Example 2

Mixed-use office building in Wilmington, North Carolina

Property description

This vintage-1906 property, located in the historic Wilmington, NC downtown area was the subject of an in-depth case study describing the facility, various energy efficiency improvements that were made, and associated outcomes (IMT 2015b). While this is a multi-tenant building (17 office and retail tenants), the owner issues gross leases and is thus responsible for and interested in energy costs.

Energy features and data

According to the case study, “The historic 44,000-square-foot historic office building at 272 North Front Street in Wilmington, N.C., is an outstanding example of how continuous capital improvements and targeted retrofits can substantially improve energy efficiency and property performance. Punctuated with the installation of a building management system in 2012 and a new central chiller in 2013, the property achieved a 21 percent reduction in annual energy costs in 2013 that generated $11,100 in annual energy savings to the owner. The retrofits yielded an unleveraged internal rate of return (IRR) of 29.6 percent, an annual return on investment (ROI) of 22 percent, and net present value (NPV) of $138,666. The improvement was so significant that the building’s rated performance climbed from the market average to qualifying for ENERGY STAR certification. The improvements also contributed to a more comfortable environment for tenants, which helps with tenant retention and net operating income, making the building a more valuable asset for its owners. The building’s increased performance can be reflected in numerous adjustments to its appraised value— possibly as much as a $217,504 increase as a result of a cap rate adjustment.”

Prior it its retrofit in 2013, the subject building had an EUI of 61.3 kBTU/sq ft-y. Following retrofit, the EUI was reduced substantially, to 44.2 kBTU/sq ft-y, corresponding to a 28% site energy savings and 21% energy cost savings.

Data Quality and Other Considerations

The most significant retrofit (chiller replacement) was performed in July of 2013. Given the timing of this improvement, the calendar-year savings (through December 2013) do not fully capture the seasonal benefits of the improved chiller.

Note that the Portfolio Manager analysis was not performed by a registered engineer, and thus third-party verification of the inputs was not obtained. As with any rental property owner, certain inputs to Portfolio Manager (particularly occupancy and numbers of computers) change often and are hard to track.

ANALYSIS: Building Performance Database

The BPD makes it possible to put the pre- and post-retrofit energy use in context with similar buildings in the area. BPD currently contains 1692 buildings in North Carolina. Tightening the filters to include only buildings in Wilmington yields a sample of only two, and these do not contain sufficient information with which to perform energy benchmarking. Relaxing the filter settings back to the state level but limiting the set to relevant office building occupancy types results in a sample of 324 buildings. The median site energy EUI of these comparison buildings is 53 kBTU/sq ft-year.

The Figure shows the site energy EUI of these buildings and our overlay of the EUI for the subject property, drawn from the existing Portfolio Manager analysis provided by the building owner. The building improved from a level significantly below the median of this peer group to a level significantly above it.

According to the case-study documentation, energy bills were reduced from $52,618 per year to $41,512 per year.

We can see from the BPD scatter plot analysis of each building in the distribution that there is no particular correlation among these buildings of EUI and overall building size. Thus the sample does not need to be further reduced to ensure a homogenous peer group.

ANALYSIS: Portfolio Manager

Portfolio Manager was used to track energy use changes throughout this building's energy retrofit process. This tool generates the EUI and places the building in context with a peer group drawn from the statistical sample of buildings provided by the Commercial Buildings End Use Survey (CEUS), performed periodically by the U.S. Department of Energy (DOE 2015). Reductions in vacancy rates drove energy use up between 2008 and 2012. The first two following charts show the latest and historical changes in Score, while the subsequent table brackets the pre- and post-retrofit years.

Prior to the energy improvements (2012), the property had an Energy Star rating of 62 (75 is a passing score for earning an Energy Star rating). Following retrofit (2013), energy use was reduced substantially, bringing the building to a performance level significantly corresponding to an Energy Star score of 84. Note, however, that the analysis was not performed by a registered engineer, and thus third-party verification of the inputs was not obtained and an official Energy Star designation was not requested.

These results are internally consistent with what we learned from BPD, i.e., the pre-retrofit building performed well below average while following the energy upgrades, performance increased such that the building was in the upper quartile of the distribution, with a PM score high enough to qualify the building for an Energy Star rating.

ANALYSIS: Building Asset Score

Insufficient documentation exist to create a new Asset Score analysis for this building. With the interest of an owner, experts can be retained to gather the necessary data and perform the assessment.

References

Miller, J. 2015b. “Valuing Energy Efficiency: 272 North Front Street, Wilmington, North Carolina.” Institute for Market Transformation, Washington, DC. 7pp. http://www.imt.org/uploads/resources/files/IMT_ValuingEE_Wilmington_FINAL.pdf

U.S. Department of Energy, Commercial Buildings End Use Survey. http://www.eia.gov/consumption/reports.cfm#/T88