MiPlan – Miami’s Bold Plan to Cut Greenhouse Gases

Global warming, Miami’s proximity to the sea, and its average 6-foot above sea level elevation have provided the impetus for the adoption of MiPlan, a bold climate action intiative which identifies the current problems associated with greenhouse gases, the output of greenhouse gases in the city, and establishes a plan to reduce those greenhouse gases.

MiPlan inventoried current greenhouse gas emissions in Miami.  The plan’s data suggests, surprisingly to me, that the Miami-Fort Lauderdale-Miami Beach area has the lowest per capita emission rate as compared to other Florida metropolitan areas (such as Tampa, Orlando and Jacksonville) and a lower per capita emission rate than the United States average.  Approximately 54% of the city’s greenhouse gas emissions come from emissions associated with electricity. (MiPlan, page 8).

Commercial sector buildings contain approximately 35% of Miami’s built square feet, but consume 60% of the city’s electricity. MiPlan contends that because of the age of these buildings (80% of all Miami buildings are more than 20 years old), upgrades to assist with energy efficiency should have a great impact on the city’s overall energy consumption and greenhouse gas emissions. (MiPlan, page 10).

As a result of these findings, the City of Miami created (in 2008) a goal of reducing its greenhouse gas emissions by 25% by the year 2020. In order to accomplish this goal, the city concludes that emissions must be cut by addressing energy efficiency in new and existing buildings. (MiPlan, page 20).  Of course, this means that the bulk of the financial burden in addressing the city’s goals will fall on the commercial sector.

MiPlan lays out seven actions to improve energy efficiency in buildings and decrease greenhouse gas emission from buildings.  They include: forming alliances with other government and non-profit organizations to address energy efficiency; reducing energy consumption in existing government buildings by retrofitting, commissioning, and auditing; reducing energy consumption in existing private buildings by mandating energy improvements during major renovations and/or points of sale and developing financial incentives for improvements; reducing energy consumption in all new construction by developing mandates and incentives for green building efforts, such as requiring all city government buildings over 5,000 square feet to be built to minimum LEED silver certification and all buildings over 50,000 square feet to be built to LEED silver requirements; reducing the “heat island effect”, educating the business sector and the public on energy efficiency, and reviewing progress on increasing energy efficiency in buildings. (MiPlan, pages 20-24).

Since the city adopted MiPlan in 2008, several ordinances have been passed in order to begin to accomplish the goals set out in the ambitious plan.  Ordinance 09-0095327 adds a new section entitled “Heat Island Effect-Roof” which provides for the construction of roofs (other than R1 and R2 residential zoning improvements) to reflect the sun’s heat.  This ordinance pertains to new construction or the repair/replacement of a roof area greater than 50% of the existing roof.  The city also passed Ordinance 09-0094921 which creates landscaping standards that prevent the destruction of the city’s tree canopy and encourages landscape design that promotes the channeling of breezes and air purification.

Despite the findings in MiPlan, there are those who feel that the benefits associated with having more energy efficiency aren’t matched by the cost of implementing these projects.  One of the problems is that even estimating cost savings is difficult.  How much can be saved by adding ‘green features’ or meeting a LEED certification?  “None of us have hard data. . . .This whole movement came out of the academic and government worlds, and those two universes aren’t concerned about cost containment,” said Jack Lowell, managing director of Flagler Real Estate Services Oncor International in Miami (quoted in “Special Report: Going Green,” Daily Business Review, August 25, 2008).

Even if Miami begins to mandate particular building standards that new construction or renovation projects will have to meet such as LEED certification, there is no guarantee that projected greenhouse gas emission declines will occur or that estimated cost-savings will transpire.  “The real [green] footprint of a building lies in the maintenance and operations,” said Brendan Owens, vice president of LEED technical development for the U.S. Green Building Council (quoted in “Special Report: Going Green,” Daily Business Review, August 25, 2008).  This concern seems self-obvious, with maintenance and monitoring of existing buildings being a subject that has not received the attention and development it will obviously need for true energy and costs savings to landlords and tenants.

Even if energy savings are realized through green building and renovation standards, there remains the debate over who receives the benefit. “There could be an argument made if landlords said their energy costs are 20 percent less so they can charge 20 percent less in market rates, but it never works that way,” said Barbara Liberatore Black, principal and vice chairman of CresaPartner, Florida (quoted in “Special Report: Going Green,” Daily Business Review, August 25, 2008).

So, while the debate over “green buildings” and energy savings continues, Miami has nevertheless forged ahead with its own bold plan to reduce greenhouse gases.  But until energy efficiency and measurement tools are commercially available and in use, and until the economics to justify “going green” are understood, we can expect slow going.

Dale A. Burket (dale.burket@lowndes-law.com) is a Florida attorney who is Board Certified in Real Estate by The Florida Bar.   He is a partner with Lowndes Drosdick Doster Kantor & Reed, P.A. (www.lowndes-law.com) in Orlando, Florida.  The author gratefully acknowledges the contributions of associate attorney Laura M. Walda (laura.walda@lowndes-law.com) to this article.

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Where are the Green Lease forms?

A growing number of cities are passing ordinances which require green or sustainable building practices.  Cities such as San Francisco have passed comprehensive standards new-build and renovation projects must meet, while Atlanta and Miami are in the early stages for such requirements.

