Development Magazine Spring 2011

Development - Ownership

Delayed Decisions Can Still LEED to Gold

Financial partner Kennedy Associates provided Hamilton Partners with fresh insights on the value of building a sustainable project. Photos courtesy of Alan Blakely, Blakely Photography.

When Hamilton Partners set out to build 222 Main in Salt Lake City they had no intention of making the 459,000-square-foot high-rise office tower a LEED-certified design. Hamilton Partners wanted the building to qualify for LEED by installing the needed green compo­nents, but the cost of certification was prohibitive, until a financial partner convinced them otherwise.

Exploration of a 22-story office tower in downtown Salt Lake City began in 1999. As one of the nation’s fastest growing metropol­itan areas, Salt Lake City was at the center of attention. Just four years earlier the city had defeated three international cities in a bid to host the 2002 Olympic Winter Games. For Hamilton Partners, Salt Lake City represented an untapped market.

Against a backdrop of rising Olympic venues, commercial development was widespread. A new 775-room, five-star hotel was underway. A 17-mile stretch of the city’s main thoroughfare (Interstate 15) was being widened. And a 24-story high-rise had just been completed for American Stores Company. Yet excitement dampened as the dot.com crash sent office vacancy rates soaring into the double-digits. Adding to a growing economic storm was the takeover of American Stores by food giant Albertson’s, which abandoned its plans to move into its newly completed Salt Lake tower, flooding the local market with more than 600,000 square feet of empty office space. Finally, the September 11, 2001, terrorist attacks halted investment as the country plunged into recession. Hamilton Partners decided 222 Main would have to wait.

Here Comes the Sun

By 2007 construction design on 222 Main was completed and site work had already begun. Still, Hamilton Partners remained determined to avoid the expense involved in pursuing LEED certification, not uncommon in a state known more for its abundance of coal-fired power plants than green buildings. That is, until Hamilton Partners brought in a new financial partner, Kennedy Associates, which convinced them to go green. The decision paid off. Not only has the building reaped greater energy savings, but the desig­nation attracted more tenants.

Kennedy Associates considers environ­mental and social ramifications as well as fiduciary responsibilities in managing real estate investments. According to Mark Reinikka, senior vice president responsible for Kennedy’s investment management of 222 Main, “Environmental sustainability and energy efficiency are key components of our investment approval process. Buildings that operate efficiently and maximize the comfort and health of the occupants possess a significant competitive advantage. We were confident that it was a prudent decision to pursue LEED certification for 222 Main.”

In 2010, Goldman Sachs an­nounced it would occupy seven floors of 222 Main (155,000 square feet or about 35 percent of the building), raising the building’s occupancy to nearly 60 percent. Previous to the Goldman Sachs announcement, 222 Main was only 20 percent leased. The decision by Goldman to expand and relocate to 222 Main was in large part due to the building’s LEED Gold certifica­tion, according to David Lang, man­aging director and head of Goldman Sachs’ Salt Lake City office.

“Consistent with the firm’s environ­mental policy, we have a prefer­ence to be in buildings that are designed, built and operated in an environmentally conscious man­ner,” said Lang. “LEED certifica­tion is one criteria, among others, that goes into our decision making process with respect to site selec­tion.”

A decade ago Salt Lake City had few LEED certified buildings. While Utah still has a relatively small number of LEED buildings, the state has made progress. According to the U.S. Green Building Council, Utah currently ranks No. 29 in the nation in the number of LEED cer­tified and registered projects. While 222 Main is the only office tower in downtown Salt Lake City that is LEED Gold certified, there are an additional six LEED Gold projects in the surrounding Salt Lake area and 12 in all of Utah.

the lobby of 222 Main

Variable air volume boxes and frequency drives were added to the ventilation system, modulating speed and ensuring that the fan motors didn’t run at full capacity when demand for ventilation fell.

Hindsight Is 20/20

The delayed decision by Hamilton Partners to go for LEED com­plicated the building process, commented Heath Blount, sustain­ability advisor with Brightworks, a Portland, Oregon-based consulting firm hired by Hamilton Partners to assist in achieving LEED Gold. Ide­ally, a LEED consulting firm would be hired very early in the process, sometimes even in the early master planning phases. Had Brightworks been hired sooner, 222 Main could have achieved higher levels of LEED certification more easily. “There’s a diminishing rate of return based on how far along the design is to where we are brought in,” Blount said. “There’s a unique challenge coming in on the middle of a project and changing its course toward certain requirements that previously weren’t there.”

In addition to the overall LEED process costing more money and requiring extensive documentation, one particularly challenging area was predicting the building’s aver­age annual electricity consumption, a LEED requirement. To meet the condition, Brightworks hired an additional firm to develop a theo­retical energy model. The building was able to exceed the 15 percent energy savings threshold, according to Don Billings, co-owner of Salt Lake-based Synergy and Associates and a consultant on 222 Main.

Other changes included improv­ing the building’s interior ventila­tion system by adding variable air volume boxes, which control the amount of outside air that is mixed and brought into spaces. Also, vari­able frequency drives were added to fan motors, modulating speed and ensuring that the motors didn’t run at full capacity when demand for ventilation fell.

Another important component added to the building was an enhanced electrical monitoring program, measuring the building’s actual electricity usage every 15 minutes. By tracking daily energy patterns, operators can reduce surplus energy use.

Yet some LEED points were unat­tainable. For instance, the building was not able to achieve points for recycling its construction waste because an untracked amount of waste had been hauled away.

One area that caused the team headaches was the building’s roof deck, which was topped with gravel and did not meet reflectivity requirements. The heat island ef­fect point was pursued for months, but in the end was not economi­cal to obtain. “The only way we could get that point is if we were to take all the rock off and put white stone pavers across the entire roof,” remarked asset manager Ken Shields. “The problem with that was we would have had to increase the amount of steel in the roof to support the additional weight of the pavers.”

Aside from the demands of LEED, the construction site of 222 Main was surrounded by streets and left very little room for operations. The site had no open space for a stag­ing area. Materials were placed and built the day they were delivered.

Going For Gold

Even before Hamilton Partners made the decision to go for LEED, the building had several green advantages. In particular, 222 Main was built on a previously developed site, reducing urban sprawl. The building fronted a light rail com­muter line, providing convenient public transportation. Initially, Hamilton Partners focused on a LEED Silver certification, but there came a point in which LEED Gold certification appeared within reach. In the end, the building reached Gold by just one point. The last point came from enhanced com­missioning, a third-party review of the building’s mechanical systems which certified they were installed and operating properly. Hamilton Partners’ believes that 222 Main’s certification could increase the value of the building by lowering its capitalization rate by 50 basis points.

Besides its LEED Gold designa­tion, the office tower is designed to stand out as two slender towers placed front to back. A three-story glass veil at the roofline adds a unique nighttime lighting effect to the city’s skyline. The building’s high-performance floor-to-ceiling glass offers a more transparent feel, allowing outside light to pen­etrate deeper into the floor plate. The interior’s lobby and elevators are lined with an inviting Spanish granite, and the floors are made of travertine marble. A large fireplace and 360-degree mantel enhances the lobby’s attractiveness. “The marketplace says we don’t consider it to be a true Class A facility today unless it is LEED,” noted Steven Sobel, associate director of Skid­more, Owings and Merrill, architec­tural firm for 222 Main.

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