Page 135 - The Green Building Bottom Line The Real Cost of Sustainable Building

114 CHAPTER 4

All told, our initial three-year learning curve amounted to approximately $1.56
million ($1.513 million + $49,000 in LEED-related education), not an insignificant pre-
mium to pay but, as we will see by the end of this chapter, an investment that is worth-
while. What did this investment teach us? Lessons learned include:

■ Be clear from the outset as to the green objectives of the project.
■ Stick to those objectives as rigorously as possible.
■ Make sure that everyone on the development team is strongly aligned with and has
a passion for the environmental objectives of the project. Most professionals in real
estate these days will profess strong interest in doing a green project. Many, unfor-
tunately, are just paying lip service in order to get your business. Collaborative, in-
tegrative design work can be painful without strong alignment among all involved.
■ Use the resources of an experienced consultant who thoroughly understands design
and construction as well as the LEED process and who is capable of overseeing the
details of the LEED submittal process.
■ Start with a smaller-sized project (but not too small). There are certain fixed costs
associated with the LEED program (developing a LEED scorecard, energy commis-
sioning, the LEED submittal process) that are factored in more economically with a
larger project. However, you don’t want to bite off a project that is too big or too com-
plex your first time out.
■ Be present on the development site as much as possible. What can be agreed upon
in an office or conference room may not be what is being implemented in the field.
■ Realistically assess the capacity of your company to adopt different organizational
processes than the ones you are currently using, and try not to overtax the staff with
too many changes all at once. That’s easier said than done, particularly in a values-
centric organization such as ours that is passionately driven to do things differently.
■ Expect mistakes and anticipate them financially by underwriting them as part of
your company’s overall financial analysis.
■ Enjoy the journey. It’s a feel-good process from beginning to end, despite the learn-
ing pains.

We began this section of our chapter with a basic question: Does green cost more?
The general answer is that it depends on what your objectives are and the general
maturity of the market for this type of development. The particular answer in the
actual experience of Melaver, Inc. is, “Yes, it does cost more.” We believe the $1.56
million initial three-year investment in green is an investment in our long-term future
and should be amortized over the lifetime of the business. Analyzed in this way, the
annual cost of green for Melaver, Inc. over a thirty-year period at a 7 percent interest
carry is about $125,000. Placing this additional annual cost in the context of our
fictionalized company Green, Inc. results in additional expenses of $125,000 (or 1.49
percent) and a reduction in net operating income from $3.75 million to $3.62 million.
Overall return on Green, Inc.’s equity drops from 15 percent to 14.50 percent or a 50
basis point reduction, as shown in Table 4.3.