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Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
Gulf Coast Green 2010, Alan Whitson, Model Green Lease
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Gulf Coast Green 2010, Alan Whitson, Model Green Lease

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Gulf Coast Green speaker, Alan Whitson, presented "Model Green Lease" on 4/15/2010 in Houston, Texas

Gulf Coast Green speaker, Alan Whitson, presented "Model Green Lease" on 4/15/2010 in Houston, Texas

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  • 1. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 1 © B. Alan Whitson, RPA 1Model Green Lease - 2010 Corporate Realty, Design & Management Institute 4850 SW Scholls Ferry Road, Suite 203 Portland, OR 97225 503.274.7162 www.squarefootage.net B. Alan Whitson, RPA 949.262.9380 AWhitson@squarefootage.net Model Green Lease © B. Alan Whitson, RPA 2Model Green Lease - 2010 B. Alan Whitson, RPA • Real Estate Experience – 40 Million Square Feet • Office • Industrial • Data Centers • Hotel & Resort – Roles • Asset Manager • Commercial Real Broker • Construction Manager • Development Manager • Facility Manager • Real Estate Consultant • Author – Books, Articles & Software Bank of America - San Francisco, CA
  • 2. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 2 © B. Alan Whitson, RPA 3Model Green Lease - 2010 Articles, Books & Software Articles • Lease Structure Hurts Energy Efficiency – BOMA Magazine, June 2005 • Green Lease – Environment Design + Construction, July 2006 • Green Lease Agreements: Navigating Uncharted Waters – Sustainable Industries, April 2008 • Turning Green in Gold – OfficeInsights Books & Software • 327 Questions to Ask Before You Sign a Lease – 1992 • Building Operating Cost Model Lease Addendum – 1993 • Bottom Line - Comparative Lease Analysis Software – 1994 • 365 Important Questions to Ask About Green Buildings – Co Author Jerry Yedulsen – 2006 © B. Alan Whitson, RPA 4Model Green Lease - 2010 Advisory Board Model Green Lease Project • Jeff Austin Wachovia • Clint McMorris Toyota • Laurie McMahon Cassidy & Pinkcard Colliers • Olivia Millar Studley • Bruce Hecht Swearingen Realty Group • Gaines Bagsby CB Richard Ellis • Jeff Woolf Cushman & Wakefield • Paul Williams Webcor • George Lohnes UGL Unicco • Randy Burke DCS Daylight Cleaning Systems • James Kiriazes Siemens • Don Millstein E-Mon • David Kanada IDeAs • Kim Shinn TLC Engineering • Gary Christensen The Christensen Co. • Richard Johnson Matrix Development • Dave Hewett David W. Hewett, Inc. • Vicki Harding Pepper Hamilton • Patrick Ramsey Paul Hastings • Shannon Sentman Holland & Knight • Scott Chrisner Chrisner Group • Paul A. King Bovis Lend Lease
  • 3. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 3 © B. Alan Whitson, RPA 5Model Green Lease - 2010 Agenda Criteria • Minimum Legal Speak • Real World & Economic Benefits • Evidence Based • Concepts – Green buildings don’t cost more – Marketplace set rents, you define your costs – Good design & management adds value faster than cost – What gets measured - gets improved – Sustainability is not a product, it is the benefit of the process – Quality is free, doing things wrong is expensive Content 1. Background – Objective, Approach, Benefits – Workplace Performance & Costs – Commercial Real Estate Leases 2. Model Green Lease – Ten Essential Elements – Implementing the Model Green Lease Background Objective, Approach, Benefits Workplace Performance & Costs Commercial Real Estate Lease
  • 4. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 4 © B. Alan Whitson, RPA 7Model Green Lease - 2010 Objective - Model Green Lease Project Create an incentive to effectively, design, build, and manage high-performance and sustainable office buildings through a green lease. © B. Alan Whitson, RPA 8Model Green Lease - 2010 Approach - Model Green Lease Project • Clean Sheet of Paper – Not a Cut & Paste of Existing Standard Form Lease – Rethink the Tenets of Current Office Leasing Practices – Build on Historical Context Where Appropriate – Integrate Building Science & Improved Technologies • Plain Language Document – Easy to Read & Understand – Specific & Performance Based • Neutral – Fair & Balanced – Neither Landlord or Tenant Centric – Advisory Board • Follow ANSI review and input formula
  • 5. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 5 © B. Alan Whitson, RPA 9Model Green Lease - 2010 Benefits - Model Green Lease • Congruent Environmental Goals – Landlord & Tenant • Alignment of Costs & Benefits – Return Operational Risk to Landlord & Reward Landlord for Operational Excellence • Landlord's Have Technical Expertise – Tenants Do Not • Metrics & Verification of Building Performance – Annual Report • Improved Performance – Building & Workplace • Increased Asset Value © B. Alan Whitson, RPA 10Model Green Lease - 2009 Workplace Performance & Costs
  • 6. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 6 © B. Alan Whitson, RPA 11Model Green Lease - 2010 How Well Does the Workplace Perform? -3 -2 -1 0 1 2 3 Cleanliness & Maintenance Acoustics Lighting Air Quality Thermal Comfort Office Furnishings Office Layout General Satisfaction - Workspace General Satisfaction - Building IEQ Database Green Buildings Source: CBE, IEQ Database - Occupant Satisfaction > 210 Buildings 34,000 Respondents © B. Alan Whitson, RPA 12Model Green Lease - 2010 ...Personal Lighting Control
