December 1, Benchmarking Real Estate Portfolio Sustainability

Transcription

1 December 1, 2011 Benchmarking Real Estate Portfolio Sustainability

2 Key Takeaways Strategic data collection and benchmarking real estate portfolio performance helps executives identify opportunities for value creation and corporate sustainability across their portfolios. Extensive data collection and benchmarking measures may involve a significant investment but deliver greater payback, and leading executives implement a stepwise process of continuous improvement. Selecting the appropriate Key Performance Indicators (KPIs) is critical to enable executives to manage for greater sustainability. Baselining and competitive benchmarking are essential to develop relevant sustainability targets. Benchmarking a portfolio and focusing on the top and bottom performers allows best practices from top performers to be transferred throughout the portfolio. 2

3 Benchmarking Relevance by RE Role Corporate Users Owners Meet corporate sustainability targets Establish baseline for comparison with peers Reduce performance inefficiencies and eliminate risk Identify low-hanging fruit for easy improvements Reduce costs and inefficiencies Reduce operational costs and help tenants meet sustainability KPIs Attract & retain leading companies by reducing TCO Increase asset value No cost and value added Responsible Property Investing (RPI) 3

4 Key Drivers for RE Portfolio Sustainability Benchmarking Prioritize allocation of resources to reduce costs and impacts Establish baselines, set goals, and measure progress Accelerate reduction of TCO using analytics Identify poorly performing assets to target efficient investment Formulate optimal strategy for reducing portfolio s footprint Determine status as sector leader or laggard Allocate resources based on competitive necessity or to demonstrate leadership Stimulate collaboration and innovation Increase adoption of relevant best practices Enhance internal learning through strategic synergies, internal competition, etc. Increase transparency with stakeholders Follow responsible property investing (RPI) guidelines Respond to large-scale annual surveys (BOMA 360, REALpac Energy Benchmarking, GRESB) Anticipate and comply with regulations Leverage regulatory risks and opportunities US city case studies: Seattle, New York, San Francisco National case studies: UK, Australia 4

5 Emerging Municipal Benchmarking Regulations Seattle Green Building Capital Initiative (2009) aims to reduce energy consumption in existing building stock 20% Benchmarking: report data for 50,000+ ft 2, non-residential buildings (by 10/3/2011), 10,000+ ft 2 residential buildings (by 4/1/2012) Disclosure: disclose energy performance to any valid party Reporting: authorize city to download energy performance New York City (PlaNYC 2030) Mandatory benchmarking (beginning in 2011) with public disclosure through Department of Finance website (starting in 2012) Energy audits and retro-commissioning Energy efficiency reports every 10 years (starting in 2013) San Francisco 2004 Climate Action Plan (CAP) targets 20% reduction in GHG emissions from 1990 levels by 2012 Requires energy efficiency audits of non-residential buildings Owners of 3,000 commercial buildings (160 million ft 2 ) must make public Portfolio Manager information by late

6 Emerging National Benchmarking Regulations Australia (National Greenhouse and Energy Reporting Act) Requires reporting GHG emissions, energy consumption and production (July 2008 on) Corporations and facilities report Scope 1 & 2 emissions (6 gases) Penalties over $200,000 (AUS) for failure to report Green Star, NABERS United Kingdom Requires Energy Performance Certificates (EPCs) for homes, commercial and public buildings for sale, rent or newly constructed Average cost: 5,000-40,000 EPCs list energy efficiency grades (A to G) based upon: Age & layout of the property Activities going on within Materials used in construction HVAC systems Lighting 6

7 Case Studies 7

8 Case Studies Citigroup/Citi Realty Services (CRS) Follows 4-step benchmarking strategy Reduced energy use 7% since 2009 & energy costs by $64 million since 2008, Increased rollout to 4,000 facilities IDG Top Green IT Organization & Newsweek s Greenest U.S. Bank (2010) Source: Citigroup Investa Tracks BMCS s in majority of buildings Applies Confidence Factors to data Uses Green Buildings Alive to engage stakeholders, employees : reduced energy consumption intensity 26%, natural gas 49%, CO 2 e 39% Source: Investa 8

