Getting Sustainability Efforts Off the Ground in Multifamily Buildings
A Q&A with Rae Schnabel of Maxus Properties
Maxus Properties is a management company operating in 13 states across the midwestern and southeastern United States. It currently has 14,000 units and 61 multifamily properties under its management. Maxus first implemented Urjanet in 2016 as part of its efforts to improve sustainability in multifamily buildings. Currently, Maxus uses Urjanet to pull utility data for 24 of its properties.
We sat down with Rae Schnabel, Director of Sustainability and Special Projects Coordinator at Maxus Properties, to learn more about the company’s efforts.
Sustainability efforts are still relatively new to the multifamily sector, and governmental regulations are driving many of the current changes. The multifamily sector is slow to embrace new efforts in large part due to the split incentive, or the fact that building-wide efforts don’t always affect property owners’ bottom lines.
Maxus Properties started its efforts by looking at common areas, where retrofits do affect the company’s bottom line, and exploring rebates available from utilities. Where Maxus has done completed in-unit retrofits, it has taken steps to educate tenants about best practices to help overcome the split incentive challenge and used those retrofits as a marketing tool.
According to Schnabel, another key challenge is educating property owners about the investment value of retrofits and the savings opportunities that exist. Maxus has not only completed retrofit projects for a fraction of the cost thanks to utility rebates, but it has also realized cost savings and increases in property values as a result. Along the way, the company’s CEO has been very supportive of sustainability efforts.
Schnabel’s advice to others: Just get started — start researching, start looking at your properties — just start somewhere. Finally, she shares the importance of data: “You’ve got to be able to show data at the very beginning of the project so afterwards you have the data that shows the impact of the project. You have to say: If we change out these bulbs with LED bulbs, this is how much we’re going to save and how much that will translate to next year and the years after. You just have to do that on every project. If it makes sense and if there’s money there to do it, then it’s a no brainer. The data drives it.”
“If it makes sense and if there’s money there to do it, then it’s a no brainer. The data drives it.”
Angela Sun: How would you describe the general sentiment toward sustainability among your colleagues and the industry in general when you first started working at Maxus? And how have attitudes toward sustainability changed since then?
Rae Schnabel: Maxus was not pursuing sustainability when I ventured into this three years ago. Energy and water conservation were just starting to become an issue with multifamily properties as we saw rates increasing.
I went to a couple of conferences and heard speakers discussing conservation. I thought, “Wow, that sounds pretty interesting. I can’t imagine we can’t save something.” We looked into it and ended up generating about $80,000 in rebates from utility companies. From there we started exploring other opportunities. It has evolved — it is a process. Now, the properties are engaged in reducing their utility costs. It continues to grow — there are people involved in our efforts today that hadn’t thought about it a year ago.
New governmental regulations have definitely pushed the sustainability efforts. In Kansas City, which is where we’re headquartered, the mayor and the city council launched an energy challenge. Multifamily buildings over 50,000 square feet must register their properties by May 2017 through ENERGY STAR. That was an incentive to companies who were not planning to take sustainability steps.
AS: Do you see anything from the tenant side that’s driving multifamily to be more sustainable and more green?
RS: That’s an interesting question. I’ve know that’s happening, but I don’t know that Maxus overall is experiencing resident initiating the interest in energy conservation. I think that’s more the case if you have newer properties.
We actually started an initiative about a year and a half ago that we call the “It Matters” campaign. We started marketing sustainability changes at our properties. Our models had signs with messages like: “We’ve turned down your refrigerator to 37 degrees and this will save X dollars or percent” or “Keep your thermostat at 68 in the winter and 72 in the summer, and you’ll save X in electricity.” We also pointed out that we installed low-flow shower heads and low-flow aerators. Also, when a new resident moved into their apartment, they would see a flyer in their unit that explained the conservation steps we had taken to make their residence efficient.
The premise was to have our property stand out from other properties in the marketplace. We wanted them to be aware that their utility bills could perhaps be lower at our complex and that may be something that the competition wasn’t doing. We thought that not many multifamily properties were marketing that or paying much attention to it at the time. I still think that’s pretty true.
AS: There’s been a lot of research that talks about how the multifamily space isn’t where other industries are as far as implementing sustainable practices. Do you feel that, that’s the case and why do you think that is? What challenges are specific to this industry?
RS: Most of the owners of conventional properties don’t pay all the utilities. We use a RUBS (Ratio Utility Billing System) and we charge back the residents some percentage of the water and sewer. It’s really a shared cost, so that inhibits conservation efforts on the water and sewer utilities.
