[Note: To follow is an excerpt of an interview with Madeleine Abel, CPM, BECO Management; Miriam Campos Root, CCIM, Prudential CRES, Robert J. Greer, The Michaels Development Company, and Michael Jeppesen, Green Earth Development. To listen to, or download the show archive MP3, go to www.IncomePropertyInvestmentTalk.com/090308.]

Mosca: To paraphrase Michael Douglas’s character Gordon Gecko in Wall Street, "Green for lack of a better word is good. Green is right, green works, green clarifies, cuts through and captures the essence of the evolutionary spirit, green in all of its forms. Green for life, for money, for love, knowledge has marked the upward surge of mankind." Robert, the National Association of Homebuilders recently announced that a thousand of their members earned the certified green professional educational designation. Can you tell us about that?

Greer: NAHB has been at the forefront and put together a program that incorporates the various levels of certification about green building, and has taken the best of all of these criteria and put together a program that makes it very clear you are achieving a successful green effort.

Mosca: Madeleine, as a volunteer leader of the Institute of Real Estate Management, can you talk about what IREM has been doing in and around the green movement?

Abel: IREM made the commitment to support sustainable issues and to provide the highest level of information to its members. Understanding that sustainability has become one of the hottest issues and challenges for a property manager, we are working hard to provide information to our members and develop relationships to other organizations that are also committed to sustainability.

Mosca: Miriam, I know your ears perked up when Madeleine mentioned sustainability because it’s a word you prefer over the green. Is it not?

Campos-Root: Absolutely. With the CCIM, which stands for certified commercial investment member, we too are on the forefront of education. As many people know the commercial real estate investment profession, the CCIM is the leader of investment evaluation. We, too, will be offering sustainable development and LEED preparation seminars and workshops.

Mosca: Michael, are the obstacles to green buildings basically disappearing?

Jeppesen: We are seeing the word sustainable affecting so many areas of people’s lives, not just in real estate. When I go to a hotel, I look to see if they’re using incandescent bulbs and about 50 percent of the time you see compact fluorescent lights. In real estate, we are going to see more and more people figuring out how to bridge sustainable strategies into revenue and into cost-savings and increased capitalized values on real estate by decreasing operating costs and increasing the net operating income.

Mosca: That’s all good news for the commercial real estate investor. Miriam, I think a lot of people have to understand that even little things can go a long way. Is that some of the message that needs to get out there?

Campos-Root: Yes, it is an awareness issue, a change of a business lifestyle. Business as usual cannot continue the way we are utilizing and using up our resources. The new business as usual is thinking ‘cradle to cradle.’

Abel: Real estate companies are making a commitment to energy reduction and creating internal mission statements committing themselves to sustainability of their properties and the preservation of our communities’ natural resources. We are doing this through reduced energy consumption and the use of environmentally friendly building supplies as well enhanced recycling and waste management programs throughout our portfolio.

Greer: We’re very excited to participate in sustainability in all of our developments. We are currently under construction with over 40,000 units in 28 states around the United States and all of them are including the process of sustainability not just in the site placement or in the building construction but in the operations and the management of these developments. It costs about 10 percent more to build a green building, but it provides lower operating costs and a healthier environment for all of our residents and that’s key to our commitment.

Mosca: Who needs the education right now, is it the industry, or is it a combination of both?

Jeppesen: There is still a huge need for the populace to understand that people are benefiting financially. There are also some real reasons to do this whether they are personal, for the environment and the planet, or in my case, productivity. It’s easy for me to get buy-in from people when I start talking about improving the quality of their life and their employees.

Campos-Root: The impetus has to happen from the developers and the municipalities. The municipalities are starting to enforce mandates. Together with the demand and the market along with the government, it will accelerate at a much faster rate. For example, the Las Vegas City Center, the largest project in the world under construction right now at about $8 billion, is going LEED certified. We also have an adjacent project next to the Project City Center at $3.2 billion, the former Stardust at $4.8 billion, and a new project called Union Park, a mixed-use downtown development on 61 acres priced at $6 billion. These numbers alone show that Las Vegas is turning toward sustainable development.