9 Case Studies TIAA-CREF Institutes comprehensive training for asset & property management staff to ensure accurate data entry for Portfolio Manager Reduced energy by 10% ( ) and attained average ENERGY STAR Rating of 75+ AXA Real Estate Investment Managers Uses Green Rating tool to measure 6 KPIs (energy intensity, carbon, water, transport, well being, waste) in existing buildings Aims to integrate water & energy policy into property managers design and systems management UK Government Targets occupancy to reduce costs, energy intensity, and GHGs Collects data through Property Benchmarking Service Finds that less space per FTE in A/C, newer, & extended-hour sites significantly lowers energy and CO 2 e per FTE Focuses on building design and systems management 9

10 McKesson: Diligence in Energy Management Motivation Reduce controllable operating expenses (down 18-22% since 2001) and environmental costs Determine portfolio-wide best practices and improve underperforming properties KPIs, Metrics RE energy efficiency performance: kwh/ft 2 Annual GHG emissions: metric tons CO 2 Energy cost control: $/ ft 2 /year Improve space utilization: from baseline of 250 ft 2 /FTE to current average 208 ft 2 /FTE; forecasting 180 ft 2 /FTE Benchmarking Collects data from 84 buildings (97% of total utility costs) Targets outliers for improvements or to find best practices Inputs data into Portfolio Manager to benchmark Reports emissions data for 84% of US footprint, per GRI standards Releases data via Corporate Sustainability Report (annual) 10

11 McKesson Building Monitoring Building Energy Consumption and GHG Emissions FY 07 FY 08 FY 09 FY 10 FY 11 Facilities Monitored for kwh Sq. Ft Monitored for kwh 4,722,893 8,618,235 9,168,419 12,058,186 11,755,703 Total MWh (kwh/1000) 70, , , , ,055 Lbs. CO 2 / ft Lbs. NOx/ ft % Real Estate Monitored for KWh/ft 2 and CO 2 / ft 2 28% 60% 64% 84% 79% For FY 2011: Data centers by far consume the most energy by square foot at kwh/ft 2, compared to call centers (28.24), offices (27.39), production (14.92) and warehouses (11.56) As the largest share of portfolio square footage, warehouse and office buildings contribute the bulk of CO 2 emissions at and lbs/mkwh/ft 2, respectively 11

12 McKesson: Diligence in Energy Management Application Schedules regular maintenance and assessment of portfolio-wide operations Follows 2010 Real Estate Sustainability Guidelines (green cleaning, recycling, lighting, HVAC, water) Uses 3 space efficiency strategies: space compression, co-location, targeted (community) work environments Lessons Learned Industry best practices have rapidly embraced greater diligence in energy management compared to 5 years ago Tight margins limit capital investments, but over time changes accumulate toward desired objectives Outlying performers make key targets to prioritize value creation through intervention 12

13 Brandywine: A Culture of Sustainable Leadership Motivation Adhere to Brandywine Environments (company commitment to create & maintain sustainable environments) Establish a culture of sustainability leadership KPIs, Metrics 20-30% cost savings in energy Minimum of 58 buildings (33% of portfolio) earn the ENERGY STAR (score 75+) Building managers comprehensively trained in Portfolio Manager Benchmarking Gather utility data and enter into Portfolio Manager (126 buildings) Rank by ENERGY STAR score, by EUI, and by $/ft 2 energy cost 13

14 Brandywine: Benchmark to Discover Outliers Facility Current ENERGY STAR Rating Current Site Energy Intensity (kbtu/sf) Cost per sf CA Building A $ ,104 VA Building A $ ,915 VA Building B $ ,215 VA Building C $ ,535 VA Building D $ ,016 PA Building A $ ,542 PA Building B $ ,683 NJ Building A $ ,312 CA Building B $ ,624 PA Building C $ ,991 PA Building D $2.18 1,218,580 Total Floor Space (sf) Benchmarking by ENERGY STAR rating, EUI, and energy cost enables managers to decide how to prioritize resources to create the most value. 14

