Tools and Practices for Implementing Green Leasing Webinar (text version)

Misaligned incentives between building owners and tenants are a prominent barrier to increasing energy efficiency in commercial buildings. Green leasing (or energy-efficient leasing) is a non-technical solution that allows property owners and occupants to share energy efficiency costs and benefits. Showcasing green leasing is a market solution to improve building energy efficiency; this webinar was targeted to a broad audience, from building owners and tenant organizations to lawyers and building raters. A new green leasing library website is introduced, offering a one-stop shop for green leasing resources, developed in coordination with BOMA, the Rocky Mountain Institute, the Natural Resources Defense Council, the U.S. Department of Energy, NYU, GSA, and the Institute for Market Transformation.

Below is the text version of "Tools and Practices for Implementing Green Leasing," originally presented on March 26, 2012. In addition to this text version of the audio, you can view the presentation slides and a recording of the webinar (WMV 82 MB).

Andres Potes:
You're all in mute mode right now, but I want to welcome you to the Green Leasing webinar, hosted by the Department of Energy. You're all on mute, and we're gonna keep it that way for now. And for you to ask questions, what we're gonna do is you're gonna have to ask them through the little questions box at the bottom of your screen. All right?

First, thank you for joining. This is a great — we've seen some really good participation from — and interest in green leasing. My name is Andres Potes and I work for Navigant and I support the Department of Energy Buildings Technologies Program, Commercial Building Energy Alliances.

On the phone with us today we have Kristen Taddoniofrom the Department of Energy, Adam Sledd from the Institute of Marketing Transformation, Steve Teitelbaum from Washington Metropolitan Transit Authority, and Jim Nobil and Alexandra Kosmides from the U.S. GSA.

All right. So let me go to the next slide here, our agendas for today is that Kristen is going to give a little overview the CBEA, of Commercial Building Energy Alliances. I'll go through and give a little brief introduction to some speakers, and then Adam Sledd from Market Transformation is going to present on the green leasing slide. We already have given the introduction to green leasing.

Steve is going to give more of a view of what green leasing, the mechanics of green leasing and what some of the resources are on the website. And then Jim and Alexandra are going to conclude with a presentation on what GSA is doing with green leasing; how they're implementing green leasing practices into their leasing.

And then, finally, the last 20 minutes are going to be devoted to questions. And the questions, again, are going to work — please feel free to type in the questions as the presentations are being given, and then we'll be able to see the questions, we'll write them down, and then I will ask them and divide them up for our panelists to discuss.

All right. So without further ado, let's start. Here is Kristen Taddonio to give little brief introduction on the alliances and the market transformation.

Kristen Taddonio:
All right. Thank you everybody so much for being on the call today. We know that this is a very popular issue and we have a panel of what I would like to believe are the best experts out there currently with regards to green leasing. This project came out of the commercial real estate energy alliance, which is one of the commercial building energy alliances. They are building owners and operators get to collaborate with U.S. Department of Energy and national labs on key areas to try to come up with strategies to overcome barriers to energy efficiency.

This particular project came out of our market transformation project team, in front of several project teams across the building sectors. And some examples of other activities that go on with the market transformation team are strategies for green leasing, financing, training and best practices for stakeholder partners.

So if anybody here is interested afterwards in joining us in getting involved, I'd encourage you to contact me at Kristen.Taddonio@ee.doe.gov. So with that, let's turn it over to the introduction of the panel.

Andres Potes:
Great. And let's start off with Adam from the Institute of Market Transformation. Adam was a starting partner at Sledd Properties, and he brings a decade of commercial real estate management experience to IMT. Prior to joining IMT was a consultant at Market Associate Reading Corporation, and has worked there in developing and provost for the U.S. Department of Security development, as well as governments of Ghana and Haiti.

He's also worked extensively in film and publishing, and he received in media studies from Pittsburgh College, and is currently working on his MBA at American University. Our speaker is going to be Steve Teitelbaum from the Washington Metropolitan Area Transit Authority. Mr. Teitelbaum works for the private sector to monetize Lambda's real estate assets and enhance buyership to develop sale release.

But before joining Lambda, Mr. Teitelbaum spent three decades practicing commercial real estate law at large firms in Washington D.C. and New York and New York City. Mr. Teitelbaum earned most of his undergraduate and law degrees from Columbia and he's also the author of the BOMA Green Lease Guide, and a frequent lecturer on commercial real estate topics.

From the GSA, we have James Nobil Jr. and Alexandra Kosmides. Jim is a senior real estate with GSA Center for lease policy and the National Office of Leasing. Jim's position at GSA is establishing leasing policies and implementations of laws and regulations as they pertain GSA's leasing program. Jim had 25+ years of private sector commercial real estate experience, and he's held senior level positions in real estate acquisition, a position in multi-family development, asset management with several national firms. Jim holds a senior certified agent specialist from the International Council of Shopping Centers.

Alexandra serves as a sustainability representative in the National Office of Leasing, interpreting, coordinating and implementing various family initiatives for the public building service in GSA. She's developed systems and procedures and guidance for internal and external measures in GSA.

She has over 20 years of private sector real estate experience related to conducting market research and site selection process. She earned her undergraduate from the University of Delaware and her graduate degree from John Hopkins in city planning. Alexandra is an active member of the Urban Land Institute, D.C. building, Industry Association and the U.S. GBC and national buildings.

All right. So let's start off with our first presentation of the day. I'm going to un-mute Adam here, and I'm mute myself. Adam, can you hear me?

Adam Sledd:
Yeah. Thanks Andres. I'd like to thank Andres and Kristen for having me on the webinar, and thanks everybody who's attending this webinar today. So you can see on the left there, this great group that the Department of Energy has put together to collaborate on the Green Lease library.

So if you haven't already seen it, this is what the homepage of the Green Lease Library dot-com's website looks like. I'm gonna just go through a brief introduction to the site, the concept of Green Leasing, and some of the benefits and challenges here. And then, like they said, Steve Teitelbaum will give you some more in-depth view of it.

As green leasing has advanced as a concept, a lot of different groups and individuals have put together some great guidance documents of one form or another. There's a lot of wonderful, helpful resources out there, some of which Steve will cover more in-depth later in this webinar. But the downside is these resources are spread out across the Internet.

And unless you're gonna devote a lot of time to researching it, or you know exactly what you're looking for, it's hard to really find the comprehensive group. You may come across the BOMA lease or one of the California, but not really get the whole picture. And some of these resources are aimed at tenants, some are aimed at landlords, some are for lawyers.

And I know I wind up spending a lot of time — my time, jus trying to help people find different resources. We put together a little table on IMT website, but I think this is a big improvement. So thankfully for us, the folks here at DOE decided to put together this website as one of their market transformation projects. The big image there is the screenshot of the interior page just with some of other images around it of the kind of resources you can find.