  • 7. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 7 © B. Alan Whitson, RPA 13Model Green Lease - 2010 The Workplace & People - Ten Year Cost Office Rent $68,973 347 SF @ $24.03 Yr * Tenant Improvements $8,683 347 SF @ $25.00 Office Furniture $8,014 $6,000 + $300 Yr * Technology $87,471 $10,000 + $10,000 Yr * Salary & Benefits $690,356 $83,678 Yr * Total Costs $863,497 Present Value 10-Years Energy is 0.6% of Total Costs 8% 10% 80% 1% 1% Rent T/I Furniture Tech Salary & Benefits Source: BOMA, BLS, * 2.5% Annual CPI, PV @ 5.75% Discount rate © B. Alan Whitson, RPA 14Model Green Lease - 2009 Understanding Commercial Real Estate Leases
  • 8. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 8 © B. Alan Whitson, RPA 15Model Green Lease - 2010 What’s A Lease? • Elements Required for a Lease – Parties – Property – Term – Consideration • Lease Defines the Contractual Relationship Between Landlord & Tenant – Who Does What, When, How, and Who Pays – Esoteric Issues: Financing, Insurance, Destruction ... – Survives Changes in Building Ownership © B. Alan Whitson, RPA 16Model Green Lease - 2010 Landlord’s & Tenant’s Business Objectives Landlord • Maximum Return on Investment – Cash Flow & Sale Proceeds • Net Operating Income – Vacancy Rate – Lease Up – Build Out & Move In – Tenant Turnover – Limit Capital Investment • Durability of Income Stream – Tenant Credit Worthiness – Longer Lease Term • Financial Management – No Surprises Tenant • Productive Workplace – Location – Building Quality – Program - Space Efficiency • Limit Capital Investment – Use of Space – Not Ownership • Limit First Costs • Flexibility – Shorter Lease Term • Total Cost of Occupancy – Predictable – No Surprises
  • 9. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 9 © B. Alan Whitson, RPA 17Model Green Lease - 2009 Lease Negotiation Process © B. Alan Whitson, RPA 18Model Green Lease - 2010 Leasing Process – Tenant Seeking Space Define Criteria Search & Inspection Indentify Candidates Request for Proposals Landlord Proposals Building Evaluation Financial Analysis Narrowing of Field Negotiations Final Proposals Decision Draft Lease Final Negotiations Final Lease
  • 10. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 10 © B. Alan Whitson, RPA 19Model Green Lease - 2010 Where Does Green Enter the Deal... Define Criteria Search & Inspection Indentify Candidates Request for Proposals Landlord Proposals Building Evaluation Financial Analysis Narrowing of Field Negotiations Final Proposals Decision Draft Lease Final Negotiations Final Lease © B. Alan Whitson, RPA 20Model Green Lease - 2010 Where Do You “Green” a Lease? • A building’s environmental performance standards are defined in specific lease clauses or lease exhibits: – Building Use – Rent – Operating Expense – Services & Utilities – Hazardous Materials – Maintenance & Repairs – Alterations & Improvements – Building Rules & Regulations – Contractor Rules & Regulations – Tenant Work Letter
  • 11. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 11 © B. Alan Whitson, RPA 21Model Green Lease - 2010 Lease Negotiation Issues The Lease Space Time Financial Legal Physical Amount Load Factor Expansion Storage Parking Identity Occupancy Lease Term Rent Commencement Renewal Base Rent Escalation Improvement Allowance Free Rent Operating Expenses After Hours Charges Takeover Sublease Assignment Non-Disturbance Self-Help Repairs Cancellation Insurance/ Destruction/Taking Building Hours HVAC Power Services Tenant Fit-Out Hazardous Material Submittals Equity Future Alterations Restoration Notices © B. Alan Whitson, RPA 22Model Green Lease - 2010 Lease Negotiation Issues - Green The Lease Space Time Financial Legal Physical Amount Load Factor Expansion Storage Parking Identity Occupancy Lease Term Rent Commencement Renewal Base Rent Escalation Improvement Allowance Free Rent Operating Expenses After Hours Charges Takeover Sublease Assignment Non-Disturbance Self-Help Repairs Cancellation Insurance/ Destruction/Taking Building Hours HVAC Power Services Tenant Fit-Out Hazardous Material Submittals Equity Future Alterations Restoration Notices
  • 12. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 12 Model Green Lease Ten Essential Elements of the Model Green Lease Implementing the Model Green Lease Ten Essential Elements Model Green Lease Environmental Performance Objective
  • 13. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 13 © B. Alan Whitson, RPA 25Model Green Lease - 2010 Environmental Performance Objective • Purpose: – Establishes “intent” of parties – Define common environment goals for tenant and landlord • Issues: – Lease are long-term agreements – People that negotiated lease, may not administer the lease – Things change; Laws, Technology, Science, and Standards • Tools: – Set “big picture” goals in Lease – Use Rules & Regulations and other lease exhibits (e.g. Building Standards, Cleaning Requirements, and Contractor Rules & Regulations) to define operational details © B. Alan Whitson, RPA 26Model Green Lease - 2010 Environmental Performance Objective… (a) The parties agree it is in their mutual best interest that the Building and Premises be operated and maintained in a manner that is environmentally responsible, fiscally prudent, and provides a safe and productive work environment. (b) The Tenant shall conduct its operations in the Building and within the Premises to minimize: (i) direct and indirect energy consumption and greenhouse gas emissions; (ii) water consumption; (iii) the amount of material entering the waste stream; (iv) negative impacts upon the indoor air quality of the Building and Premises.
