Author and Instructor:

Edward S. Smith, Jr.

CREI, ITI, CIC, GREEN, MICP, CNS

CIREC Program Developer

Continuing Education 3.0 Credit Hours

Copyright © by Edward S. Smith, Jr.

Updated January, 2018

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Green Commercial Buildings:Issues, Systems and Savings

Instructor: Edward S. Smith, Jr.

CREI, ITI, CIC, GREEN, MICP, CNS,

CIREC Program Developer

Copyright © 2011, updated January, 2018

Edward S. Smith, Jr.• Commercial and Investment Real Estate

Consultant, Corporate and Individual Training• Certified Real Estate Continuing Education

Instructor CT, NJ and NY• Author of over a dozen Continuing Education

courses, ten books and over a 180 articles on Commercial and Investment Real Estate

• CT and NY Real Estate Broker

www.CommercialEd.com

What is Green?

Green = Earth Friendly

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What is a Green Building

• A green building is an environmentally sustainable building, designed, constructed and operated to minimize the total environmental impacts.

• Well designed green buildings will save money, increase comfort and create healthier environments for people to live and work.

Making a Building Green

• The main strategies to achieve a green building include:

• Reducing energy consumption

• Increasing natural light

• Improving indoor air quality

• Creating thermal comfort

• Water conservation

• Recycling waste

• Reducing carbon emissions

Earth Issues

• Limited Resources

• Fossil Fuels

• Greenhouse Gases

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Limited Resources

• Cannot be replaced

• Oil

• Natural gas

• Coal

• Arable Land

• Freshwater

Fossil Fuel

• Burning fossil fuel releases GHG’s

Greenhouse Gases:

– Carbon Dioxide

– Methane Gas

– Nitros oxide

– Fluorinated Gases

Awareness begins…

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1952 December London, England

• Deadly smog settled over London trapped by cooler air above.

• Dirty cloud engulfed the city for 4 days.

• Rich with soot from factories and low quality home burning coal.

• “The Great Smog” caused 12,000 deaths

• 1956 United Kingdom adopted the first air pollution regulations.

China today• China’s cities have

the worst air quality in the world.

• Electricity comes from burning coal.

• Produces millions of tons of sulpha dioxide each year and particles into the air.

• 600 million people breath this air.

“Red Alert” in 10 Cities in China

• Schoolchildren cross the street in Jinan, in east China's Shandong province on December 24, 2015 amid heavy air pollution

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New Delhi, India

More than a Million Cars banned from New Delhi Streets

• For 15 days from January 1, only cars with odd-numbered license plates will be allowed on the roads on odd-numbered dates and those with even-numbered plates on the other days to try to reduce pollutant levels which regularly hit 10 times the World Health Organization safe limits.

United States today

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Facts about energy use in U.S. commercial and industrial buildings

• Number of buildings – commercial 4.8 million; industrial 350,000 – total over 5 million

• Combined annual energy costs – commercial $107. 9 billion; industrial $94.4 billion

• Portion of energy used inefficiently or unnecessary 30%

• Combined percentage of U.S. greenhouse gas emissions produced by commercial 17%; by industrial 28% - total 45%

• Source: Energy Star

Impact of Buildings in the U.S. on the environment

• Electricity consumption 73%

• Energy use 39%

• Carbon Dioxide emissions 38%

• Raw material use 40%

• Waste output 30%

• Potable water consumption 14%

Source USGBC United States Green Building Council

Green House Gases

• Climate Changes

– Increased temperatures

– Melting ice at north and south poles

– Extreme weather

• Health Issues

– Outdoor air quality

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Real Issues

• Earth’s resources

• Health issues

• Social responsibility

• Running out of places to put trash

– Plastic has a 100 year life!

– Plastic is made from oil!

NASA Global Warming

Results of global warming

• Climate Changes – Extreme Weather

• Rising temperatures raise sea levels

• Salt water encroaches land reducing supplies of fresh (drinking) water

• Certain species would become extinct as rising temperatures change habitat

• Millions of people who live in precarious locations or depend on the land to live would be affected

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Drought 2011 – 2012Drought 2014 – 2017

• 2011 and 2012 Worst droughts in US history, 55% of the country in serious conditions.

• Nothing can grow

• Livestock Disaster – no food for herds

• Food prices skyrocket

• 2014 - 2017 West and Southwest droughts again; wildfires run ramped. East Hurricanes and Floods

• 2017 California Floods

Once a huge lake

California Wild Fires 2016-17

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San Diego Desalination• We must have freshwater to survive.

