Almost perfect

Green building arrived in Las Vegas last May with an explosion of the first order.

Placed in 977 strategic locations on six separate floors of the Boardwalk Casino and Hotel, 170 pounds of TNT reduced the 16-story building to a pile of rubble in about 40 seconds to make way for CityCenter, the $7 billion MGM Mirage development of casinos, hotels, and high-rise condominiums that developers claim will be the largest private construction project in the history of the United States, and a silver-rated LEED development, to boot.

Even as the dust cleared from the implosion site, personnel were on hand not to clear the concrete debris, but to begin crushing it into aggregate for re-use on site. A full 90 percent of the old Boardwalk was similarly recycled, saving the time, cost, and fuel involved with hauling debris 45 miles to the nearest dump.

With 2,700 planned condo units in four of seven buildings on 77 acres, MGM is betting all of its chips that LEED certification represents the future of development—particularly high-rise residential development—on the Strip. “By the time CityCenter opens in 2009, we think all discerning customers will expect environmental responsibility,” says Cindy Ortega, MGM Mirage senior vice president of energy and environmental services. “Environmental design will be demanded in a project.”

Environmentalism demanded in Sin City? Yes, green building has made it to Vegas, baby.

And seemingly everywhere else. Just a quick spin on the Web site of the United States Green Building Council —the Washington, D.C., firm that administers LEED, or Leadership in Energy and Environmental Design—makes it clear that LEED certification of CityCenter will be one of the few things that happens in Vegas that does not stay in Vegas: LEED-associated programs touted by the council include partnerships with the U.S. Army, Honda Corp., Frito Lay, and Fortune magazine, among others.

At a time when American consumers' appetites for green products from Toyota Prius hybrids to low-VOC paint are growing vociferously, their loyalty to those companies that they perceive as green is likewise on the rise. According to the 2007 Cone Consumer Environmental Survey, conducted in March 2007 by the Boston-based brand and management consulting firm, 93 percent of Americans believe companies have a responsibility to help preserve the environment. Another 91 percent have a more positive image of a company that is environmentally responsible, and 85 percent said they would consider switching to another company's products or services if they perceived negative environmental practices.

With little exception, green mania has swept across every social and economic landscape of the national consciousness, and multifamily property development, ownership, and management has not been immune. “If you are not facing the challenge of green, it's only a matter of time until you will be,” summed up Irvine Co. Apartment Communities president Max Gardener at the 2007 Multifamily Trends conference held in conjunction with the Pacific Coast Builders Conference in San Francisco last month. “And that is going to be a short period of time.”

That's certainly the hope of green-minded developers, who see an equally brief window to reverse hundreds of years of environmental indifference that, if unmitigated, could lead to the demise of the planet. “We have this enormous challenge to survive as the human race, to sort of put it in the big picture,” says David Baker, a partner at San Francisco architecture firm David Baker and Associates and a project leader of Folsom Dore Apartments, a 98-unit affordable housing project in San Francisco that achieved a silver LEED rating this April. “So it is important to do what you can. We believe we are the first certified multifamily housing project in northern California—affordable or not—and we're shocked by that. There are a lot of people that have thought the idea out, but when push comes to shove, the work, commitment, and dollars [involved in the certification process] can prevent a building from being certified.”

And when Baker says certified, he means LEED certified. Although other options exist (see “Alternate Routes,” below), LEED nonetheless has emerged as the de facto stamp of approval for green buildings. That's due in part to the approval and entitlement process, with state and regional municipalities beginning to play a larger role in requiring LEED certification for public buildings and putting the residential projects that come across their desk on the fast track to approval. “I wondered why LEED was chosen when we started a couple years ago,” says Ortega of CityCenter. “In Nevada there are tax incentives for developers who achieve a LEED silver standard or higher. That alone is a reason why LEED would be chosen as opposed to a different standard. Having said that, I think LEED would be chosen by any project in the U.S.”

But LEED is not without its problems, particularly as applied to multifamily developers—and especially considering the fact that the national council does not have a certification standard for multifamily properties. “Green is here to stay,” Jeff Stack, managing director and principal at Irvine, Calif.-based multifamily management and development firm Sares-Regis Group, noted at Multifamily Trends. “But unlike commercial construction, there's no standard, and until there is a standard, it is going to be a problematic issue.” As a result, the multifamily set has been forced to remain content with applying for LEED's certifications intended for nonresidential, commercial buildings.

Technical experts and program developers at the LEED offices are working to change that. LEED for Homes, a pilot program for residential construction begun in August 2005 and set to roll out live this fall, will include certain multifamily applications, and the organization plans to use successes in that arena to launch additional pilot programs for multi-family mid-rise and high-rise projects.