  • 14. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 14 © B. Alan Whitson, RPA 27Model Green Lease - 2010 Environmental Performance Objective (c) The Landlord shall operate and maintain the Building and the Premises to minimize: (i) direct and indirect energy consumption and greenhouse gas emissions; (ii) water consumption; (iii) the amount of material entering the waste stream; (iv) negative impacts upon the indoor air quality of the Building and Premises. (d) The Landlord shall use its reasonable efforts to cause other tenants of the Building to conduct their operations in the Building and their premises in conformity with the Environmental Performance Objective. Ten Essential Elements Model Green Lease Rent Structure
  • 15. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 15 © B. Alan Whitson, RPA 29Model Green Lease - 2010 Rent Structure • Purpose: – Reward Landlord for designing, building, managing and owning a high-performance and sustainable office building • Issues: – Net lease format creates a financial disincentive for Landlord – Net lease format creates minimal financial incentive for Tenant • Tools: – Gross Lease with Expense Stop or Base Year • Comprehensive Expense Definition – Amortization of Project Costs Which Reduce Operating Costs – Retro-Commissioning Services • Right to Audit Clause © B. Alan Whitson, RPA 30Model Green Lease - 2010 Glossary • Escalation Clause: A lease clause that provides for the rent to be increased. This may be accomplished by several means such as fixed periodic increases, increases tied to the consumer price index or adjustments based on changes in operating expenses paid by the landlord in relation to an expense stop or base year reference. • Base Year: Actual operating expenses for a specified base year, most often the year in which the lease commences. Once the base year expenses are known, the lease essentially becomes an expense stop lease. • Expense Stop: An agreed dollar amount for operating expenses (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its pro-rated share of increases. May be applied to specific expenses (e.g., property taxes or insurance). Also called “dollar stop.”
  • 16. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 16 © B. Alan Whitson, RPA 31Model Green Lease - 2010 Glossary • Operating Expenses: The cost of operating an office building, such as cleaning, repairs and maintenance, utilities, security, management fees, taxes, insurance and similar day-to-day expenses. Operating expenses should not include financial expenses like debt service, ground leases, depreciation and income taxes; capital expenses such as roof replacement; any expense associated with the production of income such as leasing commissions and legal fees. • Right to Audit: A lease clause that gives the tenant the right to audit the lease and defines the process for doing so. The goal of a lease audit is to determine whether charges assessed by the landlord under a tenant’s lease are correct and proper, and refund any overcharges by the landlord to the tenant. © B. Alan Whitson, RPA 32Model Green Lease - 2009 Lease Types
  • 17. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 17 © B. Alan Whitson, RPA 33Model Green Lease - 2010 Gross and Net Leases Lease Type Continuum Gross Lease Net Lease Net Lease: The base rent does not include building taxes, insurance, utilities, or other operating expenses Gross Lease: The base rent does include building taxes, insurance, utilities, or other operating expenses According to CoStar 58% of office buildings do not include energy in their base rent © B. Alan Whitson, RPA 34Model Green Lease - 2010 The Net Lease Paradox Landlord's Perspective A B C D Base Rent Operating Expenses Tenant's Perspective A B C D Base Rent Operating Expenses
  • 18. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 18 © B. Alan Whitson, RPA 35Model Green Lease - 2010 The Gross Lease Advantage Landlord's Perspective A B C D NOI Operating Expenses Tenant's Perspective A B C D Base Rent © B. Alan Whitson, RPA 36Model Green Lease - 2009 Three Myths About Operating Expenses
  • 19. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 19 © B. Alan Whitson, RPA 37Model Green Lease - 2009 Myth One We have done a good job of reducing energy use in office buildings © B. Alan Whitson, RPA 38Model Green Lease - 2010 Income & Expense 2007 - 1985 2007 2006 2005 2004 2000 1995 1990 1985 Total Income $23.74 $23.86 $22.75 $24.04 $22.72 $19.33 $17.26 $14.73 Cleaning 12% 1.36 1.34 1.21 1.20 1.17 1.20 1.15 1.05 Repairs & Maint. 11% 1.71 1.69 1.55 1.52 1.37 1.55 1.38 1.21 Utilities 21% 2.35 2.28 2.00 1.83 1.86 1.87 1.84 1.85 Road, Grd & Security 8% .88 .82 .72 .73 .68 .61 .50 .38 Administrative 12% 1.32 1.37 1.18 1.22 1.18 1.12 .90 .68 Fixed Expenses 36% 3.89 3.70 3.06 3.39 3.14 2.98 2.84 2.17 Total Expenses $11.61 $11.08 $9.72 $9.89 $9.40 $9.33 $8.61 $7.34 Net Operating Income $12.13 $12.78 $13.03 $14.15 $13.32 $10.00 $8.65 $7.39 BOMA Experience Exchange Report, All Buildings
  • 20. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 20 © B. Alan Whitson, RPA 39Model Green Lease - 2010 Commercial Electricity Prices 0 1 2 3 4 5 6 7 8 9 10 11 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 CentsperkWH Source: EIA – Form EIA 826 - Oct 2009 Table 5.3 US Annual Avg. © B. Alan Whitson, RPA 40Model Green Lease - 2010 Electricity Usage 0% 5% 10% 15% 20% 25% 30% Misc. Refrigration & Cooking Water Exterior Light Office Equipment Ventilation Heating Cooling Interior Light