• Worldwide droughts

• Around 700 million people in 43 countries suffer today from water scarcity. By 2025, 1.8 billionpeople will be living in countries or regions with absolute water scarcity, and two-thirds of the world's population could be living under water stressed conditions.

2014- 2018 Polar Vortex

Sustainability

The ability to satisfy the basic needs of today

without compromising the ability of future generations to satisfy their needs

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Building Issues

• What does it cost to cool a building?

• Those AC’s in overdrive product 1,000’s of gallons of condensation –

where does that water go?

• How hot is that black tar roof?

absorbs heat; costs more to cool.

It's about the bottom line.

• Sure we want to improve the environment.

• Conserving resources for future generations is important.

• How much will I save going Green?

• But, what does it cost initially; how long is the pay back?

Saving Energy

• Makes sense.

• Is now cost effective.

• Tax deductions and credits.

• Rebates are available.

• Being mandated in some municipalities.

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GREEN Attitude

• Do simple things:

• Turn off lights – alternative light bulbs

• Recycle

• Water conservation – aerators

The time has come for business to go green

• Social responsibility

• Economic sense

• It is about the “bottom line” $$$

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Tasks of real estate professionals include:

• Educating clients on reliable information sources

• Become the source of the source

• Taking objective stance to sustainability and green claims

Be the Source of Information

• Place the listing on:

• Local MLS

• Loopnet.com

• Commercialsearch.com

• Company Web Sites

• With GREEN features in comments.

• Recommend local companies that

support sustainability.

• Join local chapter of

USGBC

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First Supermarket LEED Gold

• Wild by Nature in Oceanside has been awarded LEED® Gold certification for new construction by the U.S. Green Building Council. Wild by Nature is the first Supermarket in the State of New York to be awarded LEED Gold certification!

• Following are a list of sustainable, energy efficient, or environmentally practices or items that have been incorporated into the Wild By Nature in Oceanside.

• Preferred parking for Low Emitting Vehicles, bicycle racks and employee showers encourage alternative transportation.

• A highly reflective, white “cool roof” reduces heat island effect.

• Drought tolerant plantings eliminate the need for irrigation.

• Waterless urinals, dual-flush toilets and low-flow faucets reduce building water use by more than 40%.

• Integrated commissioning ensures the building’s energy system works efficiently and effectively.

• Heat reclamation from the refrigeration system provides the heat for the building’s water.

• Highly efficient heating and cooling systems increase energy savings. A central Building Management System provides a high level of control over building systems.

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• Skylights provide additional lighting and a welcome environment, and daylight harvesting lowers lighting levels as necessary.

• LED lighting, high-efficiency compressors, and other measures significantly reduce the energy use of the store’s refrigeration system.

• Construction waste was minimal and a significant portion of waste was recycled.

•

• Fly-ash was incorporated in to the concrete foundations, reducing the building’s carbon footprint.

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Fly Ash

• A by-product of coal burning electrical power plants

• Captured from the furnaces exhausting gases.

• Added to concrete, giving it more strength

• The production of concrete creates carbon dioxide, adding fly ash reduces the amount of concrete needed

• First used in the construction of the Hoover Dam 1933-1935

• The steel, concrete, block, carpet, tile, and drywall used to construct the building boast recycled content.

• The concrete and the majority of the concrete block and drywall were also manufactured regionally, reducing the impact of material transportation.

• Paints, coatings, adhesives and sealants with low levels of Volatile Organic Compounds (VOCs) and composite woods with no added urea-formaldehyde provide a healthy indoor environment for employees and customers.

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During occupancy, Wild By Nature will provide the capacity to recycle cardboard, paper, metal, plastic, glass and plastic bags.

Green Cleaning and Integrated Pest Management will further protect the integrity of the indoor air quality in the building.

Wild by Nature LEED Gold

New York’s Empire State Building

• Awarded the LEED Gold for Existing Buildings certification.

• The 1,454-foot-tall, 2.85 million-square-foot property is the tallest building in the U.S. to receive LEED certification.

• This distinction comes as further recognition from the $550 million Empire State Rebuilding program.

• The retrofit conducted by Johnson Controls and Jones Lang LaSalle is guaranteed to reduce the building's energy consumption by more than 38 percent and should save $4.4 million in energy costs annually.

• The improvements also reduce carbon emissions by an estimated 105,000 metric tons over 15 years.

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Empire State BuildingNew Glass Technology

• 6,500 Windows Replaced with “Low-E” Argon filled Triple Pane Windows.

• Blocks up to 95% of the suns ultraviolet rays.

• In winter keeps cold out and heat in.

• In summer keeps cold in and heat out.

