Page 213 - The Green Building Bottom Line The Real Cost of Sustainable Building

EXISTING BUILDINGS 191

optimizing the triple bottom line performance of this building. (The general real estate
market, however, is unlikely to find that response wholly convincing.)
Let’s consider a bit more closely the benefits associated with this particular LEED
for Existing Buildings project, utilizing Esty and Winston’s four-category schema,
employed throughout much of this book. That schema, as you may recall, looks at the
benefits of a green program through four lenses: short-term and tangible revenue cre-
ation, short-term and tangible cost reduction, longer-term and more intangible benefit
creation, and longer-term and more intangible risk and liability reduction. I’ll consider
each briefly in turn.
Short-term cost reductions through the LEED program come primarily through
lower operating expenses (for water, energy, landscaping, etc.). Water savings amount
to $4,700 annually, while energy savings are calculated to be approximately $9,400
each year. We have also seen a reduction in the cost of landscaping as a result of migrat-
ing to drought-resistant native plants. Insurance is a less promising story. So far, LEED
certification has not resulted in a lower insurance premium for Crestwood per se,
although our underwriter is working on it. And, as pointed out in Chapter 4, our over-
all portfolio has seen insurance savings of around $29,000 annually, a savings we
attribute to the overall green orientation of the company. One insurance company that
promotes its green program quoted us its rates for LEED buildings. Unfortunately, the
rates were double what we’re currently paying. In short, savings in operations annually
amount to $14,100, for a total savings over a ten-year period of $140,000.
Short-term revenue creation is a bit trickier to calculate. We know that our 2007 year-
end occupancy at Crestwood was 92 percent, compared with an occupancy for other
office buildings in this sub-market of 81 percent, for an 11 percent differential. With total
rentable square footage at 76,000 square feet, that differential means that Crestwood
has approximately 8,400 square feet more than other office buildings in the general
vicinity, which translates into additional gross rent of $143,000, or net income of
$109,000. The big questions, of course, are how much of this revenue is owing to the
building’s green orientation, how much is due to our strong emphasis on service, and
how much is related to various building amenities that enable it to compete favorably
against other properties in the area. It’s hard to say for certain.
At least initially, during our early ownership of Crestwood, we knew that our occu-
pancy rates were more or less comparable to competitive properties in our sub-market.
This is no longer the case, so something positive has occurred that has enabled us to
differentiate our building from others. Special amenities (the fitness area, conference
rooms, and break rooms)? Certainly. Service emphasis? Probably. Green orientation?
Probably, as well. In fact, we would argue that our service orientation and our green
orientation are inextricable parts of an overall emphasis on our tenants. For the sake of
our financial analysis here, we will assume that 75 percent of our over-market occu-
pancy is owing to the building’s amenities, while the remaining 25 percent ($27,000)
is related to our service offering.
The longer-term benefits are, if anything, trickier to calculate. We have certainly
seen a significant amount of positive publicity as a result of delivering the first multi-