When Shorenstein Properties LLC acquired Lincoln Center, a seven-building office campus in the suburban Portland market of Tigard in 2007, the company already was in the process of implementing a plan to transform its nationwide portfolio of Class A office properties into an environmentally sustainable one. Sustainability has been a major goal of Shorenstein Properties for many years and remains a key component of the firm’s operating strategy.
Shorenstein’s goal is to promote environmental stewardship through the implementation of sustainable ecological initiatives benefitting the company’s properties, tenants and employees, as well as the broader communities in which the company operates. If this sounds like a mission statement, that’s because it is. Environmental stewardship is very important to the firm.
Shorenstein’s repositioning of Lincoln Center included upgrading common areas as well as retrofitting lighting systems for increased energy efficiency.
In fact, Shorenstein’s commitment to sustainability extends well beyond its currently more than 14-million-square-foot LEED certification program. The firm is a partner in EPA’s Energy Star program and 78 percent of the company’s portfolio has either qualified for the Energy Star label or is pending approval. Shorenstein also is a corporate partner in the U.S. Department of Energy’s Better Buildings Challenge, where it is committed to reducing energy intensity by 20 percent in properties it owns and manages by 2020. For the past several years, the company also has been a participant in the Environmental Defense Fund’s Climate Corps Initiative. And it participates actively in programs like BOMA’s 7-Point Challenge while also taking a leading role in shaping national sustainability policy through its seat on the Real Estate Roundtable’s Sustainability Policy Advisory Committee.
A central tenet in Shorenstein’s sustainability efforts, though, has been the ongoing “greening” of its portfolio, a process largely validated through benchmarking programs such as Energy Star and LEED certification. As an owner and operator of existing buildings, Shorenstein has made extensive use of the LEED Existing Buildings: Operations and Maintenance (EBOM) rating system. LEED–EBOM addresses energy and water efficiency, whole-building cleaning and maintenance issues (including chemical use), recycling programs, exterior maintenance programs and systems upgrades. The rating system helps building owners and managers measure operations and maintenance on a consistent scale, with the goal of maximizing efficiency and minimizing environmental impacts.
Shorenstein acquired Lincoln Center as part of a 17-asset, 46-building portfolio purchased in March 2007 from Equity Office Properties. The transaction netted Shorenstein about 4 million square feet of existing office space throughout the Portland market and also included downtown assets such as Umpqua Bank Plaza and the partially developed First & Main, a 16-story LEED Platinum office building, which Shorenstein completed in 2010, leased and then sold in spring 2011 for about $130 million.
Lincoln Center consists of six mid-rise office buildings, the first of which was completed in 1978 by developer Trammell Crow, and one high-rise tower. The newest building opened in 1990. Lincoln Tower, completed in 1987 and at 12 stories the largest building in the campus, also is the tallest building in Tigard, a city 10 miles southwest of Portland and a submarket in its own right, with more than 3 million square feet of commercial office space.
At the end of the fourth quarter of 2013, JLL reported Portland’s overall office vacancy rate at 11.1 percent, tied with San Francisco and New York for lowest in the country. (The vacancy rate for Portland’s northern neighbor, Seattle, stood at 12.5 percent.) While office vacancy was slightly higher in suburbs like Tigard, the trend line was down and, at 12.2 percent, vacancy had also dropped to below 2007 (pre-recession) levels. In fact, leasing activity in Portland’s suburban markets accounted for 96.4 percent of market demand last year. (See “Suburban Portland Office Demand.”)
Repositioning Lincoln Center
With fundamentals improving and tenant demand on the rise, it was important for properties like Lincoln Center to be positioned in an increasingly competitive market as offering the right amenities. Lincoln Center’s amenities include a fitness center, common area showers (currently being constructed), four breakfast/lunch cafes, two full-service restaurants, conference rooms/training facilities and on-site management provided by Shorenstein Realty Services. Increasingly, however, tenants want to see at least some elements of energy efficiency and sustainability as part of the “amenity package.”
