ULI Washington News

Sustainability and Urban Resilience – Making a Business Case for Stakeholders

Helen Gurfel, Executive Director of ULI’s Greenprint Center in New York led a thought provoking conversation about advances of green and sustainable building methods and practices and how to make the case for building owners and developers to incorporate these advances into their business model.

Joining her were Tommy Wells, Director of DC’s Department of Energy and Environment, Chrissa Pagitsas, Director of Fannie Mae’s Green Financing for Multifamily and Jon Penndorf, Sustainability Leader of Perkins + Will’s DC office.

Helen posed the challenge of how to incorporate new technologies into buildings, existing and new construction and how to motivate developers and building owners to become more efficient, to certify their buildings and to build and share best practices that are value enhancing and achievable.  Greater market adoption of improved building methods are critical for the ongoing and future success of the larger sustainability movement and have posed challenges on the business end as up front costs are required in order to achieve longer term gains.

sustainability-2There is clearly evidence of greater adoption and standardization in the industry, as well as value creation.  Data analysis and benchmarking help to identify areas of opportunity for owners and developers and keep them on track to achieve the desired results and to test and quantify value add improvements.  Performance metrics have evolved to include Tenant Engagement, Evolution of Technology, Health & Wellness, Net Zero Building, Urban Resilience and all of which can be used to test and confirm value enhancement from sustainable methods.

Speaking to DC’s current role in the movement, Tommy Wells highlighted efforts to address water related challenges and suggested that the relationship of heat and water was changing how water is managed, not just in DC, but nationwide.  Increased flooding in historically non-flood zone areas, microburst storms, water surges and rising water levels have led to the city taking active steps to reshape the shoreline along the Anacostia River for flood resilience. This approach includes providing incentives to building owners to retrofit existing building stock and to build at new and higher levels, incorporating improved foundation systems and identifying new locations for mechanical systems on site.

Mr. Wells asserted that we now need to treat the 500 year flood zone as a 100 year flood zone and to prepare for future challenges, not just by developing and maintaining natural creeks and waterways, but by building improved storm water management systems and utilizing natural spaces for filtration and water runoff.  DC is a member of 100 Resilient Cities, funded by the Rockefeller Foundation, to address ongoing environmental change facing DC and other cities around the U.S.  Cities are both the cause and solution to climate change; but they are proactively addressing current and future building challenges, increasing the tree canopy to over 40%, rethinking our power grid and making it more localized, utilizing more solar power and rechargeable batteries and developing areas of the city for improved water management.  These actions are moving cities in a better direction, but there is still much work to be done.

Developers and building owners can work with DC through Green Bank, designed to provide loans for investment in retrofitting existing and building new “greener” buildings and the City is continuing to explore ways to provide incentives, both “the carrot and the stick”, for our industry to increase adoption and practice of improved building methods.

Chrissa Pagitsas shared ideas and programs through Fannie Mae that help multi-family owners and developers to increase their value and tap into savings through adoption of sustainable methods.  Their Green Building Division lends across the real estate spectrum, with 20% going to multifamily debt, which is substantial, and last year provided $36 billion in green financing overall.

Key drivers for considering green loans are product (types of loans), pricing (interest rates to motivate developers), process (does it work within the traditional banking structure), public policy (regulation and incentives) and position (what are bond investors seeking).

Loan products offered by Fannie Mae include:

Green Rewards – for retrofitting/repairing existing stock; lower pricing, additional proceeds and pays 100% of energy audit.  Designed to save money for owners and tenants.
Green Building Certification – better rates tied to certification through programs such as LEED, NGBS, Energy Star and others.
Green Preservation Plus – designed for affordable housing

More investors are now looking at value and performance of sustainable projects and Fannie Mae works with them to use metrics to quantify and track performance of projects as part of the lending process.

Jon Penndorf heads up Sustainability Design for the DC office of Perkins + Will a research based design firm partnering with Fitwel, 100 Resilient Cities and Google’s Healthy Building to develop and expand advances in sustainable design and greater resilience of structures.

The discipline of urban resilience ties directly into sustainability efforts, and it addresses the vulnerabilities of buildings and cities and the threats caused by climate change and people.  They work to evaluate and understand the challenges and consult with clients to mitigate risk, adapt to changing conditions and build structures that can resist environmental stressors – essentially making them more resilient.

Three resiliency strategies overlap to drive design – Environmental Performance, Economic Development and Social Inclusion.  The more aware building owners and developers become of all the potential “stressors” and act to minimize or eradicate them, the greater their buildings will perform, both physically and monetarily.   Jon asserted that financial performance of a building can be enhanced through greater occupant wellness on a number of planes – mental, physical, emotional and spiritual.  In 2016, it was estimated that $153 billion in productivity was lost through chronic illness of employees and that 20% of our health is driven by our indoor environment.  By designing and creating healthier buildings, and responding to the human need for a biological connection to nature through sensory stimulation (visual, auditory, etc.), building owners can create greater value for a property, help tenants have happier and healthier employees, leading to greater productivity and profit, thus creating the potential for higher rents in a building.  Better environmental building design also helps reduce employee absence due to illness, thereby enhancing employee wellness and productivity, which enhances a company’s overall productivity.

When asked about challenges going forward, the panelists identified a specific area of focus.  Mr. Wells said that water was a key concern and that they were working with Copenhagen on water management innovation, based on that city’s water related challenges and solutions.  Ms. Pagitsas asked how we can rethink lending and work to standardize programs and to work out how best to advise developers looking to tap into creative and sustainability funding.   Mr. Penndorf spoke of challenges with helping developers looking for a certain return on their investment and to develop new metrics for building performance and demand response, such as designing for peak energy loads.

To listen to an audio recording of this, please click here.

Please see PowerPoint Presentation links below:
Jon Penndorf, Perkins + Will
Chrissa Pagitsas, Fannie Mae

Helen Gurfel, Executive Director, ULI Greenprint Center

Jon Penndorf, Sustainability Leader, DC Office of Perkins + Will
Chrissa Pagitsas, Director, Green Financing Business, Fannie Mae
Tommy Wells, Director, Department of Energy and Environment, Washington, DC

Recap Written by Lucy Fraser and Michael Stevens

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