RCLCO (Robert Charles Lesser & Co.) of Washington, D.C. says wellness and health are the strongest real estate market drivers today, with buyers in this group more affluent and educated. RCLCO also found that 91 percent would pay more for green features, and 41 percent would pay more even if there was no financial payback.In a more recent March 2008 study, The CoStar Group found that LEED-certified properties increased occupancies by 4.1 percent. Rents on these properties averaged $11.24 per square foot higher, with sale prices rising to $171 per square foot. (The poll’s national sample was controlled for property location, product, size, class and age.)“This is not a new conversation, and there are no more excuses for developers to ignore sustainable design,” says Abramson. “If they do, their properties will be ‘dinged’ down the line. You just can’t compete anymore without a green and sustainable strategy.”

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