U. S. Rating Systems

• Energy Star

• LEED – Leadership in Energy and Environmental Design

Energy Star Rating Systems

• Established by the U.S. by EPA and DOE• Energy Star Rated 50%*• Energy Star Label 75%*

*Performs better than 50% or 75% of similar buildings nationwide

• Energy Star Leaders – Top Energy Performance• Energy Star Partners – Recognizes outstanding

contributions to reduce greenhouse gas emissions through energy efficiency

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Energy Star

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2014 Energy Star Partner of the Year KOHL'S

• Energy Efficient and Reduced Carbon Emissions

• 1,158 Stores – 910 Energy Star Certified

• 453 LEED Certified Buildings 35,671,412 SF

• 160 Solar Powered Stores

LEED Certified Commercial Buildings

• As of August, 2016

• 90,100 Commercial Buildings LEED Certified in U.S. 36,400 Projects pending certification.

• 881 Buildings in NYC

• 402,800 Homes LEED Certified

• Representing over 17.1 billion square feet

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LEED Rating Systems• New or Major Reconstruction

• Core and Shell

• Interior Buildouts

• Existing Buildings

• New Developments

• All Types of Properties:

• Office, Retail, Hospitality, Data Centers, Schools, Healthcare, Warehouses and Distribution Centers, Single Family and Multi Family Homes, Mixed Use Projects

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LEED Point SystemCredit Categories

• Sustainable Sites• Water Efficiency• Energy and

Atmosphere• Materials and

Resources• Indoor Environmental

Quality

• Location and Transportation

• Innovation

• Regional Priority

• Integrative Process

• Smart Location

• Neighborhood Pattern

• Green Infrastructure

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Construction: Prevent Erosion

Surround the site with a silt fence to contain runoff.

Sustainable Sites 10 Possible Points

Site Selection

• Urban redevelopment – up not out

• Brownfield's redevelopment

• Positioning of building on site

– Daylighting or Solar applications

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Flat Iron Building NYC• Built 1902

• Day lighting concept

• Recessed windows for shade

Site Selection

• East-West Day light

• South facing for Solar

• Retain area natural resources

• Storm water control

Construction: Storm Water Management Plan

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Solutions: Pervious Concrete• Water flows through zero

runoff, lessons urban flooding, increases groundwater recharge.

• May be colored. A light color parking lot will reflect the sun and reduce the heat island effect.

Heat Island Effect

Roof TopsWhite or Green

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Green Roof Benifits• Heating and cooling load reductions – systems

do not have to work so hard saving money and extending systems life

• Storm water runoff reduction

• Extending the service life of the roof 40-60 years

• Reduces urban heat island effect

• Absorbs carbon dioxide

• Reduces noise pollution

• Provides urban wildlife habitat

Javits Center NYCLEED Silver

• 840,000 SF Convention Center

• 7 Acre Green Roof, Wildlife Sanctuary

• 100 New Energy Efficient HVAC Systems

• 6,000 new bird friendly windows; bird collisions decreased by 90%.

Light Pollution

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Light Pollution Reduction

Transportation

• Reduce the number of cars needed to get to work. Employee car pools.

• Building situated near public transportation.

• Encourage bicycles.

• Smart growth – walk to work!

Water Efficiency

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Water Facts• The average person in the U.S. uses

80 – 100 gallons of water a dayX 325,000,000 people

• Largest use is flushing of toilets and showers.

• A bath holds 50 gallons of water.

• A typical faucet flows at 1.5 gallons per minute.

Rain• Replenishes our water supply.

• One inch of rain produces 27,154 gallons of water per acre.

• 27,154 gallons of water weights 112 tons.

• A leaky water line loses one gallon of water every 10 minutes. You are losing (and paying for)144 gallons a day; 52,560 gallons a year!

Water Conservation• Condensation waste from air conditioners

• Rainwater harvesting

• Landscaping plant choices

• Using mulch – recycled wood chips

• Low flow bathroom fixtures

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Water use restrictors

AeratorsAuto flushMotion sensitive faucets

Waterless urinalsReduced size water tanks

Water Efficient Landscaping

• Rainwater harvesting

– Used to water landscaping

• Select drought resistant plants

• Minimize grass cover

• Use Recycled Greywater for watering landscaping

Energy and Atmosphere

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Commissioning

• Hiring the experts (engineering)

• Testing for energy efficiency

• Building Envelope -seals, windows, doors

• HVAC systems

Atmosphere Controls

• HVAC Efficient system - regular maintenance

• Window sealing and replacement

• Ventilation and filtration – ducts cleaning

• Control heat and air temperature 73°

• Roof color effect - black verses white

• Roof top gardens

HVAC Facts

• Alternate systems of cooling use chilled water, with water cooled by a refrigerant at a central location and circulated by pumps to units with fans that circulate air locally.

