As the economy was collapsing back in 2008, Greg Mutz and his leadership team had to make an important decision. Like everyone else in the housing industry, the team at Chicago-based AMLI Residential was concerned with having to right-size headcounts, extend maturities, defend its balance sheet, and decide whether to shut down, or at least slow, its development and construction spigot. But unlike many of its multifamily peers, AMLI’s decisions weren’t strictly defensive. Even as the recession was tightening its grip on the country, the firm made one large strategic decision: It invested in a massive program to make its properties more energy efficient.
“We came together 18 months ago and concluded that environmental issues will increasingly impact valuations in the future. We also believed that the price of energy and water will escalate well ahead of the overall inflation rate,” CEO Mutz says. “We think the control of energy usage and water usage will enhance the bottom line and become a competitive differentiator.”
AMLI placed a bet with its owner, PRIME Property Fund, which is managed and administered by Morgan Stanley, that investors will come to covet—and pay more for—those apartments that are more efficient. To reduce its carbon footprint, lower energy costs, and enhance sustainability, the company undertook a double-barreled approach to determine where both its properties and its property managers stand on energy efficiency. Under the new AMLI initiative, the company’s tech team would create another dashboard to measure each property’s energy efficiency and would use its construction and development teams to have an internal energy audit of AMLI’s buildings.
Unfortunately, with the construction world crashing, the development team wasn’t very busy. Instead of laying them all off or jettisoning them into property management, Mutz decided to change a handful of key personnel roles within the organization to focus more on measuring how to green its current stock of apartments. He tasked Fred Schreiber, his vice president of development, with leading that charge.
Resident Training
Renters can make a big dent in efficiency.
Apartment companies can invest thousands and thousands of dollars in upgrading their light bulbs, paint, and energy monitoring systems, but those measures can only affect a small percentage of energy usage on site.
“A lot of the energy usage comes from the occupants,” says Ric Campo, CEO of Camden Property Trust, a REIT based in Houston. “They plug in their televisions and their iPhones, and they plug in their peripheral equipment, and that’s what sucks out their power. You have to continue to educate people.”
Camden has run into this sort of issue firsthand. It recently completed a move to paperless leasing with electronic signatures, though the firm finds that customers still want a paper printout of their leases. “People get uncomfortable not having paper back-up for everything,” he says.
So Campo gives his property managers a simple instruction: “The behavior has to start with a simple no,” he says. “If you want to print it, use your own paper and ink—and 90 percent of them won’t print it. You won’t change fundamental behaviors until it costs people something.”
That education can come through a number of channels. Chicago-based AMLI Residential’s green dashboard, for instance, provides property managers with the latest information about residents’ energy consumption and recycling loads. Steve Hallsey, president and CEO of AMLI Management Co., thinks the dashboard will eventually give the firm the opportunity to send out a blind sample of energy usage to each resident to show how much, say, a typical one-bedroom unit should be using.
“[The green dashboard is] not only adding behavioral change to our people,” he says, “but I think it has a great ability to change the behavioral patterns of our residents. Over time, it will allow us to get more information to residents. In many cases, it’s kind of blind to them, especially water usage.”
Property managers are already using AMLI’s property dashboard to spur resident action. For instance, the dashboard told AMLI’s manager at Suwanee, Ga.-based McGinnis Ferry that the property recycled 2 tons in April. So, in the spirit of competition, the manager created a property-wide contest urging residents and on-site staff to recycle 5 tons the next month. “If you really focus on recycling, there’s a lot of improvement,” says Greg Mutz, CEO of AMLI. “It’s about reinforcing conservation.”
Resident education is also a key initiative at Atlanta-based Post Properties. “We need to figure out how to communicate with residents and help them be more environmentally conscious, even if they’re not a believer in global warming,” says Steve Sadler, vice president of strategic business services at Post.
Meanwhile, Atlanta-based Gables Residential hands out green tips for residents upon move-in and provides reusable shopping bags as a welcome gift. It also set up a recycling program and has an Earth Day celebration each year, but Sue Ansel, chief operating officer of Gables, wants to do more. So the company is developing courses for on-site associates so they can teach residents about green features for each property. “It will be specific to each property, depending on location,” she says.
So far, the results have been positive. “AMLI has really come up with some creative and efficient ways to measure energy on a real-time basis,” says Sue Ansel, chief operating officer of Atlanta-based Gables Residential. “I think they’re a step ahead of the game. I think that’s a place where we will all get to, but I think they’ve done a good job of incorporating that into their daily software. It’s the next step for us.”
