It’s been quieter than normal around here for a few reasons, but mostly because – as I’m very pleased to let you know – my wife and I welcomed our first child – a beautiful, healthy, baby girl – on September 5.

That’s obviously a great reason to slow down our publication schedule, but to try and start making up for the lack of articles here, please feel free to download this archive of all the green leasing articles we’ve published here at GRELJ in a handy PDF white paper. I hope you’ll find it a useful reference in connection with your green leasing efforts. I actually compiled the archives into this format in connection with a CLE program in which I recently participated  (and may become available for download at some point in the future).

If there’s interest, I may consider compiling our other topical archives into similar PDFs. I look forward to your feedback on the white paper and continuing to bring you great content here at GRELJ in the weeks and months ahead!

The investors who challenged Malkin Holdings’ plans to convert their ownership interests in the Empire State Building into a publicly traded REIT have settled the lawsuit for $55 million. The agreement is contingent on Malkin raising at least $600 million during the REIT conversion; 80 percent of the settlement will be in cash and 20 percent in shares in the new REIT. Law360 reported the settlement – which the parties reached back in September – based on recent Malkin SEC securities filings.

As you may recall, in the complaint, which was filed in New York County Supreme Court, one of Empire State Realty Trust’s investors alleged that Malkin sought “to consummate [the public offering of shares in the REIT] through self-interested consent solicitations that fail to provide the participants with material information sufficient to allow them to make informed decisions regarding whether to support the planned transaction.” The investors sought an injunction enjoining Malkin from completing the REIT conversion.

But now, assuming the settlement proceeds and the REIT conversion occurs, funds from the offering – which Malkin hopes will actually top $1 billion – would pay investors who wish to cash out of their equity in existing Malkin entities, service debt, and fund the remaining renovation work at the LEED-EB Gold Empire State Building (between $55 and $65 million, according to the offering’s SEC filing). The companies that Malkin intends to consolidate within the REIT currently own 12 buildings with 7.7 million square feet of office space; 7 of those properties and 5.8 million square feet, including the Empire State Building, are located in Midtown Manhattan. The other 5 are in Westchester (NY) and Fairfield (CT) counties.

The REIT, which would be publicly traded as Empire Realty Trust, the name of the eponymous company that currently owns the Empire State Building, would strategically focus on the leasing of commercial office space at Malkin’s existing Manhattan office properties. However, the REIT would also use a portion of the funds that its public offering could raise to acquire additional properties. Now that the suit is settled, this could indeed be very good news for the green building industry generally – and New York City’s particularly – should the conversion move forward as planned and Malkin uses the proceeds to deploy advanced building technologies and retrofit an increased number of office building acquisitions.

According to a recent survey performed by the German cooperative bank fund Union Investment, the embattled continent’s real estate investment community is “not interested in simple sustainability certifications for individual assets, but are moving on to full-blown green real estate strategies” across entire portfolios and companies. These results echo those from a few years ago in a survey prepared by RICS, which concluded that investors are more interested in specific energy performance metrics rather than individual third-party certifications.

Union’s results were published in a recent issue of Property Investor Europe News, and came from surveying 172 property investors in Germany (75), France (50), and the United Kingdom (47). The survey required that participating companies only self-use 50 percent or less of their total real estate portfolios and its conclusions are interesting for those of us on the other side of the Atlantic, given that Europe has generally trended ahead of North America in terms of thinking about sustainability issues connected to real estate.

• First, for 35 percent of respondents, green leases have become “more relevant;” according to PIE, this is “an especially strong trend in France,” where 68 percent of respondents agreed. This result is likely because of the Grenelle environmental legislation that we’ve discussed here previously and requires landlords to incorporate an environmental appendix into most commercial office leases.

• 62 percent agreed that green maintenance has increased in importance; 39 percent actively look for green service providers; and 34 percent of respondents offer building metric data – energy consumption, lifecycle costs, and waste volume – at a portfolio level: an increase from 25 percent last year.

• Also at the corporate level, 34 percent of respondents have incorporated a sustainability program into their overall corporate social responsibility strategy; 31 percent have a sustainability strategy for their overall portfolio; and 36 percent produce a sustainability report (49 percent in the United Kingdom).

