Will Clark began his career in New York.

To recap, in part one our interview with Will Clark covered increasing NOI through practical water and energy efficiency measures and moved on to carbon, tax credits, and PACE programs in part two.  Multi-family sustainability veteran Will Clark has worked in various capacities within the multi-family sector including as a developer and asset manager.  He is currently an REO Asset Manager for a special servicer, managing a rotating portfolio of 15 to 35 REO properties for CMBS trusts.

GreenLandlady: Is there something you think property managers should be doing right now?

Will Clark: With regard to leases, captured utility data isn’t particularly applicable to us right now as the owner pays a lot of these things, but I would still start putting those clauses into leases for benchmarking purposes later.  Electric deals, again, our hold period is too short for that to be much of an issue for us, but I’m sure if we got a request we would look into that.

GLL: Do you see the multifamily sector morphing beyond net zero into energy producers?

Clark: Personally I have a pretty extensive interest in solar panels, but all that’s going to be driven at the state or the national level.  If we’re going to create renewable portfolio standards where an owner can make money doing it, they’ll do it, but without an incentive, they won’t.  This is largely driven by self-interest and with the current financing climate, it’s tough. Unless you’re going to get credit in a way that offsets your costs, I really don’t think very many people are going to look into on-site power generation. I’d also add that most roofs in multifamily have a lot of ‘architectural interest’ and the variable pitches and levels that requires isn’t always compatible with a large solar installation.

GLL: What about micro turbines?

Clark: I have yet to read a convincing argument for their use.  Some studies were done over in the Netherlands with micro turbines from a variety of vendors.  They put them all in the same place and found the payback period was 20+ years for all of them and the winds were not sufficient for sustained energy production either.  Right now I would argue that nobody has a good enough idea of their wind profile and that’s pretty critical information to make it worthwhile.

GLL: Are you concerned about making provisions for Electric Vehicles (EVs)?

Clark: Most of my stuff is B and C, a lot of C class, so we don’t have many who are going to be at the forefront of the electric vehicle revolution.  However, when that day comes, hopefully it will be a faster uptake than Zipcar (which I actually use myself).  I think it’s one of those issues that managers will have to deal with but not yet. Being aware of mass transit is important, and in Toledo, I think we’re going to start buying bus tokens for residents who do not have or chose not to drive. Again, it’s a way to differentiate ourselves and provide someone with what I think is more tangible than a free month of rent. Emphasizing the Walkscore of a location or just the local services makes a property more attractive and integrates the property more deeply into the community.

GLL: Are certifications like LEED, EnergyStar and GreenBuilt valued in your industry?

Clark: Green certifications – except for LEED on a high-end residential – there’s not much demand in the marketplace for them and speaking of LEED specifically, there’s little acknowledgment of multifamily as a property type. Southface has a decent program, Enterprises ‘Green Communities’ are okay, but unless you start looking abroad at things like BREEAM or PassivHaus, the official recognition has not caught up to the desire for better data and direction. Most of the literature I see gives greater financial weight to EnergyStar.  I do think sustainability results will be balance-sheet driven, just not necessarily the paper certification. The practices will continue to be steered by the balance sheet.

GLL: Although I have a total brown-thumb, on Green Landlady we write a lot of articles about multi-family urban agriculture. I keep trying to imagine how apartment communities will be able to integrate food production into the urban landscape in a practical manner. Do you think that multi-family will ever be able to implement urban agriculture successfully?

Clark: Absolutely and I thought about it last night.  Where it really makes sense is on properties with a lot of kids where you need something for them to do.  If you don’t have something off-site then you definitely need something on-site to keep them occupied. And I think that there is certainly a subset of kids – some are going to want to play sports and hang out – that you could interest in something more sustainable like gardening or planting. So I think as just another activity you’re not going to appeal to everybody, but if you can find 5% or 10% of the kids on the property and get them interested, that’s a decent start.

GLL: Would you be concerned about the property’s appearance?

Clark: Frankly, it’s generally going to improve your community aesthetically, and it can look very nice.  I also think it’s going to improve your retention, because now you have people who are quite literally invested in the land itself.  They’ve spent time and energy and money, in some respects, on improving the property.  I also think that it works well as an activity on a seniors’ property.  Many of them are old enough to remember Victory gardens and things like that and still have the skills they used so many years ago.

GLL: So you would see this as community building enterprise?