IMT is excited to be part of the great group helping with this project, and I think just getting all these resources in one place will have a positive impact. And so if anyone was worried, putting everything together one site would take away traffic from some of the other groups, like the San Francisco Group or the NRDC page. These are all — they're links. So the idea is to help drive — you know, be a central place to drive traffic out to these resources, whether that's a book or a PDF or a webpage.

The goal is to help people not just find one thing, but also to be able to get the whole picture, you know, the Washington State Lease and the federal guidelines and the BOMA lease, the articles written for the American Bar Association. So by collecting these all in one place, hopefully it will just make it easier for people to look at it, start thinking about standards, and overcome some of the obstacles that we face in trying to make green leasing become more standard practice.

All right. So what is green leasing? Steve Teitelbaum will explain this much more in-depth right after me, so I'm just gonna try and run though the basics. There is a lot of working definitions out there, but this is the one we tend to use at IMT. There are certainly situations where a tenant or landlord can do sustainability improvements without incorporating them into the lease document.

But since the lease is really where you're putting in writing all the costs and benefits associated with this tenant/landlord agreement, then that's where we think you should include some of this stuff. To a certain extent, our definition is really just about the energy and the cost and benefits of how energy is used over the term of the lease.

[Audio cuts out 00:10:54 to 00:11:23]

One is — green leasing is just a way to fix a big barrier for energy efficiency improvements, so the retro fits. The split incentive gets mentioned regularly as one of the main barriers here. And I'll get into the split incentive a little bit. But that's really the big reason. Second, we've got more corporations than ever are reporting their GAG emissions and putting out CSR goals and sustainability goals.

And what I find is a lot of these companies are doing great things in all areas of their business, but the facilities are maybe lagging behind. And so greening the lease is one way to help the facilities area catch up with some of the other sustainability goals that the corporation might have. And then third, newer potential regulations, whether those are federal or local, in D.C. and New York and some other places, we have a lot of sustainability regulations being put in place.

And while you may not have to capture every single of them in the lease, as we go forward and people get used to this, I think the lease form will change a little bit to reflect these regulations.

So the next slide. There we go. So the next slide is — Steve is going much more in-depth on LEED, but it's worth noting just that right now, today, there's a difference necessarily between a LEED building and an energy efficient building. And I think LEED 2012 will change that to a certain extent, and obviously the EB: O&M is really all about efficiency.

But I have to explain pretty frequently that a green lease does not just mean leased space in a LEED building. And that you can get into a LEED building that isn't going to be the most energy efficient building. So I'm looking forward to LEED 2012, but as we wait for that, we're just trying to help people keep in mind that the two things are not mutually exclusive.

So we get to some of the obstacles and the challenges to green leasing. The four major stakeholder groups that we deal with are landlords, tenants, lawyers and brokers. And what we find is — it's an education issue that you're gonna have some members in each of these groups that know sustainability issues and energy issues really well, and some of them don't.

And wherever there is a gap, that gap is why things don't get done or move forward. And what we'll find is the sustainability director at a company understands some green leasing concepts and the landlord understands the green leasing concept, but say the tenant's rep doesn't get it and the tenant's lawyer doesn't get it.

So could have a landlord who has a formed green lease, they give it the tenant and the tenant's lawyer pulls out two-thirds of the green lease clause, basically what you're left with is a bike rack. So that's — education and getting everybody educated is really the top barrier. And I think this website will hopefully go a long way towards fixing that.

The second thing is really the changed management issue. And that's sort of what I mean down the bottom with negotiating key points is even when people do know about these clauses, it's bringing something new into the lease. And lease language, while there's all kinds of different lease language out there, it tends to be slow to change. So we can just — a lot of our work is just focused on the education aspect, and then the changed management aspect.

One thing we would hope would help with the changed management issue is getting some good economic analysis. NRDC is doing great work on this in New York. Rocky Mountain institute is doing good work on this all across the country. But this is just the slide we like to use at IMT.

And it shows different studies, different datasets; they're all controlled for location and other factors and they all reach the same conclusion, which is basically if you got an energy efficient building, it's worth more. You're gonna get a better rental rate, you're gonna have lower occupancy — not lower occupancy, lower vacancy…sorry; and you'll get a better sales price.

I've got another slide that's not in this presentation, but that is for the D.C. metro area that had really helped us come up with that shows the same thing just for D.C. But we're seeing it over and over again. So there's definitely some value to having energy efficient buildings, and we think that green leasing is a way to help unlock that value.

Okay, so then we get to the types of leases. You've got the full service gross, which is sort of the simplest version. It's just the base rent, and everything is included in the base rent. You have the modified gross, which tends to be — it's similar to gross, but all of the operating expenses are sort of put in different buckets. And anything that comes in over whatever they were the first year of that lease, the tenant pays for.

And then the net lease or triple net lease, basically, the tenant is paying their base rent, but then most everything else, other costs, also pass through to them except for certain capital costs. But I like this slide as a visual way to look at the sort of different lease types. And they're all still — even within these three categories, you're still getting all kinds of variations. But those are the three main types of leases that you're going to see.

So this is a great visual slide that I borrowed from NRDC on the split incentive. I think it's just a quick way to reference it, which is basically, if you're the building owner — say you own a strip shopping center or multi-tenant office, there's a disconnect between who pays for energy efficiency improvements, and who gets the benefit.

So if I'm a landlord in a triple net multi-tenant office building and I want to get Energy Star certification, I go in and do a lighting upgrade and an HVAC upgrade. And it seems great and it should be reducing our energy use, but my lease calls those capital expenses, then I don't have any way to get money back from the tenants for those improvements.

And since it's triple net and I'm passing all the energy costs through to the tenants, then they're the ones that are saving money, and, basically, I'm just amortizing these improvements and not getting really anything back. So that's the split incentive. You want the party that's paying for the energy efficiency improvement to benefit from the energy efficiency improvement, and that's what we're trying to fix with green leasing.

So, thankfully, there are a lot of smart people out there working on solutions to this. And one of the best solutions, I think, came out of New York last year, that's the plan NYC revenue clause, to develop in conjunction with the New York City's mayor's office. And I'm not gonna go too into depth because you can find — but there's some great resources on Green Lease Library dot-com that explains this better than I can in two minutes.

But it's basically — what it does is it help the landlord do energy efficiency improvements by performing the upgrade and then passing the cost through to the tenants based on the projected savings. So it's great for the owners because it means they recoup their costs faster, and it's great for tenants because it means they get a better building and they still get to save money, you know, during and after the upgrades are paid back.

And by using — it uses this sort of 20 percent buffer to protect the tenants in case the project doesn't quite perform as expected. To me, it works best with sub meters or a separately metered basis, but I generally think everything works better with sub metered or separately metered spaces.

So if we can, that was just one clause, if I can take a step back in the leasing process and say, ideally, you're starting with the letter of intent. We can go through all the different lease clauses, but, ideally, you're starting with your RFP, or your letter of intent, and you're starting by trying to figure out what both sides of the sustainability goals are.