• A ton of cooling capacity is the amount of cooling provided by melting a ton of ice .(per day: 24 hours).

• One ton = 12,000 BTU’s

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HVAC Condensation• A five ton air conditioning unit in the summer

produces 2.5 gallons of water as condensation per hour.

• Rules of thumb:• 300 SF Building Requires 1 Ton• 30,000 SF = 100 tons

• 100 Ton Unit produces 1,200 gallons of water• condensation in 24 hours

Refrigeration Management

• HVAC systems

• Air quality – filtration systems

• Geothermic heating and cooling

Geothermal in any building

At a certain depth the earth's temperature becomes constant and may be controlled to heat and cool buildings.

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How Geothermal Works

Geothermal methods

Eastport Elementary SchoolLEED Gold

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St. Patrick’s Cathedral, NYCGeothermal Heating and Cooling

Renewable Energy

Daylighting is the practice of placing windows

or other openings and reflective surfaces so that during the day natural light provides effective internal lighting. Particular attention is given to daylighting while designing a building when the aim is to maximize visual comfort or to reduce energy use.

Wikipedia Encyclopedia

Energy Reduction Techniques

• Take advantage of day lighting• Heat controlled with window blinds• Programmable thermostats • CFL or LED light bulbs• Motion sensors: offices, storage, bathrooms• Energy Star Computers/Appliances• Solar photovoltaic panels

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Lighting

• Daylight Views

• Interior Glass Walls

• Light Bulbs

– CFL – Compact Fluorescent Lamps

– Just changing light bulbs can reduce lighting costs by 30% or more!

• Auto shut offs and timers

Energy Star Lighting

• CFL Compact Fluorescent Light Bulbs

• Use 75% less energy

• Last 10 X longer

Slide header copyComparison of energy usedFor  60,000Hours of light

LifespanHours

Watts KilowattsUsed

Incandescent 1,500 60 3,600

CFL 10,000 14 840

LED 60,000 6 360

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LED – Light Emitting Diodes

• Longest Lasting• Lights in a Specific Direction – No Waste• More Light – Less Energy Use• Virtually No Heat

• Per U.S. Dept. of Energy• This will reduce lighting electricity demand by

33% by 2027!

How many people does it take to change a light bulb?

• In Buckingham Palace, London, England

• 60 Foot High Ceilings

• Erect scaffolding, cover precious portraits

• Lights have been changed to LED

• They won’t have to change a light bulb for the next 20 years!

It Was Only A Matter Of Time

“ I'd put my money on the

sun and solar energy. What a source of power!

I hope we don't have to wait till oil and coal run out before we tackle that."

Thomas Edison

1908

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Solar Energy

• Today it is cost effective.

• Significant rebates are available.

• Excess production can be sold back.

• Kohl’s Stores

East Lyme High School

How Solar Energy Works

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Solar Farms• 1st on LI Brookhaven

National Lab Site

• 200 acres

• 162,312 Panels

• 44 Million KWH produced annually

• Delivering power to the grid since 11/1/11

• LIPA, DOE, BP Solar

Antares Solar Field40 Acres East Lyme, CT

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Somers Solar Center, CT

China is now making an effort on developing more renewable energy.

A massive photovoltaic power station has been built over a fish farm in Zhejiang, China. It covers 300 hectares (741 acres) and has produces220 million kilowatt-hours annually. It also provides shade over the water which helps facilitate the fish farming. It provides power for 100,000 homes.

Indoor Environmental Quality

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Indoor Environmental Quality

• Ventilation

• Tobacco smoke

• Indoor air quality

• Thermal Comfort

• Lighting

Ventilation

• ASHRAE Standards define ventilation system standards of “acceptable indoor air quality”.

• Permanent monitoring systems

• Monitor CO2 concentrations

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Tobacco Smoke

• Prohibited in Building

• Minimum 25’ away from any air intake or operable windows

Indoor Air Quality

• IAQ = Productivity and Health

• Concerns for construction workers and occupants. Prior to occupancy flush out air systems or quality testing.

Indoor Air Quality IAQ

People in the U. S. spent 90% of their time

indoors.

