photo credits
Photo Credit: © Daniel J. Sheridan, 2011. All rights reserved. This is a photograph of the recently constructed Frick Chemistry Building at Princeton University. Sustainable building features include a photovoltaic panel array that generates power while providing shade to the glazed atrium roof, a gray water system to collect and recycle storm water for non-potable uses, and landscaped rain gardens and bio-filtration areas. For more information concerning Princeton's commitment to creation of a sustainable campus environment, visit www.princeton.edu/sustainability/
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A Conversation at the Crossroads of Law and Sustainability

Category: Green Leasing

Green Jobs Forum Makes Greenbuild Debut

Greenbuild 2011, the tenth annual U.S. Green Building Council’s premiere educational event and product expo, got underway yesterday in Toronto.  I must say it’s impressive.  Attendance is nearly eight times that of the inaugural event in 2002, and the number of exhibitors has increased fourfold.  If anyone still thinks green building is a passing fad, they should get on a plane and come to Toronto. Corporate event sponsors from industry powerhouses such as Kohler, Hermann Miller and Steelcase and participating industry partners such as BOMA and the World Building Council for Sustainable Development reinforce the sense that this movement has truly come of age and is here to stay.

I’m not really the intrepid reporter type, but since I am here I thought I would share some of the highlights from the conference. I haven’t (yet) figured out how to be in several places at once, so I can share only about those sessions I attended.  For those of you interested in keeping up with other Greenbuild news, check out the posts under Twitter hashtag #GBNEXT .

This year marked the addition of a new Greenbuild program: The Green Jobs Forum.  Kimberly Lewis, VP of Conferences and Events for USGBC, received  well-deserved kudos from Rick Fedrizzi (Founder and Co-Chair of the USGBC) and others for launching this program and for keeping the issue of green jobs front and center.  Fedrizzi kicked off the opening session of the forum with a dual message.  First, he firmly rejected the current political paradigm that pits economic growth against environmental stewardship. Second, he implored forum attendees to have a “bias toward action”, and cited as an example former President Clinton who, according to Fedrizzi, was relentless in his drive for results over commitments at last month’s annual meeting of the Clinton Global Initiative.  Fedrizzi’s sentiments were echoed and expanded upon by Bracken Hendricks, Senior Fellow at the Center for American Progress, a Washington think tank which co-sponsored of the forum.  The opening session also featured presentations by Michael Thompson, Councillor of the City of Toronto, Ken Neumann, National Director of the United Steelworkers Canada, Robert Peck, Commissioner of the Public Buildings Service of the U.S. General Services Administration, and Dan Esty, Connecticut’s Commissioner of Energy and Environmental Protection and author of the book Green to Gold. Peck made an interesting observation about the “green jobs” label itself, and predicted that within five or six years the label will become less and less relevant as familiarity with sustainability and green building concepts become necessary core competencies across the entire real estate and construction  industries.  Esty highlighted Connecticut’s approach to financial support for development of sustainability technologies and green building, an approach that does not pick winners or losers, but creates opportunity for as many ideas as possible.  According to Esty, markets, not governments, are much better equipped for the task of determining winners.  To implement this approach, Connecticut recently launched the nation’s first Green Bank, which has been hailed as a true innovation in the sphere of public-private financial cooperation to support the development of green technologies and industries. Esty also laid down his own challenge to industry: focus on the problem to be solved, and don’t presuppose that existing solutions are the only answer. People want cold beer and hot showers – not fridges and hot water heaters. Now there’s a man with his priorities in order!

Following the opening session, there were several breakouts.  The first one that I attended was entitled “Moving Investment Capital – Commercial Real Estate Finance and the Green Economy”.  This terrific panel which was moderated by Ashok Gupta of the Natural Resources Defense Council, included Duane Desiderio, VP and Counsel of the Real Estate Roundtable, Bob Hinkle of Metrus Energy, Claire Broido Johnson, GM of Serious Energy Capital, and Maria Vargas, Deputy Director of the U.S. Department of Energy’s Office of Systems, Analyses and Planning.  Desiderio led off the panel with a discussion of current Roundtable initiatives to improve government support for green building by, among other things, expanding the availability of the current 179(d) tax deduction to include existing buildings, and by urging changes to the current DOE loan guarantee program (yes, the same one involved in the Solyndra debacle) to emphasize retrofits, not just new technologies.  Next, Johnson and Hinkle each described new models for financing energy efficiency improvements offered by their companies.  While the models have some similarities, they are both innovative entrants to the market previously monopolized by Energy Service Companies (ESCOs).  Both emphasized flexible, deal by deal underwriting which is “supplier agnostic”, distinct advantages to the ESCO model.  The goal of these product offerings is to solve the internal hurdles faced by key decision makers inside of any enterprise (most notably, capital commitments), and drive broader market penetration for these types of deals.  Finally, Director Vargas described DOE’s Better Buildings Challenge, and articulated the Department’s ambitious goal of improving energy efficiency in commercial buildings by 20% by the year 2020, generating over $40 billion in annual energy cost savings. During the Q+A, yours truly posed a question about driving energy efficiency retrofits into the mid and lower ends of the commercial real estate market.  All of the panelists expressed some dismay at the pace of progress in these market sectors, and mentioned some of the structural barriers with which we are all familiar, including non-aligned lease arrangements, an appraisal community ill-equipped to handle green building
valuation, and general market ignorance, malaise or both. However, there was clear recognition that these all are solvable problems, and that persistent outreach and education from the green building community will be key to eventual success in these market sectors.