So if you have a company that's decided it will only go into an Energy Star building or you have to be able to build your space out to LEED CI, you need to know that early on to get the most benefit out of this process. If you go all the way through the process and you get to negotiating the final lease points and then go, "Oh yeah, we need your building to be Energy Star-rated," then suddenly you've reopened negotiations and it's gonna cause more issues.

So the earlier you can start bringing this up, the better. And, again, there's a bunch of resources on the website that cover how to do this from an RFP. There's a great U.S. BPC guide, there's a great Portland guide, a great California guide. So that's most of what I wanted to cover. Here at IMT, you know, we assist partners in doing projects like this.

We provide a lot of technical assistance in D.C. through the DCSEU, and then we just try and educate stakeholders with webinars like this. So thanks again for having me on, and I'm excited to be a part of this group and part of this project.

Andres Potes:
Great. Thanks Adam. That was a great introduction into our resource and into what IMT is doing on green leasing and green leasing in general. So now I'm going to turn it over to Steve. Steve, you're on?

Steve Teitelbaum:
I'm here.

Andres Potes:
Okay. Great.

Steve Teitelbaum:
Thanks very much. It's a pleasure to be here today. And Adam has given us a good introduction to some of what we are going to be talking about. We start with 2008, which I call the birth of the green lease year because my co-star named it that, and that was the year that we had two of the national leaders in green leasing come out.

One was actually Canadian, which is the national green building standard introduced here, and the other was BOMA Green Lease Guide, which I authored in 2008, and then we re-authored it in 2011. And the thing I want you to focus on here, and we'll talk about it more as we go on, is that these were heavily revised and superceded that it is an evolving field and very little stays the same as we go forward in this field.

So Adam talked about what a green lease is, and as he said, it's definitely not a standard lease in a green building. That has no green attribute besides the building happens to be green; it doesn't mean the building will be operated green or that other tenants will be building out their premises green. So that's not what we're talking about. It can be a lease that addresses sustainability in a non-green building.

Adam mentioned that's how LEED EB:O&M led to buildings and maintenance got started, the idea taking a non-green building and improving its operations to make it more sustainable even if it does not achieve certification; it gets better. And the third option, of course, is the most option; it's a lease that addresses sustainability in a green a wannabe green building.

And to address the wannabe green aspect, there is a significant difference between a registered building that is registered with the USCBC, which administers lead, and a building that is certified. The building cannot be certified until it's delivered. So if you're looking at a new building or a building to be built and it's got a big banner on it that tells you that it being certified, that's a lie. Okay.

Be very careful with words like that. There's a lot of brainwashing, as its known the field. A building that's to be built or is under construction can only be green-registered. And actually only about 30 some percent of building that are registered with the USCBC go on to become certified. It doesn't mean they're not green.

Many buildings can be registered and be built green and just choose to not get certified, but be leery of the advertising and the marketing. The key that I ought to mention is that a green lease addressing a building in a forward-looking manner. It looks ahead, whereas most of the green leasing requirements that LEED has, in the past, has traditionally looked back. They've looked at design standards, design construction matters, and so they are sort of retroactive or retrospective in their approach.

And that applies to the so-called LEED NC, LEED for New Construction, the LEED CS, LEED for Core & Shell, which is for multi-tenant buildings — base bundling work, and the LEED CI, which is LEED for Construction Interiors, which is the tenant interior build out in a LEED C&S building, or it actually can be in a non-LEED certified building.

You can still build out a tenant space in a building to a LEED standard, which the LEED CI standard even if the building itself is not green. So just keep those different factors of LEED in mind as we go forward. The key, as Adam mentioned, is not so much leadership and energy and environmental design, it's leadership and energy and environmental performance.

And the great thing here is, as Adam mentioned, the LEED standards are moving more and more to a performance-oriented grading system. And the new LEED 2012, which the comment period closed on — last week, and will presumably be voted upon by the members this summer, and announce a green build this fall, will actually have more and more emphasis on energy efficiency and operating efficiency than its predecessors did.

And the fact that each of its predecessors built on their predecessors to get more efficient, so we're merely moving all the way up. There is a question that can be addressed as to how important LEED will even be in green leasing going forward, as states and municipalities start adopting green standards of their own. The question is will LEED even be necessary.

So in California, if you have CALGreen and all the buildings are built to the CalGreen standard, or in Maryland, they're adopting the international green construction code, and all buildings will be built for that code. If the building is already by definition is green because state law requires that it be green, the question then is do you actually also need a LEED certification on top of it.

Is that just marketing, or does LEED do something in addition to what the state standards do? LEED is intended to be a market leader. It is intended to move up the food chain. Only the top buildings were originally supposed to be LEED certified. It was not supposed to be a universal standard. So there may be some value to LEED even after state laws start adopting more and more green standards, but there may not be depending on what the green standard is.

Now, the one that Adam mentioned that is the critical one is LEED for Existing Buildings:Operations&Maintenance. This is the one standard that clearly addresses operations. It is the fastest growing LEED certification, whether that's because there hasn't been too much new construction. So all the others don't qualify or don't generate that much interest right now, or whether it's because the existing building stock so overwhelms the size of any new building stock, that this is the critical way to go.

But you see that you have to be an existing building, it has to be occupied, in service, to quality for this particular LEED certification. And there is, by the way, in talking about LEED — I don't want to confuse LEED with green or green standards. One of them is the Green Globe standard; the United Kingdom has the green standard; Australia had Neighbors and a different standard.

There are different standards around the world. Green Globe does have a presence in the United States, and it has a rough equivalent to the LEED EB: O&M standard and its own standards for continual improvement of existing building. BOMA also has a standard to get buildings improving in their operational aspects. The key to all of this is aside from the technical requirements; we're trying to move with green leasing, and all these standards, to modifying traditional behavior. Okay.

And that's the important aspect of all this. We're trying to do better. It doesn't necessarily mean that we're going to be saving the whales or anything else. It's not a political statement. There are plenty of people who do not believe in climate change or that mankind is contributing to climate change, but, nevertheless, believes in this because what happens is the budding operates better. The building does better.

The building is less expensive to run, the building is healthier to occupy, and as Adam mentioned, it may have higher rent rates, lower vacancy and a higher sales price. The bottom line, literally, is the bottom line. It does not take a political statement to adopt any of these things. Adam also mentioned that LEED is not necessarily, inherently, energy efficient, although, as I said, they're trying to get there.

For people who are focused mostly on energy efficiency, there is a free standard that is Energy Star. It's the same standard, the folks who rate your refrigerators and your washing machines and all the other appliances. They also rate buildings, and it's administered by the Department of Energy and the Environmental Protection Agency. It's free. You can do it online.

You just have to assemble all necessary data, which you need somebody qualified to do that, plug it into the tool, and you will get yourself rate. Every building can be rated. The fact that a building claims to be Energy Star rated is not material; the question is what's its rating? If you just answer you data, you will be rated. But if you get a rating of one, that's horrible.