• Given Europe’s more acute energy challenges, it’s perhaps not surprising that for 58 percent of respondents overall energy consumption remains the most important metric in considering how “sustainable” an individual property may be. In France, that figure swelled to 72 percent. But only 36 percent of respondents answered the same question by ranking a property’s carbon footprint or use of renewable energy resources as most important.

The survey also yielded some interesting attitudes about green buildings and sustainability within real estate generally. For example, although 50 percent of respondents agreed that green buildings have the potential to become an asset class of their own, less than 50 percent agreed that a market for green buildings has already emerged within their respective country. Perhaps of most interest to USGBC and other third-party organizations that certify the environmental performance of buildings, less than 20 percent of respondents agreed that there are “clear evaluation criteria for sustainable buildings.”

On the other hand, over 60 percent agreed that “user behavior has a significant impact on the environmental performance of a building” and that “transparency is not possible without benchmarking ” This latter conclusion should be of interest to those of us here in New York City, where mandatory benchmarking for both public and private sector buildings has already resulted in some important reports and other conclusions that ought to assist in driving building performance higher in the months ahead.

A fully copy of the survey results is available for download here.

Some background: SRECs are creatures of New Jersey statutory law. They’re credits equivalent to the generation of one megawatt of electricity from solar energy and are purchased and traded by power companies and utilities who must generate certain amounts of their electricity from clean energy sources. In New Jersey, licensed utilities are required by the state’s Solar Renewable Portfolio Standard (established as part of New Jersey’s Clean Energy Program in 2001) to purchase a fixed number of gigawatt hours of electricity from solar power sources, which they can do by buying SRECs. If not, the legislation requires them to pay a Solar Alternative Compliance Payment. See NJSA 48:3-87(d).

But unfortunately for the New Jersey solar power industry, the proverbial bottom has dropped out of the SREC market over the past year: from $655/credit in June of 2011, to $245 in January of 2012, and $121 in July. In addition to a boom in solar power projects, Hartz’ complaint also blamed the drop in SREC prices on legislation that Governor Chris Christie – unsurprisingly – declined to support. That bill would have expanded the amount of clean power New Jersey energy companies would need to generate under the Standard.

In the complaint, which alleges breach of contract, fraud and unjust enrichment, Hartz claimed that Platinum reneged on its commitment to purchase 3000 SRECs at a cost of $255 each ($765,000 total). The complaint also alleged that Platinum repeatedly assured Hartz during negotiations beginning in June of 2011 that the transaction would close, and that the parties exchanged a signed purchase and sale agreement in January of 2012.

Hartz also claimed that throughout the negotiations Platinum was aware of both the pending legislation and the possibility that it might not be enacted by the Christie administration. Platinum informed Hartz in January of 2012 – simultaneously with Governor Christie’s announcement quashing the bill – that it would not close the deal, the complaint alleged. According to Hartz, although it was able to cover by selling the SRECs to another buyer, it did so at a loss of $230,000. Hartz filed the suit in July.

The SRECs at issue in the litigation were created from Hartz’ 30,000-solar panel, 8.5-megawatt, 65-acre facility in Secaucus near the New Jersey Turnpike, which it opened in January. Hartz also operates rooftop solar installations on seven other buildings in Secaucus. The case – D.N.J. Docket No. 2:12-CV-04586 – settled in late August without further pleadings or motion practice, according to the docket. But it’s an important one for us to consider here at GRELJ: as cheap shale gas continues to flood the market, the renewable energy industry is struggling. So it’s not unreasonable to expect that more of these types of suits could occur if REC prices continue to fall.

A copy of the complaint is available upon request.

Three years after it was slated to open, the Carmine Carro Senior Center in Marine Park, Brooklyn (pictured above) is still under construction, and local residents are blaming the delay on the project’s green building features, which are mandated under New York City’s Local Law 86 of 2008.

The project itself dates from 2004, when its budget was $5 million. At the time, New York City’s Parks Department put the project out to bid twice, but couldn’t find a contractor that was able to bring it in under bid. The reason? According to the Brooklyn View, Local Law 86, which required the project to target LEED Silver certification from USGBC. But in 2008, the city increased the budget to $11 million, the Parks Department, secured a contractor, and the the project broke ground.