  • 21. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 21 © B. Alan Whitson, RPA 41Model Green Lease - 2009 Myth Two Net leases encourage tenants to control their operating costs © B. Alan Whitson, RPA 42Model Green Lease - 2010 Benchmarks 976,826 Sq Ft868,616.7 Sq FtAverage Building Size 267.03312.08Sq Ft/Office Worker 22140Number of Buildings 21,490,188 Sq Ft121,606,342 Sq FtTotal Building Rentable Area $2.99$2.23Electricity Cost Sq Ft – Avg. 131.79111.40Building Hours/Week 109.8381.06K BTUs/Sq Ft 85.76%88.39%Office Occupancy Rate Corporate Facilities Downtown Agency Managed Downtown BOMA Experience Exchange Report - 2008
  • 22. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 22 © B. Alan Whitson, RPA 43Model Green Lease - 2010 Operating Expense Comparison $9.77 2.01 7.41 .45 .58 .04 2.04 1.42 1.12 25 Percentile $9.57 2.84 6.10 1.51 .57 .04 1.59 1.29 1.08 25 Percentile Corporate Facilities - DowntownAgency Managed Buildings - Downtown $13.61$11.78$11.82$15.28$11.69$13.00Total 4.903.103.286.324.275.06Fixed Expenses 10.338.549.678.697.327.94Total Operating 1.59.70.961.511.051.11Administrative 1.04.78.83.98.75.85Security .15.08.18.10.06.08Roads/Grounds 3.212.442.692.602.102.32Utilities 2.891.802.332.171.781.86Repairs & Maint. 2.001.651.711.771.431.47Cleaning 75 Percentile 50 PercentileAverage 75 Percentile 50 PercentileAverage BOMA Experience Exchange Report - 2008 © B. Alan Whitson, RPA 44Model Green Lease - 2010 On Average 21.8% Higher Operating Costs $6.10 $7.32 $7.94 $8.69 $7.41 $8.54 $9.67 $10.33 25 Percentile Median Average 75 Percentile Agency Managed Corporate Facilities BOMA Experience Exchange Report - 2008
  • 23. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 23 © B. Alan Whitson, RPA 45Model Green Lease - 2009 Myth Three There is little variation in operating costs among Class A office buildings in a city © B. Alan Whitson, RPA 46Model Green Lease - 2010 Operating Expenses Vary Greatly • 163 Office Buildings • 600,000 Sq. Ft. or More • Downtown (CBD) • 11 Cities Atlanta (13) Boston (20) Charlotte (8) Chicago (39) Dallas (7) Houston (15) Minneapolis (15) New York (10) Philadelphia (6) San Francisco (24) Seattle (6) $1.23 $0 $1 $2 $3 $4 25% < $1.59 25% > $2.82 Middle 50% 249 Building Avg. Data Source: 2008 BOMA Experience Exchange Report Utilities
  • 24. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 24 © B. Alan Whitson, RPA 47Model Green Lease - 2010 Cleaning $0 $1 $2 $3 $4 $5 $6 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report © B. Alan Whitson, RPA 48Model Green Lease - 2010 Repairs & Maintenance $0 $1 $2 $3 $4 $5 $6 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report
  • 25. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 25 © B. Alan Whitson, RPA 49Model Green Lease - 2010 Utilities $0 $1 $2 $3 $4 $5 $6 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report © B. Alan Whitson, RPA 50Model Green Lease - 2010 Roads & Grounds $0 $1 $2 $3 $4 $5 $6 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report
  • 26. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 26 © B. Alan Whitson, RPA 51Model Green Lease - 2010 Security $0 $1 $2 $3 $4 $5 $6 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report © B. Alan Whitson, RPA 52Model Green Lease - 2010 Administrative $0 $1 $2 $3 $4 $5 $6 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report
  • 27. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 27 © B. Alan Whitson, RPA 53Model Green Lease - 2010 Total Operating Expenses $0 $2 $4 $6 $8 $10 $12 $14 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report © B. Alan Whitson, RPA 54Model Green Lease - 2010 Fixed Expenses $0 $2 $4 $6 $8 $10 $12 $14 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report
  • 28. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 28 © B. Alan Whitson, RPA 55Model Green Lease - 2010 Total Operating & Fixed Expenses $0 $5 $10 $15 $20 $25 $30 Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report © B. Alan Whitson, RPA 56Model Green Lease - 2010 The Spread in Operating Expenses 16.7% 7.0% 8.0% 37.6% 25.8% 21.2% 24.9% 30.8% 26.8% 18.2% 35.8% 0% 20% 40% 60% Seattle San Francisco Philadelphia New York Minneapolis Houston Dallas Chicago Charlotte Boston Atlanta Data Source: 2008 BOMA Experience Exchange Report
  • 29. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 29 © B. Alan Whitson, RPA 57Model Green Lease - 2009 Case Study Banner Bank Building Boise, ID LEED CS, Platinum © B. Alan Whitson, RPA 58Model Green Lease - 2010 Banner Bank Building - Boise, ID • 180,000 Sq Ft, 11-Stories • Construction Costs – $120 Sq Ft • Opened July 2006 – 14% Leased at opening – Building accounted 34% of vacant space in CBD – 85%+ Leased in 1-Year – 98%+ Leased • Office Rents – $19.00 - $21.50 Gross Lease • CBD Market Rate • Operating Costs – 37.4% Below Competitors
  • 30. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 30 © B. Alan Whitson, RPA 59Model Green Lease - 2010 Design & Construction • LEED CS Platinum – 50% - Less Energy Use – 80% - Less Water Use • Building Features – Column Free Space – Under Floor Air Distribution – Moveable Wall System – Lighting Control – Low E Glass – Cool Roof – Recycled Water • Stormwater – Low Flow Plumbing Fixtures – Geothermal Heat © B. Alan Whitson, RPA 60Model Green Lease - 2010 Value was Added in Four Areas 1. Spending in one area is offset by greater savings in other areas • Raised Floor - HVAC 2. Improving the quality of operations • Temperature & IAQ 3. Capitalize the savings in operating costs • Electric Hand Dryers • $373,333 Value Added 4. Tax savings and cost of change over • Movable Walls, Modular PVD Cabling, Raised Floor