Clark: Yes, I think it’s psychological, it’s fun, it’s interesting, it’s something to do to get people out as a community event. You’re meeting with your neighbors and you’re accomplishing something that you can see, so, yes, I think that there is a place for it. I don’t believe many owners agree with me. I don’t believe many managers necessarily agree either, but I have tried it.  On a property in Indianapolis a couple of years ago and another I had in Arkansas, we had these huge open areas where we didn’t know what to do.  We put some railroad ties in a big square, threw some dirt into it.  We asked the local 4H to sponsor a couple of outdoor events for the kids and all of a sudden we had a decent garden there.

GLL: So you’re relying on tenants not wanting to leave during the growing season and confidence that the gardeners will stay committed?

Clark: Yes, and it makes sense also because it’s one less thing that an owner has to maintain. I don’t have to sod it. I don’t have to water it. Someone else is taking care of it and it’s a great way for me to reduce my expenses.  It also, of course, is something you can sell to perspective residents.  “Hey, we’ve got a nice little community garden and a couple folks who are eating tomatoes that they’ve grown here,” that kind of thing. I think it’s a great idea.  In fact, it’s something that as I go out – if I feel like we’re going to hold a property for more than just a growing phase - then it’s probably something that I would start employing more readily. It’s quite possible.

GLL: What is your resident care and retention philosophy?

Clark: Going back to the community gardens and things like that, all of these things improve resident happiness. If you improve resident happiness, you improve resident retention.  The thing I hate wasting money on is short term residency. I would rather tenants stay two, three, four, five years, or even longer primarily out of self-interest.  With a longer term resident, I don’t have to pay the turn costs which are equivalent to a month’s rent or more at our price points.  Of course, from a sustainability standpoint, turnover creates greater materials expense and additional labor costs.  At a minimum, when a tenant moves I’ve got to throw the carpet out, repaint the unit and use all those cleansing products which create a lot of waste.

GLL: What could motivate you to manage your properties in a more sustainable way?

Clark: The biggest motivation in sustainability for me is holding onto revenues. If I don’t have to throw out the carpet or repaint every year that creates a huge savings. When you think about how much waste is created by carpet replacement alone, it’s absolutely staggering.  CARE (Carpet America Recovery Effort), an industry-led landfill diversion initiative, has some astonishing information about carpets and landfills. Think about utilities as a cost going out the window. Reducing the electrical, heating, or water waste is one way to improve the financial performance. Improving the indoor air quality helps people feel better, which means the leasing team is more energized and the residents are happier and more likely to refer a friend. It may sound repetitive, but at the end of the day, improving NOI is the major factor in operating properties more sustainably because it’s the only way we can currently receive credit for doing so.

GLL: What sorts of trade-offs have you made with conventional products versus sustainable choices?

Clark: Where I can, I replace carpet with more resilient flooring. We use laminate flooring, linoleum sometimes, and also the newer ‘green’ flooring that’s a peel & stick product with a wood grain.  I look for the tough products that will last more than two resident cycles and hope up to seven and even ten years. Of course, I think it looks better and area rugs are much more manageable.  You can remove and clean them and actually vacuum underneath them. If you think about the dirt that ends up on a carpet and the underlying carpet pad, it’s not very attractive.

GLL: So what final advice would you have for multifamily property managers?

Clark: The biggest thing that we can do to improve sustainability of multi-family is to make the communities more pleasant to live in and keep our residents happier so they’re not leaving. The longer residents stay, the more life we get out of the materials we use.

GLL: Thank you so much, Will, for being so forthcoming and spending so much time with us.

Clark: It was my pleasure.

Other Articles of Interest:

• Wednesdays With Will Clark: Begin With A Focus On NOI
• Wednesdays With Will Clark: Carbon, Corporate Insight and Uncommon Sense

The problem is that the rise or build up of CO2 is forming something akin to a blanket in our atmosphere and like a blanket it is keeping the planet warm.  Since most of the CO2 in the atmosphere is produced by burning fossil fuels such as coal in power plants and gasoline in cars, we can stop the blanket from getting thicker and further warming the earth by (among other things) using less electricity and walking instead of driving.

Of course I have simplified things greatly, but really this is just to explain why walkability and your property’s proximity to markets, banks, restaurants and shops are important aspects to consider when marketing an existing building, considering additional amenities or reviewing a prospective acquisition.

MARKETING

Use a walkability calculator (see below) to check your neighborhood’s Walk Score and if it’s good, cue the applause and tout it in your marketing materials.  Furthermore, if there are businesses nearby that might be compatible with your property, consider creating a partnership. Offering discounts to area residents can be a win-win for shops, restaurants, gyms and other businesses and help garner new, loyal customers from among your residents. Those discounts will also help you build a terrific resident-care reputation.