Designed in-house by Bruce Eisenberg, the Parks Department’s Director of Architecture, the Senior Center will feature rooftop solar panels and a geothermal heating and cooling system. Its green roof is circular by design in order to increase the reduction in local heat island effect and reduce stormwater runoff.

But according to the Daily News – which recently reported the story and anonymously quoted a construction worker at the site that “a lot” of work still remains to complete the project – the Senior Center’s most complicated green design feature is its geothermal heating and cooling system. “We’re a blue-collar community,” local resident John Manzola, told the News. “When we hear astronomical numbers on this project for what we’re getting — two bathrooms and a grass roof — we get angry.”

Still, the Parks Department defended the project and its design in the Daily News,, noting that the building should use 45 percent less energy than a standard building. Local politicians also told the Daily News that they intend to keep the pressure on the Parks Department in order to bring the project to a successful conclusion, soon.

It’s anecdotal, of course, but the story is another reminder of how green building policy – though well-intentioned – can outpace the industry’s capabilities. And it demonstrates, as a 2009 Marsh survey of A/E/C executives cautioned, that financial risks from green building – whether stemming from higher design and construction costs or third-party certification fees – are real and must be addressed by owners when establishing project budgets.

Since its debut in March, the Urban Green Council’s Paul Reale has been presenting to the local green building and real estate industries on the benefits to landlords and tenants who implement the Energy Aligned Lease Clause, which we’ve written about here at GRELJ previously. After over two dozen presentations to organizations across New York City’s commercial real estate industry, Mr. Reale and UGC are continuing their outreach efforts with an FAQ document outlining some of the most frequently asked questions about the clause, many of which are of interest from a variety of perspectives.

According to the FAQ, WilmerHale’s lease with Silverstein Properties at 7 World Trade Center (pictured above) remains the only current implementation of the EAC. But one of the most interesting questions discussed in the FAQ arises from tenants’ concerns about the following scenario: a landlord’s energy-saving capital improvement results in pass-through operating expenses decreasing significantly, and dropping the tenant’s overall rent owed to the landlord below its original base rent. But under the terms of the EAC the tenant must still pay 80 percent of the predicted savings of the improvement to the landlord: a figure which could theoretically exceed that original base rent. So it seems that it would be a better deal for the tenant if the EAC had never been put into place. Consider the following from the FAQ:

Q: “In a typical modified gross lease, the tenant agrees to a “base rent” for the first year that includes a base operating expenditure (“OpEx”). Payment for annual increases in OpEx in addition to the base OpEx is the responsibility of the tenant. If an energy conservation measure is completed at the end of year 1 of a lease, might the reduction in OpEx drop below the base rent, thus requiring the tenant to pay the base rent in addition to 80 percent of the predicted savings [as required by the EAC as drafted]?”

A: “No. Escalations in non-energy OpEx are much larger than the savings from energy-related OpEx. Thus, even accounting for savings from energy-related OpEx, it is extremely unlikely that the overall OpEx would decrease. [See slide 19 of the EAC presentation for further details, available here.]“

Another short hypothetical may also help illustrate why this scenario should not be an issue for most types of modified gross leases. Suppose that the base rent for a given space is $20 per square foot with a $10 expense stop. Suppose in Year 1 the operating expenses are $12/sf, so the landlord performs a qualifying capital improvement in Year 2 that drops operating expenses to $8/sf. The tenant’s effective rent will still be $20/sf because the landlord is paying for the first $10 in operating expenses. But in this scenario using the EAC should still be a win for the landlord because its overall net operating income will increase on account of the lower operating expenses resulting from the capital improvement.

If you – or your organization – is interested in hosting Mr. Reale and his presentation, which discusses the issues in the FAQ and the EAC itself in much greater detail, you can contact him at pr@urbangreencouncil.org.

As you may recall, District Court Judge Robert Bryan agreed with Washington State that the federal Energy Policy and Conservation Act’s (“EPCA”) building code exception applied to disputed energy efficiency amendments in the state’s building code, and thereby allowed the amendments to take effect. (As we’ve noted previously, the building code exception is set forth within EPCA at 42 U.S.C § 6297(f) and allows state and local governments to set energy efficiency targets for new residential construction which can be reached with equipment or products whose efficiencies exceed federal standards, provided the enabling legislation also includes other means to achieve the targets with products that do not exceed the federal standards. This was the central issue on appeal to the Ninth Circuit.)

