Big Turnabout In Green Markets

Savvy stewards of sustainable development sell dollars and sense, not the
‘tree-hugger’ label

By Nadine M. Post Engineering News Record

Waves of optimism are coursing through the veins of green building enthusiasts. Thanks to a growing track record of
success, a proliferation of government incentives and grant programs and honed marketing strategies, sustainable projects
are popping up in all shapes, sizes and building types—from schools to industrial plants to complete communities.
Institutional and investor resistance to environmentally responsible development has so eroded that the greeners of America
are predicting that in a decade or so, environmental construction will simply be a matter of course.

"It would not surprise me" if it became the norm within the next decade, says John L. Knott Jr., CEO of both Dewees
Island, a "green" island retreat near Charleston, S.C., and The Noisette Co., which is building a 3,000-acre environmentally
sensitive urban redevelopment in N. Charleston.

Green development is "absolutely" easier now than it was five or 10 years ago, says Jonathan F.P. Rose, president of
Jonathan Rose & Cos., New York City. More architects and engineers understand the field, he says. Also, there are more
good examples, more proven products and many more valuable resources to guide green developers.

Green development may eventually blend with the mainstream, but it is not there yet. There are still financial, zoning and
acceptance hassles for developers. There are states, among them Colorado, Maryland and New York, that encourage green
building. And there are places, such as Nevada, that are just beginning to awaken to the idea. And there is even debate
about what constitutes a green project.

Historically, one of the biggest obstacles has been the financial markets. "Most of our financing sources are
high-net-worth individuals," says Knott, rather than banks and traditional investors.

One problem has been the soft sell. People are trying to sell green and sustainability instead of the benefits of a
development, says Knott. Environmentally responsible projects are more durable, economical and efficient to run and they
offer healthier and more comfortable environments to the occupants and tenants, he maintains. That’s what gets an investor
or a buyer’s attention.

Jody Durst, co-president of the Durst Organization, New York City, agrees. "The issue isn’t some vague sense of social
responsibility," says Durst. "Rather it is the concrete matter of health, safety, productivity and cost efficiency."

Durst maintains that the only real obstacles to green developments are psychological. Partly there exists "a mistaken
sense" that if it’s green, it’s not relevant to good business economics. "That simply isn’t true," says Durst, adding that to
avoid the psychological blocks against sustainability, the firm, which developed Four Times Square, one of the first
speculative office towers in the U.S. considered green, avoids the use of the labels. "Instead, we just talk about the impact of
energy conservation on the tenants’ bottom line," he says.

Avoid tree-hugger labels, avoid socially responsible marketing campaigns. Sell the project on its tangible merits, the
developers say. "Banks ignore green and look at cash flow only," says Rose. "Investors want to see exactly the same return
on a [green project] as on any other investment," he says.

EXTREMES Denver mixed-use site is dense and near transit…

…Island retreat is the opposite – but both are green.

Capital costs are now generally less or about the same, say developers. But by spending about 5% more, "you can
deliver a 100-year building, rather than a 50-year building," says Knott, with a short return on investment.

Investor resistance can be overcome by the financial track records of the pioneer projects. "Present them facts," says
Knott, "not fiction." He claims that the investors in the Dewees Island project got two-and-a-half to three times the expected
profit. But some developers still see institutional impediments. "Building codes and zoning are still averse to environmentally
sound building," says Knott. "In many cases, if we demonstrate the project meets or exceeds the intent of the code,
however, a variance is not needed," he adds. For large-scale projects, a separate overlay zone can be created, which has its
own rules.

Rose agrees about zoning obstacles: "We have a zoning system that makes it much easier to build high-performance
buildings in the wrong places—in the suburbs. The older the community, the more entrenched the bureaucracy and the more
the regulation—street width, parking, density or even process rules. Ironically, mature suburbs have greater environmental
regulation, so it is becoming more difficult to do greenfield green development."

Rose, whose firm is currently managing about $200 million worth of green development, maintains that for a development
to be truly green, it must be in an environmentally responsible location—near mass transit—to reduce use of the automobile.
His ideal is a mixed-use urban infill redevelopment that can take advantage of existing infrastructure and utilities. His
example is the firm’s 27-acre Highland’s Garden Village, a more than 60%-complete redevelopment close to downtown
Denver.

But high-density infill development only works if the community is receptive. In some cities, zoning is being revised to
allow as of right, mixed-use, infill development.

Regardless of the rules, developers’ advice about the smartest way to proceed with a project remains the same. Green
development works best when the developer’s team spends more time on planning and design, and involves the community
to create a common vision. Design may take longer and cost a bit more, but permits and approvals then go by in a flash.
And the neighbors actually become a help. Speaking of the Denver project, which took two years to design, Rose says, "The
neighbors love it! They feel ownership. They help sell it."

In the end, the general public’s interest in healthier living environments, improved indoor air quality and a growing
awareness of the cost and scarcity of energy and water resources will all serve "as spurs to continue the dialogue" about
environmentally responsible construction, says Russell C. Albanese, president of Albanese Development Corp., Garden City,
N.Y. The firm is building its second green residential high-rise at Battery Park City in lower Manhattan.

"The real estate industry has always been proficient at meeting demands of the marketplace," adds Albanese, "and the
market demand for high-performance, healthier and green buildings is growing."

http://www.enr.com/new/coverstry_042902.asp