  • 31. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 31 © B. Alan Whitson, RPA 61Model Green Lease - 2010 Per Square Foot “Market” Downtown Boise Total Income $19.95 - Total Expenses -7.75 = Net Operating Income $12.20 ÷ Capitalization Rate 7.5% = Building Value $162.67 Valuation - Income Capitalization Method Downtown Boise, ID Colliers © B. Alan Whitson, RPA 62Model Green Lease - 2010 Per Square Foot “Market” Downtown Boise Banner Bank Building Total Income $19.95 $19.95 - Total Expenses -7.75 -4.85 = Net Operating Income $12.20 $15.10 ÷ Capitalization Rate 7.5% 7.5% = Building Value $162.67 $201.33 Value Created per sq ft $38.66 Total Value Created $6,960,000 Value of Building Green Downtown Boise, ID Colliers
  • 32. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 32 © B. Alan Whitson, RPA 63Model Green Lease - 2010 How Tenants Benefit with Green Lease $19.50 $20.00 $20.50 $21.00 $21.50 Base Year Year 2 Year 3 Year 4 Market Banner Bank Assume 5% Annual Increase in Operating Costs Ten Essential Elements Model Green Lease Energy Use by Tenant
  • 33. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 33 © B. Alan Whitson, RPA 65Model Green Lease - 2010 Energy Use by Tenant • Purpose: – Manage Tenant Energy Use • Issues: – Define baseline energy use for tenant - include in Base Rent – Actual Tenant Usage replaces Pro Rata Share Allocation • Tools: – Energy Allowance: 6.4 KWH/Sq Ft/Year – 21.8 KBtu/Sq Ft/Year • Building Hours 59 Hours per Week • Lights 0.78 Watts per Sq Ft – EPAct 2005 • Plug Load 1.30 Watts per Sq Ft – Sub-Metering • Management by Exception Process © B. Alan Whitson, RPA 66Model Green Lease - 2010 Reducing Building Operating Hours is Key Weekly Operating Hours When HVAC Is Provided Without Extra Charge Agency Managed Buildings All Buildings 88.70 77.28 50K - 99K Sq Ft 79.84 75.69 100K - 299K Sq Ft 80.87 76.98 300K - 599K Sq Ft 88.86 88.83 >600K Sq Ft 106.62 94.94 Model Green Lease Building Hours - 59 Hours per Week Mon – Fri 7:00 am to 6:00 pm Sat [with prior notice] 8:00 am to 1:00 pm Downtown Suburban Data Source: BOMA Experience Exchange Report
  • 34. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 34 © B. Alan Whitson, RPA 67Model Green Lease - 2010 Building Operating Hours per Week 0 20 40 60 80 100 120 140 Washington San Francisco Philadelphia New York Minneapolis Los Angeles Houston Denver Cleveland Chicago Boston Atlanta Data Source: BOMA Experience Exchange Report © B. Alan Whitson, RPA 68Model Green Lease - 2010 Calculating the Energy Allowance Lighting (w/sq ft) .78 Plug Load (w/sq ft) 1.3 Sub-Total 2.08 Operating Hours/Week × 59 Sub-Total Week 122.72 Convert to Annual × 52 Sub-Total Annual 6,381.44 Convert to KWH/Sq Ft ÷ 1000 Total KWH/Sq Ft/Year 6.3814 KBtu/Sq Ft/Year 21.8 Lighting - EPAct 2005, 40% Reduction from ASHRAE 90.1-1999 Plug Load - 2007 oPod Study of California Offices
  • 35. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 35 © B. Alan Whitson, RPA 69Model Green Lease - 2009 Case Study New York Times New York, NY © B. Alan Whitson, RPA 70Model Green Lease - 2010 New York Times Light Controls “We designed our building to use 1.28 watts per square foot of lighting power ... The New York Times Company is using only 0.38 – that’s 70% less.” Glenn Hughes Director of Construction for The New York Times Company during design, installation, and commissioning of The New York Times Building Strategies: – Scheduling 2% – Occupancy Sensors 10% – Daylight Harvesting 30% – Light Level Tuning 58% Savings: $315,100 yr / $0.51 sq ft Current NYC Code is 1.1 watts
  • 36. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 36 Ten Essential Elements Model Green Lease Operational Performance © B. Alan Whitson, RPA 72Model Green Lease - 2010 Operational Performance • Purpose: – Define buildings operational performance in relation to specific performance standards and metrics • Issues: – Lease have traditionally used vague terms like “reasonable”, “comparable with other Class A office buildings” • Tools: – ANSI/ASHRAE 55-2004, Thermal Environmental Conditions for Human Occupancy – ANSI/ASHRAE 62.1-2004, Ventilation for Acceptable Indoor Air Quality – Commissioning & Retro-Commissioning
  • 37. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 37 © B. Alan Whitson, RPA 73Model Green Lease - 2010 Heating, Ventilation and Air Conditioning (a) Heating, ventilation and air conditioning (“HVAC”) during Normal Business Hours, in season at such temperatures and in such amounts as to comply with ANSI/ASHRAE Standard 55-2004, Thermal Environmental Conditions for Human Occupancy, and ANSI/ASHRAE Standard 62.1-2004, Ventilation for Acceptable Indoor Air Quality. Air filtration shall be provided and maintained with filters having a minimum efficiency reporting value (MERV) as determined by ANSI/ASHRAE Standard 52.2-1999, Method of Testing General Ventilation Air Cleaning Devices for Removal Efficiency by Particle Size. Pre filters shall be have a MERV of 8 or higher, and final filters shall have a MERV of 14 or higher for all outside air intakes and inside air recirculation returns. © B. Alan Whitson, RPA 74Model Green Lease - 2010 Heating, Ventilation and Air Conditioning (b) The HVAC system which services the Premises shall be designed, installed and maintained in a manner which shall maximize its efficiency and shall, during Normal Business Hours, maintain the temperature of the Premises within the following range of temperatures, subject to unusual heat loads caused by Tenant's extraordinary use of the Premises or alteration of the Premises made contrary to the provisions of this Lease: Summer Outside: 93° F Dry Bulb - 74° F Wet Bulb Inside: 75° F Dry Bulb - 50% Relative Humidity Winter Outside: 22° F Dry Bulb Inside: 72° F Dry Bulb - 50% Relative Humidity Building's HVAC internal heat loads shall be based upon [INSERT] watts per rentable square foot (RSF) for lighting and power and one (1) person per one hundred and fifty (150) rentable square feet.