After walking through the case history and providing an overview of EPCA and the building code exception, the court first focused on the plaintiffs’ argument that the Washington code failed to satisfy the building code exception’s requirement that – in order to survive a preemption challenge – a state- or local-level code cannot “require” that a covered product have an energy efficiency standard that is higher than what is required by federal law. The court rejected the plaintiffs’ argument that the Washington code’s other compliance options are “so costly that builders are economically coerced and hence ‘required’ to select the higher efficiency options.” The court reasoned that “[t]he state would effectively require higher efficiency products [only] if the code itself imposed a penalty for not using higher efficiency products.”

Interestingly, the court identified the energy efficiency code that was at issue in the AHRI et al. v. City of Albuquerque litigation in connection with this line of reasoning. There, as you’ll also likely recall, the federal District Court for the District of New Mexico overturned the City of Albuquerque’s energy efficiency code after a similar preemption challenge by similar industry trade groups, partly on the basis that – with respect to the prescriptive compliance paths in the code – the ordinance “had created a situation in which the builder had no choice” and was forced “to install additional products that compensate for not using a higher efficiency product. . . . The Albuquerque ordinance thus effectively required use of higher efficiency products by imposing a penalty through the code itself.”

The Ninth Circuit also disposed of the plaintiffs’ argument related to subsection (c) of the building code exception within EPCA. It held that although Washington’s code must give credits in proportion to energy use savings without favoring particular products or methods, “Congress intended not mathematical perfection, but rather preventing the building code from discriminating between products and building methods. [The Washington code] achieves this objective by awarding credits for average equivalent energy use for each option in different situations.”

So what does the decision mean for green building policy generally? First, it’s important to note what the court pointed out at the very outset of its opinion: BIAW “is the first case at the appellate level to consider EPCA’s preemption-exemption provision.” But coupled now with the AHRI decisions from Judge Vazquez, and Judge Bryan’s opinion at the District Court level, there is a growing body of law related to what many commentators have described as the “convoluted” EPCA building code exception. As more state and local governments attempt to craft energy efficiency codes, more challenges could ensue. And if that happens, this body of law will continue to grow.

But perhaps most importantly these types of lawsuits will shed increased light on EPCA’s requirements and spur legislators to consider the preemption implications of proposed legislation as it relates to energy efficiency at the state and local levels. Indeed, in her very first opinion in AHRI, Judge Vazquez wrote that “the drafters of the [Albuquerque] code were unaware of the long-standing federal statutes governing the energy efficiency of certain HVAC and water heating products and expressly preempting state regulation of these products when the code was drafted and, as a result, the code, as enacted, infringes on an area preempted by federal law.”

More suits could also encourage Congress to revisit the building code exception and perhaps clarify the seven-part test to give better guidance to both courts and policymakers seeking to implement state- and local-level energy efficiency codes. While the purpose of federal preemption is clear and logical – avoiding patchwork legislation and thereby increasing costs of doing business – a murky area of law and legislation in this important area as it relates to green building and energy efficiency policy is not in anyone’s best interests.

I am pleased to announce that In Third Parties We Trust? The Growing Antitrust Impact of Third-Party Green Building Certification Systems for State and Local Governments, an article I co-authored with Professor Darren Prum of Florida State University and Professor Robert Aalberts of UNLV, has been published in Volume 27, Issue 1 of the University of Oregon’s Journal of Environmental Law and Litigation. The pinpoint citation is 27 J. Envtl. Law & Lit. 191 (2012).

You may recall an earlier article that I published dealing with this topic, which had a much narrower focus than our current effort, where we explore antitrust issues in much greater detail and with an increased discussion of relevant case law. The article abstract is as follows:

According to the American Institute of Architects, there has been a 50 percent increase in the number of municipalities with a green building program in place since 2007. And 24 of the country’s 25 largest metropolitan areas are built around a city with green building legislation on its books. Reducing buildings’ environmental impact is a noble – and critical – goal. But governments’ reliance on private, third-party standard-setting organizations – and the rating systems that they promulgate – as the basis for that legislation may be legally problematic.

