Value Beyond Cost Savings - Green Building Finance Consortium

Appendix GSustainable Property Cost-Benefit ChecklistPotential Property Costs Description of Cost Applicability Analysis 120D. Increased Operating Costs1. Higher maintenance costs--training, manuals2. Vendor availability and pricing3. Product or systemfailure/underperformance4. More costly lease analysisand implementation5. Higher real estate taxes6. Costs of required additionalmonitoring/measurementE. Building Operating Problems1. Products underperform2. Service providersunderperform3. New systems learning curvefor engineeringstaff/maintenance staff/etc.4. New/different systems canreduce economies of scale forengineering staff for aconcentrated portfolio ofsimilar assets5. Capacity/seasoning of serviceproviders/contractors6. Tenants do not cooperateIn most cases, sustainable property investment will notresult in increased operating costs, but perhaps operatingcosts that are higher than initially projected. For example,while the original projections could be for a 40% reductionin energy use, insufficient training of engineers,maintenance staff, and tenants, as well as systems orservice providers that do not meet performanceexpectations, could limit the reduction in energy use to alower number, say 25%. Additionally, energy costs couldhave gone down significantly, like they did in 2008,reducing operating cost reductions, while resource usereduction may have met original projections.Additionally, sustainable properties require additionalmonitoring and measurement of sustainability outcomes,and, in addition to the capital cost to put in such systems,there are additional operating costs which will be required,including, at least initially, additional time and expense toadminister and address lease issues.If values go up due to the sustainable property investment,higher real estate taxes could result, increasing operatingcosts beyond historical norms.Building operating problems can occur on sustainableproperties primarily due to products, systems, serviceproviders, maintenance staff, and other factors in theproduction and operation of a sustainable building that aremore pioneering, or untested relative to their reliability.These learning curve issues are more likely to occur in theearly operations of a building, but can also occur later dueto untested durability and functioning over time of somesystems.(See Section I-D of this Appendix)The primary way to address the applicability of thispotential risk is through evaluating the process andfeatures of a sustainable property. Much of the risk ofpotential building operations problems can be mitigatedthrough proper planning, modeling, contracts, and theselection of features and systems with more proven trackrecords.288