Utility Management Improvements Add $10 Million to Property Value [Case Study]
Through a series of retrofit and design changes and utility management improvements, the Fillmore Center apartment building reduced water consumption and lowered energy costs to save the property about $500,000 annually and enhance property value by $10 million, based on today’s cap rates.
Combined with enhancements to recycling and transportation accessibility, the downtown San Francisco property, managed by the Laramar Group, became the largest multifamily property on the West Coast to earn a Leadership in Energy and Environmental Design (LEED) certification.
By working with public utility companies, Laramar Group was able to get a return on the improvements in less than two years. That success has fueled other projects within the company’s $1 billion portfolio of properties from replacing existing water fixtures with low-flow models to replacing appliances with those that have EnergyStar ratings. A high-rise in Chicago is currently going through similar renovations.
“It’s really set the stage for us to do this again at other properties,” said Senior Vice President Steve Boyack, who presented a sustainability case study on the Fillmore Center at last fall’s NMHC OpTech 2012 conference in Dallas.
Today, sustainability is very much in the Laramar Group’s daily vocabulary.
Leveraging Utility Company Rebates Save $134,000
A significant increase in water costs in San Francisco moved the Fillmore Center to take on an aggressive retrofit of its water devices. High-consumption users would bear the brunt of the increase, and Fillmore Center and its large community of residents were sure to be included.
“We started looking for opportunities for incentives that were being offered by utility providers or municipalities and were able to find programs with the [California Public Utilities Commission (CPU)] that they had put into place to help families to address the concerns of these increases in water rates,” Boyack said.
In addition to working with the PUC, Fillmore Center worked with Pacific Gas & Electric Co. to revamp its bathrooms and irrigations systems, plus overhauled its lighting system with energy efficient light bulbs.
With a little creativity, more than 5,500 water devices – including 3.5-gallon toilets with dual-flush fixtures, low-flow aerators and showerheads – were replaced with $134,000 in help from PUC rebates. Because many of the rebates initially offered were product specific, Laramar Group leveraged 1,500 toilet replacements to convince the utility commission to include dual-flush, low-flow toilets, new technology at the time.
PUC signed off and began releasing money in stages. The result was trimming a $322,000 project cost to $188,000. On top of that, the property is saving an estimated 38 percent on its water bill for 6.3 million gallons of water per year in consumption.
“We wanted to introduce dual-flush toilet to the marketplace,” Boyack said. “We actually had to get them in from Canada at the time, you couldn’t get them anywhere in the United States. We actually got (PUC) to rewrite their rebate code and give us a rebate that would put us in the same expense category of somebody who is using a typical 1.6-gallon flush toilet. So that was a big win for us.”
Boyack said the savings is calculated on water costs prior to the city’s increase, but believes with the new rate the impact probably is double.
Lighting Retrofit Drops Electric Bill by 50 Percent
Built in 1992, the Fillmore Center was in need of a lighting retrofit. Because of the size of the property, a full-time union lighting technician earning a healthy income was on staff to change bulbs in the thousands of light fixtures throughout the property’s common areas.
Around 2005, Fillmore Center opted for a significant lighting retrofit to include longer-life bulbs that would eventually eliminate the need for the maintenance position. By taking advantage of $181,547 in PG&E rebates, Laramar Group got 48 percent public funding for a $377,992 project with a one-year return on investment.
Replaced or retrofitted were 4,841 fixtures in units, offices, stairwells, garages and common areas. Neary 1,400 lamps were changed, as well as 338 ballasts. Occupancy sensors and dual-bulb fixtures were installed in stairwells and garages. All exit signs and landscape lighting were switched to LED lights, and elevators got three-watt LEDs.
“These amounted in significant reductions in usage,” Boyack said. “I remember the electric bill at the property was about $750,000 per year and by the time we were finished it was in the $360,000-$380,000 range. A tremendous win for us in regards to lighting.”
Earning LEED Certification Along with Return on Investment
With the water and lighting upgrades, the Fillmore Center was on the verge of LEED certification, although Boyack says that wasn’t a priority when the projects were conceived. But after the upgrades, company officials realized they were close to earning the ubiquitous distinction.
Fillmore Center expanded resident transit options to include 15 Zipcar vehicles, while a resident shuttle bus, later converted to biodiesel bus service, was put in place. The result was a 47% reduction in conventional commuter trips, based on one driver in one non-fuel efficient car, versus similar facilities.
Also, a multi-tiered recycling program was established to include paint, toxic materials and electronics among other traditional recyclables to reduce Fillmore Center’s annual waste to landfills by 17 percent.
In 2008, the Bay Area community was awarded the LEED Silver for Existing Buildings: Operations & Maintenance.
“An important point about this project in particular is that it really never started out to be a LEED project,” Boyack said. “As developers and managers of real estate, our goals are often driven by returns on our investment and reducing our operating costs, and that’s exactly where it started with Fillmore Center.”