Key events on energy efficiency finance and triple bottom line investing

Meet us at the the following events. We’ll be presenting about:

- energy efficiency financing

- responsible property investment metrics for high performance portfolios

- taking the green economy to the next level

In the weeks ahead, Lisa Michelle Galley will be featured at a number of key industry conferences. The topics covered by Lisa and other leading voices in the sustainable investment community will highlight the  latest trends and provide a valuable forum to learn about innovative solutions to some of the most pressing challenges facing the green building and finance sectors.

Presentation on Energy Efficiency Financing

GSMI -The Sustainable Buildings Series: Retrofits

October 21, 2009; 11:15am – 12pm, Mission Bay Conference Center at UCSF
Lisa will cover the key considerations for different types of energy efficiency financing.  From there she will talk about how owners can more effectively coordinate their energy efficiency financing efforts across their portfolios. Lisa will be co-presenting with Peter Liu of New Resource Bank.

Presentation on Metrics for High-Performance Portfolios

Responsible Property Investing Council: 2009 ULI Fall Meeting
November 04, 2009 – Joint session of RPI and Sustainable Development Councils
Moscone Center South, San Francisco
Along with co-presenters David Wood, of the Responsible Property Investment Center and  Jean Rogers of ARUP, Lisa will offer fresh insights and recommendations developed in a year long study of the development and application of  responsible property investing metrics on institutional real estate portfolios. Lisa and Jean will discuss how the real estate investment ‘system’ has been impacted by sustainability.

Taking the Green Economy to the next level

Sustainable Industries Economic Forum in San Francisco
November 19, 2009; 9:30am -10:15am
St. Regis Hotel, San Francisco
Lisa will join a panel of industry leaders including Paul Hawken, author and CEO of the Pax Engineering Group, to discuss some of the most challenging aspect of successfully implementing triple bottom line solutions and how we can take the green economy forward. The event will offer valuable perspective on growing strategic partnerships as a core aspect of sustainable business.

If you would like to meet us at any of these events, please email us info@galleyecocapital.com

News about future events is available through our website.

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Heard at ULI Developing Green: Transwestern’s Green Retrofit Program

Long time no post, I know.

After many weeks on planes, trains, kayaks, bicycles and of course, automobiles — my long road trip ended at the Urban Land Institute’s Developing Green Conference in Beverly Hills.

There, I presented on financing energy efficiency and heard from some of the leading professionals in green building investing today.

Some of you were following me on Twitter that day and this post expands on those tweets.

Transwestern Talks Green Retrofits

Transwestern Exec’s Allan Skadowski and Scott Tausk talked the way we like at conferences (straight) and often don’t get enough of, no matter how much we pay.  They spoke about Transwestern’s development of its existing building retrofit capabilities including successes and lessons learned.

There was no powerpoint, no slick corporate infomercial, giving their talk the authentic vibe we crave over here on the Green Journey.

Note that I’ve done my very best to make the short snippets below reflect the speakers statements as closely as possible.