Managing that software—and modifying it to meet the ever-evolving energy demands of living buildings and growing portfolios—is a full-time job for Schreiber, a lawyer by training who started with the company in 2007 on the development side after a stint in real estate finance law with New York-based law firm Weil Gotschal & Manges. But the 31-year-old has embraced his new role with a passion. “As development slowed down, a lot of us tried to help in other parts of the company,” Schreiber says. “I did a little legal, but part of what I volunteered to help out with was the sustainability program that we were running at that time.”
Now, Schreiber is leading AMLI’s green program, which involves Mutz; Phil Tague, executive vice president of AMLI; and Jennifer Wolf, AMLI’s senior vice president of development. Schreiber’s plan? To use the company’s in-house teams, including construction, development, management, and utility groups, to solve the energy riddle and shepherd AMLI into a profitable, sustainable, efficient future.
“Instead of a shotgun approach, I advocated focusing on our core competencies and leveraging things AMLI was good at,” he says. “Instead of trying to do everything green, let’s focus on the green dashboard and energy audits. We were able to dive into that headfirst and take responsibility and make sure it was implemented. My role has been helping to put the company’s best and brightest together and push them to develop these technologies.”
Hands on the Dashboard
The dashboard concept is nothing new at AMLI. In 2003, the firm spent a year to develop the web-based technology that would serve to measure its on-site performance. The platform provides both executives and on-site managers with sortable, real-time information about 12 different factors, including effective rent increase, physical occupancy, percent of service requests completed in 48 hours, average Internet response time, renewal ratio, closing ratio, average days held vacant, and the portion of the budget that can be managed via controlled expense reduction.
AMLI Residential
Headquarters: Chicago
Year Founded: 1980
No. of Employees: 700
Units Managed/Owned: 25,500/24,000 units
Geographic Coverage: Pacific, Plains, West South Central, Mountain, Mid-Atlantic, Great Lakes, South-Atlantic
With that template and technology infrastructure already in place, AMLI thought it would be easy to take its dashboard and create a second generation that would measure and rank managers on their ability to reduce energy and water usage in common areas; increase the percentage of environmentally-friendly products they’re buying; and re-asses their recycling practices. As with the regular dashboard, properties can be sortable by region, metro area, construction type, and even joint venture partner. The green dashboard enhancements took a year to develop.
“They created their own metrics, and they created their own dashboard,” says Doug Bibby, president of the Washington, D.C.-based National Multi Housing Council. “They didn’t get something off the shelf. They put a tremendous amount of work in it, and it’s very impressive.”
The payoff is worth it, though, according to Schreiber. With a simple double-click of a mouse, a site-level employee can pull up a property’s utility bills (though there is usually a lag time of about 60 days from when the energy was used and when the bill goes up). “There’s a simple page with all meters. You can see which ones are the outliers, and make sure you’re paying for the right amount,” Schreiber says. “You have to give it to site-level employees in a digestible format that they can take action on and get back to leasing and customer service.”
Leadership Lessons: Fred Schreiber
Fred Schreiber for Hanley Wood
Credit: Andrew Kornylak
TITLE: Vice President of Development
AGE: 31
FIRST PROFESSIONAL JOB: Lawyer
BEST BUSINESS DECISION: Leaving the practice of law and joining AMLI Residential
FAVORITE QUOTE: “Opportunity is missed by most people because it is dressed in overalls and looks like work.” —Thomas Edison
GREATEST BUSINESS CHALLENGE: Trying to allocate effort and capital among many options for improving energy efficiency and sustainability
PEOPLE YOU MOST ADMIRE: My wife and my parents
BEST ADVICE EVER RECEIVED: My grandfather always stressed the importance of education and intellectual curiosity.
PLAYING ON YOUR IPOD: Jamie Cullum, Kings of Leon
Mutz and Schreiber are looking for month-to-month improvements, while realizing that weather anomalies—such as a cooler-than-normal July or a snowless winter—could impact net revenue results. “This is an attempt to say if you’re pushing the needle and trying to get improvements, you’re going to see your score go up,” Schreiber says. “We measure [the properties] against themselves and maybe over time that standardizes in a way so we can reward the best performers in the company.”
The system measures recycling at each property each month by weight. Tague says that about one-third of AMLI’s properties have doubled the size of their recycling since the dashboard became active. “The most tangible result has been in the area of recycling,” Tague says. “All of it is just a matter of focus. [The property managers] are competitive, and they want to win.”
For instance, AMLI discovered that its North Briarcliff property in Atlanta was recycling 9 pounds per unit, per month, while its Milton Park property in Alpharetta, Ga., was recycling 21 pounds per unit, per month. The reason is that Milton has its vendors recycling cardboard, which is a heavy product.