If you get a rating of 100, that's fantastic. 75 and above is Energy Star labeled, by definition, that's the top 25 percent, and that is the direction that LEED is moving in finally, actually requiring a lower Energy Star score in the past that it presumably will be going forward. So this is an interesting tool that is provided to us. The drawback of Energy Star is that it requires the building have been in operation.

It has to have an operating history, just like LEED EB: O&M requires in a sense. And it also takes into account how the building is used, not just how it's designed. But it does not distinguish between the building's design and the way the building is used. So if you have a building that's well designed, but is abused by its management company or by tenants who run 24/7, the Energy Star score will suffer even though the building, itself, is terrific.

And, conversely, good tenant practices can take even a poorly designed infrastructure and make it operate better. So to address these issues, the Department of Energy is thinking about coming out with a new standard that would really compliment Energy Star by filling in these gaps, working around it, and could apply to new buildings as well as existing buildings, while also differentiating between the base building system and the operating criteria that the building uses.

Let me talk a bit about some of the materials you'll find on the wonderful library that Adam has been talking about. And until now, you really had to hunt around the Web and find things at random. This is a great new tool. But a few words of advice as to what you will find, somebody with a point of view produces most of the things that are out there in LEED's marketplace.

The point of view may be that of a trade association or an entrepreneur or of a nonprofit association, but they all come to this with a different mentality in mind. And most of them, because landlords are the one who use leases, most of them come with a pro-landlord mentality. There are some exceptions, as you'll see on the slide, and we'll talk about that as we move forward through the program as well.

The clause that Adam mentioned is one of the newer ones, the — I call it the "revenue clause". It really only addresses with incentive issue, that is who pays for the cost of capital improvements that make a building operate better. It is not, generally, a green lease. The rest of the lease is untouched by this. And it does impose certain costs on the tenant, on the theory that these costs are for the tenant's benefit, and therefore they should be paying.

However, I take a somewhat cynical view of the clause that it is landlord-generated by the real estate board of New York. You'll notice that the tenant pays capital expenses based on projected savings, not actual savings, that the person making the projection is an independent expert engaged by the landlord. And so you can see that the clause has some issues in it that a tenant might not like very much.

So there are ways to amend the clause and to deal with it, but, nevertheless, just be aware of its point of view. The clause builds on a great study done by an NRDC taskforce, in which I served a few years ago that tried to address this split incentive issue. I have come to the conclusion over the years, as we have moved away from what the Bob Peck of GSA calls "green bling".

Which is the idea that the way to green buildings is to glom improvements onto them, add physical things, add infrastructure, add mechanical systems. As we moved away from that after realigning you can green a building in an intrinsic way just from operations, the importance of adding all this bling or all these capital items diminishes some.

So it's entirely possible that the importance of the split incentive issue will diminish over time, particularly as more and more buildings and more and more contractors and designer and other professionals learn how to do green and the costs come down. So we're hoping that we move to a world of split incentives may still exist, but not be that important.

It sort of reminds me of the old TV show Home Improvement starring Tim Allen, where he played the character of Tim the Tool-man Taylor, and his solution to every problem was to just add horsepower to it. In a sense — well, obviously here we're trying to reduce horsepower in a way, in a sense, it's the same idea. There's a mechanical solution to every problem and it's expensive.

Well, that's not necessarily the case. If you remember the show at all, every time he did something, it blew up in his face, literally, so maybe the same is true here. So let's move on and talk about some of the other products that are out there. I skipped over the NRDC's great product. The Lease Energy Efficiency Guidance, is what lead to the revenue clause, is a great report that provides a lot of really good background information on the problem and some really nice solutions without presenting green lease language.

One of the interesting things that the revenue clause did not do is it did not adopt the suggestion from the NRDC product to create greater transparency and information sharing between landlords and tenants. The revenue clause is basically the landlord hands the tenant a report from the landlord's engineer that says that energy will be saved in the following amounts, costs will be saved, you pay this. There is no transparency. There is no real information sharing.

And, as I said, there is no requirement that there be actual savings at all. So the NRDC report was a little bit different than the product that the Real Estate Board of New York has come up with. I had mentioned earlier, the Canadian Real Pack Lease; I realize it's Canadian, and I'm probably talking to all or almost all Americans, but the Canadian product is very similar in both its lease and it's green language to what we do here in the United States, and it's really an excellent product.

It's also free, so I encourage you to go online and download it. It was the first actual lease, really, to promulgate a full green lease provision in it. It put it in the rider, which my personal view, which Adam sort of alluded to earlier, is that if you put all the green lease clauses in a rider, that is not best practices because it does tend to get crossed out in its entirety by the other side, which may or may not understand what you're trying to do.

So there is a risk. Of course it's easier to find the green provisions if they're in a rider, it's also easier to delete them. One of the great things about the Real Pack document is when it first came out in the spring of 2008, it was expressly aspirational. A lot of collaborate language in it, a lot of consulting, a lot of "we'll discuss", a lot of things like that, and it expressly made it not a default for a party to violate the Real Pack release rider.

That's a fairly unusual provision in a lease, Canadian or American. Usually if you don't abide by it, it is a default. Interestingly, when the Real Pack form came back out in 2009, almost a month or so after it was first issued, it had essentially abandoned that approach. The collaborative and consultative language was replaced by traditional, hardnosed lease language, that one side shall, the other side shall not. Once side will do this, you will not do that.

And it also now added an option where you could make it a traditional clause where violation of the green lease rider was a default, or you could stick with the approach that it was not a default. So you can see the evaluation of the field, so to speak, right there in that one document, which I still think is an excellent document, and I'm understanding that's now a couple of years old.

Next is the BOMO form, which is the one that I wrote in 2008, and it was reissued in 2011 with a new name. It's really the first American full span green lease, unlike the Real Pack form. It integrates the green language directly into the text. And it's a different approach, we thought it was a better approach, simply because it's less likely if the text is integrated directly into the lease document, that people will, one, notice it and object, or, two, object on the grounds that it's not consistent.

The idea was to put the language in a way that it was entirely consistent and seemed to be entirely organic, one with the rest of the documents. And I think that's really a good way to go. Of course, it's harder, therefore, to integrate the BOMO green lease language into whatever lease form you like to use, but it's not all that hard. Two reasons why. One, in the BOMA green lease, itself, the green language will literally appear in green ink; it's in a green font, so you can find it really easily, and you can pull it out and you can tweak it.

Second, I've noticed a lot of articles and periodicals about green, and then provide sample green language and, often times, I really impressed, and then I realize that it came verbatim from the BOMA green leases. So, obviously, it's not all that hard to pull out and plug into your own documents.

The other great advantage of the BOMA document, over most if its peer group, is that in the margins of each page, it includes extensive, explanatory text and commentary, is this a good idea, what does this mean, what is leaving out, is this too one-sided, so the tenant can use it as well, as the landlord. And it's a good way to not only just list language, but to understand what the language means, which is a critical issue.