The final breakout session I attended, entitled Understanding the Performance of the Green Building Economy, featured an equally impressive panel moderated by Chris Pyke of the USGBC, including Jonathan Flaherty of Tishman Speyer, Timothy Howell, Vice President of Sustainability for Ecological, Mike Zatz, Manager of USEPA’s Energy Star Portfolio Manager, and Bill Sisson, Director of Sustainability at United Technologies Research Center.  The focus of the panel was benchmarking of energy performance and transparency and disclosure of performance data, an issue I addressed in an earlier blog post in the context of the ASTM’s recently promulgated standard on building energy performance assessments. The discussion was lively and informative, and addressed many of the challenges posed by New York City’s ordinance that mandates disclosure of energy performance data for commercial buildings containing at least 50,000 gross square feet. Leasing was again discussed as a primary topic of concern, especially in the context of multi-tenant facilities.  But all panelists agreed that the pent up demand for energy efficiency modeling, benchmarking and improvement is both real and large, and will be the source of a great many new jobs.  As one of the panelists noted, if you have a child going off to college and thinking about engineering, this is a great career opportunity.

Although I learned much, my biggest takeaway from the green jobs forum is that the participants in the green building movement are not concerned solely with creating the next architectural wonder or “net zero” carbon emission buildings.  No, there are many smart and devoted people who care deeply about the employment and other challenges that we now face as a nation, and who are working diligently to unleash the full economic power of green building to help us face those challenges.  Soldier on, good people!

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LEED EBOM AND EXISTING LEASES – A SQUARE PEG IN A ROUND HOLE?

Among the many significant changes under LEED v3 was the inauguration of the Existing Building Operations and Maintenance (EBOM) standard designed to certify the sustainability of ongoing operations of existing commercial and institutional buildings, and to encourage building owners and tenants to implement sustainable practices and reduce environmental impacts over a building’s life cycle.  EBOM is a welcome development from several perspectives, including the fact that it implements measurement standards that actually can document whether or not a building has lived up to its “design” potential. It also creates a path toward green building certification for owners and tenants of existing buildings willing to make the requisite investments.

Notice that I said “owners and tenants”, not “owners or tenants”.  Leased buildings that already are occupied present significant challenges to parties wishing to pursue LEED EBOM.  Because the EBOM standard can be achieved only for an entire building, occupants of at least ninety percent (90%) of the total square footage must agree to be part of the certification process.  For owner-occupied and single tenant buildings, this is not a major hurdle, but for multi-tenant facilities, the challenges can be substantial, especially if the existing leases do not provide a process allocating costs and benefits associated with “greening” the premises.

The old “triple net” paradigm under which building owners absorb up-front capital costs and tenants pay ongoing operating costs does not square with the lifecycle cost assessment paradigm employed under LEED.  This could leave a landlord in the position of making substantial capital investments (for example, in a more energy efficient HVAC system) that reduces the tenant’s operating costs yet does not allow the landord to share in that benefit.  These are not simple issues to negotiate mid-way through the term of a lease.

If both a landlord or tenant wish to consider a plan for achieving EBOM certification, step one is a careful review of the underlying lease and identification of those provisions that may require adjustment to accommodate an effective EBOM certification process.  These would normally include provisions covering the characterization and allocation of building operating expenses, provision of building services, including utilities and cleaning, tenant alterations and improvements, and building rules and regulations.  There are several useful starting points when considering potential approaches to these issues, including BOMA’s Guide to Writing a Commercial Real Estate Lease, Including Green Lease Language (available for purchase here), REALPac’s Office Green Lease National Standard (available for download here), the Corporate Realty, Design and Management Institute’s  Model Green Lease (available for purchase here), and the USGBC’s Green Office Guide (available for purchase here (under LEED Integration Guides).   While all of these publications have useful and thought-provoking approaches to common green lease issues, they all share in common one key advantage:  a clean slate. Read the rest of this entry »

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