Yudelson: ‘You should be tougher’ on non-LEED West Village
Your input is requested on a very important matter!
Yesterday, I highlighted the UC Davis West Village student/faculty housing development getting a $2 million grant from the California Energy Commission.
I also noted the project not adhering to LEED guidelines or any other third-party rating standard for that matter.
That definitely caught the attention of none other than Jerry Yudelson — a Green Journey reader with regular comments — who took me to task on not going deeper on the lack of third-party rating standard for the project.
His point:
Like this story, but you have to be tougher in your commentary. Not only is LEED not mentioned, thus no third-party accountability, but CEC did not require it as a condition of the grant, going against a clear requirement for all new state buildings. Also, there are no clear sustainability objectives: e.g., housing to use no more than 5 kWh/sq.ft./year for heating, cooling, hot water and lighting, no more than 50 gals/capita/day water, 100% use of certified wood, no use of PVC, etc. Without these touchstones/benchmarks, the so-called “sustainable design†is not ground-breaking at all, just a grab bag of technologies and design approaches.
I gotta admit: Jerry’s making a big point. It is true that not even the most minimum standard for energy and water saving guidelines were agreed for the project, despite it being a deal controlled and co-sponsored by the University of California (sponsorship from ground lessor relationship). Adding to that, the project received funding from the California Energy Commission, a big proponent of green building in general.
Here at Galley Eco Capital, we’re aware of several large developments in California that have gone through an extensive environmental review and entitlement process taking many years. The sustainability requirements that they were required to adhere to were baked into the deal years ago, somewhere during the process.
Should the developer feel compelled to achieve LEED-certification anyway? I know that we USGBC supporters would want them to do so.
They finally achieve entitlements now, years later, during a new era that expects more vigorous, sustainable land use, transportation, environmental and building policy. I am not 100% sure about whether this is the case for West Village, but it fits the fact pattern.
Other developments, such as the Catellus Mission Bay project here in San Francisco, encountered a similar situation with their entitlements. In Mission Bay’s case, the master developer did not have to require LEED-certification from vertical developers, but some — Alexandria and McCarthy Cook, for example — built buildings to LEED-Silver, anyway.
In their case, these vertical developers needed LEED-certification from a marketability standpoint, to remain competitive with UC San Francisco or the large biotech and pharma companies on the prowl for new space. The West Village developers are marketing the units at below market prices, so assuming the pent up demand remains strong, they will not face any marketing risk associated with the fact that their product is essentially “self-certified”. Here the real estate story could trump the broader trend towards going green.
Your turn: What do you think?
- Should we be harder on the West Villages of the world, who are getting grant funding for “research” even as they avoid adhering to the most minimal third-party certification?
- Are we not hard enough?
- Are their efforts really just a ‘grab bag of technologies and design practices like Jerry says?
Please send me (and Jerry) your point of view. I will compile all the messages and share with those who respond.
We like this kind of issue here on Our Green Journey, because we want an authentic discussion first amongst finance and investment professionals — no fluff. That’s the only way that we are all going to create better, more sustainable results for our communities.
So tell it like you really see it. Your input would be very much appreciated.
Banks, Climate Change & Green Real Estate: Money Talks
Mindy Lubber, head of Ceres, talks about how the big US banks are taking responsibility to reduce the negative effects of climate change. You’ll notice that she mentions the banks being signatories to the Carbon Principles and changing the way they go about financing coal-fired power plants.
This is good to keep in mind because people often get confused about why some of the big banks advertise their corporate social responsibility, as if its a global policy applicable to all lines of business, but still have no committed capital, specific products or policies earmarked for green commercial real estate.
No, I’m not saying that they are greenwashing. Certainly tightening due diligence and financing guidelines for coal-fired power plants is a good thing.
The Green Journey take on it is caveat emptor**, but in a proactive, not a lazy or disaffected, sense.
Keep in mind that any company — not just banks — advertising their social responsibility can (and often do) “choose locally” and “talk about it globally”. Yes, they can pick out a few business areas to be more green, ignore the others, claim to be totally socially responsible, and then use that to enlarge their corporate reputations, win awards, and make more money. All of which keeps watchdogs like Ceres in business in the first place.
How to navigate this space? Its up to all of us to give credit where credit is due, and at the same time ask more pointed questions about their business policies regarding sustainable real estate and then vote with our wallets.
Notes:
** Means ‘you’re on your own, dog’. Thousands of years ago in Latin, it meant ‘let the buyer beware’.
Finance Industry Spin or Denial on Sustainability?
I thought I’d share some of the latest that has made its way over to my inbox over the past few days. Take a look and let me know what you think. Is it spin? Denial? Spinial?
The Mortgage Bankers Association on Green Lending: “We’re already underwriting green.”
MBA research director Jamie Woodwell put out an article in the March 2008 issue of Mortgage Banking, their trade magazine, titled “Class G–The New Class A” (sorry, folks, no link, it was sent to me from a subscriber). Within a piece that includes decent info on the greenwave hitting finance, begins a decent lead-in to the MBA’s take on green lending:
“For most lenders, green lending is simply a new shade of their traditional lending programs.
As with any request for financing, a lender approaches the financing of a green building by developing an underwriting of the property that takes into account property-specific income, expenses, property value and costs. The extra challenge in financing green buildings has been the degree to which the underwriting associated with a building’s green features differ from those of a standard building.
But the commercial/multifamily lending industry is accustomed to heterogeneity in the same properties it underwrites. No two properties have the same location, tenants, lease rolls, rents expense mix, purchase price and cap rate — think, for example, 1970’s New York office tower, 1980’s Sacramento, California, industrial park; and 1990’s Atlanta apartment building. The industry has become extremely adept at recognizing these differences through underwriting — a process in which a property’s unique circumstances are researched, assessed and factored in.”