15 Brandywine: Target Low-Hanging Fruit Before Larger Investments Application Identifies low-hanging fruit for short term, significant value creation first Performs building energy audits for lowcost/no-cost EE upgrades Targets major capital improvements to improve underperformers Observes regional differences between tenant demand for sustainability Lessons Learned Uses Portfolio Manager to identify top performers and design incentives to improve underperformers Accounts for regional differences and inexperience with newer tools Prioritizes energy savings, value creation by investment level 15

16 Focus on Data Centers and Labs: IT load is 82% of total load Before Consolidation 6 buildings (874 KSF) 2,499 employees 2,011 racks (DC and R&D) 3 data centers (7 KSF) 144 racks Restricted by space, power and cooling capacity challenges Consolidation 3 data centers to 1: 7K SF -> 5K SF Data center & R&D lab space 116K -> 75K SF Scalability and flexibility Minimized interruption and investment cost to scale Energy efficiency PUE = 1.2; LEED Gold; annual GHG emissions reduction 11.1 MM tons 16

17 Energy Use (kwh/yr) Building System Comparison Total energy use breakdown by component type for DC Building Baseline Brocade Total Baseline Energy Use: 22,088,483 kwh/ yr Total As-Built Energy Use: 8,124,439 kwh/yr UPS Electric Losses 557 Cooling System Fans Humidifiers Chillers Cooling Towers 1273 Chilled Water Pumps Condenser Water Pumps 17

18 2009 & 2011 Energy Monitoring 2009: typical power consumption breakdown for PUE 2.0 (DoE benchmark) Chillers 20% 2011: Brocade calculated power consumption breakdown for PUE 1.2 ACU 1% Misc 3% Chillers 14% ACU 20% IT Equipment 50% IT Equipment 82% Misc 10% Building Energy Consumption Facilities Monitored for kwh 6 6 Sq. Ft Monitored for kwh 874, ,331 Total kwh 67,897,747 74,052,258 Lbs. CO 2 78,776,951 67,671,391 Lbs. CO 2 / ft PUE >

19 Sustainable Value Creation (KPIs) 19

20 KPIs: Clear, Comparable, Usable & Accurate Corporate Sustainability Indicators for RE Responsible property investment (RPI) Global Reporting Initiative (GRI) Sustainable Reporting Guidelines: Economic performance indicators Environmental performance indicators Construction & Real Estate Sector Supplement (CRESS) Total Cost of Occupancy (TCO) Leased Buildings: operating expenses + capital expenses (annual) Owned Buildings: rent proxy costs + operating expenses + annualized capital expenses Analyzed vertically & horizontally against portfolio & other KPI data Normalized through currency conversion, per ft 2 or FTE Space Utilization Measure net / usable space, per BOMA interior gross area (IGA) Use AWS to improve efficiency of leased space by 20% (average) FTE/ft2 20

21 KPIs: Clear, Comparable, Usable & Accurate Energy Management Site and source energy (Portfolio Manager) Energy intensity (EUI, kbtu/ft 2 or m 2 ), energy cost (total $, $/ft 2 or m 2 ), energy per occupant (kbtu/fte) GHG Emissions Scope 1, 2, 3 converted to CO 2 e CO 2 e/ ft2 or m2, CO 2 e/fte, etc. Water Potable use, cooling, irrigation Gal/ft 2 Waste Waste and recycling rates Lbs/ft 2 and lbs/fte Indoor Air Quality (IAQ) Temperature, humidity, air movement, CO x, dust, mold, PM 2.5, NO x EPA s NAAQS regulate safe concentrations for 6 criteria pollutants ppm, ppb, µg/m 3 ; averaged over consistent timeframes 21

22 Common Barriers to Benchmarking Sustainable Real Estate Performance Barriers Uncertainty About KPIs to Measure Difficulty of Portfolio-wide Data Collection & Management Solutions and Responses Refer to leading benchmarking sources (ENERGY STAR, BOMA, REALpac, etc.) Consider KPIs chosen by leaders and peers Prioritize KPIs that are consistent with mandated disclosure as well as voluntary corporate sustainability reporting requirements Assign responsibility for collecting and compiling data (staff, service providers, consultants) Invest in software that simplifies the task Start with readily available data and expand to other data sets later Lack of Robust 3rdparty Data Sets, Scarcity of Reference Benchmarks Begin with available benchmarks: ENERGY STAR, ERC, NABERS, etc. Support data transparency by releasing data to benchmarking surveys and using ENERGY STAR Portfolio Manager Encourage peers to participate in surveys and ENERGY STAR 22

