© B. Alan Whitson 1 It’s the Money! Corporate Realty, Design & Management Institute 319 SW Washington, Suite 602 Portland, OR 97204 503-274-7162

© B. Alan Whitson1

It’s the Money!Corporate Realty, Design & Management Institute

319 SW Washington, Suite 602Portland, OR 97204503-274-7162www.squarefootage.net

B. Alan Whitson, [email protected]

© B. Alan Whitson2

A Little Bit About You?

• Affiliation

AIA, ASID, CABA, IIDA, ASHRAE, BOMA, IFMA, NAESCO, USGBC

• Organization

A&D,

ME&P,

Building Automation - Mfg.,

ESCO,

Corp. End User,

Govt. End User,

Regulatory Body,

Utility

© B. Alan Whitson3

What’s Your Payback Period?

14%15%17%18%20%22%25%29%33%40%50%

67%

100%

200%

847872666054484236302418126

Payback Period in Months

Return on Investment (ROI)

per payback period in months

Annual ReturnInvestmentROI =

© B. Alan Whitson4

Goal: ROI Greater than Cost of Capital

5.07%

18.36%

9.19%

Average Cost of Capital

7,278 Companies 101 Industries

Source: NYU Stern July 2002

MarketAverage

© B. Alan Whitson5

Which Earned More Money?

$0 $75,000 $150,000 $225,000 $300,000

US Treasury 5 yr.

Wilshire 5000

S&P 500

Energy Savings

1/97 to 12/01 1/97 to 12/02

$100,000 Invested 1/’97 - Amounts shown exclude return of initial investment

© B. Alan Whitson6

Income & Expense 2001 - 1985

2001 2000 1995 1990 1985

Total Income $24.03 $22.72 $19.33 $17.26 $14.73

Cleaning 1.20 1.17 1.20 1.15 1.05

Repairs & Maintenance 1.45 1.37 1.55 1.38 1.21

Utilities 2.00 1.86 1.87 1.84 1.85

Roads, Grounds & Security .71 .68 .61 .50 .38

Administrative 1.28 1.18 1.12 .90 .68

Fixed Expenses 3.20 3.14 2.98 2.84 2.17

Total Expenses $9.84 $9.40 $9.33 $8.61 $7.34

Net Operating Income $14.19 $13.32 $10.00 $8.65 $7.39

BOMA Experience Exchange Report, All Buildings

© B. Alan Whitson7

Commercial Electricity Prices

0

1

2

3

4

5

6

7

8

1960 1965 1970 1975 1980 1985 1990 1995 2000

Ce

nts

pe

r k

WH

Source: EIA -DOE -9/02

© B. Alan Whitson8

Downtown & Suburban Office BuildingsBOMA Experience Exchange Report 2002 Agency Managed Corporate Facility

Downtown Suburban Downtown Suburban

Total Income $24.02 $21.23 $20.50 $21.13

Cleaning 1.30 1.03 1.61 1.09

Repairs & Maintenance 1.59 1.29 2.02 1.54

Utilities 2.04 1.87 2.46 2.13

Roads & Grounds .11 .31 .18 .32

Security .58 .37 .91 .82

Administrative 1.12 1.18 .91 .65

Fixed Expenses 3.36 2.57 2.95 2.23

Total Expenses $10.10 $8.62 $11.04 $8.78

Net Operating Income $13.92 $12.61 $9.46 $12.35

Avg. Connected Load - W/SqFt 5.26 5.92 4.49 5.09

Operating Hours per Week 88.67 71.51 124.71 94.99

Energy Intensity - kWh/SqFt/Yr. 24.25 22.00 29.13 25.13

© B. Alan Whitson9

Electricity Usage

0% 5% 10% 15% 20% 25% 30%

Misc.

Refrigration & Cooking

Water

Exterior Light

Office Equipment

Ventilation

Heating

Cooling

Interior Light

© B. Alan Whitson10

What’s a Watt Worth?

