Firms eye potential, return on investment

By STAN BULLARD

for Crain`s Cleveland

4:30 am, August 3, 2009

(Original article found here)

They will be too late to add to the paperwork James Breen already has filed in an effort to win a Silver rating under the Leadership in Energy and Environmental Design program for existing buildings for Lincoln and the attached IMG Center building at 1360 E. Ninth St. The U.S. Green Building Council sets LEED standards for the property industry`s green efforts.

However, the six-figure investment in solar panels will pay for itself in about five years, estimates Mr. Breen, who heads a partnership that owns the 15-story IMG office building and the attached, six-story Lincoln Building.

In addition to the cost savings and business payoff linked to green efforts, Mr. Breen sees a larger dynamic at play, which is prompting other downtown skyscrapers and buildings throughout the region to go for their stripes as green buildings.

“In a few years, it will be compulsory,” Mr. Breen said. “The government will require it. Or, if you don`t have a green building for Corporate America, it will go somewhere else.”

While Mr. Breen`s LEED effort is a surprise because of the age of the Lincoln and IMG Center buildings, which date to 1921 and 1965, respectively, the owners of two 1980s-era buildings — Fifth Third Center, 600 Superior Ave., and 200 Public Square — are in the study stage of pursuing LEED rankings.

Both of those buildings already enjoy an advantage in pursuing LEED recognition because they have U.S. Environmental Protection Agency rankings as Energy Star buildings for reducing energy consumption and greenhouse gas emissions.

Fifth Third Center owner Behringer Harvard is pursuing the designation because of the building`s energy profile and because it fits a company philosophy to pursue sustainable business practices, said Jason Mattox, the Dallas-based real estate company`s chief administrative officer.

“We`re always looking for ways to reduce energy expenses, both for the tenants and the overall financial performance of the portfolio,” Mr. Mattox said. “While it`s fair to say the economy has driven some other aspects of the leasing decision higher, tenants are looking for sustainable and LEED-type buildings.”

Behringer Harvard already has witnessed the process pay off elsewhere. At the 35-year-old Bank of America Plaza building in Charlotte, N.C., the bank wanted LEED ranking as part of its corporate profile, Mr. Mattox said. Energy improvements that led to a reduction in the building`s electrical consumption, plumbing retrofits that saved 1.5 million gallons of water annually and other upgrades cost about $70,000, Mr. Mattox said, but promise to save $200,000 yearly.

Harbor Group spokeswoman Amy Ford said Harbor also was prompted to start the LEED process at 200 Public Square because of its experience pursuing LEED at the Hurt Building in Atlanta, which earned a Gold designation.

While most examples of green building and LEED certification are linked to substantial redos of existing buildings or newly constructed buildings, David Browning, managing director of CB Richard Ellis`s Cleveland office, expects that more building owners will pursue green efforts as part of regular upgrades.

“It`s more than a fad; it`s a trend,” Mr. Browning said, noting that many building owners will need to meet LEED rankings to win government tenants, and corporate tenants increasingly have a LEED goal in their requests for proposals for office space.

Trends in real estate also push green strategies. With tenant demand down due to the recession and the ability to buy or build new buildings diminished by the credit crunch, Mr. Browning said more building owners will look to strategies to reduce costs. The LEED process provides a systematic way to pursue such savings.

As far as the steps it took to put IMG and Lincoln on the green pathway, Mr. Breen said, “there is not a lot of glamour involved. There are a lot of spreadsheets. A lot of process controls are involved.”

For example, Mr. Breen added a new cooling tower at IMG that accommodates new automatic controls and motion sensors to turn lights on and off when people enter and leave rooms.

Mr. Breen refused to say specifically how much he spent in the quest for a LEED rating although he characterized it as more than $1 million.

As far as results go, Mr. Breen puts it this way: “Every spreadsheet has exceeded our expectations.”