Ventilation and Filtration

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Thermal Comfort

• Programmable thermostats

• Operating windows

• Air flow

Air Flow Underfloor Air Distribution

Underfloor Air Distribution

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UAD Installation

Materials and Resources

The Hearst Building 1928

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Reuse of part or parts of the original building

Hearst TowerNew York City LEED Gold

Construction Materials

Renewable Forestry Products

Certified Wood

Forest Stewardship Council

Responsible management of the world’s forests.

McDonalds

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Materials

• Framing – detailed planning – cuts

• Minimized waste

• Modular

• Prefabricated building sections

• EPA estimates 130,000 tons of construction waste each year.

Modular Construction

Brooklyn, NY

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Avoid VOC materials

• Volatile Organic Compounds

• Paints and wall coverings

• Flooring and carpeting

• Adhesives and sealants

Construction Waste Management

Materials Reuse

Recycle Content

Salvaged Materials

Transportation

Regional Materials

Use products extracted or manufactured within the region (500 miles)

Reduce transportation costs and pollution

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Recycling Policies

• Designated collection and storage areas

– Paper, glass, plastics and metal

The Economics

Figuring the pay back

• Lower Operating Expenses verses Initial Cost

Cost = Pay Back in Years

Annual Savings

$10,000 = 3.3 year payback

$3,000

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Fairmont Hotel Green Roof-Cost $25,000 for 2,100 SF green roof 18” depth to grow herbs and vegetables for the hotels restaurant. -Saves $25,000-$30,000 just in the cost of herbs alone!-Less than one year payback on investment!

Fairmont Hotel

Green Roof vegetable and herb garden

Examples

• Buildings vary in size, cost and savings will be specific to that building.

• To get an idea we will look at some household improvements that may also be applied to commercial properties.

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Compact Fluorescent Lights• Advantage: uses 75% less energy last’s

10 times longer and produces 30% of the heat that incandescent bulbs produce!

• Cost: About $3 a bulb

• Payback: less than a year.

• Commercial “CFL tube” fixtures, pay back in 2-3 years.

Case Study LED Lighting65 Fixtures10 hours a dayUsed 31 days a month

R20 Halogen 50 Watt R20 LED 6 Watt

KWH per month  2,372.50 KWH per month       284.70 Installation cost  $3,034.85

KWH cost                     $0.23 KWH cost                    $0.23 Monthly Savings   $480.19

Cost per month      $545.68 Cost per month        $65.48 Annual Savings  $5,762.33

ROI                    6.3 months

Programmable Thermostats

• Cost $50 -$150 each

• Regulates heat and cooling in homes and commercial buildings.

• Pay back in reduced fuel costs about a year

• See calculators on Dept. of Energy’s Energy Star web site.

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Weather stripping

• Time is the enemy of windows and doors

• Cost: Weather stripping a door $20

Caulking a window $10

• Air leaks cost money

• Paybacks in about two-three years

Bathroom Fixtures

• Low Flow showerheads $30 and up

• Aerators $2 and up

• Savings are almost immediate

Solar Panels

• At one time cost prohibitive

• Today affordable

• Often payback 7 to 10 years

• Plus Rebates

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Return on Investment

• Lower Operating Costs, Higher Net Operating Income and Value

• Cost Recovery – Depreciation

• Rebates

• Tax Deductions and Credits

• Increased Leasing Opportunities

How Green Saves Money

• Storm water management prevents floods and building damage.

• Heat Island – reflective or green roofs reduce cooling costs.

• Water reduction and reuse reduces water cost.• Commissioning – monitoring and testing HVAC

and for air leaks reduces fuel (heating and cooling) costs.

Green Saves Money

• Adding Solar Panels reduces electric costs.

• Thermal Comfort – programmable thermostats reduce fuel (heat and cooling) costs.

• Changing light bulbs reduces energy costs, both electricity and fuel.

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People Benefit Too

• Better indoor air quality

• Better lighting

• Less sick days

• More productivity

• More desirable building

• Lease quicker for more money!

Increased Tenant Retention

• Tenant retention effects bottom line; avoids cost of tenant replacement

– Downtime without tenant income

– New tenant improvements

– Brokers commissions

Green Tenant Questions

• Is the building LEED or Energy Star Certified?• What is the age and efficiency of the HVAC

system?• Are spaces separately metered?• What kind of lighting fixtures?• Are there water efficient fixtures?• Is there a rain collection system?

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Green Tenant Questions

• Is there public transportation within a ¼ mile?

• Are there bike racks or storage area?

• Do alternative cars get preferential parking?

• Are Green cleaning supplies used?

Development of the Green Lease

• Agreements in traditional leases about “green” concepts and procedures.

• “Best Efforts” to be green.

