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COLORADO REAL ESTATE JOURNAL
— October 15-November 4, 2014
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Law & Accounting
A
s a real estate attor-
ney who’s had the
privilege to work on
several projects that attempted,
sometimes successfully, some-
times not, to implement new sus-
tainability initiatives, I’ve come
to learn that it’s not so simple to
implement these plans, despite
the well-meaning intentions of
the parties. So, as the world of
commercial real estate ever so
slowly moves in the direction
of sustainable development, the
question must be asked – what’s
the holdup? On paper it certainly
sounds like a good idea. The
environment is benefited. The
real estate developer gets credit
for implementing “green” initia-
tives. The tenant can promote an
“ecofriendly” store or apartment
complex to its customers, entic-
ing them to shop and protect the
environment or live “green” at
the same time.
So the question remains, why
isn’t it that easy? The fact is, a
great deal of initial tenant educa-
tion and planning needs to be
performed by the developer, and
quite frankly, it simply isn’t; that
is, the necessary education and
planning doesn’t happen until
it’s too late. Without educated
tenants and a concrete plan to
put sustainability initiatives
into place, good intentions are
doomed to fail before they can
even begin. I’ve seen first-hand
how new so-called “green” tech-
nologies are received without the
detailed information necessary
to answer all of a prospective
tenant’s questions. They are not
received well. So what are some
of the initial barriers to sustain-
ability and how can they be over-
come?
n
Barrier No. 1: lack of ten-
ant education.
As a develop-
er, are you perhaps looking to
implement a new HVAC sys-
tem at your property utilizing
state-of-the-art ground source
heat pumps? How about install-
ing greywater cisterns for rec-
lamation and reuse of water to
irrigate the property? To most
people, that sounds good in the-
ory. Who doesn’t want to be able
to promote sustainability and
help the environment? However,
the problem quickly becomes,
how does one go about explain-
ing these various technologies?
Invariably, tenants are going to
have questions. Tenants always
are going to ask what these tech-
nologies are
and
how
they
differ
from “stan-
dard”
sys-
tems used in
existing stores
all across the
country. They
are
going
to ask who
m a i n t a i n s
these systems
and
what
happens
if
(and when)
there is a
problem. Further, they are going
to ask who installed it and what
happens if (and when) the cur-
rent developer/owner sells the
property. What then? Is the new
owner going to come in and
maintain these systems? The ten-
ant is going to want all of the
specifics regarding how these
questions will be addressed.
So how can a developer pre-
pare? The answer is, start early.
Talk at length with engineers
and consultants. Ask the tough
questions. How long do these
systems take to implement? Are
there local companies available
to perform the necessary initial
construction and maintenance?
Are these technologies reliable
over the long term or will there
be constant maintenance head-
aches? If a developer doesn’t ask
these questions, the tenants cer-
tainly will. And worse, if a devel-
oper doesn’t ask these questions,
they won’t have the answers;
ultimately dooming their sus-
tainability initiatives before they
can even begin. Prepare an infor-
mational package detailing the
scope and function of all of the
sustainability initiatives that you
want to implement and get it in
the hands of potential tenants
upfront; the earlier the better.
Don’t wait until the lease stage
to start having these discussions.
Inevitably, by that time, the ten-
ant (particularly large national
retailers) will have spent signifi-
cant time andmoney planning its
store with conventional systems,
which is going to lead to the
dreaded statement no developer
wants to hear, “Sounds good, but
maybe next time.”
n
Barrier No. 2: lack of proper
planning.
While in the process
of educating tenants on sustain-
ability initiatives, it is important
not to lose sight of the next sig-
nificant barrier to sustainability
– planning. Without proper and
thorough planning, it is next to
impossible to successfully imple-
ment sustainability initiatives,
even if a tenant agrees to par-
ticipate. Again, it is important to
note two critical factors. The first
is that planning really can’t start
soon enough. Secondly, start-
ing planning during the lease
negotiation stage is simply too
late. Planning how to implement
sustainable initiatives takes time
– and resources. Engineers and
consultants need to get involved.
Developers need to determine if
their initiatives will apply to the
entirety of their property or just a
portion of it.
Additionally, the planning
stage also requires a thorough
knowledge of the realistic con-
straints on the property, includ-
ing economic constraints, par-
ticularly for any sustainabil-
ity initiatives that will not be on
new or ground-up construction.
For example, existing buildings
may need to be retrofitted to
accommodate new technology.
Another example of an issue in
this area that I have seen come
up time and time again relates
to the installation of photovoltaic
power systems to harness solar
power. While this certainly could
be a great selling point to pro-
spective tenants or equity inves-
tors, the problem comes into play
when it is discovered that an
existing building, or perhaps a
newly designed building that is
already in the permitting phase,
doesn’t meet the structural
requirements necessary to hold
a rooftop-mounted PV system.
Simply put, this could have been
avoided with proper planning.
Another issue that can be
avoided with proper planning
is the overall disruption to the
property that the implementa-
tion of sustainability initiatives
may entail. For example, a
practical issue that I have been
faced with is how to implement
ground source heat pumps into
a property when all of the park-
ing already is completed. As the
developer, we were faced with
questions about how much, if
any, of the parking areas had to
be dug up or closed off, even
for short periods of time. Prop-
er planning was necessary to
implement this technology with-
Andrew J.
Hayden
Attorney, Ryley
Carlock &
Applewhite, Denver
Deep roots reach higher.
Developing deals, navigating complex regulatory
hurdles, responding to disputes, growing an enterprise –
experience the difference that law elevated makes.
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