If your area is not covered or the neighborhood’s Walk Score is middling, you can still create a benefit for your tenants.  Utilize resources like Google maps to create a comprehensive list of ‘nearby’ services.  Focus on markets, shops, restaurants, libraries, post offices, schools, hospitals, daycare, after school music classes or other businesses that may be of interest to potential residents. Then, as described above, contact these businesses about forming partnerships with your property.

Be bold and proactive, as partnerships between businesses and apartment communities can substantially strengthen local economies.  The bonus?  While you create a more sustainable, walkable and newly appealing neighborhood, your efforts will help reduce CO2 emissions.

Unfortunately, if your property is situated within the bowels of Middle Earth, management may need to consider getting creative by. . .

ADDING A TRANSPORTATION AMENITY

Take a page from senior and student housing communities by offering regular shuttle service to popular destinations.  To boost ridership and make it more cost effective, team up with other multifamily properties, retirement communities, office buildings, the local shopping center or other businesses.  Speaking of cost, one of the most intelligent and innovative leaders in the multifamily housing industry has taken this concept further.  At no cost to his company, Eric Brown of Urbane Apartments is setting up a shuttle service to ferry residents from their Urbane brand communities to downtown Detroit.  Residents will have access to this service every Friday and Saturday night, allowing them to enjoy evenings out free of parking and designated driver concerns.

Although not exactly the usual definition of ‘walkability’, a shuttle service does cut down on vehicle miles traveled and, therefore, reduces CO2 emissions.  The additional genius behind the shuttle service concept is that it allows you to market the walkability of an area that would normally be considered beyond the reach of your residents.  This expanded geographical advantage also allows you to create partnerships within that new business area, as if it were home territory.

ACQUISITIONS

Assuming you can get financing, there may be some great deals out there in existing multifamily housing, but, as always, buyer beware.  There is a lot of uncertainty over how the housing sector will be stabilized and whether or not that will benefit multifamily housing.

• How easily can residents access public transportation?
• If public transportation is minimal or nonexistent, how high will vacancy rates rise when gas tops $5 a gallon?
• Will residents be working from home, using on-site flex cars to run errands or driving electric vehicles?
• If you’re pinning your hopes on EVs, are you prepared to make accommodations for them?

Remember the problem is CO2, as outlined earlier, so electric vehicles are only a solution if the power comes from renewable, non-polluting sources such as wind and solar.  In the end, when it comes to walkability, more is better.  Urban apartment and condo dwellings will remain the most sustainable types of housing available.  They will hold their value  and appeal to residents if well maintained and properly retrofitted to minimize their carbon footprint.

The Walkability Calculator is the third one down, here.

Other Articles of Interest:

• Walkability: Nurturing Community
• Public Transport or Bust?
• NAR’s Green MLS Tool Kit Rocks

Certainly the use of electric cars provides an opportunity for a homeowner with a 120Volt outlet in the garage - and those with charging stations set up at work - but what about apartment residents?  According to National Geographic, many experts predict that 10% of our vehicle fleet will be some form of electric vehicle (EV), conversion or hybrid EV by 2013.  This may seem fast to some of us, but if they are right, we are not prepared.

The Department of Transportation estimated that there were 254.4 million registered passenger vehicles in the United States in 2007, so using 10% to do the math that means over 25 million vehicles are going to need outlets soon.  This won’t be something that only happens at work.

With the price tags of the two available EVs currently in the $100,000 range, this crowd may not live on your property at the moment, but an affordable EV will soon be in target range - if the Chevy Volt arrives at year-end as promised.  What is not easily discernible is the growing consumer interest in retrofits of existing vehicles.  Many car owners are converting their vehicles’ operation to electric and its impact on the EV market and demand for charging options could explode.

A recent article in the Multifamily Executive stated:

“Like GM, Ford also recommends having a dedicated 240-volt line to the garage, with 80 to 100 amps to meet the needs of two cars at 40 amps apiece. Ford will require the installation of a charge point, a box that is hard-wired into the home that contains the cord and ensures the cord isn’t charged unless it’s plugged into the car. Ford says it is working to make it as easy as possible on the customer, including providing an option to have the box installed upon purchasing its plug-in Focus.”

The utility companies will prefer re-charging during off-peak hours when electricity usage is lowest, but this requires infrastructure, so a bit of panic is seemingly permeating utility companies’ planning departments.  There are big benefits to setting up solar and wind-powered charging stations wherever possible, of course, but there is an advance start-up cost and continuing maintenance is required for best operation and life of these expensive systems.