Electricity Reduction - Lighting 1,637,402 kWh

1W SF x 355,000 SF x 88.7 Hrs Week x 52 Weeks

Less Lights = Less Heat to be Removed 101Tons

355,000W x 3.412 Btu / 12,000 Btu per Ton

Electricity Reduction - Cooling 372,682 kWh

101 Tons x 0.8 kW/ton x 4,612.4 Hours

Total Electricity Reduction - Lighting & Cooling 2,010,084 kWh

Reduction in Annual CO2 Emissions 1,608.1 Tons

2,010,084 kWh x 1.6 lbs CO2 per kWh


Global CO2 Emissions

0

5

10

15

20

25

30

1849 1874 1899 1924 1949 1974 1999

Source: ORNL - CO2 Emissions from Fossil Fuels - Billion Tons


75% of CO2 Emissions from 17 Nations

22.3

2.5

10.910.1

1.2

10.610.0

15.9

8.19.3

4.3

8.36.7

20.1

8.6 9.0

5.3

53%

75%

USAChina

RussiaJapan

IndiaGermany

UK Canada

ItalyS. Korea

MexicoUkraine

FranceAustralia

S. Africa

PolandIran

CO2 Tons Per Capita Cumulative CO2 Emissions %

Source: ORNL - 1999 CO2 Emissions from Fossil Fuels - Global Per Capita CO2 Emissions 4.45 tons -214 nations


What’s a Watt Worth?

Electricity Reduction - Lighting 1,637,402 kWh

1W SF x 355,000 SF x 88.7 Hrs Week x 52 Weeks

Less Lights = Less Heat to be Removed 101Tons

355,000W x 3.412 Btu / 12,000 Btu per Ton

Electricity Reduction - Cooling 372,682 kWh

101 Tons x 0.8 kW/ton x 4,612.4 Hours

Total Electricity Reduction - Lighting & Cooling 2,010,084 kWh

Reduction in Annual CO2 Emissions 1,608.1 Tons

2,010,084 kWh x 1.6 lbs CO2 per kWh

Savings in Annual Operating Costs $273,371 - $0.77 sf

2,010,084 kWh @ $0.136/kWh

Reduction in HVAC Equipment Costs $252,500 - $0.71 sf

101 Tons X $2,500/Ton

14

Operating Costs & Value


Building Value - Income CapitalizationPer Square Foot

Total Income $24.03 Total Expenses + Leasing -9.84 Net Operating Income $14.19 Capitalization Rate 7.50% Building Value $189.20

Income and Expense All BuildingsBOMA Experience Exchange Report - 2002


Building Value vs. Operating Costs

$189.20

$709.20

Initial Building Value Operating Costs - 40 Years

CPI @ 2.8%


Building Value vs. Operating Costs

$189.20$225.99

Initial Building Value Operating Costs - 40 Years

US Treasury 5.75%Present Value


Reducing Operating Costs Effect ValuePer Square Foot Before

Total Income $24.03 Total Expenses + Leasing -9.84 Net Operating Income $14.19 Capitalization Rate 7.50% Building Value $189.20

Income and Expense All BuildingsBOMA Experience Exchange Report 2002


Reducing Operating Costs Effect ValuePer Square Foot Before After

Total Income $24.03 $24.03 Total Expenses + Leasing -9.84 -9.34 Net Operating Income $14.19 $14.69 Capitalization Rate 7.50% 7.50% Building Value $189.20 $195.87

Income and Expense All BuildingsBOMA Experience Exchange Report 2002


Saving Energy Pays

• Invest $1.25/sq. ft. in an Efficient Lighting Upgrade

• Saves $0.50/sq. ft. in Energy Costs per Year

Payback - 2.5 Years

ROI - 40%• Creates $6.67/sq. ft. in

Building Value

ROI - 533.6%

$1.25

$6.67

Investment Building ValueCreated


Who Gets the Energy Savings...

