These articles were written by Bart Jackson and Karen Hodges Miller
Preserving Land Profitability
For years each has circled the other with suspicion. Land conservationists and those with a financial stake in land have seen themselves on opposing ends of a balance scale, believing that for one to rise, the other must fall. But international land conservator Story Clark insists that profitability for each is best achieved by strong partnerships.
In her book, “A Field Guide to Conservation Finance,” Clark points to Linda Mead, executive director of the D&R Greenway Land Trust, as one of the environmentalists who is doing it right. To explain the beneficial partnerships being worked out between landowners, financiers, and the conversation communities, D&R Greenway, along with the Mercer County Green Table, is hosting Clark’s talk, “About Land Finance Strategy and Finance,” on Monday, September 17, at 6:30 p.m. at the Johnson Educational Center. Advance registration requested: email@example.com.
Having been a landowner, a government worker, a preservation advocate, and finance advisor, Clark has witnessed land conservation from virtually every side. Raised in New York City, Clark appreciates the value of any size open space. “Also, as the daughter of a Wall Street banker, I realized early on that investors in that community are more likely than average to have a strong interest in preserving land,” she says.
Graduating from Hampshire College in l976 with a bachelor’s degree in biology and creative writing, Clark went immediately into environmental work. She joined the Alaska Land Project, which in the late 1970s doubled the size of that state’s parkland. In l989 she founded the nationally renown Conservation Alliance (www.conservationalliance.org), partnering with Patagonia Inc. to do so.
For the last 30 years Clark has made her home in Wyoming, championing conservation efforts there. She also runs a smaller land trust in Massachusetts, and serves on the board of Conservation International, boosting local economies around the globe so that land may be better protected. “People first have to be able to eat, before they can think about preserving land wisely,” she says.
Clark wrote “A Field Guide to Conservation Finance” to provide both tools and inspiration.
“Land owners are the people with the opportunity to shape this country,” she says. “They desperately need guidance from the conservation and financial communities working in partnership to make it work.” She says that there are so many financing techniques that are simply ignored or under used.
Traditional tools. Singer and avid environmentalist Pete Seeger referred to banks, somewhat disdainfully, as “those hallowed halls of marble.” Yet this is where Clark insists every land conservation group can find its biggest boosters. In this age of competitive home mortgaging, banks have become more creative with standard instruments such as bridge loans. Such loans are often ideal when a piece of property suddenly comes on the market and a conservation group needs cash prior to negotiating final easements.
Additionally, no institution has a greater handle on land use around a community than the local bank. By making friends with bank board members and executives, a land conservation organization can learn of upcoming potential properties. Lenders are also an ideal source for creating support networks. Bankers are money smart, and see the obvious benefit of linking a business with a conservation group for the launching of a financially involved project.
Seeking spokespeople. Build your support network personally, one business at time, suggests Clark. Somewhere in the community is a business owner who understands the benefit of a local park, riverside greenway, or nature preserve nearby its retail centers. Hotel owners are often the first to see this advantage.
Clark points to a local conservation group in Crested Butte, Colorado, which linked up with a sporting goods store. To help preserve the mountain bike and hiking trail areas, the store adopted a voluntary store surcharge on all its outdoor sporting goods. Hiking and biking customers gladly paid a little extra to help keep their favorite sport sites out of developers’ hands.
Once established, these first business partners can become the spokespeople, enlisting other business people to join the movement. All along the way it is vital for the conservation organization to thank its business partners and to keep them informed. Nothing so encourages future participation as a newsletter spelling out the conservation achievements, or a picture in the paper of a business owner presenting a check. (With the banker in the background, of course.)
Negotiation by ear. “This is where Linda Mead is so good,” says Clark. “She approaches the landowners and listens to all their concerns and needs, and then builds her land use suggestions from there.” Rather than seeing landowners as mere donors, they are best viewed as a prime, obvious partner by those who want to preserve open land.
These are individuals with their own concerns. They want to provide an easement, but they care even more about providing adequately for their spouse and heirs. They might be willing to donate the wetlands segment of their property, and then develop the rest, if something could be worked out with the EPA.
