When you’re an established developer, switching markets and business models is difficult, but for Maryland-based Atapco properties, the transition is worth it if helps people and the environment.
Patrick Coggins, vice president of development, says the company has spent the last several years transitioning away from “greenfield” suburban projects, in which virgin land is cleared and excavated, to more environmentally friendly urban redevelopment and transit oriented projects.
“We’ve been turning the ship for the past three to four years,” he says. “Obviously it can’t happen overnight.”
Atapco Properties was formed after decades of expansion and mergers. It began with the American Oil Company, which started in 1910 with a one-horse tank wagon and three employees. As the company grew into an oil empire, it started investing in real estate and formed the American Trading and Production Corporation.
That company started developing properties from 1961 until it reorganized in 1998 and officially formed Atapco Properties as a subsidiary.
Coggins says Atapco Properties is shifting to green building because its owners want to be better environmental stewards, and see the long term benefit of practicing sustainability, despite the upfront costs.
Staying green while making a profit
So far the company has balanced profit and environmental stewardship. In 2014 it designed and delivered the first LEED Platinum Certified apartment building in Maryland, equipped with a large solar panel array that provides 13 percent of the building’s total electrical demand.
LEED Platinum Certification is the highest form of recognition by the non-profit, U.S. Green Building Council. To receive it, developers must score 80 out 100 total points on the LEED criteria; points are awarded for conserving heat through equipment like energy recovering wheels that use exhausted air from an HVAC system to preheat or precool air going into the building. Other criteria include using regional and recycled materials as well as reducing construction waste.
The certification process helps builders save money in the long run because it raises building values and cuts utility costs, but can be expensive up front, especially when it involves buying energy recovery equipment and paying for certification and commissioning of large commercial buildings.
Additionally, urban development or re-development projects tend to be more expensive than greenfield developments due to higher construction costs, environmental issues and dated infrastructure, Coggins says. However, he says there are many public-private partnering opportunities to offset additional costs.
For buildings that require expensive public infrastructure improvements, such as water, sewer or road improvements, tax increment financing (TIF) is sometimes available. Tax increment financing allows developers to use the increase in yearly property taxes that result from improving a building’s value to pay off bond financing of public improvements.
In historic neighborhoods, Atapco can pursue state or federal historic tax credits if it can maintain the historic character of the building. In low-income neighborhoods, the company can qualify for new market tax credits if it can show that its project will help revitalize the community.
Coggins says there are dozens of other programs like these and one of the challenges for his team is finding them and understanding how they work.
“It’s good for the sustainability of urban areas if developers are able to partner with communities to find creative ways to offset the high cost of urban redevelopment,” he says.
The right tenants
Another challenge for Atapco is finding tenants who appreciate the value of sustainable construction and take care of the equipment in their buildings. Coggins says it’s disappointing to lease to tenants who tamper with or disconnect equipment like energy recovery wheels because they don’t understand its cost or use.
He says ideal tenants are those who care about more than just their monthly rent. And while plenty of mom and pop shops are interested in green building, Coggins says he’s heartened by how often large retailers and franchises demand LEED Certification on the buildings they rent. Sustainable building lowers tenants’ utilities bills and provides marketing benefits, but Coggins thinks tenants also want to be better corporate citizens.
“Those kinds of tenants get it,” Coggins says. “Our goals are aligned and they understand the sense of goodwill [shown to their community] by pushing for sustainability.”
Moving forward, Coggins says Atapco wants all of its buildings to meet either LEED, or other green standards. Where tenant preference is an issue, Atapco will design the building’s shell with LEED standards in mind, but will leave any interior mechanical or electrical work up to the tenants to pursue.
Trying new things
In cases where Atapco maintains its own property, such as in a full-service apartment or office buildings, it can try even more complex, novel alternative energy systems. For example, Coggins says the company recently renovated an outdated office building in Carmel, Indiana, and was able to introduce more environmentally sustainable design elements, including a new geothermal heating system.
The system uses a series of pipes that run along the bottom of a nearby pond and into the building. Coggins says the bottom of the pond is cooler than the air in the summer and warmer in the winter. Pumps run the water through a heat exchanger which transfers the water’s heat (or coolness in the summer) to the building’s interior, reducing carbon emissions in the process.
The heating system has yet to go through its first winter, but Coggins says he’s excited to see how it performs. Using geothermal heat isn’t necessarily the cheapest and certainly not the easiest way to heat an office building, but like Atapco’s other changes, he says it’s worth it if it encourages other developers to try sustainable practices and prompts other tenants to demand them.
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