  • 38. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 38 Ten Essential Elements Model Green Lease Annual Performance Report to Tenant © B. Alan Whitson, RPA 76Model Green Lease - 2010 Annual Performance Report to Tenant • Purpose: – Transparency, Environmental Reporting – Encourage Measurement & Verification, and Benchmarking • Issues: – Energy, Water, Recycling • State of California requires Building Energy Statement in 2009 – Certification of Building Performance Compliance by Landlord – Landlord Record Keeping, and Auditable by Tenant • Tools: – Integrates with Annual Operating Expense Adjustment Process – Sub Metering, Contractor Rules & Regulations – Accounting System, Building Automation, and Green Vendors
  • 39. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 39 © B. Alan Whitson, RPA 77Model Green Lease - 2010 Annual Performance Report Metrics • Energy Use Actual / Per Sq Ft – Electricity – Natural Gas – Steam – Chilled Water – Fuel Oil • Renewable Energy – Renewable Energy Used – Percentage of Total Energy • Operating Hours • Water Use Actual / Per Sq Ft – Irrigation – Domestic Cold Water – Domestic Hot Water – Cooling Tower – Other Process Water – Total Potable Water Used – Reclaimed or Grey Water Used • Waste Stream By weight or volume – Consumables – Durable goods – Construction & Demolition – Total – Reporting levels • Sent to landfill or incineration facilities • Diverted from landfill or incineration facilities • Waste Diversion Rate © B. Alan Whitson, RPA 78Model Green Lease - 2009 Case Study Hearst Tower New York, NY
  • 40. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 40 © B. Alan Whitson, RPA 79Model Green Lease - 2010 Design • 46 Stories, 856,000 Sq Ft • LEED C&S Gold, LEED CI Gold • “The Hearst Tower is designed to be 26% more energy-efficient than a standard office building.” • Key Lighting Design Features – 14,000 Light Fixtures – Photo sensors control artificial light based on the amount of natural light available – Motion sensors turn off lights and computers when area is unoccupied Hearst Tower – New York, NY © B. Alan Whitson, RPA 80Model Green Lease - 2010 Real Life: July 28, 2008 2:38 AM
  • 41. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 41 Ten Essential Elements Model Green Lease Hazardous Materials © B. Alan Whitson, RPA 82Model Green Lease - 2010 Hazardous Materials • Purpose: – Requires that neither landlord or any tenant violates any federal, state or local law or regulations regarding the use, generation, presence, storage, disposal, or release of hazardous materials – Defines what is a “hazardous material” • Issues: – Requires expert legal help – Survives lease expiration or termination • Tools: – Federal, State & Local Laws and Regulations • CERCLA (Comprehensive Environmental Response, Compensation and Liability Act) • RCRA (Resource Conservation and Recovery Act) • TSCA (Toxic Substances Control Act)
  • 42. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 42 © B. Alan Whitson, RPA 83Model Green Lease - 2010 Understand the Priorities • Health & Safety – OSHA – Local Fire - HazMat • Legal – Liability – Fault – Duty of Care • Insurance – Risk Management – Coverage • Marketing – HazMat Suits + TV Crew = Bad Ten Essential Elements Model Green Lease Cleaning & Recycling
  • 43. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 43 © B. Alan Whitson, RPA 85Model Green Lease - 2010 Cleaning & Recycling • Purpose: – Improve IAQ & Safety, Save Energy, Reduce Waste Stream • Issues: – Tenant Education – Worker Training, Correct Equipment, and Purchasing Program • Tools: – Effective Tenant Communications Program – Common Environmental Goal – Lease Clause – Building Rules & Regulations – Lease Clause & Lease Exhibit – Green Cleaning – Lease Exhibit • Green Seal, Environmental Choice – Daytime Cleaning Program © B. Alan Whitson, RPA 86Model Green Lease - 2009 Case Study Joe Serna, Jr. Building Sacramento, CA
  • 44. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 44 © B. Alan Whitson, RPA 87Model Green Lease - 2010 The Joe Serna Jr. Building – Calif./EPA HQ • 950,000 Square Feet • $270 Million • 3,000 Calif. EPA Employees • EPA Energy Star – Energy Star Rating 96 – One of the most energy efficient high-rise office buildings in nation – 37.1 kBTU/SF/Yr. – Lighting load .69 W/Sq. Ft. • USGBC LEED-EB Platinum • Recycling Program is a Profit Center © B. Alan Whitson, RPA 88Model Green Lease - 2010 How To Keep Waste From Becoming Trash • Standard trash can is mixed paper recyclable picked up by janitors – no liners – 3,000 Liners/Day $65,000 Year - Savings • 206 recycling centers located throughout building • Managing the Waste – Recycling White Paper Pays – Recycling Reduces Pick-Ups – Compactor Cuts Trash Volume – < 2 Pick-Ups per Month
  • 45. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 45 © B. Alan Whitson, RPA 89Model Green Lease - 2010 Daytime Janitorial Greens Bottom Line • Janitorial Hours – 11:00 am to 8:00 pm – Night Utility Crew • Instituted in 2001 Energy Crisis – 8% Energy Reduction – $100,000 Energy Savings • Turnover Almost Zero • 70% Reduction in Complaints – $120,000 Savings in Labor Hours – Tenants Become Supervisors Ten Essential Elements Model Green Lease Building Rules & Regulations
  • 46. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 46 © B. Alan Whitson, RPA 91Model Green Lease - 2010 Building Rules & Regulations • Purpose: – Guidelines for day to day operation and maintenance of building, e.g., security, recycling, after hours entry, ban space heaters – Allows Landlord to adjust operations without amending Lease • Issues: – Lease clause: “...shall at all times abide by and observe the rules and regulations...” – Landlord may change with notice to tenant, and “...shall not be inconsistent with the provisions of the lease” – Failure to comply can be a default by the Tenant • Tools: – Rules & Regulations Lease Language and Exhibit © B. Alan Whitson, RPA 92Model Green Lease - 2010 Rules & Regulations - Lease Exhibit • Every office worker should have a copy Rules & Regulations or access to via Building's website • Partial List of “Green” Issues – Ban energy-intensive devices, such as space heaters – Recycling – Smoking – Pesticides & Chemicals – Cooking “Odors” – Living Creatures – Health Emergency
  • 47. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 47 Ten Essential Elements Model Green Lease Fit-Out of Tenant Spaces © B. Alan Whitson, RPA 94Model Green Lease - 2010 Fit-Out of Tenant Spaces • Purpose: – Reduce environmental impact of Tenant Fit-Out & Churn • Issues: – Construction Waste Management – Initial Fit-Out & Renovations – IAQ Impact – Churn & Adaptability to Future Needs – Restoration • Tools: – Lease – Work Letter or Construction Letter – Contractor Rules & Regulations – High Performance Building Standards