• Definitions of Green (Rating Systems)

• Now actual Green Leases

Green Leasing• Building Performance

• Building Materials

• Sustainability

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Building Performance• Energy and Water Efficiency

• Emissions Reductions

• Transparent Performance

• Indoor Air Quality

• Engineering Operation Performance

– HVAC

– Plumbing

– Lighting

Building Materials• Construction

• Improvements

• Alterations

• Cleaning Supplies

• Recycling

Sustainability• Maintaining LEED or Energy Star Ratings

• Conservation and Recycling Programs

• Building Management

• Environmental Management Plan

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Role Changes• Tenants want landlords to perform their

operations and maintenance duties in specific ways.

• Landlords are dictating types of materials and equipment tenants can use in its office space and requiring compliance with recycling and conservation programs.

Primary Issues• The cost of energy saving improvements paid by

landlord – payback time?

• If LEED rating is accomplished, ability to maintain rating – tenant cooperation

• Competitive rent – need to attract tenants –lower operating costs help

Lease Components• Capital outlay for energy improvements

• Payback time

• Savings

• A Green lease needs to be like a partnership between the Landlord and the Tenant. It needs to be transparent.

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Cost of Construction vs. Benefits

• If the landlord recovers the increased cost of construction through a higher base rent, the tenant may legitimately expect to receive the benefit of lower operating costs. (Triple Net or Modified Gross Lease)

• If the landlord does not recover the increased cost of construction through a higher base rent, the landlord may legitimately expect to retain the benefit of lower operating costs. (Gross Lease).

NYC First Green Lease• At LEED Gold Certified 7 World Trade Center

• Language developed by the NYC Mayor’s Office of Long Term Planning and Sustainability.

• Utilizes the “split incentive” scenario

Split Incentive • Landlord pays for capital improvements but does

not benefit from any reductions in operating expenses because the tenant pays the operating expenses per the lease.

• Landlord will recover the costs of those improvements from the tenants.

• Based on “simple payback”, not over “useful Life” tax depreciation.

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Lease Language• Landlord may include in the operating expenses

(to be paid by the tenant) the aggregate costs of such Capital Improvements not to exceed 80% of the Projected Annual Savings.

• The aggregate costs of such Capital Improvements will be fully amortized over 125%

of the simple payback period.

Example• Capital Improvement cost $2,000,000

• Projected annual Savings $500,000

• Payback period is 48 months

• $400,000 (80%) of savings is in operating expenses paid by tenant for 60 months (125%) of payback period.

Results• During the first five years of the lease:

– The tenant has their operating expenses reduced by $100,000 a year.

– The landlord is reimbursed by the tenant for the full cost of the capital improvement.

• In the following years of the lease the tenant has their operating expenses reduced by $500,000 a year.

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New Lease Issues• Tenant may negotiate for bicycle storage and

shower rooms.

• Landlord may establish preferred parking spaces for low-emission or fuel-efficient vehicles.

• Incentive programs may be established for

employees of the building to use mass transit.

Violations and Enforcement • Eviction may be too harsh

• Separate section in lease “Violation of Environmental Rules”

• Create Tenant Rules (Environmental) i.e.

• Tenant shall turn off all interior lights and equipment when not in the premises.

• Tenant shall comply with Landlord’s recycling program.

Assignment and Subletting• The landlord may insist that its consent to a

proposed assignment or sublease can reasonably be denied in the event the proposed assignee or subtenant will or could cause part or all of the building not to conform in accordance with green aspects of the lease, including the third-party certification system.

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Reality• Green Leases are and will continue to be a

hybrid.

• Just like there is no standard lease, there will be no standard green lease. There are now good models available, that attorneys will use to create new green leases.

• Green leases will be more transparent.

Government is very concerned about Climate Changes

Natural Disasters

• Melting of the poles - rising seas

• Eroding shorelines – loss of beaches

• Storm repair is very expensive

• Infrastructure is deteriorating

• Drought – loss of crops – food supply

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South Carolina, October 2015Damage in the Billions

2017 Hurricane Season

• Harvey – Texas 51” of rain, major flooding

• Irma – Caribbean Devastated, Florida and 4 other State’s with Extensive Damage

• Katia – Hit Mexico at same time as 6.1 Earthquake

• Jose – More damage in Caribbean

• Maria – Hit Caribbean again Puerto Rico Destroyed

Required Green• Town of Babylon (Towns Everywhere)

– All new construction over 4,000 SF must be LEED Certified

• City of New York (and All Major Cities)– All construction must be LEED Certified

• U.S. Government– All U.S. Government building originally

required Energy Star rating, however now all new construction must be LEED Silver Certified.

