Adelaide Grady can point to one of the best green investments multifamily money can buy: For $6.35 at any big box retailer, you can get a tube of acrylic latex caulk and a caulk gun that can immediately begin saving the typical apartment community thousands of dollars in energy expenses. “A huge source of energy loss in a building is in air leakage: Drafts can be up to 30 percent of your total consumption at any given time,” says Grady, vice president of development and overseer of the “Green Team" sustainability unit at Atlanta-based Wood Partners. “If you can fill the gaps and holes in the sheathing as part of building or retrofitting much tighter than what typical construction practice calls for, you can quickly recoup significant savings for a very low-cost effort."

One of the reasons Grady is so enthused about caulk guns is because of the energy incentives granted to apartment developers and operators for achieving certain levels of conservation. Since Wood Partners is set up as a partnership, the tax credits and deductions typically offered as “green” incentives are difficult to take advantage of. Consequently, Grady and her development team search far and wide in Wood Partners' markets for utility company rebates and other sources of green capital contributions as the firm attempts to meet Energy Star certification requirements at each of its properties and save as much cash as it can along the way in both cap-ex and recouped energy billings.

Wood Partners isn't alone, as more and more forward-looking apartment owners seek guidance, information, incentives, and opportunities to maximize the tax breaks and energy savings they and their localities are hoping for.

Finding Savings Opportunities

The incentive investigative process at Wood isn't an unusual one for apartment firms looking to maximize outside dollar contributions to the green bottom line. While several widely publicized benefits exist at the federal level, including 45L tax credits and 179D energy tax benefits (see “Low-Hanging Fruit,” page 37), navigating state government agencies and municipal utility companies to find available grants, rebates, credits, and deductions can be a full-time research project, and one that many firms are increasingly turning over to professional energy-auditing firms.

“When we do a project and are hired to get the federal benefits, we investigate state by state to see where the municipal and utility rebates and incentives are, because typically the operators are unaware of those opportunities," says Dori Eden, director of business development for Pasadena, Calif.–based tax consultancy and cost recovery firm KBKG. “One of the difficulties, especially for multistate owners, is that every market is different: Georgia has a program that matches the fed's and is based on square footage but doesn't apply to garden-style, while Oklahoma has a state credit for multifamily garden-style where they're giving an additional $4,000 a door. Every state has carved out its own new incentive programming."

Benchmarking the Spot

Some state agencies might even run multiple incentive programs. The New York State Energy Research and Development Authority (NYSERDA), for example, recently launched a multifamily energy-benchmarking initiative that makes $7 million available to support commercial real estate benchmarking efforts leading to energy conservation. For multifamily participants, NYSERDA provides $3,000 to help cover the costs of an energy audit report that is commonly the first step in any longer-term benchmarking effort.

“Our objective is to help building owners find areas where they can make low-cost and no-cost improvements to their buildings that help them quickly find energy conservation and savings,” says NYSERDA project manager Ryan Moore. In addition to energy audit assistance, NYSERDA provides funding for converting master-metered properties to submetering (50 percent of the cost of each meter up to $250) as well as a more comprehensive multifamily performance program that lets owners claim up to $600 per unit for making a commitment to a 15 percent reduction in property energy usage.

NYSERDA, similar to other state energy agencies, is also keen on getting multifamily property owners engaged in benchmarking efforts as part of wider energy reduction goals. In New York City, Local Law 84 requires benchmarking using the U.S. Environmental Protection Agency's Portfolio Manager tool and will apply to most Big Apple apartment buildings beginning May 1. Similar mandates are under way in Seattle; San Francisco; Austin, Texas; and Washington, D.C., and all involved expect benchmarking regulations to proliferate.

“Definitely, I think you'll see more policies similar to Local Law 84, and New York state in general has some aggressive energy goals,” says Moore. “The plan we have right now is to reduce our buildings' energy consumption by 15 percent and generate 30 percent of our electricity from renewable sources by 2015."

While some apartment operators are wary of benchmarking mandates, others see the effort to collect energy usage data as part of a broader collaborative effort to reduce energy loads, which should save apartment operators in the long run. “We think benchmarking is important as part of a broader effort to evaluate where we are as an industry,” says Grady. “Once we know more about where we are, we can make much better decisions about where we are going to go from here in terms of achievement thresholds, and the benchmarking helps you figure that out."

In the meantime, Grady is back to the big box store for another case of caulk and some guns to ship up to Wood Partners properties in the Northeast, where the firm is seeing utility rebates up to $850 per unit for tightening building envelopes as part of its Energy Star certification process. “And that for an investment of about $100 per unit to make the apartments more energy efficient,” Grady says, adding that for a lot of green efforts, getting the incentive is as much about research and resolve as it is capital outlay and labor. “Once you've been through the process and train for that effort, the execution isn't hard at all."