But what if your city doesn’t pass these kinds of ordinances? Are green building practices and incentives going to matter? Despite the current economic climate, developers, economists and industry-leaders are in agreement that green leases will be a part of the new commercial and residential developing market. “In today’s ‘red’ economy, some may argue that green real estate is just a passing fad. However, all signs indicate just the opposite—that green is the future standard in the real estate industry.” (Diana M. Ducharme, “Green Leasing in a Red Economy,” Hinckley Allen Snyder, LLP Client Update, December 2009). The green building market, including residential and commercial projects, is expected to more than double from today’s $36-$49 billion to $96-$140 billion by the year 2013 (U.S. Green Building Council, “Green Building By the Numbers,” April 2009).

Even though new commercial construction starts are at a record low, some developers are seeing an increase in their sales due to their widespread marketing and publicity of their green-built projects. For example, Dockside Green, a new 1.3 million square foot commercial, industrial and residential development in Victoria, British Columbia has actually seen an increase in sales with the promotion of the ‘green-ness’ its units. Developer Joe Van Belleghem said, “What we’ve tried to train our people [to do] is really make sure the customer knows what they’re getting. Because if you’re saving a lot of energy and water and sewage and you start to look over time how much that will save you over a 20-year period, it’s phenomenal how much dollars you’re saving.” (“Dockside Green defies market slump,” Times Colonist, November 2009 – article no longer available).

Due to an influx in available commercial and residential space, perhaps there is even more of a need for building green and then heavily promoting the sustainability of properties, as well as providing incentives in green leases for both landlords and tenants. “Now, [the landlord controlled commercial real estate lease negotiation] relationship is inverted with landlords wooing prospective and existing tenants like never before. With landlords worried about a shortage of creditworthy tenants, and tenants worried about deteriorating economic fundamentals . . . mutual commitment to a green office environment may be [an opportunity to create a balanced win-win-relationship]” (Barry LePatner, “Green leases add value for landlords and tenants,” Real Estate Weekly, July 22, 2009). By providing a green space and a green lease and marketing it as such, developers and commercial real estate owners could have the opportunity to put a little more ‘green’ in their pockets. “On the bright side for owners, it’s a great opportunity for improved performance and repositioning of a building. Re-branding is hard to do, and this is a great way to do it. You can buy an older building, retrofit it and make it a LEED EB building.” (Matt Hudgins, “Green Leases: A Matter for Debate,” National Real Estate Investor Online, May 5, 2008, quoting Mark Pillsbury).

There is no industry standard definition of what constitutes a green lease. Simply, a green lease should “ensure that both landlords and tenants reach mutually agreed upon objectives regarding sustainability.” (Susan Coleman, “Negotiating Commercial Leases: How Owners & Corporate Occupants Can Avoid Costly Errors,” PLI Order No. 18155, May 18-19, 2009).

It seems obvious that there cannot be a “one size fits all” model for green leases. Green leases must differ based on the types of space being used, whether the space is new or existing, the location of the building, the amount of space a tenant will occupy, how many tenants will occupy the building, and what kind of green technology is being utilized in the building. (Ronald B. Grais and Kristen M. Boike, “Jenner & Block: Green Leasing—The Changing Environment of Leasing,” Emerging Issues Commentary, June 2008).
In addition to the complexity of drafting based on the green-centric specifics of each lease, there are several additional problems which result from altering a typical commercial real estate lease structure. Though most tenants and landlords understand the benefits to constructing and occupying buildings which were designed with sustainability in mind, there are incentive problems. For example, a standard gross lease doesn’t offer tenants incentives to act in a green manner. “In a gross lease, it is the owner’s incentive to take action to reduce the carbon footprint for the building and preserve resources, because any savings which flow from those decisions will benefit the owner and not the tenants, whose monthly rent usually goes up each year.” (Jeffrey Swenarton, “Get ready—green leases are coming,” Business Review, December 10, 2009). According to Karen Penafield, vice president of advocacy for the Building Owners and Managers Association (BOMA), “You can upgrade all your systems and achieve a lot of energy efficiency that way, but if the tenants use more and more energy, you’re not really doing anything on the conservation side.” (Kevin Borgia, “A model lease agreement,” Sustainable Industries, December 4, 2007).

Landlords who improve on energy efficiency in their buildings may not be able to recapture the costs of green building from tenants. “Landlords have little incentive to improve the building’s energy performance since the tenant pays its own utility bills.” (Barry LePatner, “Green leases add value for landlords and tenants,” Real Estate Weekly, July 22, 2009). A net lease, on the other hand, would require that a tenant would pay its own utility bills, and therefore, give it the incentives to act in a green manner.

Due to the need to revolutionize current lease structures in order to incentivize behaviors on both the landlord and tenant sides, law firms, business organizations, and other companies are starting to create green lease sample forms. Organizations like BOMA and Square Footage are selling their versions of green leases which they claim account for landlord and tenant cost and benefits in a green building.  CB Richard Ellis assists clients with adding green standards to traditional leases, instead of drafting an entirely new environmentally friendly lease. “That can be included in the lease as an exhibit just as you would include an exhibit for how a building will be cleaned every night.” (Matt Hudgins, “Green Leases: A Matter for Debate,” National Real Estate Investor Online, May 5, 2008). Looking forward, law firms and their clients will need to come up with solutions to site-specific lease negotiations, perhaps incorporating ideas from model lease ideas.

Dale A. Burket (dale.burket@lowndes-law.com) is a Florida attorney who is Board Certified in Real Estate by The Florida Bar.   He is a partner with Lowndes Drosdick Doster Kantor & Reed, P.A. (www.lowndes-law.com) in Orlando, Florida.  The author gratefully acknowledges the contributions of associate attorney Laura M. Walda (laura.walda@lowndes-law.com) to this article.

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