One concern I don’t hear talked about is how building managers are going to manage security.  How do you protect your outdoor charging station from the opportunists who see expensive photovoltaic panels as easy money?  And what are those $10,000 to $24,000 electric vehicle batteries going to sell for once the EVs roll out in volume numbers? Okay, so that one is neither an issue nor solvable until we have enough unprincipled electric vehicles owners to support a black market. Managers may still want to site charging stations somewhere in plain sight and at least think about how to protect your tenants’ future big investments.

Although the focus is currently on new construction – San Francisco is adjusting its building codes and Portland, Oregon, as well - city planners are already setting up permitting requirements for existing buildings.  Manufacturers are pressing for quick upgrades to infrastructure as well.  Britta Gross is director of global energy systems and infrastructure commercialization for GM.  According to Multifamily Executive, she recommends dedicating at least a minimum number of spaces to EVs, with the best long term solution entailing the installation of a 240-volt outlet at each stall along with any appropriate upgraded transformers. Ford makes similar recommendations.

In Vancouver, B.C., a building code was recently implemented that requires all new multifamily buildings to wire 20% of their parking stalls for EVs.  Target electrical capacity, incidentally, is identified as the ability to accommodate the load of simultaneous charging of  all vehicles within the building’s electrical grid. New building wiring is reasonable in cost, but whether buildings codes or tenant demand drive them, retrofits on older buildings may place some drag on building operations’ budgets.

Initially there may be incentives for landlords – such as reduced or even free energy for charging and/or free installation of charging hook-ups - but these usually go only to the ‘pioneers’.  Even if mandates are slow in coming, your property will need to have its electrical system upgraded to include charging areas or you can expect to lose some portion of your EV population.  Without charging capability at home it will be too inconvenient for EV-owning tenants to bunk at your place.  Electric vehicles are fantastic, of course, but electricity is not free either.  (Peak usage loads make it more expensive for tenants to charge their EVs during normal business hours.)

There may be another safety issue with tenants who stay when you don’t provide needed services.  They may take matters into their own hands. While researching this article I kept having a recurring vision of a bunch of electrical extensions threaded out a row of apartment bedroom windows.  I hope I’m just being paranoid.

If you still doubt the pending impact of the new EVs during a recession with so many people reluctant to buy new cars, check with the Environmental Protection Agency (EPA).  The final ruling is still being reviewed, but the EPA has new guidelines for measuring performance of electric vehicles.  This is currently expressed as miles per gallon (MPG) to provide a basis for comparison with gasoline or biofuel powered vehicles so don’t get confused by the ‘G’.  When GM announced on August 11th, 2009, that based on the proposed EPA guidelines the new Chevy Volt was expected to get up to 230 MPG, this got everybody’s attention.  Not only could we patriotically chant ‘buy US taxpayer supported cars’ , but we could all give it a ‘wow’ rating.

Nissan quickly followed up with claims that its Leaf model would get up to 367 MPG using the EPA’s new guidelines.  Of course, when you look at EVs it also makes sense to factor in (1) how far a full charge takes you before the gasoline-powered electric generator kicks in (30 to 40 miles in a non-luxury prototype), (2) the pollution caused by the many coal-fired plants that produce the electricity and (3) the life of those expensive batteries.  The environmental damage of EVs is still dwarfed by that of the gasoline-powered vehicles we drive.

California is one of the states encouraging EV rollouts, but in a thoughtful attempt to protect the consumer they will require a 10-year-warranty on all EV batteries.  (Lithium-ion batteries can have a 10 year life with some resale value for parts.)  As the technology to extend battery life beyond a solid five years is still somewhat sketchy, some manufacturers are meeting the regulation by including two expensive batteries rather than one.  Of course this raises the car prices by $15,000 plus, an unfortunate result. Some companies are intending to lease the batteries, which would sort of circumvent the issue and possibly the regulation as they would not be “sold”, but that will be quickly addressed by regulators if it’s not in the works already.

Everyone agrees innovation is needed to push the number of EV users to meet the EPA’s greenhouse gas reduction goals and mandates, and some plug-in groups are pressuring states to make regulations (like the 10-year battery requirement) more realistic.  Either the price of an EV must be low enough to reasonably compete, or gasoline must be high enough to drive the market away from conventional automobiles.  In any case, eventually you too will have a tenant bring home an electric vehicle (EV) or a retrofit and want you to ‘Mickey Mouse’ a charging accommodation.  While you still have time, you may want to develop a plan.

Should  you set up a charging station on your property?

The answer may need to be based on what’s going on where you live.  San Francisco is currently the most ‘plugged’ area in the country and has the full backing of city officials and residents.  As a testament to this support, converted hybrids can be found plugged into the public charging stations  across from City Hall.  Companies like Google (its principals are investors in the Tesla EVs) have added charging stations for their employees and executives, several of whom already have EVs and converted hybrids. Organizations like Plug In America, an EV advocacy group, have been delighted with the response of 20 U.S. cities in the planning stages of ‘electrifying’ their infrastructure, but it will not be easy.