– Any retrofit over 50,000 SF must also now be LEED Silver Certified.

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Green makes $en$e

• Many municipalities are requiring new or retrofits be LEED certified.

• If not required tax incentives may be available to encourage Green building.

• Know what is going on in your market.

NYC Goal to lower Greenhouse Gasses Emissions

• 75% of NYC Carbon Emissions come from energy use in buildings

•Local law #84 passed in 2009, effective in May, 2013 requires “Benchmarking” in all buildings over 50,000 SF.

• As of 2018 all buildings over 25,000 SF are now required to be Benchmarked.

Benchmarking

• Calculating and recording the total energy and water use in a building. This is used to calculate the total carbon emissions of that building

• A year to year comparison will show if a building is improving by reducing the amount of emissions

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Carbon Footprint

• The primary carbon footprint is the sum of the direct carbon dioxide emissions of burning of fossil fuels, like domestic energy consumption by furnaces, waters heaters, and HVAC systems.

• The carbon footprint of buildings can now be measured and tracked.

Carbon Tax ?• A carbon tax is a tax on the carbon content of

fuels — effectively a tax on the carbon dioxide emissions from burning fossil fuels. Thus, carbon tax is shorthand for carbon dioxide taxor CO2 tax.

• The rationale for a carbon tax is simple: the levels of CO2 already in the Earth’s atmosphere and being added daily are destabilizing established climate patterns and threatening the ecosystems on which we and other living beings depend.

Real Estate Perspective

• Improving the buildings score by reducing carbon emissions is perceived as making the building more marketable and increasing building value.

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2018 Available Tax Breaks

Ways to assist owners in making their commercial buildings more energy efficient.

Bonus Depreciation

• Effective September 28, 2017, 100% of the cost of eligible property may be depreciated in the year of purchase; this will end December 31, 2022.

• Thereafter the Bonus Depreciation will phase down: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, 0% in 2027.

Bonus Depreciation• Eligible property used in trade or business are

interior improvements to nonresidential buildings.

• Previously the rule required that items purchase must be new; it now allows for new or used items.

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Section 179 Expensing

• A taxpayer may elect under Section 179 to deduct (or “expense”) the cost of qualified property, rather than to recover such costs thru depreciation deductions.

• The limit has been raised to $1,000,000 with a phase out threshold of $2,500,000, for property placed in service after December 31, 2017.

Qualified Property has previously included and will continue to apply to:

• Personal property used in trade or business• Off the shelf computer software• Qualified Real Property

Leasehold Improvements (interior nonresidential)

Qualified Restaurant Property (purchase of building or building improvements)

Qualified retail improvements (only in areas open to the public)

• Passenger Automobiles (other limits apply)

Major Change

Restaurant building property placed in service after Dec. 31, 2017, no longer meets the definition of qualified improvement property, and is depreciable as nonresidential real property.

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New Definition

• Qualified improvement property is any improvement to an interior portion of a building that is nonresidential real property if such improvement is placed in service after the date such building was first placed in service.

• Qualified improvement property does not include any improvement for which the expenditure is attributable to the enlargement of the building, any elevator or escalator, or the internal structural framework of the building.

Added in the new tax bill are:

• Property to furnish lodgings

• For nonresidential real estate roofs, heating, ventilation, air conditioning, fire protection and alarms and security systems

• Eligible amount for expensing may not exceed taxable income for the year, but may be carried forward to successive years.

ITC Extended

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CVS Platinum LEED

The Future

Renewable Energy

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Long Island, NY

Gansu Wind Farm - ChinaThe largest wind project in the world was started by China in 2008. The Gansu Wind Farm, is being built in phases, and will actually be in 340 wind farms different locations. The goal is to be producing 20,000 Megawatts of power by 2020.

The Power of Water – Hydropower

Strategically built dams on rivers can be controlled to produce water flows captured by turbines to produce electrical power; this hydropower does not pollute the air like the power plants that burn fossil fuels. These are domestic sources of energy that almost all counties have, reducing reliance on international fuel sources. Current 15% of electricity produced worldwide is from hydroelectric plants.

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Niagara Falls

Largest Hydroelectric Plant in U.S.

Three Gorges Dam Yichang, China

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Nuclear Power Plants• In the simplest terms, uranium atoms are

smashed in a controlled chain reaction within a reactor; this Nuclear Fusion creates heat. Water circulating in the reactor collects heat energy; a heat exchanger is then used to create steam, which powers the turbines and generators producing electricity.

• The greatest benefit of Nuclear Power is that it produces no carbon dioxide; it is truly “carbon-neutral”.