Jeppesen: As a CCIM and a LEED accredited professional, I look at net operating income and increasing the value of real estate. In office buildings, we look at energy savings and full-service leases. We are lowering operating costs by installing more efficient equipment and we're reducing the cost that the owner pays for operating the building. Meanwhile, we are charging market rent for the lease and the tenant is getting a benefit because they're in a more healthy building. In the future there will actually be leases where tenants will benefit as well.

Greer: Green building or sustainability is simply a new way of thinking about design and construction of affordable rental housing. Incentives for green building speak for themselves because the homes have lower operating costs, require less maintenance, and they are healthier places to live.

Abel: It’s been proven that all you have to do is adjust your thermostat 2° and you could potentially have an energy savings of somewhere between four and eight percent. That may seem small but it could be significant over a year’s time.

Mosca: The government likes to say that Energy Star, the system itself, saved enough energy in 2007 to avoid the greenhouse gas emissions equivalent of those of 27 million cars. How important is the U.S. Energy Star program?

Abel: Energy Star is important because it is the tool to create a baseline from where to compare your actual energy costs and create a rating. The goal is to continuously try to improve your rating. You get a new rating every year by inputting information like utility usage, the size of your building and the type of tenancy in the building. It is initially a lot of work to input this information but if you want to prove the economics of sustainability, you do need a baseline from which to compare.

Jeppesen: The EPA Energy Star score is a prerequisite in LEED certification for existing buildings tool. It works and is an incredible program. It works for residential; it works for commercial, and the individual. When out buying appliances or computers look for that seal because it does make a difference.

Mosca: Can each of you leave our audience with a golden nugget?

Abel: IREM is going to be releasing a new report called, "A Practical Guide to Green Real Estate Management" in October with practical ideas for sustainable buildings.

Campos-Root: From a sustainability perception, communities must grasp the reason why we are doing this. There are obvious economic benefits such as reduced operating costs and asset value in profits, faster ROIs, improved employee productivity and satisfaction, and optimized lifecycle economic performance. There are also environmental benefits like enhancing and protecting ecosystems and biodiversity, improving the air and water quality, reducing solid waste and conserving our natural resources. Lastly, the health and community benefits, improved air, thermal and acoustic environments in our buildings, enhancing our comfort, occupant comfort and health.

Greer: The effects and the costs of green building provide safer, healthier, more comfortable homes with economic benefits like lower energy and water bills, reduced exposure to mold and mildew and other indoor toxins. The bottom line from all of that is homes are quieter and tighter and the residents save money on their utility bills.

Jeppesen: You can turn office buildings and facilities from cost centers into profit centers. The typical office employer is going to pay on average two dollars a foot for utilities, about $20 a foot for rents and about $200 per square foot for the average employee costs. If we can show them how to increase productivity by about 10 percent, we’ve just paid for their rents and we know statistically that we can increase productivity up to about 16 percent. That turns these buildings forever into profit centers.

Published: September 25, 2008

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Peter L. Mosca is president and founder of BAK Communications, Inc. He has over 22 years of communications and media consulting experience, serving a variety of nonprofit organizations, including the CCIM Institute and the REALTOR Association on all three levels – national, state and local. He is the Spokesperson Trainer for the CCIM's Jay Levine Academy and trains hundreds of residential REALTORS nationwide to be effective industry spokespeople. He is consistently ranked as "excellent" by about 90% of those who attend his presentations. While his principal consulting focuses are public speaking and media relations development and content delivery and management, Peter is also the host of the Voice America Network's weekly radio program, "Income Property Investment Talk," a one-hour program that brings the powerhouses of commercial and residential real estate to property investors every Wednesday at 11 a.m. EST. Peter is married 17 years to his wife Barbara. They have two children: Ashley, 15 and Kelli, 12. Hence, the name BAK Communications, Inc.