Don’t Build a Certified Gas Guzzler

Some investors narrowly focus on obtaining the LEED-plaque without doing sufficient analysis of whether they are approving the right kinds of energy-savings features for their investment dollars.

And that can cost them more than they assume — here’s a real cautionary tale:

The GSA’s Federal Building in Youngstown, Ohio is highlighted in today’s NY Times as a LEED-certified gas guzzler. The barebones fact is that, despite achieving LEED-certification, the building failed to qualify for Energy Star rating, when its utility bills were assessed last year.

What did they do wrong?

The GSA focused on things like daylighting, native landscaping and a white roof. They also paid for a “gas guzzling cooling system” and didn’t funding enough “structural energy-saving features”.

What’s at stake for the real estate industry is the enormous investment of time and capital into creating green and energy efficient buildings, in order to avoid the potential appraisal risk tied to obsolescence now facing many conventional buildings.

The USGBC’s own research indicates that “a quarter of the new buildings that have been certified do not save as much energy as their designs predicted and that most do not track energy consumption once in use.”

In addition to possibly leaving an owner open to reputation damage from accusations of greenwashing, failing to make the right decisions about structural energy and water saving design could harm the viability of the green building investment in a few ways:

a) Wasted money: in our opinion, an investor operating an underperforming certified green building is still open to the appraisal risk that they were trying to avoid in the first place,

b) Breach of duty to your shareholders: in the opinion of some attorneys, the investor is breaching his fiduciary responsibility to his shareholders for not taking sufficient steps to avert material risks to their investment.

b) An entre to litigation hell: in the opinion of some other attorneys, the green building’s subperformance can possibly leave the A/E/C partners possibly open to litigation related to the subperformance issues.

And on top of all of that, absolutely no one wants to be the operator who has to come up with a clever response for his investors because his firm is featured in the press as the owner/operator of a gas-guzzling green building. The damage from that sort of press is enough to outweigh any concerns about potential first cost fears on structural energy-saving features.

So if one of your partners or clients doesn’t see much value in paying for structural energy-savings features, hand them the story of Youngstown Ohio Federal Building.

Ask them if they’d like to see their name in the papers as the next owner of a LEED-certified asset that has been officially assessed as a gas-guzzler.