Page 276 - The Green Building Bottom Line The Real Cost of Sustainable Building

254 CHAPTER 8

ears
Y Years 0 1 2 3
REVENUES/SAVINGS
REVENUES/SA VINGS
300,000
300,000
Net rrevenues from brbrokers
Net evenues fr om okers 300,000 300,000 300,000
300,000
Additional revenue from sustainable consulting
consulting
Additional
om
fr
evenue
sustainable
r
op
mgmt
om
pr
r
fr
Additional revenue from sustainable prop mgmt
evenue
sustainable
Additional
300,000
300,000
Total Revenuesotal Revenues 300,000 300,000 300,000
300,000
EXPENSES
EXPENSES
(60,000)
Personnel
(60,000)
(60,000)
Personnel (60,000) (60,000) (60,000)
(50,000)
(50,000)
(50,000)
Rent (50,000) (50,000) (50,000)
Rent
Administrative expenses
Administrative expenses (20,000) (20,000) (20,000)
(20,000)
(20,000)
(20,000)
Sustainability associate
Sustainability associate
for
additional
consulting
Fee to brroker for additional consulting revenues
evenues
r
F
ob
oker
e
et
work
pr
op
mgmt
et
e
F Fee to brrokers for additional prop mgmt work
ob
additional
for
okers
(130,000)
(130,000)
(130,000)
Total Expensesotal Expenses (130,000) (130,000) (130,000)
170,000
170,000
170,000
Total Cashflowotal Cashflow 0 170,000 170,000 170,000
1.000
0.826
Discount Factor 1.000 0.909 0.826 0.751
0.751
Discount Factor
0.909
154,545
PV
PV CashflowCashflow 0 154,545 140,496 127,724
127,724
140,496
NPV
1,364,906
NPV 1,364,906
Figure 8.4 Cash flow for Green, Inc.’s sustainable brokerage division.
cent goes to Green, Inc. Out of that 40 percent revenue, Green, Inc. pays the salary of
the executive office manager and the rent on its office space, and covers some basic
elements of administration such as copying, stationery, and signage. We’ll assume
that each broker brings in gross commissions of $150,000 annually, of which they
each retain $90,000, while Green, Inc. receives the balance of $60,000 per broker or
$300,000 annually ($60,000 × 5 brokers). Gross revenues over a ten-year period
amount to $3 million, while total costs over this same period equal $1.3 million, for
net revenues over a ten-year period of $1.7 million. Discounted back to Year 0, the net
present value (NPV) of this conventional set-up is just over $1 million. An overall
view of this traditional brokerage set-up can be seen in Figure 8.3.
But Green, Inc. is not a conventional real estate company and so decides, five years
into its overall commitment to sustainability, to bring in a sustainability associate to
champion sustainable brokerage. There’s a cost associated with that additional hire.
But Green, Inc. discovers some benefits as well. The company also decides, as part
of its overall incentive structure with its brokers, to provide a 10 percent referral fee
for any additional work a broker brings to the company. As a result of this revised com-
pensation structure, Green, Inc. gets one additional sustainable consultancy job annu-
ally, amounting to $75,000 in revenue. The company pays $7,500 as the referral fee
on this business. Moreover, Green, Inc. gets some additional third-party property
management assignments over this same time period, from companies that, because
of introductions from the brokers, wish to have their assets managed sustainably.