Navigating through those types of administrative decisions—and pushing the paperwork associated with them—has long been one of the main criticisms of the LEED program. Although the organization and its stakeholders are working hard to eliminate the clerical burden and its associated costs, proponents maintain that developers still need to expect a premium on the labor and economics involved with the higher aspirations of green building.

“The other side of the coin is definitely that LEED is very tedious,” says Ortega. “It is an intensive task to keep track of materials, the recycling of materials, et cetera. It is difficult and adds more overhead, so if there is no incentive on the project other than just to get the LEED plaque, it is going to be a hard sell to a multifamily owner. We needed two more clerks just to keep track of paperwork and processes.”

According to Emily Mitchell, assistant program manager for LEED for Homes, the program should offer some additional admin alleviation by streamlining it through local offices. “In LEED for Homes, that local relationship with a provider allows for quick interaction, because ideally they are just down the street from each other,” she says.

By all accounts, aspiring to LEED is difficult. Developers who have achieved certification, however, say that difficulty makes them better builders and better business people, forcing them to think of larger issues and make harder decisions within more finite timeframes. “If you have a LEED-certified building at any level, you have gone above and beyond the norm,” Baker says. “It is third-party verified. You can't cut corners.”

“The attention to LEED and the owner wanting to achieve the points and do well drives decisions that don't happen in other projects,” agrees Ortega. “The mechanical, electrical, and plumbing subcontractors work harder to optimize energy design. You are having discussions about adjusting the direction of the building, changing the spin, adjusting the appropriate level of window tinting. You always evaluate the cost versus the will, but it is great to have projects that do that rather than just doing what is easiest or cheapest or what we have always done.”

Those higher standards are expected to translate to higher premiums on both rents and on the resale value of buildings as LEED continues to gain popularity, observers say. “LEED is advantageous in a soft market in both for sale and rental, and LEED-certified should fetch a premium on resale within the multifamily community of portfolio traders,” says Don Neff, president of construction risk management, third-party peer review, and quality assurance firm La Jolla Pacific in Irvine, Calif. “The operating income efficiencies alone should translate into a price premium.”

Neff, who will oversee the LEED certification of La Jolla Pacific's headquarters, encourages builders to shoot beyond basic certification. “There's not much of a difference in design features between certified and gold. It is relatively easy to come by,” he notes. “Do you want to make a statement, or do you want to go along with the crowd?”

And if you choose not to build green at all, it just may be the rental crowd that is leaving you and your properties behind. Although there's no evidence that prospective residents are coming into the leasing office asking for green features in their buildings yet, the intense marketing of green features by the industry could change that quickly. “If it were perceived by the development community that green features were a marketing advantage, you'd have more LEED buildings,” Baker says. “I think that is indeed what is happening right now.”

Editor's note: To participate in the LEED for Multifamily pilot program, tentatively scheduled to begin in fall 2007, visit the U.S. Building Green Council's Web site at www.usgbc.org.

ALTERNATE ROUTES

Despite gains in its popularity and acceptance among the U.S. residential and commercial construction and development community, the U.S. Green Building Council's LEED program is not the only game in town. When it comes to certification, the Portland, Ore.-based Green Building Initiative, in particular, offers builders and developers an alternative route to certification on a national basis. In addition, green building certification bodies are common at the local and regional level and are often tied into home builder associations and other industry groups.

Gary Gerber, founder of Sun Light and Power in Berkeley, Calif., and a proponent of green building and affordable housing, also is a founder of Build Green, a local green building consulting firm that plans to conduct third-party verifications for sustainable projects. “I'm thrilled at LEED's success as a voluntary certification body, but I still don't think it treats energy, and in particular sustainable energy, with as much weight as it ought to.”

As one of the project leaders on LEED certification for Alameda County's stopwaste.org headquarters, Gerber notes that they only had to satisfy 12 percent of the building's energy demand with sustainable alternatives to get the building a platinum LEED certification. “That's not a very stringent standard at all.”

Green building also need not be certified by any particular body, though industry experts warn against marketing an environmental bill of goods to prospective tenants that you ultimately might not be able to fill. “If builders are forced to spend it, they want to market it,” says Jay Freedman, an attorney who specializes in construction defect litigation for Newport Beach, Calif.-based Newmeyer & Dillion. “But regardless of what certification you have, be careful of what you say. From the outset, communicate with designers and subcontractors so you are all on the same page, and document every step you take in order to guide your marketing message and also deflect any future claims.”

Even the national council's proponents have not entirely consumed the LEED Kool-Aid, and some remain open to changes in the process of how green buildings are certified. Indeed, the LEED system itself is in near-constant flux as stakeholders within the development community revise and approve the council's standards. “Green building does not have to be LEED,” says David Baker, partner at San Francisco architectural firm David Baker and Associates. “Maybe it will shake out that it does not become the gold standard. But it is right now. For its flaws, it is the most widely recognized.”