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  • 1. NRDC Center for Market Innovation: High Performance TENANT Demonstration ProjectAPRIL 2013Case Study: Tenant Energy Performance Optimization Li & Fung USA, Empire State BuildingPrincipal Author: Lauren Zullo Contributing Authors: Wendy Fok and Greg Hale

2. About NRDC The Natural Resources Defense Council (NRDC) is an international nonprofit environmental organization with more than 1.3 million members and online activists. Since 1970, our lawyers, scientists, and other environmental specialists have worked to protect the world's natural resources, public health, and the environment. NRDC has offices in New York City, Washington, D.C., Los Angeles, San Francisco, Chicago, Livingston, and Beijing. Visit us at www.nrdc.org and follow us on Twitter @NRDC. About NRDC's Center for Market Innovation The core mission of the Center for Market Innovation (CMI) is to expand the impact of NRDC by creating market conditions that will redirect capital flows toward sustainable uses. We believe that engaging mainstream capital is a critical component in achieving our common goals. We do so by engaging with the business community to articulate and implement sustainable value propositions, with a current focus on energy efficiency, water management, and regenerative agriculture. A collaborative approach between building owners and occupants is essential to optimizing the performance of commercial office buildings, and tenant demand will be a critical factor in driving the market toward optimizing commercial building performance. CMI has established a High Performance Tenant Demonstration Project (the Project) aimed at accelerating demand for high performance tenant spaces in the commercial office market by demonstrating their economic benefits. The Project aims to promote the compounding effect of owner/tenant collaboration, as tenants who value high performance spaces choose to locate or remain in buildings with highly efficient central systems and transparent energy management practices. As a result, building owners investing in central system energy efficiency improvements will not only garner operating savings, but will also gain competitive advantage in attracting and retaining these high value tenants. Visit us at www.marketinnovation.org and follow us on Twitter @NRDC_CMI. ACKNOWLEDGEMENTS The authors wish to acknowledge and thank the following people for providing information, analysis, and assistance in executing this project: Belinda Fung with Li & Fung Limited; Rick Darling, Adrian Chiu, Merton Owens, Laura Rainier, and Nathaniel Hochman with LFUSA; Tamela Johnson, Sean McDonagh, John Fitzgerald, and Christopher Cummings with Gardiner & Theobald; Dana Schneider and Andrew Bush with Jones Lang LaSalle; Anthony E. Malkin with Malkin Holdings; John Weale with Integral Group; Henny van Lambalgen and Andrea Burnham with Quest Energy Group; Clay Nesler and Paul Rode with Johnson Controls Inc.; Adam Slakman with Greenprint Foundation; Kyung-Ah Park and Kevin Smith with Goldman Sachs; Megan Casey with Lighting Works; David Ford with AMA PC; Mitch Palais with Benchmark Builders, Inc; Rebecca Shore with CodeGreen; Radhika Khosla, Jay Orfield, Yerina Mugica, Marian Weber, and Peter Malik with NRDCs Center for Market Innovation. The authors would also like to thank the following individuals for providing peer review of this case study: Arah Schuur with U.S. Department of Energy; Craig Graeber, Janice Barnes, and Joan Blumenfeld with Perkins + Will; Ariella Cohen and Scott Kessler with NYSERDA; Meg Waltner and Starla Yeh with NRDC. CMI has engaged several industry leaders as technical advisors for the Project, including Goldman Sachs, Johnson Controls, Jones Lang LaSalle, Malkin Holdings, SKANSKA, and ULI/Greenprint. This work is made possible by the generous support of Goldman Sachs and the Rockefeller Foundation.NRDC Director of Communications: Ed Chen NRDC Deputy Director of Communications: Lisa Goffredi NRDC Policy Publications Director: Alex Kennaugh NRDC Publications Editor: Carlita Salazar Design and Production: tanja@bospoint.com COVER PHOTO: Timothy Schenck 2013 Natural Resources Defense Council 3. EXECUTIVE SUMMARYLi & Fung USA (LFUSA), a global consumer goods company, has committed to design and construct a high performance tenant space in the Empire State Building to reduce energy demand, increase efficiency, and improve indoor environmental quality. The tenant project is the first in a series of case studies by the Natural Resources Defense Councils (NRDC) Center for Market Innovation (CMI) aimed at demonstrating the energy and cost savings impact of high performance tenant design.The first phase of LFUSAs high performance build-out encompassed three floors and is projected to yield a 28 percent annual electricity savings compared with an American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE) 90.1-2007 code-compliant design (minimum energy