Page 271 - The Green Building Bottom Line The Real Cost of Sustainable Building

SUSTAINABLE BROKERAGE 249

is relieved of having to face an uphill battle alone. Having said all that, without a finan-
cial incentive the broker has little reason to push a sustainable agenda.
A caveat: We have a pilot financial incentive system in place for our brokers. But it
is just a pilot program and has been in place for too short a time to evaluate its effec-
tiveness. Our guess is that we will need to make considerable refinements to the pro-
gram, or perhaps junk it altogether and replace it with an alternative system in the next
few years.
The incentive system is simple. Melaver, Inc. pays a 10 percent referral fee for any
third-party sustainable work that our brokers effect. If we serve as the developer or co-
developer on a project, the broker who brought us the deal gets 10 percent of the fee.
If we serve as the general contractor or provide consulting services, the same 10 per-
cent referral fee applies. If a broker brings us a property to manage according to our
Mark of a Difference sustainable property management guidelines, the company pays
the broker 10 percent of all fees collected.
These fees, which are paid directly to the broker, are nothing to sneeze at. Here are
some hypothetical examples:

■ A broker brings in a development project—a 75,000-square-foot office building—
that will cost in the neighborhood of $15 million to construct. At 4 percent, the
development fee amounts to $600,000. The referral fee is $60,000.
■ A broker brings in a developer who is looking for a local company to oversee the
construction of that same 75,000-square-foot office building. At 10 percent, the con-
tractor fee is $1.5 million. The referral fee for the broker is $150,000.
■ A broker brings in our consultancy group to provide LEED consulting on a third-
party development project (the same 75,000-square-foot office building). At one-
half percent, the consultancy fee amounts to $75,000. The referral fee for bringing
the deal is $7,500.
■ A broker brings in our property management group to manage a development after
it is completed. (Again, the same office building.) At $20 a square foot, the office
building generates $1.2 million in gross revenues after a common area factor of
20 percent is factored in (75,000 × 80% × $20). Property management fees amount
to 5 percent of rents collected, or $60,000. The referral fee to the broker is $6,000
annually. Given that property management contracts are often multi-year deals
(three to five years, conservatively), this would entail fees to the company rang-
ing from $180,000 to $300,000 and a broker referral fee ranging from $18,000 to
$30,000.

At the time of this writing, our brokerage division has referred one small develop-
ment deal (total fee of $25,000, broker referral of $2,500), one general contracting
deal (total fee of $500,000, broker referral fee of $50,000), one consultancy deal (total
fee of $60,000, broker referral fee of $6,000), and one property management deal
(total fee of $30,000, broker referral fee of $3,000). Total potential revenue to the
company amounts to $615,000 and broker referral fees amount to $61,500.