CREJ

24 / 28

Page 24 — Property Management Quarterly — October 2017
As most people working in com-
mercial real estate are aware, in
late 2016 Denver passed an energy
benchmarking ordinance that applies
to multifamily and commercial build-
ings 25,000 sf or greater. The ordi-
nance requires commercial building
owners to find out the Energy Star
score of their properties and provide
that information to the city. The ordi-
nance is being rolled out in stages.
In 2017, only buildings 50,000 sf or
larger must participate. Beginning
next year, buildings 25,000 sf and
larger also are included. When fully
rolled out, the policy is expected to
cover around 360 million sf of space
annually.
Our research team found a connec-
tion between other cities that have
enacted similar reporting policies and
an uptick in green building adoption
rates. Nine of the top 10 cities on the
index have implemented benchmark-
ing ordinances, and several of those
cities have seen measurable gains in
green building certifications. Overall,
cities with benchmarking policies
have 9 percent more Energy Star and
LEED certified office buildings and 21
percent higher green-certified office
square footage. While the research
notes that it is too early to call it a
definitive correlation, they do plan to
study the link further in the future.
Holding a green building certification
is not only environmentally responsible,
but also it can be leveraged to attract
buyers and tenants. Denver LEED certi-
fied buildings were very active in 2016
with 333 transactions totaling more
than 3.5 million sf. In terms of property
sales, 13 LEED certified office buildings
traded last year, averaging a 20 percent
premium in price per sf. Of the top 25
leases signed in 2016, five occurred
in LEED certified buildings and seven
occurred in Energy Star buildings.The
largest lease signed last year in metro
Denver – a 357,000-sf renewal by a pre-
mier financial services firm downtown
– occurred in an Energy Star building.
Locating your organization in a green-
certified building also is something
companies can leverage with employ-
ees. According to a Nielsen 2014 Corpo-
rate Sustainability report, 67 percent of
respondents indicated that they would
prefer to work for a socially responsible
company. Further, that preference was
strongest among the millennial popula-
tion surveyed. If a company chooses to
invest in a green-certified space, it can
promote that aspect in its recruitment
efforts to potentially gain an advantage
over its competitors.
In addition to Denver’s benchmarking
ordinance, in November Denver voters
will decide on a new policy called
“The Denver Green Roof Initiative,”
which would require most new
buildings greater than 25,000 sf to
cover at least 20 percent of the roof’s
surface (depending on total building
size) with gardens, solar panels or
other green components. In addition
to new buildings, properties facing
roof replacements also could be sub-
ject to the policy.
It’s too early to say whether the
Green Roof Initiative will pass, but
putting the initiative up for a vote is
indicative of our city’s growing inter-
est in commercial real estate sustain-
ability. At this point, it’s critical that
property owners and property manag-
ers include environmental responsi-
bility in their ongoing dialogue – both
in terms of how to plan around new
policy as well as how to leverage
a building’s green features with
tenants.s
Sustainability
fixed-rate financing, which, in combi-
nation with the long duration, provides
certainty to building owners. Addition-
ally, C-PACE interest rates are lower
than other forms of alternative financ-
ing, including mezzanine debt or pre-
ferred equity.
• Construction financing. For property
owners who are either building new
construction or completely retrofitting
a building, having to make burden-
some debt service payments before
a building is fully occupied can be a
financial strain. C-PACE can be struc-
tured with “capitalized” interest pay-
ments, which allow the building to
generate income before the first pay-
ment is due from the property owner.
• Reimbursement. Some projects are
time sensitive, such as roof replace-
ments in the winter or a chiller in
the summer. For proper owners who
do not have the luxury of waiting
for financing before starting the
project, C-PACE can be used to reim-
burse building owners for work that
already is completed, allowing them
to replenish their capital reserves or
free up cash flow.
C-PACE financing represents a
unique and innovative structure that
solves problems facing commercial
property owners while filling the
gaps in traditional financing. It does
not involve any government money
whatsoever and since property taxes
are operating expenses, C-PACE is not
debt.s
Kagan
set your peak demand due to all of
your equipment slamming on at the
same time every morning.
The chart is an example of a
building that was simultaneously
using gas and electric heating in
the winter during morning warm
up, which was setting the demand
charge high. This was a brand new,
third-party commissioned energy-
efficient design, and the manager
could not figure out why the energy
bills were so high. After discover-
ing this issue and making some
programming changes to lock out
electric heat in the morning, the
building owner saved approximate-
ly $3,800 a month, or $20,000 a year
during heating season.
4. Ensure your HVAC isn’t simulta-
neously heating and cooling, which
also is a common issue that goes
unseen in buildings. Check to make
sure your airside economizers are
functioning properly on moderate
days. If you don’t have economizers,
it might not be a bad idea to budget
them into future units so you can
take advantage of the cool outside
air.
If you can, isolate zones – either
with your BAS or with their own
cooling unit – that need special
attention, such as data closets.
Quite a bit of energy is used try-
ing to cool one room while heating
the rest of the building if the zones
aren’t properly isolated.
5. Last, but not least, submetering
your systems (for example, HVAC
vs. lighting, or by different areas in
your building) will help you dig into
where there are issues and oppor-
tunities. Or, at the very least, having
a whole building smart meter tied
into you BAS will help you track
and monitor your energy use every
day in 15-minute increments, rather
than just getting a utility bill once a
month.
There are many strategies out
there, but these are a few to get
started. Hopefully these were help-
ful, and if you have questions on
any of it, there are tons of resources
out here to help.s
Breeden
pan of 15 to 20 years, so your system
really has to be in the 10- to 14-year
mark if you want to explore a con-
version. If your system is more than
15 years old, your best bet is to plan
for a capital expense to replace the
unit.
The converting of refrigerant also
can create issues for potential buyers
of new buildings. In most cases, the
documentation and maintenance
records for equipment is largely lack-
ing from sellers and it is incredibly
important to know if a building’s
system has gone through a conver-
sion. Buyers need to ask what type of
refrigerant systems are in prospec-
tive buildings and perform an analy-
sis of refrigerant if there is reason to
believe a system has been converted
or contaminated.
If you’ve done the analysis and
determined you have to replace the
system, the next step is working
with a partner who understands the
various options and can help you
develop your financial strategy. Some
owners and managers are using
the Colorado Commercial Property
Assessed Clean Energy program as
an option to perform change outs
of their R22 systems. This strategy
allows for a holistic change out of
systems while still maintaining
positive cash flow but often needs to
occur at the same time as a lighting
retrofit and/or building automation
upgrade.s
Koenig
Rocky Mountain Trane
This building was simultaneously using gas and electric heating in the winter during
morning warm up, which was setting the demand charge high. After discovering the
issue and making some programming changes to lock out electric heat in the morning,
the building owner saved approximately $3,800 a month.