• Why are they going green? They made it clear that their goals are to be perceived by peers as proactive – not being a leader in going green. They were also reacting to tenant concerns in market.
  Not wanting to spend too much money – keeping it a low cost program. Transwestern operates a value-add fund. The average hold period is 4-5 years for assets. They have about 65 buildings in their portfolio. Decisions made on the basis of marketing and long-term cost control.
• What do their investors think about greening buildings? Some of their investors don’t care; some investors have it as a factor (but don’t want to pay much for it); a few care heavily about presence of green initiatives on properties.
• Like certification? Thumbs up on LEED EB 2009; LEED online version 3 is much more robust. They are now big fans of volume certification – earn points on your existing buildings as you go instead of waiting for a building to achieve all its points before submittal for LEED certification.
• What was their process to study retrofitting and certification within their portfolio? They chose 25 bldgs to move through certification. They are still currently pursuing 18 buildings. Eight or nine going through the process.
• How much do they pay for certification? “We’re paying $0.17-$0.18/sf to get buildings certified.” Interesting is that they point out that their certification costs have gone down quite a bit as they’ve gained more experience with LEED-EB. Also stated that most of the buildings they certify already are within an easier range of certification — focus on low-hanging fruit. They admitted that they are not taking any “dogs” through the LEED-EB process now; they estimated it’d cost ~$2.00/sf to certify buildings with very low EnergyStar scores like 40.
• Results from their program? They’ve done a scrub on the utility costs of the buildings they’ve certified realizing a 2% savings in utility costs which include substantial utility rate increases. Occupancy on their certified buildings is up 20%.
• Any differences in the cost/value of LEED certification? They had all bldgs evaluated at the start of their program on the basis of the cost to achieve LEED-Silver/Gold /Platinum status.  They found no cost difference between certified and Silver levels. However, Gold cost much more than Silver.
• On the value of retrocommissioning: this is a ‘must’ in their view. They now advise their owners that retrocommissioning results in unlocking serious energy expense savings and that it shouldn’t be left out of any retrofitting initiative.
• How do they know their green retrofit efforts have been successful? Transwestern  has no firm measurement system in place.  However, they say they are seeing lots of positive anecdotal evidence within their operations supporting certification. They indicated that there are definitely leases that have been done due to properties being Certified or Silver. They specifically cited a property in Houston, where a prospective tenant required them to put their promise to get LEED-Silver on a building in the lease agreement (my note: lawyers in the audience were scribbling furiously at this point).
• Has anyone paid them more on the sale of a retrofitted building? Not exactly. “However, the presence of a bidder who expresses interests in the property because its green helped to drive up the price at the end of the day”.
• What increased rents have you experienced? None. Market conditions today are too unstable to look at certification as a premium bringer. Certification value comes more from being focused on operating expenses.
• Green Lease Language in play? No.
• Payback example? They said that they do not focus on paybacks as a decision-making tool (my note: compare this with notes above about only certifying buildings which can be done for very low costs - i.e. short payback). However, they did offer their experience of chiller replacements having a payback in 6-7 years. They also stressed that in areas with high utility rates, like Houston, California and the Northeast, the payback looks great. Other areas with lower utility rates (Midwest) will show longer paybacks for now. As cap-and-trade legislation rolls out in some form, they expect that increased electricity rates will make the payback analysis even better even in currently lower cost utility areas.
• Are you doing any separate analysis and monitoring of the carbon footprint of your portfolio? This was my question. The answer they gave was telling: “We try to get LEED-Silver certification. Whatever that translates to in carbon emissions is what it is.”

Transwestern is, IMHO, at the upper tier of the commercial real estate industry when it comes to greening their existing buildings, when measured on the basis of having gotten a program off the ground and learning how to implement LEED and EnergyStar to their and their properties’ benefit.

They deserve props for their initiative and accomplishing much more than most other real estate platforms in our industry (at this moment in time). Yet, by their own admission, they don’t want to be known as leaders, just “proactive” — so I can’t archive this story under “industry pacesetters“, alongside other groups who both demonstrate competence and broader community stewardship greening their portfolios. Too bad that they equate leadership with “spending too much money”.

What do you think? Am I (un-)fair in my assessment?

ULI on the Financial Bailout as the Swedes Shake Their Heads Knowingly

Tired? I know, I know…

Staying on top of political theater and the daily collapse of banks can wear a body down.  Watching the never-ending series of CNN breaking news, checking your own bank’s solvency and reading the papers leaves nearly no time for work!

Well, we won’t tell you how to vote, but here’s a couple of items that might help you as you navigate the highly spun news on the financial bailout — or at least up your game at the next few cocktail parties.

And the green finance angle, you might ask? Well, because of our commitment to sustainability and responsible property investing, we monitor issues affecting the sustainability of communities, particularly their financial viability.  And with that, there are two items to help you in your thinking:

Item #1: Some nitty gritty on the bailout legislation impacting the housing market

We’ve been fans of  ULI’s blog, The Ground Floor, from the very beginning — way before they got their new cool lookin’ blog template.  John McIlwain’s post on the details of how the housing market could be assisted by the proposed bailout legislation spell out specific assistance actions that we do not normally hear about through the news media. He’s pulled out two core areas of focus, which depending on how they are implemented will determine whether we think the bailout was a good or bad idea. Those two areas are:

• program guidelines: this tells the entities getting assistance exactly when and how they should be creating programs and within what scope regarding their troubled assets. Specifically, these guidelines should contain:

(1) Mechanisms for purchasing troubled assets.
(2) Methods for pricing and valuing troubled assets.
(3) Procedures for selecting asset managers.
(4) Criteria for identifying troubled assets for purchase.

• foreclosure mitigation efforts: entities dealing in mortgages and related securities are empowered to offer assistance programs for homeowners that can help to avoid additional foreclosures.  Well, its about time! But, of course, we’ll have to see how both these issues evolve through the legislative process. It ain’t over till its over.

