Page 195 - The Green Building Bottom Line The Real Cost of Sustainable Building

EXISTING BUILDINGS 173

TABLE 6.1 INITIAL CAPITAL INVESTMENT IN CRESTWOOD

IMPROVEMENTS COST
First floor construction $ 665,000
First floor furniture and equipment $ 185,000
Artwork $ 44,000
Fourth floor office suites improvements $ 452,000
Total improvements $ 1,346,000
Acquisition price $ 9,400,000
Total capital investment $10,746,000
Gross square feet 93,544
Common area factor 18%
Leaseable square feet 76,706
Market vacancy factor 8%
Rental rate per square foot $17
Gross potential revenue with vacancy factor $ 1,199,683
Expense ratio 24.1%
Net operating income $ 910,559
Cap rate on total capital investment 8.47%
Typical cap rate for comparable office building 7.5%
Value of Crestwood at market cap rate $12,140,793
Additional expenditures available for green $ 1,394,793
upgrades
Every additional $100,00 results in cap rate −0.08%
change

Nevertheless, this overview provides a flavor for the type of calculation that needs
to be factored in more when it comes to considering the greening of an existing build-
ing. Delivering a LEED for Existing Buildings project is challenging but it is consid-
erably easier when the focus is less on maximizing a return on a building and more on
optimizing its triple bottom line performance within market constraints.

MAKING A DIFFERENCE

This shift in approach toward long-term fiscal management of an asset is just the first,
albeit important, step in greening an existing facility. A second step was our overall
approach to property management.
When our company committed to constructing all of its developments to LEED
standards in 2002, there was uncertainty regarding what to do with our existing port-