performance required by law), resulting in nearly $38,000 in annual electricity cost savings for these three floors. Over the 15-year lease term, the performance measures are projected to return $566,495 in energy savings ($392,000 present value using a 5 percent discount rate).1 The incremental implementation cost of the energy performance measures (EPM) package is $134,000 ($0.98/ft2) over a code-compliant design budget, including energy modeling soft costs and net New York State Energy Research and Development Authority (NYSERDA) incentives, resulting in a simple payback period of 3.5 years. The net present value of the projected full lease term energy savings, after recouping the tenants up-front incremental cost, is $258,000, constituting a 192 percent return on the tenants initial investment in the energy performance package and a 27 percent internal rate of return. If the suggested package of performance measures is implemented on the remaining six floors that LFUSA has yet to build out under its lease, the company can capture 31 percent in energy savings on those floors, yielding a combined savings across all floors of $1.8 million over the 15-year lease term. The package of energy performance measures for the three floors of Phase 1 is projected to reduce electricity consumption by nearly 3.3 million kilowatt-hours (kWh) over the lease term, which will avoid approximately 1,660 metric tons of carbon dioxide (CO2) emissions,2 roughly equal to taking 346 cars off of the road for one year.3|Overview of Package of Energy Performance Measures Energy Performance Measures (EPMs) are technologies and systems that aim to reduce energy use through efficiency and conservation. Working closely with the building owner and CMI, LFUSA evaluated an integrated, multi-component package of EPMs, which were then incorporated into the space design to achieve substantial, cost-effective energy savings, and corresponding carbon emissions reductions (see table 1). The project team determined six target EPMs to include in the initial stage of analysis including lighting, mechanical, and plug load measures. Table 1: Overview of Proposed Energy Performance Measures (EPMs) I. Daylight Harvesting Lighting Controls: Utilize luminaires with built-in photosensors and controls to dim lights when ambient daylighting lights the space. II. High-Efficiency Lighting: Utilize high-efficiency luminaires and install occupancy sensors. III. Optimized HVAC Units: Right-sized, high-efficiency, variable air volume (VAV) units. IV. Demand Control Ventilation (CO2 Sensors): Use CO2 sensors to control outdoor air damper. V. Low-Velocity Air Handlers: Reduce the fan power requirement through use of lower face velocity air handlers (larger footprint or additional unit). VI. Plug Load Management: Circuit plug loads to a single master shutoff switch that is turned off outside of business hours.PAGE 1 Center for Market Innovation: High Performance Tenant Demonstration Project I Li & Fung USA Tenant Energy Performance Optimization 4. Figure 1: Project Information and Projected Performance Building InformationBuilding InformationTenant NameLi & Fung USA (LFUSA)Building OwnerMalkin Holdings LLCLocation350 5 Avenue, Midtown Manhattan thBuilding Size2.7 million sq. ft. (102 Floors)Principal UseClass A Office with Street-Level RetailConstruction TypePre- WWII SkyscraperU.S. EPA ENERGY STAR Rating90USGBC LEED Certification GoldEnergy Retrofit Completion Date2011LFUSA Lease Term15 Years Phase 1 Build-Out (3 Floors)Square Footage137,400 sq. ft.Phase 1 Build-Out (3 Floors)Modeled Energy Reduction28%Total Electricity Savings over Lease Term Incremental Implementation Cost (without incentives) State Incentives (net of review and filing costs) Energy Modeling Soft Cost3.3 GWh $164,370 $36,940 $6,600Adjusted Incremental Implementation Cost$134,030 ($0.98/ft2)Total Electricity Cost Savings over Lease Term$566,495Present Value of Electricity Cost Savings over Lease Term (5% discount rate)a$392,002Net Present Value of Project Investment$257,972Return on Investment (ROI) over Lease Term Internal Rate of Return192% 27%Payback Period3.5 years Projected Total Build-Out (9 Floors)Projected Total Build-Out (9 Floors)Square Footage Modeled Energy Reduction Total Electricity Savings over Lease Term$511,110State Incentives (net of review and filing costs)$124,876Energy Modeling Soft Cost Adjusted Incremental Implementation Cost$19,800 $406,034 ($0.99/ft2)Total Electricity Cost Savings over Lease Term$1,813,733Present Value of Electricity Cost Savings over Lease Term (5% discount rate)b$1,255,062Net Present Value of Project Investment Return on Investment (ROI) over Lease Term Payback Periodb31% 10,519,320 kWhIncremental Implementation Cost (without incentives)Internal Rate of Returna412,200 sq. ft.$849,028 209% 29% 3.4 yearsAssuming zero escalation in electricity prices over the lease term and a 5 percent administrative fee per the terms of tenant's lease. Ibid.|PAGE