Item #2: Swedes Say ‘Been There, Done That’

Now for something related, but different. Take a look at this New York Times article about how the Swedes approached a similar financial crisis a few years ago. The focus: when faced with the same problems, they took a very different course of action. And the results were both positive and, more importantly, sustainable.

Housing Developers: Preparing for Opportunities During the Downturn?

So I heard Bob Gardner, of RCLCO, give a presentation about the state of the multifamily market and trends at the ULI Multifamily Trends conference today. Turnout was good, albeit with a somewhat subdued mood overall.

One of my friends summed it up this way, ” there’s a lot of folks in this room who are hurtin’ right now”. The more positive statements by the groups who reported that their business and portfolios were still performing well went something like, “we’re building out product that we’ve committed to; beyond that we’re staying on the sidelines”.

All that being said, a couple of mezz guys said that they were getting steady calls to assist with recapitalizations that couldn’t be accomplished through the senior debt channels.

The Sunny Side of the Housing Downturn

The bright side offered by Bob and several of the other speakers was that many real estate fortunes have been made during a downturn. Bob’s example: low land prices in the early 1990’s set up master developers for many years thereafter. Hmm… good point; so I started taking notes.

He pointed to Gen Y as one of the largest opportunities out there right now and that real estate developers and investors would be wise to study up on this group and prepare for the significant impact they might have on how and where real estate will be built in the very near future.

Basic Gen Y 101–> Here is a presentation that will give you the GenY download.

Here are a few notes on Gen Y’s demographic characteristics, which strongly favor green and sustainable real estate investing:

• This group of consumers is willing to pay for walkability and transit. They really value their time, so they are not big on paying for a big house and commuting. These types of issues receive great attention when siting sustainable investments.

• They are very into working from home. Having an office in a corporation is not as much of a big deal for them. (Cuts into their “me-time”.)  This also seems to add support to the low carbon information, communications and technology opportunities, talked about in my telecommuting post yesterday.

• They start becoming homebuyers in 2012 (!!). The green angle here is the “other green”. (Excuse the pun, I couldn’t resist)

Yesterday I wondered aloud about whether developers would start creating more live/work units that cater to home workers and families all in one. If so, make sure they’re sited in a walkable, transit-oriented location.

Based on what I learned today about Gen Y, it appears that this type of product is not some far off fantasy, but could present a mid-term opportunity. In any event, an economic downturn is a good time to study the opportunity and spend time positioning your firm to deal with this emerging demographic trend.

Tangible Integrity: Why Google Leases Green Office Space

I went to a local ULI Green Trends Program last night. Kacey Clagett, of Field Paoli, moderated a panel consisting of David Radcliffe, Sustainability Director for Google, David Johnson, West Coast Director for William McDonough & Partners and Richard Springwater, Head of The Prado Group, the developer who built Foundry Square.  Great discussion overall on why going green makes sense from the perspective of a tenant, architect and developer.

David Radcliffe’s comments on why Google leases green space stood out. Not only is leasing green space consistent with the general corporate philosophy, but he took the time to detail Google’s thinking process about green space. You can imagine that Google can throw a great deal of brain power at anything they want to study. It is safe to say that a couple of those brains went into overdrive deconstructing their “green space = value” proposition. Here’s a short summary on their perspective:

When Google evaluates space decisions, they look at their total cost of occupancy, which is made of:

• Base Rent
• Additional Rent – operating expense reimbursements
• Workplace Services, overhead
• Other related costs

Google studied their total costs of occupancy for leasing green space and figured out that they were paying a higher Base Rent compared to non-green space. However, since Base Rent was only 34% of their total costs of occupancy, the increase in rent for the green space increased their total occupancy costs by only 1.7%. So, the additional cost of green space is negligible in their view.

They also looked at one of their most important activities, attracting talent. They ran various tests attempting to isolate what mattered most to employees and linked it to sustainability initiatives, including occupying green space.

You gotta keep Google’s hiring scale in mind as you read this: Radcliffe pointed out that Google is hiring on a scale of 200 employees per week (!!). The right or wrong hiring equation has massive business implications for them, so they spend lots of energy learning and making sure they are delivering on what the right talent cares about.

They isolated several key variables of what their employees and talent care about the most. Tests revealed that a company’s integrity is THE most important variable to the employees and recruits. Integrity trumped pay, career development and every other traditional measure of employer relevance to Google employees. And the employees and recruits interpret green working facilities along with other green initiatives as being visible evidence of Google’s integrity.

So, for Google, leasing green space provides huge upsidewith very little or no downside. Not a bad deal at all.

Photo Credit: Flickr/Keso - Google logo