Suddenly, the managers at other properties were beginning to ask their vendors if they can handle cardboard, too. That lead to greater recycling poundage across the portfolio and saved AMLI money—recycling vendors often charge a flat fee, while garbage collectors charge by the pound. “If our on-site teams know what vendors are doing across the country or region, you can leverage that,” Schreiber says.
Tague says the next big improvement will come in electrical usage. “I think people are not used to measuring their electricity in the common area,” he says. “We weren’t able to give them data on the level [by meter] that the dashboard does.”
Others are impressed by the amount of information AMLI can provide its property-level managers. “They definitely have more information,” says Ric Campo, CEO of Camden Property Trust, a Houston-based REIT. “Information is power, as we all know. That’s helping them implement these strategies on a more cost-effective basis.”
Information Overload
In some ways, the industry is still figuring out how to build green. For AMLI, the problem wasn’t new construction. It was the approximately 24,000 units in their existing stock. “Everybody is spending time, money, and effort thinking about how to make new development greener,” Mutz says. “The bigger question is how do you make the millions of existing units greener?”
Industry Leaders
AMLI Residential has made great strides in measuring its energy usage, but other apartment firms are not far off. Here’s who’s getting ahead of green—and how.
CAMDEN PROPERTY TRUST
Like AMLI, Houston-based Camden Property Trust has developed a green task force focusing on energy efficiency. The first thing it tackled across its portfolio: low-hanging fruit such as lighting with fluorescent tubing and low-VOC [volatile organic compounds] paint. The company is also working to reduce its paper consumption by totally automating its accounts payable system, thereby reducing the number of checks that need to be cut, as well as introducing an online leasing system where leases aren’t printed and can be renewed without paper. And the pause in development has given Camden a chance to green its development pipeline with products such as reflective roofs.
GABLES RESIDENTIAL
Atlanta-based Gables Residential is making tremendous strides in monitoring its water and electricity usage in common areas; tracking the amount of recyclable waste it collects as well as the volume of product consumed at its corporate offices; and measuring the amount of education about sustainability that its residents receive. The company has been involved in green development for more than 15 years and is still pushing to meet certification standards in the cities in which it builds. For existing properties, it has developed a catalog of green products. And Gables is also creating a certification program for its maintenance and property management staffs, while simultaneously exploring whether alternative energy sources could power its leasing offices.
POST PROPERTIES
Atlanta-based Post Properties is yet another firm in the midst of mobilizing a green team. The firm’s green team is composed of eight people from across its corporate, managerial, and property levels, including maintenance folks. The team has made quite an impact. It has done a portfolio-wide lighting swap out to fluorescents; moved to organic pest control inside of units; selected native plants that require minimal water for its landscaping; and installed low-flow toilets and flow restrictors on faucets and showerheads. Post also does its own internal submetering, which allows the firm to identify energy wasters, such as a leaky faucet, faster than an outside vendor might be able to.
UDR
Highlands Ranch, Colo.-based UDR has been vocal about the company’s dual emphases—technology and green. Their primary initiative: To outfit all units—new, redeveloped, or simply being turned—with green energy devices ranging from compact fluorescent bulbs to low-flow fixtures. And the REIT has plans to be the first in the industry to offer full energy disclosure (of average energy costs per unit) via the Internet and mobile devices. They predict that such information reporting will be mandatory, and an industry norm, within three to five years.
One option, of course, is grading managers through the green dashboard. The downfall there? If they have a property that bleeds energy, there’s little a manager can do. That’s where the second part of AMLI’s strategy comes into play. “We went out and devised our own index so we could rank our properties on a sustainable basis across our portfolio,” says Wolf, who worked on AMLI 900, a 440-unit high-rise in Chicago that was AMLI’s first LEED-certified building.
AMLI uses two devices to measure its buildings’ efficiency for its grading system. First, the company uses the blower door diagnostic test to measure how tightly sealed a space is. The test works like this: A tester shuts the entry door to the unit, closes the exterior windows and doors, and opens up the interior doors. Then they turn the fan on, which forces air out of the units. “How hard that fan works will tell you how leaky your home is,” Schreiber says.
Air can also leak through heating and air-conditioning ducts and vents, escaping into the attic and putting an extra strain on the HVAC system. And that’s what AMLI studies with its second test—the duct blaster diagnostic tool. “We pump a bunch of air into the duct system and measure what and how much comes out of the supply registers,” Schreiber explains. “Whatever is missing is lost in the duct work and reduces the efficiency of the system.”
Originally, AMLI brought in outside firms to administer these tests and rate its properties, but it soon chose to send six employees through a Home Energy Rating System (HERS) course, used by the single-family industry, where they’d learn how to test the apartments.
“We gather data and then come back and put that into a spreadsheet to get a snapshot of the performance of our apartments,” says Timothy Gianndrea, vice president of construction for AMLI. “We use that information to make improvements relative to the issues at the property.”