Also, the USCBC, of course, jumped in and has its own guide, which is also an excellent product. This is one of those that tends to be more pro-tenant. It's fairly general. The lease language, itself, is at the back, but the book, itself, is really a good way to provide an introduction to greening a building in a way that assures you that it can be done in a natural manner without a lot of angst.

It also has really good questionnaires, request for proposal language, and a scorecard you can use to compare buildings. So it's really useful for the earlier stages of the process. Adam referred to the problem in getting brokers to adopt green leasing techniques in their own leasing practices; this book is one that I say to people, I onto understand why if I was a broker, I would not be buying this book in mass and giving it out to my prospective tenant clients.

This is a great product for the brokerage community, as well as the tenant community. The California Sustainability Alliance was early in the day in coming out with green lease language and green requests for proposals. This one is free, unlike the USGBC product. You can get it online. So if you want to get a great green request for proposal or due diligence scorecard for free, you can go online and get this one. The lease provision database in it, in my opinion, is pretty rudimentary; it's pretty aspirational, and not very effective.

But the rest of it, I think is really excellent. And, in fact, it's linked to by a couple of other lease resources. One is the Green Tenant Toolkit, which is from the San Francisco mayor's taskforce on existing green buildings, and they link back and forth as to their provisions, and it's also a very interesting approach that they take. There's also a — not to confuse you between Green Leases' toolkit, the Green Tenant toolkit is also a green lease, singular, toolkit.

The Green Lease toolkit is actually from London in England. It's also excellent. It's amazing how the Canadian and the English experience, which is usually earlier in the pipe — farther down the pipeline than the American, is very illustrative to us of where we've been and where we're going. So I encourage you to even look at the UK version. You'll see a tremendous number of similarities between what they do in the UK, and what we're doing here.

So that's the Green Lease toolkit, singular; here's the Green Leases' toolkit, and there's also the Green Tenant toolkit, all very worthwhile. And last is the Model Green Lease that is literally its name, best marketed probably of any of the products. It does use — or it talks a lot about the gross lease concept is a way to get away from the split incentives. It's really not a true gross lease; it's a modified gross lease, whereas Adam explained, the base year's expenses are folded into the base rent, and only increases above that are paid by the tenant.

Once you modify the green lease, without that, it's not all that different than many net leases, in a sense. So I'm not sure that there's a lot advantage. Also I have to advise you, as the little bullet point here says, "Potential has the effect on gross leases. The Financial Accounting Standards Board has been threatening, the last two years — or three years, to adopt accounting standards that will make a lot less attractive for tenants to have gross leases than net leases."

And so before you say a gross lease is the solution to my green problems, think about what that will mean for your accounting standards if you're a public company. Be very careful before doing that. As you can see from this and from the Green Lease Library, itself, there is no one universal truth; we're still evolving, we're still growing, we're still learning new things.

I just encourage you to think about operations, not just design and construction, even though design and construction is probably much sexier. And I encourage you to customize your approach, not just list language and concepts, but to think about what you're trying to do. The one thing I have no mentioned is the federal government. The Federal Government does not have regulations, really, that apply to private sector buildings in this sense.

It's not potentially achievable these days. So they have just, essentially, allowed the state and municipalities to accept their own standards in this regard. However, as we're now going to hear, the general service administration, itself, has been very aggressive in using its power as a tenant in the marketplace, to require sustainable buildings, and they've done a great job of it.

Many states and municipalities have piggybacked or come up with similar concepts that they will only lease in green buildings, or they will only buy green buildings for their own use, and they are trying to move the market, and they do some wonderful things. So with that, I'll turn it back over so that we can hear from our friends from GSA.

Andres Potes:
Thank you Steve — a very good presentation. I'd like to remind before I turn it over to Jim and Alexandra, that we will be posting these slides and a recording of the webinar onto Green Lease Library dot-com, and also onto the Department of Energy website for the Commercial Building Energy Alliances. So all the materials will be available, just navigate to http://www.greenleaselibary.com, or to the Department of Energy sector. All right. So now I'm gonna un-mute Jim. Jim, can you hear me?

Alexandra Kosmides:
Actually, Jim and Alexandra and myself are — we're sharing a computer and a headset just for technical reasons. So I'm gonna start off with some explanations, and then pass it on to Jim. Hello, everybody; I'm Alexandra Kosmides from GSA's office of leasing, and my colleague, Jim Nobil, and I, wanted to provide an explanation and hopefully a better understanding of some of GSA's green leasing initiatives.

Okay, what we wanted to do is just touch on some of the federal laws and executive orders and policies related to sustainability, talk about some of the reporting requirements we're charged with, talk about the green clauses in our standard lease documents, touch on what's known as our green purchasing plan, and then explain our energy start requirement in greater depth.

So if you go to this next slide, it shows a timeline and list of some of the major federal laws and policies and executive orders that have been issued that relate to sustainability over the past decade. The primary ones that our office has been focused on recently, the law and the executive order, the key ones are EISA, the Energy Independence and Security Act from 2007, and then this more recent executive order, 13514 from 2009.

If you go to the next slide, it illustrates the guiding principles that are threaded throughout many of these laws and executive orders and policies. And these guiding principles are basically cheap themes that relate to how buildings are planned and designed and constructed and operated. And this diagram here shows that they very closely align with the major LEED rating categories. They address things like energy efficiency, water and conservation, indoor environmental quality, etcetera.

So what our office does is we take these laws and executive orders and guiding principles and translate them into specific lease language and specific leasing requirements. If you move onto the next slide, it shows the two green measures that out office is tracking. Our success — GSA's success and progress related to complying with these laws and executive orders is measured on a quarterly basis.

The key measure that we're bound by is this one on the left. It's this external measure that we report to OMB, the Office of Management and Budget, as well as the white house, the Council of Environmental Quality. And what we need to do is show our compliance with these guiding principles. There are two different ways that we can do this in a lease setting.

We can either sign leases in third party-rated space, such as LEED or Green Globes, or ensure that a certain mix of green clauses are always included in a lease procurement. And each year, these targets increase and we track these, for instance, in FY12, ten percent of our lease statuses have to meet these guiding principles. The second measure on the right is an internal measure and it tracks how well we're securing Energy Star labeled space with the leases that we procure.

If you move onto the next slide, Adam, it shows here — it illustrates a timeline — a timeframe if you will of when the green clauses were introduced into our document. And if you look back, you can see that the bulk of these were issued over a decade ago back in September of 2000, you can see that many green clauses took effect. What our office does and has done over the past decade is update and refine and incorporate new language, new green language into those documents.

The next slide shows that in our documents, we incorporate several dozen green clauses within them. Just recently, the SFO document, the Solicitation for Offer that many of you might be familiar with; it has recently been replaced with new lease models. We basically transformed a one-size-fits-all lease document into multiple models that are unique for different lease situations. Each has different requirements and levels of complexity.