“Land conservation is a nuance art — not an all or nothing proposition,” insists Clark.
New financing opportunities. Financial opportunities have exploded far beyond the standard list of formulaic instruments available 25 years ago. Land conservators may not have kept up, but today’s financiers are reducing loan hurdles in ways that can only be described as admirably artistic.
In the area of land use, lenders are showing themselves especially agile due to the increasing scarcity of the product. The tax benefits of granting easements are being introduced as deal makers. In researching her book, Clark interviewed over 275 individual land conservation organizations, and her main surprise was how little these groups knew of the new capital opportunities available.
Landowners, as well, remain unaware of their many options. Most think that the only way to keep their land in its natural state is outright donation or selling it to a preservation organization for a pittance.
But while growing populations create pressure for development, the very scarcity of the land is giving landowners incredible new control. With the proper advice from financial and management professionals, both private and public interests are being rewarded.
“Land conservationists have seldom had such an opportunity,” says Clark. “Now is their time to jump in and get what we all want.” — Bart Jackson
Is Going Solar Worth
The Initial Cost?
Solar equals clean. It also equals savings — but only if you can afford the steep buy-in. Legions of homeowners have discovered this sad fact, and now CEOs are in the game, puzzling over whether the enormous up-front cost of installing solar energy systems is a good investment in lowering utility bills and in building goodwill in the community.
The choice to go solar may be easier now because a couple of Yale business school graduates have come up with a remarkably creative solution that lets anybody into the solar game. It’s so good that you’re going to wish you had thought of it.
In 2005 Jesse Grossman and Vanessa E-H Stewart co-founded Soltage in Jersey City with the idea of crushing solar capital-cost barriers. They explain how their service operates at NJTC’s “Investing in Clean Tech” seminar on Tuesday, September 18, at 4 p.m. at Rutgers University’s Institute of Marine & Coastal Sciences auditorium, Cook College campus. Cost: $60. Visit www.NJTC.org.
The seminar, designed for investors, entrepreneurs, and potential clients, consists of Grossman explaining Soltage, followed by two venture capital panels. Moderators are Alan Wink and Richard Cleaveland both from Amper, Politziner & Mattia. Panelists include Alan Kelly, managing director of SJF Ventures; Greg Olsen, CEO of GHO Ventures; and Teddy Rice, director of Ironwood Ventures.
Grossman, whose father was an executive with the Ford Foundation, grew up all over the world — in Indonesia, Africa, Hawaii, and Washington, D.C. Stopping off in Minnesota, he took his bachelor’s in biology from Carleton College, graduating in 2001.
Armed with his B.A., Grossman headed for Tanzania, becoming a landscape resource evaluator. “These were gigantic, vital problems,” he recalls. “The country might want a hydroelectric dam for electric power, yet it might sacrifice part of a game reserve, which generated great eco-tourism cash flow. How do you evaluate and solve this dilemma?” He later returned to Indonesia, making similar analyses.
Grossman then entered Yale business school, where he majored in emerging markets, and met fellow MBA student, Vanessa E-H Stewart, with whom he founded Soltage.
“We selected New Jersey as corporate headquarters, because it was the state most committed to the solar energy cause,” says Grossman. The state has set the goal of having 200,000 megawatts of solar power up and running by 2020. Today New Jersey boasts only 40 solar megawatts, but the clients (mostly residential) are stacking up as they wait for installing from a handful of companies, all of which have huge waiting lists.
The goal of 200,000 megawatts should be achievable, and a big question now is how great a hand the state’s businesses have in bringing it about.
Solar’s bottleneck. There is no doubt that solar is the wave of our energy future. Grossman points out that, while America’s energy needs are rising exponentially, no new traditional energy installations are being built. Major utilities are continuing to fill their grid only with existing coal, gas, and nuclear plants. This makes solar not only a cleaner, cheaper source — but the source-elect by default.
The hurdle is that solar panels cost a lot of money. At approximately $800 to $1,000 each, it takes 50 panels to produce a 10,000 watt array, enough to power up most homes. In a number of states, New Jersey foremost among them, rebates have brought the price way down — to a point where the arrays will pay for themselves in five to seven years.