AMLI’s new team has tested around 60 AMLI properties around the country. When they’re finished with their testing, they generate a report, giving it a grade between 1 and 100 (with 1 being the most efficient and each number above that signifying a percentage point more efficient). Roughly 70 percent of this score is comprised of a property’s energy efficiency, with another 10 percent coming from its water efficiency, indoor air quality, and site sustainability.
Though AMLI goes through a deliberate process to make sure its fixes provide the intended results, it’s finding that the fixes are fairly simple, such as insulation, caulking, weather-stripping, and lighting retrofits in all common areas and clubhouse. “When they get a HERS test and an energy audit, there’s a whole section that lists the types of things they can do for immediate results,” says Steve Hallsey, president and CEO of AMLI Management Co.
For instance, AMLI found it can reduce water usage by 20 percent if it puts restrictors on its showerheads and faucets. If there’s a duct leaking in the attic, the company could apply spray foam in the roof—holding the air in the structure. “Instead of solar, geothermal, or nuclear, all you really need to do is caulk,” Mutz says. “You can do an amazing amount of stuff by being smart and focusing on the low-hanging fruit. As an industry and as a nation, we have been remarkably wasteful when it comes to energy. We think we will be able to achieve a whole lot by simply leveraging a little common sense, some focused effort, and some smart folks knowledgeable in building design and operation.”
Information Advantage
Now that AMLI’s green dashboard is up and running, the goal of the project is to show property managers exactly how much energy the lights in their clubhouse are costing or how many tons of recycling they’re doing a month. And the energy audits are wrapped up, so there will be time to do just that.
One new frontier is, of course, the multifamily world outside of AMLI. Already, the company is working with Boca Raton, Fla.-based Altman Cos., which is planning energy audits at two very different properties. At the 279-unit Satori in Ft. Lauderdale, Fla., there are a lot of green touches, but Joel Altman, chairman of the company, wants to make sure he’s getting the most bang for his buck. Meanwhile, in the second project, Altman is having AMLI test a troublesome high-rise for the elderly in downtown Detroit that was once a state-of-the art building. “We’re getting killed by utilities,” Altman says. “We thought this is a great place where we might be able to test.”
But there’s also potential for the green dashboard itself to become a revenue generator. Consider what AMLI’s peer Camden did with the YieldStar revenue optimization system—launching the technology in-house as a way to improve efficiencies and then spinning it off into its own product line. Campo says he sees potential for AMLI’s green dashboard technology to ultimately be packaged for the rest of the industry to use on its computer systems as well.“What AMLI is doing can ultimately be commercialized in the industry overall once it’s more proven,” Campo says. “The idea of shutting lights off and changing out regular and fluorescent bulbs—you don’t need a lot of specific technology to do that. But to monitor your electrical use or indoor air quality or to do some of those things, it does take technology.”
Right now, AMLI is using its energy audits to break down the payback on any investments they make seven months up to four years from now (or even for a more extended amount of time). “We tally it up and say this is roughly the type of payback you can expect,” Schreiber says. “We also try to help our partners understand what savings will be direct to ownership and what will accrue to the residents and therefore have an indirect benefit to the owners.”
The green dashboard measures utility and energy costs across common areas, clubhouses, leasing offices, pools, amenity areas, and vacant units. That still leaves a lot of square footage controlled by residents. And other than education (see “Resident Training” on page 27), there aren’t a lot of ways to control resident usage other than structural fixes, such as caulking or weather-stripping.
Tague says the company has thought of opening the dashboard up to residents, but ultimately, it may just post the results and appeal to their sense of competition. “We can tell residents how they can move their property from the lower half of the ranking to the upper half of the ranking,” he says. “Some people will become competitive, and they’ll think about not running their washer until they have a full load.”
Mutz sees a lot of advantages with his green investment. For instance, energy represents about 13 percent of AMLI’s operating expenses. If AMLI can reduce energy by 10 percent (even across 20 percent of a property), that’s huge.
And it’s putting the company ahead of the game, especially if localities tighten up their energy usage standards or even go in the direction where they require apartment companies to publish energy usage per unit (which is something some companies are exploring). Then, Mutz thinks the apartment operators with a lead in energy usage reduction will be winners. There is no doubt in Mutz’s mind that over time, regulation will increase and government at all levels will mandate ever-increasing requirements that lower energy consumption and enhance sustainability. And that’s not all Mutz is banking on.
“It’s not that we can make the living experience at an AMLI apartment just a little bit better,” Mutz says. “We can make living at an AMLI community a lot more enjoyable of a place to live. There’s more satisfaction. Going green has a very positive impact on the perception of the AMLI brand.”
