Each month CEG is presenting a blog contributed by members of Professional Women in Construction (PWC). Founded in 1980, PWC is a nonprofit advocacy andsupport organization dedicated to the advancement of professional, managerial and entrepreneurial women in construction and related industries. PWC has chapters nationwide.
Successful property management requires developing a capital plan and a budget that will sustain the building structure, support its function for years and enhance the bottom line for all shareholders. Having a structured and consistent approach is critical.
Each property manager should have a process in place to gather and analyze information regarding the condition of the building’s structure, enabling management to pinpoint exactly where repairs and upgrades need to be made, estimate costs and prioritize each issue according to specific objectives. Running funding scenarios will demonstrate the impact of different spending levels. Having a thorough knowledge of available tax incentives and rebate programs is essential in integrating all possible cost savings into capital budgeting. Another critical aspect in developing credible capital plans is ensuring the validity of the underlying data. Accurate and detailed cost and condition information forms the basis of the strategic capital planning and property management process and is required in developing defensible budgets and obtaining funding.
Preventive maintenance is a subject often omitted in capital planning and one of the main causes of building failure. Gradual deterioration erodes function and decreases value. Inadequate building performance can stem from the envelope’s failure to control moisture, from the degradation of mechanical systems, or from shortcomings in the original design. Emerging priorities, coming more to the forefront in recent years, are: protective design for the building envelope and the need to maximize energy efficiency and sustainability. Proper capital planning requires collecting detailed data on a building’s condition and its deficiencies.
Turning a strategic plan, which often has a five- to seven year horizon, into an actionable annual budget can be challenging. Funding all identified capital requirements can be accomplished by prioritizing and implementing all available tax incentives and rebates. The process of prioritization begins by categorizing identified requirements. These categories typically include major operations and maintenance projects including: system renewal; strategic capital projects; and mandated projects such as those involving regulatory compliance or lease obligations.
The capital planning process often identifies opportunities to bundle similar capital projects, based on the building system affected, physical location, or the trades involved. This bundling enables property managers to obtain better prices for materials and more competitive labor costs. When property managers and shareholders have a basis for making informed decisions about project prioritization and capital budget allocation, they are less vulnerable to the hefty premiums of emergency repair projects. The ultimate result is a budget based on an objectively ranked list of capital needs, with clear funding and cost assumptions. Sustaining and maintaining the program is a critical final phase in developing an accurate budget that reflects current priorities.
A major cause of under-funding is the lack of budget credibility. Accurate data and predictive tools enable the development of realistic and defensible multi-year capital budgets.
Implementing the newest technologies and innovative sustainable materials is essential in building efficiency and cost saving opportunities into building operations. Energy-efficient buildings produce real savings, which fall directly to the owner’s bottom line. Improving buildings’ energy efficiency also enhances property value and significantly reduces operating costs, sometimes by as much as hundreds of thousands of dollars a year. A detailed understanding of life cycle renewal timelines and costs is important to effectively prioritize system requirements and avoid unanticipated spikes in required funding over time.
Property managers should monitor the ever changing regulatory compliance as well state, federal and local incentives available to building owners. New York State is one of the national leaders in terms of providing incentives for energy efficiency estimated at $250 million per year.
NYSERDA’s Multifamily Performance Program offers commercial, industrial, and multifamily (75+ units) customers rebates on equipment upgrades, performance-based custom incentives, and co-funded energy audits. Pre-approved projects are eligible for 50 percent co-funding for Level III energy audits, up to $67,000. Post-audit, customers can apply for rebates toward energy efficient capital upgrades. Local power companies offer various utility rebate programs.
Since 2007, energy savings programs have been implemented in more than 4200 multifamily buildings. The following are just a few examples of how commercial and multifamily properties can benefit from proper capital budgeting, funding allocation and the implementation of available incentive programs:
• Riverview Court is a 343-unit affordable housing complex that was able to save 25% or $319,875 on annual energy costs. Riverview earned $411,600 in construction incentives and qualified for a bonus payment of $205,800 for achieving energy savings greater than 20%. Riverview Court received a total of $617,400 in NYSERDA incentives, which constituted 25% of total project construction costs. Energy efficiency was accomplished by replacing aging windows, lighting, refrigerators and installing electricity sub-meters.
• Trump Tower at City Center in White Plains, NY reduced its energy use by 21%, qualified for $280,000 in incentives as well as the loan to fund the remaining portion of the project. Construction improvements paid for themselves in just over three years.
• Phipps Garden Apartments is a two-building apartment complex in Queens that was required to upgrade its #6 oil-burning boiler. The owners decided to invest in a comprehensive energy upgrade, which earned $300,000 in incentives and is now saving $180,000 on energy annually.
Long-term capital planning with multi-year forecasting delivers substantial cost savings and efficiency gains, reduces financial, operational and legal risks, and provides long-term benefits to all shareholders.
Professional Women in Construction (PWC) board member, Dorothy Wasiak, Director Capital Planning/Senior Asset Manager, Matthew Adam Properties, is co-chair of the Continuing Ed and Mentorship programs together with Nancy Czesak, RA, first vice president, Tishman, an AECOM Company.