This Article reviews one of those potentially problematic bases: antitrust. In order to suggest antitrust risk management strategies for both public and private actors that are promulgating green building legislation, this Article traces the history of some of the country’s first green building programs. It also examines the different mechanisms through which governments at the federal, state, and local levels have crafted legislation. Based on those mechanisms, it then reviews and analyzes existing analogous antitrust case law to evaluate the types of issues that could arise between third-party organizations and various levels of government.

The Article concludes by suggesting that government should not rely exclusively on a single rating system when crafting green building policy. Relevant case law teaches that private third-party organizations are historical targets of antitrust scrutiny by the courts. Accordingly, the Article presents a variety of arguments in support of the proposition that governments should create legislation that provides for flexibility in implementation and compliance.

A copy of the article is available for download here from SSRN; we look forward to your feedback in the comments below.

The Philadelphia City Council is on the verge of approving an ordinance that would require owners of commercial office buildings larger than 50,000 square feet to report their energy and water consumption in the form of a “green score” based on the federal government’s Energy Star program. If enacted, the ordinance would take effect on June 1, 2013. It calls for the implementation of “a Citywide program to provide for the reporting of Citywide benchmarking data online and in a manner that permits owners and tenants of [qualifying commercial office buildings], prospective purchasers and lessees, and the public to view and compare energy and water usage among comparable buildings and uses.”

But on June 5, representatives from BOMA’s Philadelphia chapter testified before the City. Although they called the ordinance “well-intentioned,” they objected to the law’s requirement that the green scores be publicly disclosed online. Specifically, BOMA is concerned that a building’s score could be deceptively low thanks to a particuluarly energy-intensive tenant (like a financial services firm or a data center) and not because the owner is doing anything particularly noxious vis-a-vis building performance.

“The bill could easily and unjustifiably apply a `scarlet letter’ to a building,” Doug Hoffman, BOMA’s chairman, testified. BOMA requested that the Council reconsider the public disclosure requirement and only require its release to prospective purchasers and tenants. Councilwoman Blondell Reynolds Brown – the bill’s sponsor – disagreed. “”It’s important for consumers to know,” she told the Philadelphia Inquirer. “For those of us who are conscientious about being sustainable, we may make judgments about where we want to conduct business.”

The Philadelphia law is actually modeled on similar benchmarking laws enacted in San Francisco, D.C., and New York City. But as we’ve noted here previously, New York’s exempts certain buildings for which public disclosure of water and energy use would be problematic (like high energy users like data centers). And failure to comply with Philadelphia’s law would be punishable by a $300 fine for the first 30 days and then $100 a day.

We’ll follow up here at GRELJ if and when the ordinance is approved, in its current form or something closer to what BOMA is pushing for.

On May 8, 2012, the House of Representatives’ Science, Space, and Technology Committee’s Subcommittee on Investigations and Oversight held a hearing titled “The Science Behind Green Building Rating Systems.” The Subcommittee, which is chaired by Representative Paul Broun of Georgia, heard testimony from a number of organizations, including USGBC, the Green Building Initiative, and ASHRAE. It called the hearing as part of the five-year cycle required under Section 436(h) of the Energy Independence and Security Act of 2007 for the federal government to choose – and subsequently evaluate – one or more third-party rating systems for federal buildings. The hearing also coincided with the release of the results of GSA’s study for the end of the current cycle (which found that although LEED matched GSA’s requirements most closely for existing buildings, Green Globes was more closely aligned for existing buildings).

From the outset, Representative Broun made it clear that the Subcommittee’s goals for the hearing were to focus on many of the pressure points behind the debates over green building policy that have reverberated across the industry for nearly a decade, framing his goals for the hearing as follows during his introductory remarks:

“Are taxpayers saving money as a result of LEED standards? . . . I’d like to learn why [LEED and Green Globes] are more effective than one that could be developed by DOE and GSA themselves. . . . I am also concerned that consensus appears to be missing in some cases. . . . Recent proposed changes to LEED for 2012 also appear to penalize some common building materials with little to no basis in science such as PVC piping. . . . Shouldn’t we instead be focusing on saving taxpayer dollars rather than social engineering? Adopting standards that don’t save taxpayer money or tell American workers that the products they make are not welcome in federal buildings defies common sense.”