23 Benchmarking Decision Framework 23

24 Benchmarking Decision Framework 1. Determine Scope of Benchmarking Initiative 6. Benchmark, Evaluate and Set Targets 7. Improve Performance 2. Establish Management Framework 5. Normalize and Analyze Data 8. Evaluate Results 3. Select KPIs 4. Perform Data Collection and Quality Assurance 24

25 Benchmarking Decision Framework Step 1: Determine Scope of Benchmarking Initiative Pursue a graduated approach Decide on thresholds for which assets to prioritize Consider possible synergies in data collection Step 2: Establish Management Framework Secure executive commitment Assign champions and team Allocate adequate resources Ensure consistent companywide approach Step 3: Select Key Performance Indicators Determine RE KPIs based on corporate sustainability KPIs Assess KPIs necessary to meet stakeholder needs Determine boundaries for portfolio; different for owners, users Select relevant absolute and intensity indicators 25

26 Benchmarking Decision Framework Denominators for Normalization of KPIs Denominators Floor area (ft 2, m 2 ) People (FTE and visitors) Revenue Products (units, tons sold) Source: SR Inc research For KPIs that measure Impact or consumption that is a function of physical size (e.g. cost, energy use, and total water use) Impact of consumption that is a function of the number of people (e.g. potable water use) Impact or consumption that is a function of many different activities (e.g. GHG emissions) Impact or consumption that is a function of products (e.g. material use and waste) Step 4: Perform Data Collection and Quality Assurance Decide on data collection process Deploy data collection & analysis software Implement data quality assurance protocol Step 5: Normalize and Analyze Data Normalize data to establish Normal Annual Consumption for like-for-like comparability Follow industry consensus on normalization factors Perform data analysis 26

27 Benchmarking Decision Framework Step 6: Benchmark, Evaluate & Set Targets Use available services & data sets to benchmark portfolio Benchmark assets in the portfolio to identify average, best, and worst performers Quantify performance changes of portfolio and assets over time Set portfolio-wide and assetlevel targets Step 8: Evaluate Results Track emerging trends and revise KPIs Pursue continuous improvement in benchmarking methodology Leverage KPI data to track personnel & contractor performance Communicate results internally Report progress to public via sustainability reports & surveys Step 7: Improve Performance Conduct energy, water, other audits on select assets Implement low- and no-cost sustainability measures first 27

28 Overview of Benchmarking Tools ENERGY STAR Portfolio Manager Global Real Estate Sustainability Benchmark (GRESB) Source: archpapaer.com Source: gresb.com/benchmark Most leading companies use Portfolio Manager as the basic building block for benchmarking programs for US assets Based on data from EPA s CBECS survey By submitting to GRESB s survey, companies can benchmark assets against entire dataset of peer respondents Currently counts 340 RE funds with about 21,000 worldwide assets 28

29 Overview of Benchmarking Tools REALpac Energy Benchmarking Report (2010) BOMA 360 Performance Program Source: First annual report analyzes data from 261 office buildings (101 million gsf) across Canada Breaks down trends by location, climate, and five use types Benchmarks buildings against peers using BOMA Experience Exchange Report (financial data) & Portfolio Manager data Exceptional performance in 6 key areas earns BOMA 360 recognition 29

30 Overview of Benchmarking Tools Green Buildings Alive: Building Datalyzer SR Inc Benchmarks on Energy Source: Data for hundreds of Investa-owned buildings across Australia Indicators include energy intensity, emissions, electricity intensity, occupancy, and HVAC complaints Source: SR Inc Research with data from EPA Target Finder Representative benchmarks in 32 key cities from SR Inc s Benchmarking Real Estate Portfolio Sustainability (July 2011) All climate zones broken down by office and retail use and by size 30

31 Q&A: Discussion 31