Q & A with Christian Gunter, who directs the Responsible Property Investing (RPI) initiative at Kennedy Associates Real Estate Counsel, LP. RPI is a comprehensive approach to real estate that promotes the value of a building’s social, environmental and financial attributes within Kennedy’s investment portfolio. Kennedy Associates, a full-service registered real estate investment advisor, brings thirty years of real estate investment expertise to a select number of public, corporate, and Taft-Hartley retirement systems, as well as major university endowments. Kennedy serves some of the country's largest institutional investors in addition to serving open-ended commingled funds and closed partnerships. Kennedy currently represents more than 300 institutional investors, and has more than $10 billion of real estate assets under management.

LEED – what’s in the acronym?

Christian Gunter (CG): LEED stands for Leadership in Energy and Environmental Design. LEED focuses on sustainable building development and operations and maintenance practices through the adoption of universally understood and accepted tools and performance criteria. The LEED ratings system was originally developed in 2001 and is continually being refined by the 17,000-member U.S. Green Building Council (usgbc.org) through an open, consensus-based process led by volunteer committees composed of practitioners and experts from a cross-section of the building and construction industry. The USGBC is a non-profit organization that administers and verifies LEED certification. LEED provides third-party certification with nationally accepted benchmarks for the design, construction, and operation of high performance green buildings. LEED promotes performance in five key areas of human and environmental health: sustainable site development, energy and atmosphere, water efficiency, materials and resources, and indoor environmental quality. These categories are scored on a point scale, with certified projects earning LEED Certified, Silver, Gold, and ultimately Platinum certifications as one achieves higher point totals.

Who uses LEED and what is different about a LEED certified building?

CG: LEED is used by real estate and design professionals, including architects, developers, real estate brokers, consultants, facility managers, engineers, interior designers, landscape architects, construction managers, lenders, and government officials. LEED certified projects receive a plaque, which is the nationally recognized outward symbol that the building is environmentally responsible, and a healthy place to live and work. LEED-certified buildings typically provide the following:

• Lower operating costs resulting in increased asset value
• Less waste sent to landfills
• Less energy and water consumed than non-LEED buildings, often upwards of 30%
• Healthier indoor environmental quality for occupants
• Reduced greenhouse gas emissions
• Qualify for tax rebates, zoning allowances, and other public incentives
• Demonstrate an owner's commitment to environmental stewardship and social responsibility

Where is the market for LEED certified buildings going?

CG: To date, there are approximately 1,400 LEED certified buildings. This is a substantial figure given how recently the standards were put in place. The rate of adoption, however, is accelerating. There are currently more than 14,000 projects in process seeking LEED certification in a total of 41 countries. This major shift in the real estate industry compares to the introduction of enforceable zoning and building codes. Though concern for the environment is a factor in the rapidly growing demand to obtain LEED certification, the primary motivation behind this drive is financial. The cost of building a basic LEED certified project has fallen to 1 to 2 percent of additional project cost, and these costs are often quickly recouped through increased operating efficiency as well as through publicly funded rebates and incentives which are available in many markets nationally. LEED certified buildings offer a certain cachet that others don’t in the market. Growing evidence suggest LEED buildings lease up more quickly, and at higher rates than non-certified buildings. We expect LEED rated buildings to sell at a premium. Many large tenants seeking new or additional space now require LEED certified real estate. They often use their LEED ratings as recruiting tools by promoting superior work environments to potential employees. LEED ratings factor in amenities such as showers and bike storage, day-lighting and views, in addition to open space areas including plazas and roof tops. The “walkability” of a building and its proximity to transit and community amenities such as shops, banks and housing are reinforced by the LEED rating system too. Tomorrow’s highly educated work force will demand LEED certified work environments.

Kennedy’s history with LEED

CG: Kennedy launched its Responsible Property Investing initiative in connection to the continued adoption of LEED standards and its historic commitment to using Responsible Contractors. RPI combines the sensibility and benefits of building and managing energy efficient, environmentally friendly buildings with economically viable and financially rewarding real estate investments. RPI focuses on sustainable development, property operations, economic fairness, and worker health. One of Kennedy’s most recognized RPI projects was the 2002 redevelopment of Brewery Block in Portland, Oregon. On behalf of the Multi-Employer Property Trust, Kennedy converted a former brewery into a transit-oriented, mixed-use office project with a significant historic preservation component. The project earned LEED Gold certification and met our own RPI guidelines. Today RPI is an essential part of Kennedy’s business model. It provides a framework for how we look at all investing opportunities. We currently have more than $1 billion in LEED certified assets under management, and more than $1 billion of LEED projects under development or evaluation. Our work implementing RPI as an investment strategy has not gone unnoticed. Earlier this summer, Kennedy Associates was selected for its RPI initiative as one of nine global winners chosen for the 2008 Urban Land Institute/Financial Times Sustainable Cities Awards. The awards honor ongoing programs that exhibit new ideas and forward thinking perspectives for the best sustainable land use practices. Each of the winners was recognized for their significant contribution in highlighting the importance of the concept of sustainability in real estate. The nine award recipients were selected from 18 finalists, chosen from a field of 86 entries submitted from 15 countries.

What is next for Kennedy?

CG: The financial benefits of sustainable development and building according to LEED standards continue to grow for new construction. However, there are huge benefits to be found in seeking LEED certification for existing buildings, especially pertaining to energy and water efficiency. On the forefront of this effort, Kennedy is participating in a USGBC LEED for Existing Buildings-Operations and Maintenance Portfolio Pilot program with a focus on sustainable operations and maintenance. As a part of this new program, Kennedy is working to achieve LEED certification for close to 35 buildings from our portfolio, representing 7.0 million square feet. Through this effort, we hope to be able to establish guidelines for the industry to improve the performance of buildings around the world. Kennedy Associates, headquartered in Seattle, has offices in Chicago, Dallas, Los Angeles, San Francisco, and Washington, D.C.

Burke, Warren, MacKay & Serritella, P.C. works with Kennedy and its clients around the country providing legal services for property acquisition, disposition, leasing and development. Recently Burke, Warren, MacKay & Serritella represented Kennedy and one of its pension fund clients in a joint venture development of a LEED certified office building in downtown Salt Lake City. Burke, Warren, MacKay & Serritella is proud of its affiliation with Kennedy. Doug Wambach is responsible for the firm’s relationship with Kennedy. He can be contacted at (312) 840-7019 or dwambach@burkelaw.com.