The entire Lincoln Center campus consists of several acres located near Interstate 5, U.S. Route 26 and Oregon Route 217. It contains just over 730,000 square feet of leasable space. Occupancy at Lincoln Center, as at most properties, dipped following the recession but for the past few years has been on an upward trend. The campus vacancy rate now sits close to the 12.2 percent Portland suburban market office vacancy reported by JLL at the end of 2013. As a value-add investor, Shorenstein saw an opportunity in Lincoln Center to own and add value through managing and leasing the asset over time. But we also saw the value in creating an asset that would be sustainable beyond our typical seven- to 10-year hold period.
The seven-building Lincoln Center campus, completed between 1978 and 1990, was certified LEED Silver in late 2013.
LEED requirements clearly are consistent with the wants and needs of today’s workforce, which increasingly seeks a lifestyle of health and sustainability. LEED has become a market standard for Class A commercial office space nationally. In a market like Portland, where environmental stewardship is very important throughout the tenant base, it was just as important to demonstrate the property’s energy efficiency and overall sustainability.
Some of the highlights of the sustainability program Shorenstein implemented to obtain LEED Silver certification at Lincoln Center include the following:
- Installation of a building automation system to maximize energy savings.
- Retrofit of lighting systems throughout the buildings and parking structures for increased energy efficiency, including LED lighting. This also included the installation of photo sensor controls within office suites as well as the adjustment of exterior lighting timers.
- Installation of high-efficiency water fixtures, including low-flow fixtures in restrooms, and implementation of a new satellite-based irrigation system to reduce water consumption.
- Implementation of a pest control management plan that has greatly reduced or eliminated the use of chemicals.
- A comprehensive green cleaning program, featuring sustainable cleaning chemicals, recycled products and green cleaning equipment to reduce particulates and promote comfort.
- Diversion of construction waste from landfills to recycling facilities.
- Automated control of heating, ventilation and air conditioning and the optimization of outside air delivery.
- Recaulking and sealing of the buildings’ facades to minimize heat loss and gain.
Shorenstein also actively seeks to engage tenants by providing information and resources through its Tenant Sustainability Resource Site and through tenant outreach programs, including a “Flip the Switch” initiative that encourages tenants to save energy. It provides a traditional recycling program for glass, plastic and paper at Lincoln Center as well as an on-site electronics recycling program, through which tenants can easily recycle cell phones, batteries and small electronics. In addition, Shorenstein arranges for e-waste collection and recycling for larger electronics such as televisions and computers as needed. Lincoln Center tenants also receive a “Green Tenant Tip of the Month.”
Portfolio-wide Sustainability Initiatives
With Lincoln Center’s LEED certification and the recent certification of 1355 Market St. in San Francisco and The Reserve in Los Angeles, Shorenstein now owns more than 14 million square feet of property certified at LEED Silver level or higher through its various investment funds. The company currently owns 25 LEED-certified properties and is in the process of pursuing LEED certification for two more.
Shorenstein’s reductions in energy use, greenhouse gas emissions, water consumption and waste generation translate directly into operating cost savings, increasing leasing competitiveness and operating margins. Since 2008, for example, the company has reduced energy use intensity by 11.9 percent across its owned and managed portfolio, saving millions of dollars annually through better operating practices and smart adoption of new technologies.
Shorenstein estimates that its portfolio-wide energy efficiency initiatives have delivered the equivalent of taking 1,800 single-family homes off the grid. Its greenhouse gas emissions reduction efforts have resulted in the equivalent of taking 1,500 cars off the road. Water conservation efforts have saved the equivalent of 10 Olympic-size swimming pools so far; recycling programs have diverted the equivalent of almost 100,000 curbside trash bins from landfills.
What is particularly fulfilling about this sustainability program is that, in 2013, largely because of projects like Lincoln Center, Oregon had the seventh-highest square footage of LEED-certified commercial office space in the U.S.
For more information:
Shorenstein’s Sustainability Site for Tenants