But a commercial plant can easily need 500,000 watts of power, and few companies are willing to spend the money it would take to derive it from solar panels. The state, meanwhile, has not offered to subsidize the cost, as it does for homeowners.
The Soltage solution. Grossman is sending his company’s engineers out to a potential clients’ sites. They evaluate energy needs, determine the required size of solar array, and then figure out the best possible placement. (About half of the clients have sufficient open space to consider placing the panels on the ground, which is cheaper and more efficient than the roof.)
After installation Soltage retains ownership of all the panels and other equipment. The client simply buys the solar energy produced on his own property. Contracts are offered for 15 years, after which the client may purchase the system or extend the contract.
The buyer’s real advantage comes with energy savings without an initial outlay. How much savings varies on size, but 25 percent is the estimated average, with 10 to 30 percent being the general range. Considering that electricity may run to 17 percent of a manufacturing plant’s operating expenses, such savings are not insignificant.
Leaner utilities. Soltage has followed the new millennial corporate format of small and simple. This nine-person firm outsources all of the installations and keeps no inventory. It has signed up a total of potential 60 clients, 40 of them in New Jersey, yet visitors will not find stacks of solar panels in the corporate headquarters yard. Everything is delivered from the manufacturer to the site for installation.
No installations have been completed yet, but Grossman expects that most of his clients will be drawing electricity from his company’s panels by the end of the year. If all the potential clients solidify their deals and all the installations run smoothly, Grossman estimates that Soltage should have revenue of $55 million by the end of 2008. It plans to reach this point by using payments from early customers to fund the purchase of solar panels for new customers.
Obviously, every company would like to purchase its solar array outright, and reduce electric bill to zero, but as long as solar panels remain large, heavy, and costly, Soltage could have found a niche — and formed a whole new utility format. — Bart Jackson
Wednesday, September 19
Green Solutions & Energy Costs
You won’t find Jeffery Grant chained to a giant sequoia as lumberjacks are revving up their chain saws. You won’t even spot him hoisting a sign in the local “Halt Global Warming” march. He is not that kind of environmentalist. Rather, Grant is an engineer who works in the Jersey City offices of Mack-Cali Realty, the state’s largest office landlord, where his job is to procure energy, and his mandate is to prove that green energy and green buildings are the most profitable way to go.
To help brokers, builders, and tenants understand the framework of green solutions, the New Jersey chapter of the National Association of Industrial and Office Properties presents “The Rising Cost of Energy and Its Impact on The Future of Real Estate Development” on Wednesday, September 19, at 5:30 p.m. at the Sheraton Edison Hotel. Cost: $135. Visit www.njnaiop.org.
Grant moderates the discussion. Panelists include Shayam Kannan, vice president and director of research and development with Robert Charles Lesser & Co.; John Gattuso, senior vice president national development with Liberty Property Trust; and Lloyd Rosenberg, president and chief executive officer of DMR Architects. “Our goal here is not so much to pass out seminar-style energy saving specifics, but rather give people some approach avenues for going green,” says Grant, who sees himself as having “one foot in the ice cold bucket of engineering and the other in the boiling hot bucket of business.”
A native of Trenton, and son of an electrical engineer, Grant earned his bachelor’s in mechanical engineering from Tulane University (Class of l980) and his MBA from Rutgers.
Grant then worked as a licensed engineer for a development company, and in l991 opened his own consulting business. For the next six years he advised commercial property owners on how to reap energy savings. He joined Mack-Cali in 1999. As director for corporate energy, he buys the most cost efficient power for its 34 million square feet of office space, valued at $5.7 billion.
“Buildings are extraordinary complicated pieces of machinery,” says Grant. “They are living, breathing systems, which when run properly are truly things of beauty.” Lowering energy costs in these complex machines involves two general options: using a cheaper source of fuel and/or fixing the structure so it demands less fuel. Simple sounding, but Grant is quick to point out that pleasing the tenant becomes an all-important third factor for the landlord.
Mining existing technology. While parades of new low-energy gadgets are coming onto the market, Grant insists that going back to basics will net the greatest savings. Changing to efficient lighting throughout the entire structure, rather than in just high traffic areas, makes for the quickest return investment. Changing to high efficiency, low-gear motors is an often-ignored cost cutter, too.