One of the witnesses – Professor John Scofield of Oberlin College – was particularly critical of LEED and its promises of increased energy performance during his remarks. Professor Scofield spoke at length about the 2008 New Buildings Institute study and the peer-reviewed papers he has published based on the NBI study’s LEED data, telling the Committee that there “appears to be no scientific basis for institutions such as colleges, universities, or the federal government to require LEED certification as a greenhouse gas or energy reduction strategy for its buildings.” Scofield concluded his testimony by arguing for a green building rating system that “combines the sex appeal of LEED with the substance of Energy Star and, of course, has scientifically demonstrated success before any consideration of a mandate.”

Testimony from Roger Platt, USGBC’s Senior Vice President of Global Policy and Law, was predictably less controversial and read more like an excerpt from USGBC’s marketing materials than a data-driven business case for the energy efficiency of LEED-rated buildings. For example, Mr. Platt testified that “LEED-certified buildings have been proven to generate higher rents, have a greater resale value, offer faster lease-up and retain higher occupancy rates. It is results like these that make it easy to see why nearly half of the Fortune 100 companies use LEED certification to increase their brand value and their bottom line, all the while preserving natural resources.” Much of Mr. Platt’s rationale for why LEED saves taxpayer dollars was simply listing a selection of federal buildings that have earned the LEED label from USGBC. While the testimony that Mr. Platt did provide was footnoted extensively, it is worth noting the stark difference between his and Mr. Scofield’s approaches to their respective testimony.

All of the witnesses’ testimony is worth reviewing in detail, as is the entire hearing (available here). But the Subcommittee’s decision to call the hearing in the first place is important for two crucial reasons. First, whether driven by Henry Gifford’s lawsuit, the floundering economy, or something else, Congress is focused on the implementation of green building policy at the federal level. This will have repercussions for lower-level agencies and governments, as well as the private sector. Second, the explicit focus on building performance data as driving future congressional decisions will – hopefully – increase the body of building performance data available to all players – not just the government – and allow better real estate decisions across the board.

But what’s most clear after the hearing is that winds of change are blowing through green building policy at the federal level. The recent flap over DOD’s decision to create its own internal building code that would complement any LEED certification efforts that do not involve any cost premium could bode for a similar situation at GSA, particularly in light of Representative Broun’s opening remarks at the hearing. Regardless of the market penetration that systems like LEED and Green Globes have made in the private sector over the past decade, a drop in federal applications for certification could be a significant blow to both, particularly if the economy remains soft.

Anecdotally, both USGBC and GSA are feeling pressure related to LEED 2012. The former has already (1) delayed the member vote on LEED 2012 until November (from August); and (2) rebranded LEED 2012 as LEED v4, pushing the ballot back until June of 2013 in breaking news last night. And on May 18, a bi-partisan group of 56 members of the House of Representatives sent a letter to GSA requesting that it discontinue using LEED if USGBC’s proposed changes in LEED 2012 are approved. The letter expresses concern over a specific credit within LEED 2012 that offers a point for projects that avoid a list of “chemicals of concern.” The lawmakers wrote that they are “deeply concerned that the LEED rating system is becoming a tool to punish chemical companies and plastics makers and spread misinformation about materials that have been at the forefront of improving environmental performance — and even occupancy safety — and in buildings.” According to the letter, GSA’s adoption of LEED 2012 would “amount to the federal government sanctioning an unscientific, arbitrary, and discriminatory program of material selection.”

The full roster of witnesses who testified before the Subcommittee was: Kathleen Hogan of DOE, Kevin Kampschroer of GSA, Ward Hubbell, President of the Green Building Initiative, Roger Platt, Senior Vice President of Global Policy and Law at USGBC, Professor John Scofield of Oberlin College, Victor Olgya of the Rocky Mountain Institute, and Tom Talbot, the CEO of Glen Oak Lumber and Milling of Wisconsin.

A video of the entire hearing is available here for your review. I look forward to your comments below.

Cape Town, South Africa, with Table Mountain in the distance.

On the heels of the Department of Energy creating a similar resource on the other side of the Atlantic, the Green Building Council of South Africa and the South African Property Owners’ Association (SAPOA) have unveiled the same tool for the Rainbow Nation.

