Page 216 - The Green Building Bottom Line The Real Cost of Sustainable Building
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194 CHAPTER 6
Considerations When Choosing
a Property
Our company’s goals in the twenty-first century have been centered around refreshing
an aging real estate portfolio, diversifying geographically and by asset type, and posi-
tioning ourselves to be opportunistic. The foundation for meeting these objectives was
in place when I joined the company in late 2003. We sold holdings that the company
had held for a number of years and reinvested the equity in stabilized office proper-
ties—historic mixed-use as well as development properties—in Huntsville and Birming-
ham, Alabama and in Augusta, Savannah, and Atlanta, Georgia.
As a company, we can’t devote all of our resources solely to development work. That
would be too future-oriented—we would run out of money needed to run day-to-day
activities long before our development projects came to fruition. It also doesn’t make
much sense to devote all of our resources to solely managing stabilized properties. We
need the enhanced returns that development work brings in. It’s more complicated when
you add acquisition work to the mix, particularly for a green development company. On
the one hand, the potential acquisition needs to be a good fit with a stabilized portfolio, a
portfolio with a relatively smooth, relatively low, non-volatile income stream that helps
pay the bills and supports the development activity. Newer buildings tend to fit the bill
well, but virtually all of the ones on the market aren’t built to green standards, and it’s
hard to justify replacing their relatively new systems. Try telling your CFO that you’ve
just bought a building that is three years old and you’ve decided to replace the standard
roof (which has a twenty-year life expectancy) with a green roof and you get the idea.
On the other hand, older buildings, ones with aging systems, might seem to be perfect
acquisition targets, except that they are often unstabilized, with poor occupancy rates, per-
haps located in challenging sub-markets, and are facing lots of deferred maintenance. Or
maybe the owner improved the property before placing it on the market, thus inhibiting
our opportunity to meet our sustainable objectives. Ideally, we identify opportunities before
they go on the market and buy them at prices that discount the cost of the improvements.
Faced with satisfying a company expectation to green all acquisitions (environmental bot-
tom line) while also satisfying company expectations that acquisitions provide a stable
income stream (financial bottom line), what would you do? Welcome to my world.
A GREEN ACQUISITION CHECKLIST
In general, we have found the following considerations helpful when thinking about
acquiring properties that will be absorbed into a LEED for Existing Buildings program:
■ Pace. Converting an existing building to LEED does not necessarily have to happen
overnight. Proactively planning the renovations is a critical part of an overall acquisi-
tion strategy, since you will want to factor into a financial pro forma the point in time
you are likely to make the move to LEED and account for the management time it will
take to implement the process.