New Jersey and California are the national leaders in encouraging energy thrift. The Garden State will rebate commercial properties up to 50 percent for switching to high efficiency boilers and chilling units. “Retrofitting becomes a simple matter of math,” says Grant. “An energy-upgrade dollar invested not only reduces cost, but leverages the property’s value for future resale.”
Automated systems are an example of technology that has been around for a while, but that is just catching landlords’ attention. Having at one’s fingertips the ability to regulate air, lighting, and temperature 24/7 throughout the entire plant holds an enormous appeal. In addition to the cost savings and increased productivity potential, tenants love the sheer high tech glitz of the device. Many, Grant notes, are even putting it on their list of demands.
LEEDS advantage. Tenants are lured by the tangible and obvious. If an owner has $50,000 to invest in his building, the installation of marble floors in the foyer has more immediate appeal than an improved-efficiency boiler system in the basement. “The fact that you have reduced energy costs from 4 watts per square foot to 3 watts can be a pretty esoteric selling point,” admits Grant.
However one little 10 by 14 inch plaque is increasingly becoming a deal maker. The LEED (Leadership in Energy and Environmental Design) green building rating system provides a standard that is beginning to gain stature. Sponsored by the U.S. Green Building Council (www.usgbc.org), credits are given to a site for water savings, energy efficiency, materials selection, and more.
Enough credits qualify the building for certification, silver, gold and platinum awards — and a very nice plaque in that foyer. Virtually every buyer or lessee knows that sustainability means savings and this very tangible ranking is boosting property values nationwide.
In addition to the energy savings, tenants are gleaning great publicity from operating in these acknowledged green quarters. “Even if you sell a totally non-enviromental-related service, it presents a more trustworthy image for your company,” says Grant.
Energy sources. For companies seeking alternative power sources, New Jersey is the right home. In fact, it is almost impossible not to buy some clean power in the state.
“Our state’s immense commitment to solar energy puts it as part of every energy supplier’s offering,” says Grant. New Jersey demands that each utility produce a fixed — and annually increasing — percentage of clean energy. This cleanly-produced power is bundled into the total energy kilowatts sold to all customers.
Grant notes that several Mack-Cali clients have been willing to pay more for totally green energy sources. Even the environmental ostriches are being dragged along by stricter governmental regulations on energy efficiency. Savings down the road make the switch to green easier to swallow. Grant points out that incorporating — or upgrading to — energy efficient systems is one of the easiest ways in which office tenants can save money. This will only become more true as energy costs rise. — Bart Jackson
Saturday, September 22
Hard Times in Real Estate Can Spell Opportunity
To understand the real estate market you must understand its cycles, says real estate developer R. Donahue Peebles. There is a time to buy, a time to sell, and a time to just sit back and watch. The trick, of course, is know what part of the cycle the market is in.
Peebles, the most successful African American real estate developer in the country, is CEO of the Peebles Corporation, which is based in Miami. He is the keynote speaker at the Metropolitan Trenton African-American Chamber of Commerce’s 10h annual dinner gala on Saturday, September 22, at 6 p.m. at the Westin Hotel. Cost: $150. Register at www.mtaacc.org.
Peebles is also holding a book signing from 1 p.m. to 3 p.m. on Saturday, September 22, at the Classics bookstore on Warren Street in Trenton.
The current credit crunch is causing havoc in the real estate market, says Peebles, but that doesn’t mean that people should panic. “Wall Street executives are manipulating the frightened public,” he says, “but there are ways to plot a realistic course of action.”
The changes do have several specific impacts that developers must take into account. Because the cost of borrowing money has increased, “fewer deals are being made right now,” says Peebles. Borrowing costs affect the value of land, and the additional money needed to pay interest also can also erode profit. While Peebles suggests that the average homeowner wait for better conditions before selling a home, he says that if an investor or developer understands the market, it can still be a good time to buy. In fact, he recently announced plans to build a new $2.5 billion luxury hotel in Las Vegas.