You can see here the four key ones that we deal with and that we've written that SFO into. It's a standard, a streamlined, a succeeding, and a simplified lease. And within each of those, there's a different mix of green lease clauses that are required and associated with each. Pretty soon, we'll be posting these within the library. It identifies the clauses in great detail.

The next slide shows one of these models. This, for example, is our standard lease model. And what it does is it breaks it down into the different components of within the lease. The construction components, the shell components, the tenant improvements, the utilities, and all of the specific green clauses that is associated with each of those different components.

So each model, those four key models I mentioned, each have a different mix of shell, TI, and utility clauses that are associated with each. If you move onto this next slide, I wanted to show here how our office has made changes to our lease document, and this pyramid shows what we've done recently and what we'll be doing in the near future and in the midterm.

The top part of the pyramid shows what has happened within the last six months. We've shifted some optional green clauses to become mandatory. We've reduced our prologue requirement. We've incorporated the water sense spec within our lease clauses. And in the future, we'll be evaluating other things; the interior design finishes, our lighting specs. We're taking a careful look at what the new ASHRAE 189, the ASHRAE 90-2010, is going to mean to our leases, as well as the new LEED 2012 requirements.

And each time we do this, each time we incorporate new lease language, we do so in a context of being careful about the kind of impact it's gonna have on our rents, the effect it's gonna have on competition, how available some of these green products are, and pretty importantly, the effect on how long it's gonna take to put together a lease.

So stay tuned for some of that new green language, and this new green clauses, as I said, will take effect soon. I want to now turn this over to Jim Nobil, who will discuss our GTP and Energy Start requirements.

Jim Nobil:
Thank you Alexandra, and thank Steve and Adam, as well. Let me see if I can't take this and wrap this up fairly so here. But the green lease purchasing is a overall internal concept — internal requirement that GSA has, that we have imposed upon ourselves and on our vendor, including lessors, for all of the goods and services that GSA is procuring, and also the services — good and services that our vendors — that are associated with our vendors and providing the goods and services that they're providing to us. So have, like Alexandra mentioned, 40 green clauses in our standard lease document. Some of those specifically pertain to our green purchasing plan and have been in our lease for some time. The requirement for CPG products, under the Comprehensive Procurement Guidelines issued by EPA.

We also have the requirements for bio-based and bio-preferred products, environmentally preferable products, and also EPA Energy Star water sense products. If we can go to the next slide, I'll explain just a little briefly where we're at on our Energy Star program, which we implemented back in December of 2010, so it's now been in effect for about 15 months, and we've had some experience that we've seen happen during those 15 months.

The most noteworthy is a huge increase, approximately doubling the number of Energy Star-rated office buildings nationwide since we implemented the program. It's one of our key green clauses — lease clauses, and it has a major impact on our lease award decisions and also on our rents and I'll touch on that in just a second.

There are four exceptions to our Energy Star label requirement, and that's — we don't get any Energy Star label buildings in response to one of our solicitations, or a building that is historic, the incumbent — or if the solicitation is for 10,000-square feet or less. So those are all accepted from having to have the Energy Star label, but then even then in those instances, the owners have to provide for all cost effective energy efficiency upgrades in order to receive a lease award from us.

And by that, we look at cost effective, not over the life cycle of the improvement, but we look at and analyze it; it has to be cost effective over the firm term, the guaranteed term of our lease. Let's go to the next slide and we'll talk a little bit about some of the issues that have come up during the last 15 months since we've implemented the Energy Star requirement in our leasing program.

One of the key things that arose was that the legislation, which is where the Energy Star requirement emanates from, did not count for newly built buildings or buildings that are experience significant vacancy. Those buildings ended up being excluded because of a lack of recent occupying operating history, even though in many cases, they were designed and constructed to be able to achieve the Energy Star labels.

So we in September of last year in 2011, we revised our language to address this issue, by allowing 18 months and offer — could have 18 months from our occupancy to achieve the Energy Star label, in the event that they were experiencing a vacancy of greater than 50 percent.

They also have to be able to produce some specified evidence indicating a capability of achieving — being able to achieve the Energy Star label, and, in some cases, that evidence is the fact that had a label in the past, and the only reason why they don't have a current label is because they are — because of the vacancy issues and is preventing them from having enough current operating history to get one.

The other method might be utilizing EPA's target finder tool, which is a tool that's used for new buildings that haven't been built yet to help in their design. If that indicates that they're designed to earn the Energy Star, we'll accept that as well in those situations. So they do ultimately offer — ultimately still have to get the Energy Start certification, but we're giving them — they don't have to have it by the time of final proposal revisions, which is more commonly known as dated best of final offers.

If we could go to the next slide now, Andres. I mentioned a minute ago that even when building each one of the four exceptions from having to have the Energy Star label, we still require cost effective energy efficient upgrades. These are examples of what we're commonly seeing in the way of energy efficiency upgrades on the heating, ventilation and air conditioning, it's usually the building automation systems and management control systems.

It's often like basic improvements that have very quick paybacks, so six months or less in the way of lighting improvements or modifications to the building envelope, sometimes stuff as simple as caulking. So these are what we're commonly seeing in that regard. Let's go to the last slide, and I'll talk a little bit about some of the other lingering issues that still are out there in our implementation of Energy Star, which, again, is one of the greenest of the greens of our lease clauses — the green lease clauses.

The first one is that there's still a limited supply of office buildings throughout the United States that are Energy Star rate; it's 6,100. And uncoupled with that is what Steve had mentioned, is that the — to get the Energy Star label, a building has to be in the top 25 percent of what's compared to the — it's benchmarked for that building type, and that building benchmark is the CBEST 2003 database, which is, at this point, is nine years old. So there's also going to be a challenge that some of the existing Energy Star buildings, some of these existing 6,100 are not likely to be able to maintain that Energy Star rating once that database gets updated.

Because if they're coming in at a score where they're just marginally the Energy Star, like around 75 or 76, 80 or so, they're going to have to improve their operations to be able to maintain that when that database gets updated. And my understanding is that the DOE and EPA are working on that, and that will probably be revised in another two years.

So the limited supply is affecting us. That restricts the number of Energy Star buildings we get offered for our space. That restricts the amount of competition we have. And it is having a — from our standpoint, an unfavorable effect on rents, from a lessor's standpoint, it's having a very favorable effect on rents.

[Laughter].

But the last thing I want to mention is that apart from the fact that the Energy Star is a rather complex requirement to administer, our leasing specialist continued to ask questions regularly on some of their procurements, as to how to handle some things, is there is still a lingering issue where the government is a tenant in a building, and we have high security areas in that building, where we're not revealing the equipment that's in that area or the number of people that are in that area.

This is typically found in some DOD situations. And in those instances, we're not providing the lessors or EPA with the data necessary in order for the building owner or manager to apply for Energy Star or to maintain a current Energy Star label. So while the building may be labeled — may have an Energy Star label when we move in, it is not gonna be able to keep that label if the data occupant behavior in that space is not being made available.