When those first few electric vehicles (EV) show up, don’t assume your current garage facility or parking area has adequate power.  It may have the outlets, but can your electrical system handle the additional load?  Tenants can be notoriously cranky with unreliable infrastructure, particularly if your EV-charging induced brown-out fries their kids’ computer.  You also need to know what your local codes require or you may end up with a tenant problem and a big fat fine.

If your municipality or utility company doesn’t have guidelines yet, an initial resource for EV prospects is San Francisco’s Pacific Gas & Electric Company (PG&E).  Their comprehensive guide for installing a charging station in a single-family residence includes relevant information for multifamily residences too.  If you understand that these new vehicles all use different types of technology, then it is easier to recognize their charging needs will be different as well. (Think leaded gasoline and unleaded here if you need a visual.)  Eventually one technology may dominate, but for now there are all kinds of technological combos in use.

What are the first steps for installing an EVSE charging station?

• Determine what kind of Electric Vehicle Supply Equipment (EVSE) is used in the electric vehicle (EV) model (or conversion) and its electrical requirements.
• Determine whether the EV requires conductive or inductive charging as they are installed differently and require different connectors.
• Verify whether the vehicle’s battery requires ventilation during charging – this information is available from the dealer or vehicle manufacturer.
• Have an electrical contractor evaluate your panel to see if there is sufficient capacity.  Most residents will want to use the quicker Level 2 EVSE charging method (3 as opposed to 8 hours for a full charge).
• In an older building or single-family home, installing a Level 2 EVSE charging station may not be possible without an upgrade.
• If you need a new electrical panel to provide sufficient capacity that is the expensive piece in setting up a standard charging station.
• Adding a 240V 40 amp Level 2 charging circuit may be worth it if this tenant amenity has ‘legs’ with your particular resident mix and builds your Rep as a committed green manager.
• Set up a separate meter initially for the EV charger or you will not qualify for the reduced energy costs generally offered to encourage EV facilities.
• Some cities do not allow separate meters for single-family residences, but this should be less of a problem for an apartment building.
• Make sure you will not need to store flammable or combustible materials in the charger area.
• Do not attempt to do the work yourself unless you are an electrical contractor, as this could make you liable for all kinds of damages.
• ‘Electrify’ a fifth of your units as a baseline by 2015, but if each of your units has two drivers with two vehicles, perhaps you will need to develop a more exacting plan.

Electrical Permits are Required

When your electrical contractor applies for the installation permit they will have to provide (a) an electrical panel schedule, (b) drawings with the wiring of the new branch circuit with meter, charger and all receptables, (c) document flow in cubic fee per minute and (d) any air inlet or outlet ventilation with vent fan specifications.  The contractor also has to document that there are no hazards and document where exactly the EVSE will be located.  It can be outside, although some equipment may need to be protected for longest life.  It is obviously wise to plan the plug-in and its cords away from anticipated foot traffic.

What are the costs of putting in a charging station?

If you are planning on solar power, companies like Sequoia Solar are out there and will give you a quote.  It won’t be cheap but there are financing plans and you could potentially charge your tenants for usage.  This could also change on whether or not your public utility, the Feds or your city decide to give out freebies, so do your homework.  Of course, a system that uses the existing municipal grid is less risky in a return on investment analysis and a lot cheaper initially, but does not present the same opportunity for ancillary income.

In a single family home an electrical contractor will charge $500 to $1,000 for an upgrade if the current panel has sufficient electrical capacity.  If not, tack on another $1,000 for the new electrical panel in an average single-family home.  A multi-family property may require a more extensive upgrade as it may have more than one charging station installation planned.  Luckily insurance carriers do not seem to be requiring a separate rider if there is an EVSE installed in a single-family home, but check with your insurance carrier just to be sure.  The rules may be different for multifamily housing as there may be more perceived liability, particularly with the 240Volt 30 and 40amp Level 2 charging circuits.  But whatever you decide, tenants in the near future will or will not move to your property based on whether or not they can charge their EVs.  If you decide to take the plunge early, market the heck out of your decision and build your green brand in every vacancy listing.

Photos courtesy of the North American International Auto Show.

If you enjoyed this article, you may want to read the rest of the series:

• Electric Cars and PHEVs are Coming!
• Myth-Defying the Electric Car
• Electric Vehicle Hype, Tech and A Beauty Pageant
• A Little EV History and  Peek at the Future