Interview with Paul Lenhart, Krupp President/CEO: Creating a positive legacy
Paul Lenhart, President and CEO of Krupp General Contractors, LLC, is the developer, builder, general contractor and owner of University Crossing.
Paul shares his philosophy on sustainable building practices, discusses the value of involving experts throughout the design and construction process, and highlights what's most important to tenants when considering a move to a sustainable building.
Q. Building with sustainable practices is perceived to add to a developer's risk because it introduces another level of complexity into a building, requires new or unproven technologies, costs more initially and just generally adds scope to a project. How have you addressed these risk factors in your new building at 749 University Row?
A: There's no question using untested and unproven technologies adds risk, complexity and a certain level of the unknown to the development equation. However, we live in a fast paced world with just about every aspect of our lives regularly changing and evolving. Change is constant. Construction practices and real estate solutions must also change, evolve and adapt.
At 749 University Row we helped to mitigate risk by working with proven subcontractor-partners and consultant-partners to guide us all through the green aspects of the construction process from the beginning. This has included writing scope documents for construction bidding, holding regular team meetings to discuss the options and allowing for systems commissioning at completion.
We know our strengths and we're not experts in high efficiency HVAC systems but we can hire experts to help us wade through the process and come to informed decisions. The more that certainty can replace uncertainty then construction and development risk is reduced.
Q. High performance buildings are more commonly tenant-owned buildings, rather than developer built and owned. What is behind your decision to build a high performance building that earns a gold or even top-rated platinum LEED designation?
A: At the Urban Land Institute annual conference in NYC in October 2004, I listened to a panel of engineers and architects discuss sustainability and the USGBC's LEED rating system. This discussion left me with a profound overall impression regarding the wisdom of incorporating green building practices in new construction which translated to the desire to build a multi-use LEED office building. One of the speakers argued that purely from a marketing standpoint, LEED makes good business sense and that existing non-sustainable buildings would be functionally obsolete and not able to compete before the end of their useful lives. I agree.
There are two operators here:
- Using sustainability to promote a tenant's business model. Green feels good but also can be part of a business branding strategy. Our tenants at 749 University Row want to promote green, sustainable practices in their businesses and are willing to "walk the talk" when it comes to leasing.
- Sustainability saves money in the long run and is good for the bottom line. Operating expenses (CAM—which is a direct tenant pass-through) in a LEED building can be substantially less than operating expenses in a non LEED building. In a competitive leasing market LEED provides a competitive advantage, all other factors being equal.
Q. Other buildings are hitting 50 percent savings above code or better, but very few of them—possibly none—are as easily replicable as this one. Do you envision building more buildings like this one?
A: This will be our second LEED Platinum multi-tenant office building. The real difference between the two buildings is the HVAC system which in this case is a VRF/geothermal HVAC system which is designed to be a more energy efficient option. Each development opportunity and each building is unique. We will build more LEED office buildings if the market responds positively to this one and there is a suitable parcel of land for the project. A LEED building is best suited to urban in-fill locations that can take advantage of existing infrastructure and transportation linkages.
A. The market doesn't generally reward one-off buildings. You've invested time and money in researching new products and approaches without knowing how these products will perform in the long term. Do you hope to use the products and technologies in other buildings? If yes, what new products and technologies are you most excited about?
A: The great thing about working on LEED projects is that they always enhance your knowledge base. I'm certain there are materials and strategies being used here that can be applied to other building projects, even the non LEED projects. Many of our clients say they want to build LEED out of the gate but then the reality sinks in when the numbers come in. Invariably, we are able to apply certain energy cost saving strategies to non-LEED projects which allows us to utilize the knowledge base gained from the LEED projects.
Concerning 749 University Row, I'm most excited about the VRF/geothermal HVAC system. I'm hoping the system will perform as efficiently and reliably as expected and provide a great demonstration platform to showcase what is possible using these high efficiency HVAC systems.
Q. The upfront cost to build a high performance (sustainable) building is thought to be greater than building to just meet code. Is this true? Can you give a cost range compared to your experience with code buildingsa percentage difference per square foot?
A: Yes, without question the cost is higher to build a LEED building. The application and documentation costs alone are at least $50,000 out of the gate. And then you must ask, "What's in the bag of groceries?" Will the rating be Platinum or Silver? In our experience the cost could be 2-6 percent higher to build a LEED building. The top end of the range could be much higher depending on the building specifications.
Q. Is sustainability a draw for tenants? What have you found to be most important to tenants?
A: Yes, I think there's a certain "warm and fuzzy" feeling associated with sustainability. However, I'm not sure I'd say tenants are willing to spend more money to be in a LEED building. There's a certain feel good factor that's not quantifiable and all things being equal I would say tenants would choose a LEED building over a non-LEED building. Perhaps the greatest direct cost impact for a tenant concerns energy cost savings. When evaluating the move to 800 University Bay Drive (LEED Platinum) after several years of occupancy and substantial direct energy cost savings, one of our tenants remarked, "Moving here has made us all look like geniuses."
Q. Would you consider yourself an advocate for high performance buildings at market prices? If yes, what is driving your support?
A: I'm an advocate for the construction of high performance buildings. I feel they are one more positive legacy we can leave and they point to good stewardship of limited resources. High performance buildings are also good for business and offer competitive advantages in the market place. As a bonus, as high performance building materials and technologies are used more frequently costs will inevitably go down, making sustainable buildings more affordable and widespread.