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Greener Properties Payoff

Taking “Green Property Management” Outdoors

A recent survey done in partnership with the National Association of Residential Property Managers (NARPM) reveals that there is a real interest on the part of property managers to learn more about what “going green” can mean to them.  Not surprisingly, the most interest in actually making “green” property improvements came when cost-savings were involved.  However, they were not willing to pay a premium for green improvements and retrofits.

At first glance, it appeared that the extent of the findings was limited to the typical building-related small steps such as compact fluorescent bulbs, water-conserving toilets, energy-efficient toilets, and going “paperless”.  There was one point mentioned about installing sustainable, drought-tolerant landscapes to reduce water consumption, but the focus of the discussion was limited to water savings.  Yes, that is an important factor – especially here in Florida where the water supply planning is the law.  Since July 2005, the Department of Community Affairs has required that local governments submitting comprehensive plan amendments include data and analysis to demonstrate that water supplies are sufficient to support anticipated growth.

I was glad to see that at least a wink and a nod were given to the fact that landscapes to add “curb appeal” to rental properties, but the real Payoff offered to property managers, facility managers and particularly Owners is achieved by considering energy savings.  When it comes to landscapes, energy is expressed in terms of  human energy expended (i.e. labor) rather than in the amount of electricity (or even gasoline) required to maintain the landscape.  The fact is that over the life-cycle of the landscape, the operational cost to maintain will far exceed the initial capital cost to install that landscape.  That is why performing a LandEconics™ analysis of a property’s landscape is so important.  You need to understand what is driving your costs, and to evaluate prospective alternatives.  You need to meet the basic horticultural requirements of your landscape (irrigation, fertilization, pruning, etc.), but these must be balanced with the budgetary considerations of the organization.  The really good news for property managers is that you can – and should – have both beauty and sustainability.  The two are not mutually exclusive.

Ask your Chief Financial Officer if an Internal Rate of Return (IRR) of 55-233% on a capital expenditure makes good sense.

Those are the kind of numbers that command attention.  We are finding that these are not difficult to obtain in the landscape.  The fact is that far too often the old adage of “right plant, right place” is not being followed, and the result is that money is being wasted on maintenance that could be eliminated by simply making a wise and informed change.

So, here’s some good advice from the authors of Natural Capitalism on “Capital Misallocation”:

“Every first-year business student knows that the correct way to allocate capital is to compare investments’ results over the long run, not choose the option that requires the least initial investment regardless of future return.   . . . a 1.9 year simple payback is equivalent to a 71 percent real after-tax rate of return per year, or around six times the cost of additional capital.  Learn to speak financial language.   Go to the comptroller and say ‘Wow, have I got a deal for you – a risk-free return of 27% after tax’ –  you will almost certainly get the capital that wouldn’t have been obtained had the savings been expressed as a 3.4 year payback.”

Hawken, Paul (with Amory Lovins and L. Hunter Lovins).  Natural Capitalism, pg. 267.  New York:  Little, Brown and Company, 1999

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