Show me the Money

Asset Management SymposiumMarch 21, 2012

David Unger, US Energy GroupJohn Klein, JDM Associates

Manage Buildings Proactively To Reduce Energy Use and Save Money

Agenda

1. Energy Use in NYC

2. Energy Use Index and Benchmarking

3. Who pays the bills?

4. Types of Energy Use

5. Short- and Long-Term Strategies for Energy Efficiency

6. Awareness and Education

2

Energy Use in NYC Most recent data

Total = 725 million MMBTU

Large buildings (<50ksf)

Small buildings (<=50k sf)

Source: nyc.gov

3

Energy Use by Building Type in NYC

Heat & Hot Water costs account for over 50% of Energy use in NYC Source: Con Edison, Keyspan, DOE, NYSERDA

4

Resident Survey

>200 communities, >50,000 units surveyed

Various markets across the USA

I would be more likely to renew my lease if I were living in a community that is implementing green practices

It is important to me to live in an apartment community that is reducing its environmental or "carbon" footprint

Agree

Neutral

Disagree

80%

16%

68%

25%

4% 7%

The Importance of Benchmarking

Energy

Water

Waste

Cost and consumption

You can’t manage what you don’t measure

Benchmark with ENERGY STAR

Set goals of target reductions

Multifamily buildings currently do not receive an Energy Star Score

Energy Use Index

EUI = index that represent energy use at the site

Sum total of BTUs used by the building / square footage of the building

kBtu/SF/yr = 1000 BTU (British Thermal Units) per SF per year

Site vs. source energy use

Weather normalized vs. non-weather normalized EUI

7

Source vs. Site Energy For every 1 kWh delivered, 3 are consumed

Each source of energy has its own efficiency in delivery

Electricity is the least efficient and natural gas is the most efficient

Source: ENERGY STAR

8

Multifamily EUI Averages

Source: Architecture 2030

9

Statement of Energy Performance

10

Types of Energy UsageType of Energy Usage Description Calculation

Non-Seasonal Electric Use All Electric use less cooling

Electric use less increase during cooling season

Cooling Electric Use Electric use for cooling

Electric use less non-seasonal electric use

Domestic Hot Water Production Fuel use for hot water

Fuel use less increase during heating season

Heating Fuel use for heat Fuel use less domestic hot water use.

11

Who covers cost

Type of Use Who Pays DescriptionCommon Area Electric

Owner Separate meter paid by owner

Tenant Electric Tenant / Owner

Normally sub-metered or direct metered by Con Ed. Still many master metered Multi-Family buildings in NYC

Water Tenant/Owner Typically covered by owner or ratio utility billing system (RUB)

Heating Owner Normally covered by owner in all centrally heated buildings

Cooling Tenant / Owner

Normally handled by window units in smaller buildings. Larger buildings may have chiller plants.

12

Controlling Energy Costs Older buildings make up a majority of the building stock in NYC

Owner typically pays heat and hot water costs

Tenant typically pays electricity costs

Office buildings: common area maintenance (CAM) costs

Overheating is a pervasive issue in NYC, as well as over lighting

Energy costs represent the largest controllable operating expense

13

Impact of Energy Efficiency

The building is the business

Financial drivers are net operating income (NOI) and asset value

Capitalization rate (cap rate)

Energy’s impact on NOI and asset value can turn pennies into millions

Energy Efficiency’s Impact on Asset Value

Multifamily building size = 150,000 SF (approximately 190 units)

Initial energy costs = $1.50/SF

Reduce energy consumption 10%, saves $0.15/SF

New energy costs = $1.35/SF

Increase in NOI = $0.15/SF x 150,000 SF = $22,500 annually

Asset value increase = NOI increase / Cap rate

$22,500/0.05 = $450,000

Reducing energy consumption 10% has the potential to increase asset value by $450,000

Impact on a Multifamily Portfolio

5 million SF portfolio (approximately 6,250 units)

Cap rate = 5.5%

Initial energy costs = $1.50/SF

Reduce energy consumption 10%, saves $0.15/SF

New energy cost/SF = $1.35

NOI increases $0.15/SF x 5 mil SF = $750,000

Asset value increase = NOI increase / Cap rate

= $750,000/ 0.05 = $13,600,000

Reducing energy consumption 10% across the portfolio has the potential to increase the asset value $13,600,000

Overheating Example

Fixed the issue in the beginning of February 2011 For every degree change in temperature set point, 3-5% energy use and cost savings Maximum 70°F in heating season, minimum 74°F in cooling season

17

Energy Efficiency Measures - Heating Enhance boiler operations to increase efficiency and reduce wear

Implement a regular maintenance routine Maintain proper setting on burner/boiler controls Maintain proper combustion efficiency

Insulate piping

Balance Heating Distribution System

Seal Building Envelope

Identify & Repair Return Line and Steam leaks

Example - large multifamily property in NYC Boilers that use #6 oil are 20+ years old Plan to convert one boiler to natural gas in the summer months in 2012,

followed by the other boiler next summer

18

Stack Effect

Moving large volumes of air through a building

In the winter, the warm air in a heated building is lighter than the cold air outside the building The warm bubble of air wants to rise up

and out

The flow of air leaving the top of the building draws cold air into cracks throughout other areas of the building

Energy Efficiency Measures – Lighting and Appliances

Light bulb purchases average thousands of dollars per year in most multifamily communities – monetary value typically not itemized Replace incandescent common area lighting with CFL or LED lamps Replace T12s with lower wattage T8s Consider photocells and occupancy sensors

Replace appliances with ENERGY STAR-qualified models

Install ENERGY STAR qualified 7-day programmable thermostats

20

Energy Efficiency Measures - DHW

Maintain proper DHW temperatures – NYC law states 120°F to the tap

Check and maintain mixing salves

Add DHW recirculation pump controls

Insulate DHW piping

Install low flow showerheads and faucets

21

Awareness and Education Increase resident awareness

Gain buy-in for increased sustainability Encourage them to consider ENERGY STAR appliances

Building manager education Vacant and model unit operational changes

Turn lights on during tours only Turn thermostats off or to a minimal setting. Turn off refrigerator or reduce temperature Conduct preventative maintenance on heating and cooling equipment Turn off water heater Check vacant and model units regularly

Review common area bills each month

23

Building Intuition Within Your Portfolio

Questions?