• However we are dealing with radioactive materials and waste.

• Many people fear the worst case scenario, a reactor “meltdown”. If the control process, gets out of control, the reactor will literally melt into a liquid radioactive glob that drops deep into the ground. This may require evacuation of contaminated surrounding areas and endanger water supplies, as we have seen happen in Russia and Japan.

• In the world 31 countries have Nuclear Power Plants, the largest is the United States, with 99 reactors at 62 Power Plants. These plants produce 20% of the country’s electricity.

• France has the second largest number of Nuclear Power Plants which produce 75% of that country’s electricity.

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Cogeneration (CHP)

Green Business

• Green insulated roof makes building more efficient…now add

• A Rooftop Farm - a viable business!

Brooklyn Grange 1st

rooftop garden Long Island City

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Brooklyn GrangeBrooklyn Navy Yard 65,000 SF

Green Parking LotsSolar Carports

• Collect energy from a parking lot!

• What a great double use of space.

• And keep your car a little cooler.

Solar Thermal Farm

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Mojave Desert, California, USA

Paris Climate AgreementDecember 2015

• 185 Countries agree to focus on reducing carbon emissions.

• With a goal to cap global warming by 3.6 degrees Fahrenheit (2 degrees Celsius).

• But, U.S. is out!

GREEN is here!

• Agents need to become educated.

• Landlords need to become educated.

• Tenants are already looking for green buildings or for landlords willing to improve their buildings.

• Be the source of the source…

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Green Value Statement

• Reduced operating expenses; increasing NOI

• Healthier workplace

• Tenant retention

• Tenant desired building

• Increased building value

• Buildings not Green in five years will become obsolete.

GREEN People

• LEED AP Accredited Professional

(Trade Consultant)

• LEED GA Green Associate

• LEED Fellows Peer Nominated

• NAR Green Designation

Thank You

“Now get out there

and make a (Green) deal!”

About Your Instructor: EDWARD S. SMITH, JR. CREI, ITI, CIC, GREEN, MICP, CNE and CIREC Program Developer

Commercial and Investment Real Estate Specialist Background Experience: Over 40 years experience in Real Estate Brokerage, specializing in Commercial and Investment Real Estate, Leasing, Sales, Management, Corporate and Private Training. Real Estate Continuing Education Instructor for 19 years. CT, NJ and NY Continuing Education Course Author and Instructor: Commercial and Investment Real Estate Certification (CIREC) Programs Developer “Real Estate Formulas and Calculations: Using the HP10BII+ Calculator” “All About Negotiations” “Introduction to Commercial & Investment Real Estate – Concepts & Terms” “Introduction to Commercial & Investment Real Estate – Tools of the Trade” “All About Leases” “Selling Commercial and Investment Properties: Issues, Money and Law” “Discrimination Issues in Commercial Real Estate” “The Evolution of Green Commercial Buildings” “Green Commercial Buildings: Issues, Solutions and Savings” “Buy the Numbers: Investing in Real Estate” “Listing Commercial Properties: What Buyers and Tenants will want to know” “Building your Commercial Real Estate Business” Author of Books on Commercial and Investment Real Estate “Understanding Green: Concerns, Concepts and Practices” – on Amazon.com “Real Estate Formulas and Calculations: Using the HP10BII+ Calculator” – on Amazon.com “The Commercial Classroom – Volume 2” – on Amazon.com “Real Estate Investments: What you need to Know – on Amazon.com “Commercial and Investment Real Estate: Tools of the Trade Dearborn Publishing “Buy the Numbers: Investing in Real Estate” Self-Published “The Commercial Classroom” Self-Published “Commercial Real Estate: Listing Properties” Dearborn Publishing “Commercial Real Estate: Understanding Investments” Dearborn Publishing “Commercial Real Estate: Smart Marketing Practices” Dearborn Publishing Industry Activity: Past President – New York State Commercial Association of Realtors (NYSCAR) Director and Past President – Metro Long Island Chapter of NYSCAR Director Emeritus and Past President – Long Island Commercial Network (the Long Island Board of Realtors (LIBOR) Commercial Investment Division) Former Director New York State Association of Realtors (NYSAR) Former Director – Real Estate Practitioners Institute at Long Island University Former Director and Officer - Commercial Industrial Brokers Society (CIBS) Edward S. Smith, Jr., Real Estate Broker – Smith Commercial Licensed Real Estate Broker in New York and Connecticut Email: CRETeach@charter.net or SmithCommercialRealEstate@gmail.com Web site: www.CommercialEd.com www.linkedin.com/in/CommercialEd