It’s not clear exactly what this particular Green Lease Toolkit includes. But it’s designed to assist the South African real estate industry “in preparing lease documents that take both green building design and operational principles into account. It also uses robust methodologies established through market analysis and is applicable across all building sectors,” according to Jarrod Lewin, who served as project manager for the toolkit on behalf of GBCSA.

The Toolkit was unveiled earlier this week at the annual SAPOA International Convention and Property Exhibition in Durban. According to GBCSA, it was developed from a “shared basis of both market need and market demand,” as South African landlords and tenants are increasingly demanding green leasing tools to assist them during the commercial leasing process.

“As the green building movement in South Africa gains traction, we are seeing a more consistent adoption of green building principles by leaders in the local property industry,” Brian Wilkinson, CEO of GBCSA said in a press release. “The Green Lease Toolkit is a precursor to shifting the paradigm of ‘living green’ into the mainstream for owners and tenants alike.”

We’ll follow up here with more information about the distinctions contained in the South African Green Lease Toolkit as they become available.

The eleven-page, first quarter 2012 Report includes live links to the original articles as they appeared here at GRELJ and over at gbNYC. Articles are organized by legal issues and transactions, projects, and new certifications in the New York City market. Commentary precedes each section.

My goal is for the Report to serve as a central, useful point of reference moving forward for all of the content that we publish here and at gbNYC each quarter in order to help industry leaders draw deeper conclusions about the state of green real estate and corresponding legal issues.

You can download a copy of the Report here, and I look forward to your feedback.

An EHPAD facility in Paris, designed by Lazo & Mure. There are 5000 EHPADs in France.

The Brussels-listed real estate investment trust Cofinimmo S.A. (Euronext: COFB) recently announced the acquisition of an EHPAD nursing home facility in Paris for just under 21 million Euros. At closing, it simultaneously signed at 12-year triple-net lease with the French healthcare provider Orpea. But more importantly the parties included as an appendix to the lease a set of green lease obligations in accordance with France’s Grenelle de l’Environnement legislation, an aggressive legislative initiative that includes a number of laws aimed at curbing energy use within the built environment.

The Grenelle de l’Environment was launched in 2007 as a working group with representatives from both private and public sector players in France to develop policy initiatives aimed at adressing climate change. Grenelle I and II refer to the sequence in which those initiatives are to be adopted by France’s National Assembly and Senate.

Grenelle II requires that an environmental appendix must be included with leases entered into for office or retail purposes larger than 2000 square meters. The requirement took effect as of January 1, 2012 for leases signed or renewed as of that date, and will trigger on July 14, 2013 for existing leases (which is why many entities – like Cofinimmo – are proactively adding appendices before the legislation takes effect).

The environmental appendix must include information on actual water and energy consumption, waste treatment, heating, cooling, ventilation, and lighting equipment in the building. In the appendix, the landlord and tenant must also establish a mechanism for continuously monitoring the energy performance of the premises in order to reduce consumption.

By way of additional background, Grenelle I imposes the following requirements:

• On existing buildings: decrease energy consumption by 38 percent by 2020 and establish a primary energy consumption threshold of 150 kilowatt hours per square meter per year. By 2050, average energy consumption of primary energy for existing buildings should not exceed 50 kWh per square meter per year.

• On newly constructed buildings: recommendation for low energy consumption buildings (less than 50 kWh per square meter per year beginning January 1, 2013.

• For all buildings: by 2021, all buildings should be positive-energy (i.e. generate more energy than they consume).

In addition to the environmental lease appendix, Grenelle II will also impose the following requirements:

• Beginning January 1, 2017, all buildings must perform an energy performance diagnosis (if they have heating or cooling installations, not a given in France).

• “Carry out works” for increasing the the energy efficiency of buildings by January 1, 2020.

NASA’s LEED Platinum Ames Research Center, Moffett Field, CA

Published by Professor Patrick E. Tolan, Jr. of Barry University Law School in Orlando, Going-Going-Green: Strategies for Fostering Sustainable New Federal Buildings is particularly timely in light of recent comments from the Department of Defense regarding the future of LEED in connection with military construction projects. In addition to standing on its own as an academic work, it also provides some necessary context to those comments with respect to green building policy at the federal level.