  • 48. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 48 © B. Alan Whitson, RPA 95Model Green Lease - 2010 Contractor Rules & Regulations • IAQ Construction Management Plan in place during build out and prior to occupancy • Follow building’s green housekeeping practices • Follow building’s low-VOC and IAQ practices • Contractor to provide Material Safety Data Sheets (MSDS) • Provide contractor information to meet building’s green purchasing policy © B. Alan Whitson, RPA 96Model Green Lease - 2010 High Performance Building Standards • Modular Power/Voice/Data • Moveable Walls & Glazing • Paperless Drywall • Carpet Tiles • High Performance Ceiling Tile • Sound Masking • Long Life Low Mercury Lamps • Lighting Controls – Occupancy Sensors – Daylighting – Dimmable Ballasts • “Flex-Head” Sprinklers Bank of America Tower – New York, NY
  • 49. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 49 Ten Essential Elements Model Green Lease Tenant Manual & Development Guidelines © B. Alan Whitson, RPA 98Model Green Lease - 2010 Tenant Manual & Development Guidelines • Purpose: – Inform tenant how to get the most out of their space and building • Issues: – Explain sustainable feature and benefits, procedures and operating parameters in non-technical terms to Tenant and Tenant's employees – Provide insights on how to maximize the building's design, systems, and building standards to create a high performance and sustainable workplace – Continuity of design intent • Tools: – Tenant Manual – Day to Day Operational Issues – Development Guidelines – Tenant Fit-Out
  • 50. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 50 © B. Alan Whitson, RPA 99Model Green Lease - 2009 Implementing the Model Green Lease • New Buildings & Major Renovations • Existing Buildings © B. Alan Whitson, RPA 100Model Green Lease - 2010 New Buildings & Major Renovations • Internal Education – Audience • Listing Broker • Property Manager • Construction • Legal • Lender – Message • What's Different • What's the Same • What are the Benefits • Marketing – Differentiate Your Building – Sell the Benefits – KISS
  • 51. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 51 © B. Alan Whitson, RPA 101Model Green Lease - 2010 Existing Buildings • Develop Action Plan – Useful Tools • Energy Star • GBI/ BOMA Go Green • LEED EB • Model Green Lease • Analyze Costs & Benefits – Market Driven Issues – Economic Value Added – Understand Tenant’s WIIFM • Develop Implementation Plan – Tie to Asset Management Plan • Timing – Exit Strategy • Budget, Rebates & Incentives – Tenant Communications Plan © B. Alan Whitson, RPA 102Model Green Lease - 2010 Existing Buildings Recycling Program Daytime Cleaning High Performance Building Standards Building Rules & Regulations Environmentally Preferred Purchasing Transition From Net to Gross Lease Format Energy Efficiency Upgrade – Tenant Space Contractor Rules & Regulations Energy Efficiency Upgrade – Base Building Retro Commissioning/Energy Star Green Cleaning New Tenants Existing Tenants Behind the Scenes
  • 52. Model Green Lease Corporate Realty, Design & Management Institute - www.squarefootage.net 52 © B. Alan Whitson, RPA 103Model Green Lease - 2010 The Bottom Line 1. Greening your lease is possible right now, regardless of your situation or marketplace 2. Benefits exceed the costs, in the short and long-term 3. ENERGY STAR and LEED certification are not obligatory – But ... 4. High performance must be a part of your culture 5. Constant monitoring, preventive maintenance, and continuous improvement are key to success 6. Effective tenant communication is vital © B. Alan Whitson, RPA 104Model Green Lease - 2010 Corporate Realty, Design & Management Institute 4850 SW Scholls Ferry Road, Suite 203 Portland, OR 97225 503.274.7162 www.squarefootage.net B. Alan Whitson, RPA 949.238.9380 AWhitson@squarefootage.net Model Green Lease
  • 53. Corporate Realty, Design & Management Institute www.SquareFootage.net Faulty Assumptions Plague Too Many Green Lease Blogs B. Alan Whitson RPA Every day I get a Google Alert on green leases, which I dutifully read and then click on the various twits, blogs and websites listed in the alert. Sometimes there is a well researched nugget. Sadly, the typical article is riddled with misconceptions, faulty assumptions, and over simplification of the commercial leasing process. Too often, the authors failed to grasp building operating practices, real estate economics, or the nuance of negotiating a lease. Six years ago, many considered it revolutionary when I wrote the Ten Essential Elements of a Green Lease. The 10 elements were based on using the right rent structure, appropriate technology, performance standards, coupled with measurement and verification to create a financial incentive for green buildings rather than the some platitude about saving the planet. Some still believe that copying a little language from a LEED reference guide into an existing lease document will create a green lease. While, this may give a lease a green tint, it does not result in a green lease. I’m aware of attorneys who’ve invested countless hours tweaking existing leases with riders in the hope of crafting a green lease. This additive approach can result in some small improvement but it usually does nothing more maintain the status quo which is not sustainable. The Model Green Lease Task Force concluded early on that the best approach was to start with a clean sheet of paper, and a clear set of goals: remove the split financial incentive, reward landlords for superior operational and environmental performance, and provide tenants with an environmentally responsible and productive workplace. Let’s exam five building operating issues and see how the language in a green lease and a bad lease differ. 1. Energy This is a simple case of follow the money. Only real estate taxes top energy as the largest operating cost for an office building. The key to controlling and reducing energy use in an office building is for the landlord to profit from doing so. Tenants have minimal financial incentive to reduce energy consumption. Of a tenant’s total cost of doing business; people account for 80 percent, rent which includes energy is 8 percent. Energy alone accounts for only 0.6 percent of an office tenant’s total cost of doing business. Given current energy costs and usage patterns, if a tenant did reduce energy use by 40 percent, the savings would not be sufficient to buy every employee a daily cup of coffee at Starbucks. Even if this did happen it’s doubtful that a tenant would see any of energy savings, since the pro rata share allocation method spreads the savings over the total rentable area of the building. Under the Model Green Lease a landlord is responsible for all energy costs up to the energy allowance. This creates a powerful financial incentive to seek out energy savings and to keep the building in top condition. This encourages a whole building approach to energy management and using the appropriate technology such as the lighting system installed in the New York Times Buildings. The building code in New York limits lighting to 1.1 watts per square ...adopting the structure of the Model Green Lease can cut energy use by 30 to 50 percent over comparable buildings.
