Page 212 - The Green Building Bottom Line The Real Cost of Sustainable Building

190 CHAPTER 6

Energy Star certification with additional upgrades tailored to the LEED for Existing
Buildings program, amounting to another $74,457. Total improvements to the building
amounted to $137,121, for a total investment over the years of $10.88 million. The ini-
tial cap rate of 8.47 percent has been reduced ten basis points to 8.37 percent. An
overview of these calculations can be seen in Table 6.6.
But what is the benefit of taking even a ten basis point reduction in the cap rate for
this building? Our quick response is simply this: As long as our overall cap rate is
within the range of market comparables, we feel we have been true to our mission of

TABLE 6.6 REVISED CAPITAL INVESTMENT IN CRESTWOOD

IMPROVEMENTS COST
Acquisition price $9,400,000
Improvements after acquisition $1,346,000
LEED-EB and Energy Star improvements
Window film $33,986
Zolatone upgrade $ 1,600
Restroom retrofit $20,567
Lighting retrofit $24,824
HVAC retrocommissioning $ 7,128
HVAC enhancements/repairs $37,840
Recycling program $ 5,260
Entry grates $ 3,916
LEED documentation/submittal $ 2,000
Total LEED-EB and Energy Star $ 137,121
Total capital investment $10,883,121
Gross square feet 93,544
Common area factor 18.00%
Leaseable square feet 76,706
Market vacancy factor 8.00%
Rental rate per square foot $17
Gross potential revenue with vacancy factor $1,199,683
Expense ratio 24.10%
Net operating income $ 910,559
Cap rate on initial capital investment 8.47%
Cap rate on total capital investment 8.37%
Change in cap rate 0.11%