$1.95 $1.60

$0.15

Before Upgrade After Upgrade

• Total Savings $0.50/Sq. Ft.

Tenant Saves $0.15/Sq. Ft.

Landlord Saves $0.35/Sq. Ft.• Building Value Increases

$0.35 Net Energy Savings

÷ 7.5% Cap Rate

$4.67 Increased Value• Bottom Line - $1,657,850

355,000 SF 19-Story Building


Economic Benefit of Green

Wilshire 5000 Composite CompanyShares Outstanding 18,510,000

Share Price $10.01

Earnings per Share (EPS) $0.32

Price Earnings Ratio (PE)* 31.28

Headquarters BuildingProject Costs ($1.25 SF X 355,000 SF) $443,750

Energy Savings ($0.50 SF X 355,000 SF) $177,500

Economic Benefits to ShareholdersIncrease in Company Value ($177,500 X 31.28) $5,552,200

Increase in Stock Price per Share $0.30

1/31/2002


It’s Hard to Make a Dollar

$15.00$18.12

$30.86

$25.32

1999 2000 2001 2002

Revenue needed to generate $1 in profit

Source: Fortune, Business Week


Show Me the Money!

Building Automation:• Control Building Load

Reduce average connected load one watt per square foot

• Control Operating Hours

12 Hours per Day M-F 6 Hours Sat.66 Hours per Week


Baseline BOMA Experience Exchange Report 2002– Downtown Buildings

Agency Managed449 Bldgs.

Corporate Facility88 Bldgs.

Avg. Building Size 322,761 SF 356,181 SF

Avg. Connected Load - Watts/SF 5.26 4.49

Avg. Operating Hours per Week 88.67 124.71

Energy Density - kWh/SF/Yr. 24.25 29.13

Annual Energy Cost - Building $626,155.49 $1.94 $829,901.86 $2.33


Reduce LoadBOMA Experience Exchange Report 2002– Downtown Buildings








Reduce Load 1 Watts/SF $507,099.71 $1.57 $645,117.41 $1.81


Reduce Operating Hours BOMA Experience Exchange Report 2002– Downtown Buildings









Reduce Op. Hrs. to 66 Hrs./Wk. $466,068.15 $1.44 $439,207.14 $1.23


Reduce Load & Operating Hours BOMA Experience Exchange Report 2002– Downtown Buildings









Reduce Op. Hrs. to 66 Hrs./Wk. $466,068.15 $1.44 $439,207.14 $1.23

Reduce Load & Op. Hrs. $377,451.01 $1.17 $341,414.07 $0.96

Savings $248,704.49 $0.77 $488,487.79 $1.37



Trees Needed to Offset CO2 Emissions

377,535

500,382

227,581205,853

Avg. Agency Managed Avg. Corporate Facility

Baseline After Reducing Load & Operating Hours

Loblolly Pine - CO2 uptake 34 lbs./yr. - 600 trees per acre


Increased Building Value

$185.60

$190.52$192.21

$195.87

$175

$180

$185

$190

$195

$200

Baseline Reduce Load Reduce Hrs. Reduce Load & Hrs.

Agency Managed Downtown Office Buildings

$ P

er

Sq

. Ft.

$1,587,410 $2,134,498 $3,316,060


Increased Stock Value

$10.01

$10.32

$10.67

$10.84

$9.40

$9.60

$9.80

$10.00

$10.20

$10.40

$10.60

$10.80

$11.00

Baseline Reduce Load Reduce Hrs. Reduce Load & Hrs.

Corporate Facilities - Downtown

$ P

er

Sh

are

$15,279,898$12,220,931$5,780,058


It’s the Money!Corporate Realty, Design & Management Institute

319 SW Washington, Suite 602Portland, OR 97204503-274-7162www.squarefootage.net

B. Alan Whitson, [email protected]

Documents

© B. Alan Whitson 1 It’s the Money! Corporate Realty, Design & Management Institute 319 SW Washington, Suite 602 Portland, OR 97204 503-274-7162