The Article generally discusses strategies for harmonizing what Professor Tolan describes as a buearacratic mess of green building policy at the federal level . It also does a good job identifying and explaining what’s led to that mess (and which perhaps was responsible for some of the confusion surrounding the recent DOD announcement):

The size and complexity of the federal bureaucracy make understanding the federal sustainable building scheme extremely complicated. . . . The difficulty is compounded because different environmental and energy obligations are driven by a number of energy laws, environmental statutes, and Executive Orders that have led to delays and inefficiencies in implementation. . . . All of these factors have created confusion about expectations and hampered progress toward meeting the goals of earlier energy-efficiency directives. The absence of standardization and the proliferation of conflicting rules and directives creates obstacles to federal green building.

After reviewing the green building landscape generally, and existing FAR regulations for government acquisition of A&E services specifically, Professor Tolan argues that “the FAR needs to be modified to better crystallize obligations to foster sustainable design principles for every new federal building.” Of particular interest to construction lawyers, he also describes in detail the federal Brooks Act (which allows federal agencies to procure architectural and engineering services using a best value standard, rather than lowest price) and design/build procurement in the context of the types of FAR-driven policy changes that could result in higher performing buildings.

The Article also spends a significant amount of time reviewing the 2006 MOU between DOD, NASA, GSA, DOJ, HUD, and other federal agencies that, among other things, called upon the FAR Council to adopt uniform FAR requirements for procuring sustainable new federal buildings. Although interim FAR rules relating to sustainable building were issued in May of 2011, according to Professor Tolan they did “little more than adopt the Guiding Principles already agreed upon in the MOU and required by the Executive Orders.” Rather, “[c]hanges to the FAR’s architect and engineering requirements ought to be instituted immediately to accelerate the federal green building agenda,” Tolan writes.

The Article’s points about the currently Byzantine nature of federal green building procurement are well-presented. But it is the FAR with which Professor Tolan concludes the piece: he presents some specific recommendations for both design/bid/build and design/build procurement: in order to “institutionalize and improve green building government-wide,” he argues that (1) “[t]he FAR should be amended to specifically require that architects and engineers with expertise in green building be added to the A&E [design-bid-build] evaluation boards;” and (2) “specific information concerning green building experience should be an important evaluation factor both for A&E firms under the traditional design-bid-build approach and also for design-build teams that submit proposals to build new federal buildings.”

A copy of Professor Tolan’s article is available upon request. The formal citation is 41 Pub. Cont. L.J. 233 (2012).

In April of 2009, Toronto became the first city in North America to mandate green roofs for most types of new construction. By a City Council vote of 36-2, the legislation was to require green roofs on all residential buildings over 6 stories, schools, affordable housing developments, and commercial and industrial buildings beginning January 31, 2010 for most property types.

But last November the industrial real estate sector successfully lobbied for an exception to the Green Roof Bylaw, as the legislation is known, before it was scheduled to take effect for industrial properties at the end of this month. New industrial properties and building additions are instead permitted to install cool roofing material (i.e., “white roofs”) instead of green roofs. Now the institutional sector – which includes schools – is pushing for the same exception. A decision is expected sometime next week.

The pushback shouldn’t be surprising: the development community in Toronto opposed the initial legislation on the basis of increased costs. (On the other hand, green roof advocates believed the legislation wasn’t broad enough and actually successfully fought to increase its purview over an original iteration of the bill.)

When we noted Toronto’s Green Roof Bylaw here at GRELJ back in 2009, we also touched on some of the associated risks that insurers and other players have identified as stemming from green roof installations generally. Recently, some of those perceived risks prevented a green roof installation on a public project in Port Moody, British Columbia. There, according to the town’s engineer, higher structural loads associated with a green roof for a new fire station would have both required a redesign and “limit[ed] the functionality” of the building, in addition to presenting “significant additional costs.”

Interestingly, the Canadian National Research Council provided Toronto legislators with input regarding the Green Roof Bylaw in 2009, noting that the energy savings from green roofs would only occur for 3 months during the year and that any claimed water retention benefits would likely never arise.

The schools’ current request for the exception is notable too: many insurers believe that green roofs are likely to become flammable and have identified schools- and their relatively easy low-rise roof access- as particularly troublesome from the perspective of potential arson. Whether those concerns play a role in driving the pending decision on the exception remains to be seen.