So we're still working on some possibilities of how to address that. One might be that — a possibility might be that agencies such as DOD provide an Energy Star rating on their own buildings using the same technique that EPA is using, but the information is kept entirely within DOD and not provided to any other government agencies.

And another possibility might be a amendment to the legislation that would revise the statutory provisions to allow exception for situations where the government, itself, is preventing — a building owner from getting Energy Star — or keeping an Energy Star. So that wraps up what I think we would like to say about GSA's green leasing program and our green lease provisions. And, Andres, I'll turn it over to you and any questions.

Andres Potes:
Great. Thank you Jim and Alexandra. That was very, very informative on what GSA is doing. We've got a number of good questions throughout the presentation, so I'm gonna un-mute all of our panelists here. Okay, everyone is un-muted. And I'll start off with a question from Pat Connelly; she's one of our chief EPA market transformation team members. She works for RREEF.

"Commercial office legions have wrongly included a clause that allows landlords to amortize the cost of capital as a part of what's passed back operating expenses. The capital outlay results in a reduction of operating expenses. This is true of modified gross leases. So is a subject of split incentive truly just an issue with growth and net leases?" Steve, why don't you take a shot at answering this question first.

Steve Teitelbaum:
Yes, it's partly my fault because it wasn't even addressed clearly enough in my presentation. In a gross lease, there is no split incentive issue. Gross lease, the tenant only pays only one kind of rent, it's base rent, whatever the operating expenses are, the landlord bears them. If the landlord makes an improvement in an effort to reduce operating expenses, the landlord is spending its own capital to reduce its own operating expenses.

There is no change to the tenant's rent and there's no pass through to the tenant. So in gross lease, there is no split incentive issued by definition. In a net lease, the answer would be yes, the modified gross lease clause that you're talking about would be the same kind of clause as you find in a net lease. So the split incentive is — in an issue with gross and net leases, assuming this clause that you identify is in the lease, the landlord does not have much of a problem at this point.

The tenant may have a problem and the clause doesn't necessarily address how you determine there were operating expense savings or who determines it, or any of that kind of thing. And there are a lot of different kinds of engineering studies and a lot of debate within circles, and some has been alluded to previously in this program, as to how you know whether or not you're actually saving money and whether your operating expenses have gone down.

But I guess that's a question for a different — that's an answer to a different question. But gross leases do not have a split incentive clause. If you've got a split incentive problem, if you've got that kind of clause in your net lease or modified gross lease, as the question asked, you do not have a split incentive problem if you're the landlord.

Andres Potes:
Great. Does anyone else want to chime in on anything there, or shall we move onto the next question?

Jim Nobil:
Yeah, Andres, I might say one thing on that. GSA does have about 450 leases where we are paying utilities, and we are taking a look at going back — I don't know if this is gonna happen in the next few months, but maybe towards the end of this year, the beginning of next year, we're looking at going back and amending those leases with our lessors to provide for a pass through of projected energy savings if they were to make capital improvements that would produce projected energy savings.

So we are taking a look at the relatively few number of leases, less than five percent, where we — and they are typically warehouses, where we are paying utilities to see about addressing the split incentive issue in those leases.

Andres Potes:
Okay. Great. Thank you Jim. If we move onto our next question. This is one from another CBEA Market Transportation team member, Mike Roth. "Are any of the panelists aware of a situation where a landlord or tenant attempted to green an existing lease midterm?"

Steve Teitelbaum:
I am not. We talk about all the time in law conferences, and everybody raised all these great hypotheticals, but I'm personally not — don't think I've ever actually seen it. I have seen buildings that are greened during a tenancy, but without changing the lease, as I think Adam mentioned at the very beginning, it's possible to operate a green building without necessarily any buy-in from the tenant.

You will be a little bit hobbled in your reporting requirements and other things. It may be a little bit more difficult if the tenant is not willing to cooperate, but I don't think I've actually seen the tenant — a landlord try to unilaterally impose green leasing requirements on a tenant. It's kind of difficult to do.

Jim Nobil:
At GSA, we voluntarily do that, in essence, whenever we have a lease expiration, and we do that we refer to as a succeeding lease, which most in the industry would refer to as just a lease renewal. But we'll use our most updated form, which will, as you saw from the slide that Alexandra presented, it will be more up-to-date and it will have more green provisions in it than the prior version would have had.

Steve Teitelbaum:
Let me feedback on that by pointing out that a lot of times, green leasing is pushed by the tenants, not by the landlords. The early adopters have largely been large corporations with corporate sustainability requirements or institutions or universities, hospitals, etcetera, and they have pushed it much more so than the landlords tend to be. So sometimes the green push comes from the tenant side, not from the landlord side.

Jim Nobil:
Right. I've seen MOUs develop from the tenant side that are lease amendments that are meant to be used during the lease, while the lease is still in effect. And the Better Buildings partnership form that you mentioned, Steve, I think they have an MOU in there that is meant to be used. And I've heard, anecdotally, of people introducing lease amendments and getting those signed mostly —

I've actually have heard it anecdotally from the landlord side, but I have yet to actually get my hands on a signed lease amendment like that. So we think it's happening a little bit. I know people are developing it and trying to get it to happen more. I think the revenue clause is something that could be adopted as a lease amendment on its own.

Kristen Taddonio:
This is Kristen Taddonio from DOE here, and that might be a nice plug-in segway. There is a contact us form at Green Lease Library dot-com, and one of our hopes is that this is going to be an opportunity for people to collect — or rather for our forum to collect case study examples. So should anybody know of any resources or have any examples that they'd like to share, please do contact us through that form. Next question…

Andres Potes:
Okay. Great. So this is somewhat of a two-part question. "Is a major impediment to spread of use of green leasing, like the New York City effort on familiarity and the need for education?" That was the first part. The second part: "The different city and states have different customary leasing practices or laws, meaning that greener energy aligned provisions must be developed and tailored separately for each major city or metro area for each state?"

Jim Nobil:
I think education is a big issue. I think that's why this website is vitally important, just in creating a central resource — my answer to the first part. The second part, there's definitely differences in different cities and states. I can tell you living in D.C. now, a typical D.C. office lease or retail lease is not at all the same as it is 100 miles away in Richmond.

So when we do these kind of outreach or do a webinar like this, you know, people in different markets have a slightly different language. They just generally refer to clauses in different ways. I don't know that it needs to be tailored separately; Steve can probably talk better about that, but there's definitely a difference.

I mean and another thing we're hearing is that in a few markets, New York, D.C., San Francisco, there's even a separation between what's considered a Class A trophy-building here, versus in a medium sized city. And I'm starting to hear, and I hope we will hear more, you know, it's not a Class A trophy building unless it's LEED or Energy Star. So that's the sort of thing, I guess, maybe starts in one market and sort of filters down.

Steve Teitelbaum:
Well, I'll follow up with that. I think the education issue is a major problem, and that's why I was pushing people in the brokerage industry to get their hands on one of the more tenant-oriented guides and get their tenants educated and get themselves educated. I think it's not as scary as many people think when they first come to it. And as I said earlier, it can actually save you money.