Peebles’ $4 billion real estate portfolio includes hotels, residential, and Class A commercial properties and developments in Washington, D.C., New York City, San Francisco, Las Vegas, and Miami Beach. His first book, “The Peebles Principle,” was published this spring by John Wiley and Sons. In it he lays out the lessons he learned while building a quarter billion dollar personal fortune, and offers advice on how to succeed as an entrepreneur.
Peebles grew up in Washington D.C. His father, a government clerk and auto mechanic, left the family when he was five. An only child, he was raised by his mother, who worked at a variety of jobs in the real estate industry, including secretary, broker, and mid-level Fannie Mae executive. As a teenager, he writes in his book, “I was aware of our financial limitations, about being able to afford the necessities of rent, groceries, and school clothes, and from that age on I wanted to make sure I could avoid those same worries when I became an adult.”
While he was still in high school, he worked to help support the family. He was urged on toward success by his mother and by his grandfather, “a hotel doorman who sent four of his five daughters to college.”
He enrolled in Rutgers in 1978 with a plan to study medicine, a time tested road to success. He quit after less than a year, however, when he “ran out of money and interest.” He returned to Washington, D.C., and started to learn about the real estate business from his mother, who helped him get a start as an appraiser. He then became a real estate salesman, then — by his mid-20s — a developer. He reeled in his first multi-million dollar deal, for an office complex in Washington, D.C., less than 10 years after he had dropped out of Rutgers.
He felt that his decision to learn the business from the ground up had been vindicated. He stresses, however, that while he did not finish a traditional college degree, he has never quit learning, and is proud to have been awarded an honorary doctorate from Johnson & Wales University.
No matter what field you plan to go into, “get good skills,” he says. He took classes and read books on all different aspects of real estate and business before becoming a developer. But, he adds, “college prepares people to think. It doesn’t give you experience.” That, you can only get the hard way.
Peebles doesn’t recommend that inexperienced people jump into the real estate investment or development market right now. But he does have advice for experienced people who want to make money even if this tough climate.
Recognize value. You must become familiar with the marketplace, says Peebles. “If an office building has been going for $300 a square foot and suddenly drops to $200 a square foot, what does that tell you?” It may be a great deal, or a very bad one, depending on the circumstances.
Has there been a significant drop in employment rates in the area? Has there been an increase in crime in the neighborhood? Evaluate all the factors before deciding to buy. Is the drop in price due to the current credit crunch, or is there another problem?
Take risks. To be successful in real estate “you need to have the mind-set of the entrepreneur,” says Peebles, and that includes being willing to take a risk.
Identify opportunities — and be ready to seize them. “Only by putting yourself in the right place at the right time can you seize opportunities,” he says. An entrepreneur must be able to recognize a good opportunity and be ready to take advantage of it.
“During the savings and loan crisis in the 1990s values plummeted. There were a lot of good opportunities around for people who had the money to buy and hold.” The people who made money at the time were the people who had ready cash and could avoid the high interest rates.
Many people today, however, are not in the financial position to think about investment real estate. Instead, they are worried about saving their homes. Peebles also has tips for struggling homeowners, too.
Negotiate. Don’t be afraid to negotiate with your lender, he says. Banks do not want to be property owners. They do not want to foreclose unless they are forced into it.
Tighten your belt. Realize that you might have to tighten your belt for about a year to keep your home. Don’t spend on unnecessary items. As values recover, you will be able to refinance in two or three years and get a better mortgage rate.
Don’t throw good money after bad. If you are in default, there is no market for resale, you can’t rent the property or renegotiate the loan, you are better off letting the mortgage go, says Peebles. In other words, if the situation is impossible, don’t throw good money after bad. You can always rent a home.
Finally, says Peebles, if you do have the money, now may be a good time to buy a home. “Go against the herd and get something of extraordinary value when no one else wants it.”
Peebles continues to keep his eye on his proverbial opportunity clock. The peak time to buy is when the hands are between 4:30 p.m. and 8:30 p.m., he says. The best time to sell is when the hands are between 10:30 p.m. and 12:30 a.m., and the time to be a spectator is from 12:30 a.m. to 4:30 p.m. What time is now? “About 2 o’clock,” says Peebles.
— Karen Hodges Miller