  • 54. Corporate Realty, Design & Management Institute www.SquareFootage.net foot. The lighting system used in the Times Building has reduced lighting energy to 0.38 watts per square foot. This equates to a combined energy savings from lighting and cooling of $1.00 per square foot. From the tenant’s side the use of sub-meters brings over allowance energy use to the forefront very quickly. How you may ask? Somebody within the tenant’s organization will have to budget for it. Also if excess energy use or after hours charges are billed to individual department’s P&L, those responsible for that P&L will scrutinize that expense closely. Experience has shown a 30 percent reduction in over allowance and after hours use after installation of sub-meters. Engineering analysis shows that adopting the structure of the Model Green Lease can cut energy use by 30 to 50 percent over comparable buildings. Green Lease Modified Gross Lease with Expense Stop or Base Year; Realistic Energy Allowance for tenants and sub- metering for tracking each tenants energy use, and separate sub-meters for high energy uses such as server rooms; Control actual building operating hours Bad Lease Net Lease, Pro-rata Share Allocation of Operating Cost promote the status quo 2. Operating Performance A few years ago the National Institute of Science and Technology did a survey of 100 office buildings and found that half of them were taking in less than the minimum amount of fresh air as required by ASHRAE 62.1. Moreover, 25% of the buildings were operating at less than half the minimum air intake rate. Over-ventilation was just as rampant as under-ventilation. Both can have a negative impact on tenant comfort, indoor air quality and energy use. Comfortable temperatures and indoor air quality are the second and third most important issues for tenants trailing only rental rate. Yet these two issues are the greatest source of tenant dissatisfaction with a building. Green Lease The lease should state that the building’s HVAC system will be operated in compliance with ANSI/ASHRAE Standard 55, Thermal Environmental Conditions for Human Occupancy and ANSI/ASHRAE Standard 62.1, Ventilation for Acceptable Indoor Air Quality. Including this reference in the lease provides a measurable performance metric. Bad Lease Terms like “reasonable” or “comparable with other class “A” office buildings located in the area” are use to describe how a building will be operated. 3. Recycling, Daytime & Green Cleaning, Green Pest Management What’s not to like about this? Recycling can turn a cost center into a profit center. Daytime cleaning cuts energy use from 4 to 10 percent and you get a cleaner building with fewer complaints. Green cleaning and green pest management protect the health and safety of the janitorial staff and tenants. Tenants won’t object unless you make the process too complicated. A major bank in Canada decided to introduce a corporate recycling program. When the program was rolled it out, they could not find a branch bank in their system that didn’t already have a recycling program started by the employees. Green Lease Appropriate Lease Clauses, Lease Exhibits, Building Rules & Regulations such as those in the Model Green Lease make implementation a straightforward task. Bad Lease If the lease does not address these topics – It’s not a green lease.
  • 55. Corporate Realty, Design & Management Institute www.SquareFootage.net 4. Annual Environmental Performance Report The idea of the annual environmental performance report comes from management guru Peter Drucker, “What gets measured, gets managed.” When the Model Green Lease Task Force first raised the idea of the Annual Report, there was some resistance. California and a growing number of jurisdictions are now requiring an annual report. Since the landlord operates the building and pays all the bills it is reasonable for the landlord to collect, analyze and report performance data to the tenants along with the annual operating budget and annual expense reconciliation. After the Model Green Lease was released, Andy Fuhrman and Alan Edgar of OSCRE asked the Model Green Lease Task Force to work with the OSCRE Green Lease Advisory Board to set up the data exchange standards. This newly released standards makes the collection, analysis and reporting of information quick and easy for the landlord and provides transparency to the tenants. Green Lease A lease clause with appropriate lease exhibit detailing the information the landlord will provide the tenant each year on operating hours, energy use, renewable energy, water use, and recycling. Bad Lease If the lease doesn’t require an annual report – It’s not a green lease 5. Interior Construction The initial fit-out of tenant space coupled with the subsequent tenant turnover can have a significant impact upon the environment and indoor environmental quality of a building. The interior construction should comply with requirements for low VOC content, dust control, proper material handling and storage, and recycling of construction waste whether the tenant is seeking certification such as LEED for Commercial Interiors or not. Green Lease Tenant Workletter Agreement and the Contractor Regulations contain language that defines sustainable product requirements and construction practices to be used in constructing the tenant improvements. Bad Lease If the lease and its exhibits do not specify the sustainable product requirements and construction practices to be used in constructing the tenant improvements – It’s not a green lease. This Spring the Model Green Lease Task Force will release the latest update to the Model Green Lease including three new tenant workletter agreements. The update will be sent to all registered users. The Model Green Lease is available for purchase online at www.squarefootage.net Alan Whitson is President of the Corporate Realty, Design & Management Institute; and Chair of the Model Green Lease Task Force. Click on www.squarefootage.net for a seminar schedule, Alan’s speaking schedule, books, CDs, software, and Model Green Lease template. You can contact Alan Whitson at awhitson@squarefootage.net This originally appeared in Alan Whitson’s Turning Green in Gold column in OfficeInsight on March 8, 2010.

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