And that leads to this:
“As a result, in most cases, the existing commercial/multifamily lending paradigm already takes into account a property’s green characteristics. When fully revealed, a full underwriting and appraisal discounted cash flow (DCF) takes into account, for example, that a green property’s initial cost may be higher, its rents higher, its utility expenses lower, its lease rollovers shorter and its terminal value higher. The result is that economic costs and benefits inherent in a green building can be recognized in, and will generally flow through its underwriting.”
Green Journey Take: Two observations: 1) Green buildings in total make up only about 2% of the entire real estate market, and 2) the nationwide credit crunch has been going on for much of the time that sustainability has been getting traction within commercial real estate. There are lots of deals out there that are not getting done. Nevertheless, the MBA has already counted so many private sector green loans being underwritten, not to mention confirming the underwriting on those loans as being ‘green’, that it can publish “typical” underwriting standards.
At the time of this writing, two major industry coalitions, the Green Building Finance Consortium, and the Market Transformation to Sustainability, are still pushing hard for leading institutions, some of whom are named in the article as green lenders, to adopt a common set of underwriting protocols for sustainable real estate. Also note that there are some major lenders cooperating with these efforts — they’re just not quite ‘there’ yet. Real estate investors are filling conferences, looking for elusive ‘green finance’ packages.
But you can prove me wrong and educate all of us: How many commercial real estate loans have you done with your lender, where they’ve already given you economic underwriting credit for the green features on your investment property? Please share your comments here, as there are many in the industry who would like to know. Plus these pacesetters deserve to get credit where credit is due.
The Mortgage Reports: Even $150/Barrel Oil Doesn’t Matter — Consumers Will Keep Drivin’
I dig Dan Green. He gives some of the most consistently straight-up download on the residential finance market. And he’s big on the crunchy technicals, which is good. Regular Green Journey readers also know that I’ve got a “thing” about energy price risk’s negative effects on US real estate. Actually, it is fair to say that quite a few of us in the real estate industry do. Now read Dan’s recent post about oil prices and consumers.
You make the call: Is Dan tellin’ it like it is or like it ain’t? Are US consumers really going to keep up their current driving habits no matter how high gas prices rise?
Please tell us what you think.
Transforming Building Markets, or Transforming Marketing?
Bill Walsh’s reprinted article in GreenBiz.com with the same title as above passionately highlights the insidiousness of greenwashing within the building materials sectors, but his thoughts address a similar concern across the entire spectrum of real estate development.
“When Home Depot invited suppliers to submit products for consideration in its Eco-Options program, manufacturers claimed that more than 60,000 of the items currently on the shelves were already “green.” According to the New York Times, “Plastic-handled paint brushes were touted as nature-friendly because they were not made of wood. Wood-handled paint brushes were promoted as better for the planet because they were not made of plastic.”
In these heady days of sustainability’s emergence within the commercial real estate industry, how will we hold each other accountable for true market transformation and not cleverly marketing the status quo?
Click here to read the article in its entirety and share your comments with us.
Labels: Bill Walsh, GreenBiz.com, Greenwashing, market transformation
“Wash me… but don’t get me wet”
Any German will immediately recognize the above saying about people who are less committed to something than they publicly profess. Environmentalists call it ‘greenwashing’.  And here’s my devil’s advocate question:
What if we are confusing a company’s incremental progress on a complex long-range strategy with hypocrisy?
The Wall Street Journal has just updated us on General Electric’s (NYSE: GE) progress on its attention-grabbing Ecomagination strategy. It seems that there is resistance to Ecomagination’s promise and products from both customers and the ranks within and more limited C-level support than was widely assumed.
To its credit, GE leads the pack in establishing top-level leadership on going green. And its stated approach, to bring innovative environmentally-friendly products to market without sacrificing profits, raised our expectations of the bottom line benefits of corporate social responsibility. Yet, GE’s current business reality is that it backs proposals to cap industrial carbon-dioxide emissions even as it continues to sell coal-fired steam turbines.
And it is particularly troubling that some GE employees still question whether climate change is even for real. Huh? (Hint: Ron Nielson’s The Little Green Handbook is a number cruncher’s dream).  Also, CEO Jeff Immelt’s statement about limiting GE’s sustainability initiatives to only those things that made ‘economic sense’ sounds reasonable on the surface, but also leaves the loud silent question of whether sustainability initiatives are being shouldered with a heavier burden of proof (and performance) than status quo business practices.
With green building now emerging in our industry, this article provides deep insights about the realities of leading organizational and industry transformation and leads to a more concrete question:
What would they write about you?
If a Wall Street Journal reporter googled your company on its green building progress, perhaps even called you and your peers to find out more on what you’re doing, what do you think would be written about you and your firm?
- Can you compartmentalize the business of green building away from your personal beliefs about sustainability?
- Do you embed sustainability into your personal lifestyle?
- Do any of your peers and employees?
- Is favoring green building a moral or business choice, or a political necessity?
- What are the economic and political realities of embedding sustainability in your company?
- What business tradeoffs are you prepared to make?
- What tradeoffs will you absolutely NOT make to go green?
- How are you engaging your employees, customers and other important stakeholders about your efforts to go green?
- Are you retaining any other business practices alongside your green building efforts which may be in conflict?
- How do you explain that?
It is very difficult to make the necessary business decisions about green building without spelling out your level of personal and organizational commitment. I hope these questions help us to engage each other more constructively and authentically.
