Saving Money by Going Platinum

Kip Richardson

Ankrom Moisan Architects

March 13, 2008

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Mirabella
Portland, Oregon Senior housing based on a hospitality model

Mirabella is a $130 million, 31 story CCRC (continuing care retirement community) being developed in Portland’s South Waterfront by Pacific Retirement Services (PRS) and designed by Ankrom Moisan Architects. The project was designed collaboratively by architects and interior designers from both our senior housing and hospitality teams, so the project is relevant to the hospitality industry. The large, welcoming lobby includes a fine dining restaurant and the building includes a number of hospitality amenities, such as a pool, spa, movie theater and ground floor retail.

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Project Goals

• LEED Certification Required by City • Initial Target LEED Silver • Design Goals:
– “Fit” with surrounding buildings – Energy management – Sustainable site and building materials

The project was required by the city of Portland to achieve a minimum of LEED Certification and the design team originally targeted LEED Silver. Project goals included a detailed look at energy systems to achieve as much energy efficiency as possible.

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Economic Goals

– Minimum “hurdle”: 8 yr payback / 12% ROI – Maximize present value (PV) of tax credits and incentives – Reduce utility costs / SF over economic life of building (LEED incentivized as a long-term owner / operator)

In order for the project to pencil, PRS needed a minimum 12% ROI in 8 years. Because PRS will retain ownership of the building, they were able to look at life cycle costs for the building and particularly utility costs.

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Energy & Atmosphere
• Water source heat pumps • Solar assisted domestic hot water • Controlled lighting reduced energy cost and light pollution • Fresh air and filtration to improve air quality • Heat recovery at exhaust systems • Solar shading at balconies and cooling towers • Energy Star appliances • Occupancy sensors at parking, storage, stairs and corridors

This is a partial list of some of the LEED Strategies employed by the design team in the Energy and Atmosphere category. We felt this area had the highest potential to enhance ROI for the project.

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Innovation

– Reduced development costs through lower systems development charges – Flex car program to reduce parking density / traffic – Bicycle parking in garage for employees and residents – Transit passes to encourage employees to use public transportation – Use of “green” housekeeping / maintenance – Resident recycling program – Purchase of renewable energy / “Green” power (solar / wind)

This is a partial list of strategies employed for innovation credits, largely based around operations. Many of these are transferable to a hospitality model.

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Going for Gold
Utility Costs / GSF: Projected 2011 $ 1.35 0.90 $ 2.25 Building GSF (excl. garage): Est. Annual Utilities Savings: Est. Future Value of Savings at 3.5% Annual Inflation for 30.5 Years: Savings to PRS in Today's Dollars: Est. Present Value of Future Utility Cost Savings at 6.00% Rate of Return: Oregon Business Energy Tax Credit (BETC) Incentives - Est. PV: Energy Trust of Oregon Energy Efficiency Incentives - Est. PV: Additional Federal Incentives / Credits for Solar Hot Water Application - Est. PV: Total Estimated Savings - LEED GOLD Certification: $ 2,509,555 $ 728,000 $ 350,000 $ 250,000 $ 3,837,555 Adjusted 2011 $ 0.80 0.54 $ 1.34 Est. Savings $ 0.56 0.36 $ 0.92 455,300 $ 416,600 Energy Water / Sewage Total Utility Costs

$ 14,839,716

The project design work included an energy model to determine the potential energy savings of the design. We realized that if we increased the building’s energy efficiency to a level that would achieve LEED Gold, we would be eligible for a number of additional incentives. We also determined that at the Gold level the annual savings in utility costs would be $416,000. If you take the Future Value of those savings over 30 years it adds up to almost $15 million dollars! The present value at a 6% rate of return is more than $2,500,000. All together, we estimated we could save $3,837,555 by going for LEED Gold.

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Moving UP to Platinum
Initiative: Energy & Atmosphere: High Efficiency Heat Pumps Variable Speed Heat Pump Motors Energy Measurement & Verfication - Post Occupancy Green Power for 35% of Electricity Demand Est. Total Incremental Costs - GOLD to PLATINUM: BETC Sustainable Building Pass-through Incentive Delta (Gold to Other Incentives: LEED Registration Cost Reimbursement: Total Incentives Available: Net Savings (Cost) for LEED Platinum: $ Incremental Cost: GOLD to PLATINUM

278,000 66,000 30,000 25,000 399,000 341,000 16,340 357,340 (41,660)

$ $

BUT - 8% energy savings throughout the building for about $42,000 of costs.

Encouraged by the economics of going for Gold, we decided to see if there were any additional savings by going for Platinum, the highest LEED rating. We estimated to get to Platinum would cost an additional $400,000, mostly for higher efficiency heat pumps. At the Platinum level there were an additional $341,000 in incentives. There was also an additional 8% energy savings in the building, which translated to about $42,000 annually. Consequently, there was no additional cost to go Platinum, but there will be additional savings over the life of the building.

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Building Costs for LEED Certification

Solar Hot Water System High Efficiency Heat Pumps High Efficiency Motors in Heat Pumps One-time Costs Associated with Eco-roof on Podium Level Low-flow Toilet and Sink Fixtures (No increased costs) CO2 and Occupancy Sensors HVAC Upgrade for Fresh Air Ventilation GLUMAC / GBS, Inc. Fees for Cert / Energy Use / Commissioning Total Building Costs Associated with LEED Certification: a - $50,000 net cost after additional OR incentives.

$

$ $

302,000 a 278,000 66,000 96,000 50,000 100,000 232,000 1,124,000

The bottom line: looking at the additional costs for efficient energy systems, plus an eco-roof and additional design fees (primarily for the energy modeling), we determined the total cost of going green over a traditional building was about $1,125,000. In fact, the net cost was under $1 million because there was a rebate on the Solar Hot Water system. This means the cost of going green was less than 1% of the construction cost of the project. All of the systems we proposed were “state of the shelf,” meaning they were proven systems with performance data available.

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The Bottom Line
• Cost of Going Green - $1,125,000 • Total savings - $3,837,000 (from reduced utility costs and incentives) Net savings by Going Platinum: $2,712,000

In the end, the net savings to our client was $2,700,000. Even if you remove the Oregon state incentives, which are not available in other states, the client still saved more than $1 million dollars, primarily in energy savings. In addition, we are currently negotiating with the city to reduce our Systems Development Charges, which are currently around $500,000, because we are treating most of our water on site. This could be a substantial additional savings.

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Mirabella

Kip Richardson
Ankrom Moisan Architects

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