But as far as the different laws and different customs, most of the different laws, to the extent they even exist, and the INT own website is a fantastic resource on this, is really directed to differences in building code standards, that is how you have to build the building and whether it has any green aspects to it, whether.

For example, a building needs to be built to LEED standards or a LEED or equivalent, or whether it needs to be LEED-certified, but they generally do not go to operating methods. They do not generally impose green operating standards on anybody. So the difference in laws is not a real impediment to green leasing, here are differences that affect green buildings.

And, in fact, if you look at the GSA, they lease all over the country and they use the same green lease clauses all over the country as a great way of standardizing practices. There are a very small number of states and localities, very small, you can count them on one hand I think; that actually have any performance-based standards in place at the time.

Kristen Taddonio:
Any additional responses, or we may move onto the next question. All right. The next question is: "As part of a green lease, might the federal government by power from a landlord that has renewable energy available, can power be part of the federal lease?" And this is coming from a questioner who is concerned about renewable energy being capital intensive and is wanting to whether there are federal incentives that might exist within the new GSA standards.

Jim Nobil:
This is Jim; I'll go ahead and take that question. We absolutely encourage landlords to utilize renewable energy as a source in the buildings, but there is no preference, per say, other than them obviously being — should be able to have an easy time getting the energy star. There's not a preference, per say, in the award decision of who would get the leases as a result of that, but we absolutely encourage that.

It's important to us because, amongst other things, it would reduce our greenhouse gas emission counts that we have to provide on an annual basis. It's — we would also be looking at, favorably, any lessor that was engaging in an ESPC to reduce the energy consumption of the building. And one other thing that we haven't directly touched on because it's not in our lease, per say, but our leases — government leases are full-service leases, so we don't have a split incentive issue under most of them.

I mentioned that we have about less than 5 percent that are otherwise, but over 95 percent are full-service leases. And we are working on programs that we will be rolling out in the future to implement — to affect occupant behavior. To reduce energy consumption through occupant behavior, although most of our lessors may not see that because at the same time we're increasing our space utilization and increasing density in our space, at the same time that we're doing the other.

But the answer is yes, we definitely encourage it, we'd love to see it, but at this point in time, no preference is being given on who would win the lease awards because of it.

Adam Sledd:
Let me jump in with one word of caution. A lot of people use the word "alternative energy" and "greenhouse gas-saving energy sources". Just be careful. A lot of people who are all in favor of using those forget that nuclear is one of the great greenhouse gas-saving energy sources available. And a lot of them would go crazy if they thought that they were buying nuclear power.

So if you want to specify that in your lease, that you want green power, specify the type of power that you're looking for or not looking for. And, also, Jim raised a great point with then increasing density in GSA's space, how do you measure gains in energy efficiency when you're putting in, literally, twice as many people as you had in the space before. It's very difficult to do.

Andres Potes:
Great. Thanks. Just a couple more questions. So one here: "What causes a variance in the premiums that green leasing is driving?"

Adam Sledd:
Well, some of that — from that one slide; it's comparing a bunch of different studies. Some of that is just the market that is looking at different geographic areas. We've seen it within a — if you look at the D.C. — say if you looked at the D.C. metro area and then just the district, itself, you'd get differences. Some of it is just general market forces, some if it geographic forces.

But the main thing is whether you're looking at Energy Star numbers or LEED numbers or both, and even if — I saw you had another question here about the age factor, I've seen other studies where they've looked only at buildings of a certain age, everything comes out the same. Pretty much any different study that's out there taking in account any number of factors, it still comes out you're getting — there's some premium, whether it's Energy Star or LEED.

And it may differ wildly, depending on the market. We think — you know, if you're on the coast, it's probably more valued, if you're in a major city, it's probably more valued than it would be — you know, you're gonna get a better value in New York than you might in Columbus. That's the best explanation we're getting so far.

Jim Nobil:
This is Jim Nobil from GSA. And I would say that while I can understand what Adam is saying in generalized basis, our experience is a little bit different, actually. Some of our biggest premiums are from the smaller markets, and, again, it's because of the lack of competition.

If there's a — let me share that on our LEED requirements, the cost — the higher cost is more related to if there's any actual higher construction cost, which, in many cases, that's disappearing these days. But in our Energy Star implementation, it's occurring really because of a lack of competition. Where there are some lease wars, where the Energy Star winning building was also the cheapest offer, but that tends to be the exception, not the rule.

And the rule tends to be because of — there's only 6,100 Energy Star office buildings in the country, the exception tends to be that the Energy Star offer war has determined that the only energies they are building, and then can, therefore, push the premium a little higher. And that can occur more often in Topeka, Kansas than in Washington D.C. So from our experience — but that's just unique to the government and the way we are mandated to do our leasing.

Adam Sledd:
Well, Jim, that makes sense. I mean I think I saw like the vacancy difference in D.C., itself. There isn't much of a vacancy difference, and our best guess was most of that comes from — there's so much LEED and Energy Star space available here, so maybe that fits with what you're saying.

Jim Nobil:
It does.

Kristen Taddonio:
All right. Thank you everybody. We are approaching the end of our time. We have a lot of additional fantastic questions that we wish we had the ability to get to; unfortunately, we have to wrap things up. But we will be sure to pass along all of your questions to our panelists and try and provide annotated answers on our website, along with the posting of the slides and the presentation.

We still strive to get up very quickly within the next couple of days. With that, I would like to invite our panelist to provide any closing comments that they may have, and we will wrap up. Andres?

Andres Potes:
Yeah, let's start with Adam first, closing comments.

Adam Sledd:
I think — I'm just excited to be part of the project. I'm really glad that this website is up, and, hopefully this helps us reach more stakeholders and improve the level of education.

Andres Potes:
Great. Steve?

Steve Teitelbaum:
I think that's correct on Adam's part. If you rummage around in the Green Lease library and put together various things you've heard today, you'll realize that it's not really that fearsome a business, and it does have all sorts of benefits, even if you don't believe in saving the whales. So I encourage people to just get into it and they'll find out that it's a lot easier to do than they think.

Andres Potes:
All right. Great. Jim and Alexandra?

Jim Nobil:
Yeah, this is Jim. I'll speak for Alexandra and myself. I just wanna say that we're not finished yet, that we've got a lot more in the works to implement provisions from coming down the pike from ASHRAE 189. Some future greening of some of our interior finishes, and also implementing some of the changes that will be coming as a result of LEED 2012, and some newly proposed guiding principles that we may be adopting.

So there's a lot coming down the pike still. Stay tuned. And if anybody ever has any questions, feel free to contact either Alexandra or myself.

Kristen Taddonio:
All right. Thank you everybody very much once again.

Andres Potes:
And I remind you to visit http://www.greenleaselibrary.com. Thank you. Bye.

[End of Audio]