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In contrast, most industries pay 100% of their utilities. For those industries, their bottom line includes all electric, water and sewer charges. Whatever changes they make for energy savings in water, sewer and electricity they see on their bottom line. That’s not always true in multifamily.
AS: There’s an interesting situation in multifamily that I don’t think you see in other industries called a split incentive, where if the building owner decides to redo all the units and install these upgrades, they won’t see the benefits even though they’ll incur the cost. Have you come across that before?
RS: Yes, absolutely. If we put LED lights in all the units and tenants pay the electricity, we don’t see any direct monetary benefit. The install costs us money. That’s why we focus on the exterior and the common areas. As mentioned, we can look at it as a marketing opportunity, but I think it depends on your marketplace.
In a RUBS situation, it’s a split incentive. We pass a determined percent for water and sewer to the resident, so if water and sewer is $100,000 a year and we only pay $15,000 or $20,000 of that and it’s going to cost us $50,000 to implement conservation changes, it may be hard to justify.
AS: Is looking at the common areas and what you can do to reduce water consumption and energy consumption there the first low-hanging fruit then?
RS: Absolutely. When we started, I really began by looking at what our opportunities were for rebates and what could be done for free for common areas. I was amazed at the number of utilities that were offering rebates or free direct install of low flow aerators or shower heads and services like cleaning and reporting on the condition of all of your air conditioning units.
I think when we started looking at that and understood we can do common areas and get a 50 or 60% rebate on the cost of doing it, it became something that made a lot of sense to pursue because our ROI was immediate or within 3 years. We’ve done about 110 projects overall in the last two years and have taken advantage of as many free projects and rebates as available. We’ve done almost $4 million worth of sustainability projects, and it’s cost us about a million dollars. There are sustainable opportunities available to multifamily owners. These can save money over the years and increase their property value.
AS: What do you think is the biggest opportunity for multifamily building owners to be more sustainable and green their buildings and their properties?
RS: The biggest opportunity is to look at what kind of rebates are available from the utilities since there are projects you can do for less than 100% of the cost in most cases. Beyond that, it’s anything that will impact common areas and your ROI. Now we are finding in some places where there are no rebates that we’re doing LED lighting retrofits just because the ROI is still three years or less.
Competition is another piece of it. We’ve have a couple properties where we did lighting projects and I think the ROI was maybe four years, but there were some new properties that were going in next door to them, and so our properties needed to look as good as they could. Doing LED lighting on the exterior has a huge impact on how a property appears to potential residents.
AS: What measures are Maxus taking to promote water conservation?
RS: We’ve done all the low-hanging fruit. I’d say about 90% of our properties now have low-flow. After that, we’re really looking at leak detection and I think low-flow toilets because the water from the toilet is a huge piece of water usage. We’re exploring that now. After LED lighting, that becomes the major focus. As the water and sewer costs continue to increase 10-15% a year, we’ve got to go down that road.
AS: How big is solar in the multifamily space?
RS: We’ve done about eight solar projects. We’ve also done lighting retrofits with those. We did those primarily because the rebates were so large combining federal and state incentives and the rebates from utility companies that it kind of became an almost zero cost item for us. I don’t see us doing solar projects without tremendous rebates. There doesn’t appear to be enough savings to bear the cost unless the utility participates.
AS: What results has Maxus seen following these initiatives?
RS: We’ve done about 110 projects and we’ve spent about 30% of the cost of the projects. We are getting the data now so that we can look at consumption. Over the first two quarters of this year, we’ve saved a little over a quarter million dollars in water, sewer, and electricity. That’s with about 70% of our properties reporting. I’m anticipating it’ll be higher when all the data comes in.
Anything we can do to lower consumption of electricity or water and sewer, that just means more savings over the years as electricity, water and sewer costs go up significantly.
That quarter of a million dollars in savings increased our property values by about $4 million. Those are huge numbers. If we can get to a half million dollars, we’ve increased our portfolio value by $8 million.
AS: Is it a struggle to get building owners to understand that it’s an investment?
RS: It’s a process. It just takes time. We started out as a company that wasn’t focused on conservation. We started talking about doing LED, but LED was so expensive that it became “Oh, we can’t do that.” Now the price of LED has come down so much. We can translate that now into property value. It absolutely is just a process.
AS: Are there any projects of which you are especially proud?
RS: The first one we did just blew me away. It was an old ice plant that was converted into apartments and we did LED lighting, which saved 30% in the common area lights. I was amazed. It actually worked. That was a great starting point for us.
AS: Maxus uses Urjanet for utility bill data aggregation. What led you to Urjanet? And how will the data from Urjanet enable you to push for new initiatives in sustainability?
RS: I previously did consumption data reporting on a spreadsheet, and I had no way of knowing where we were and the impact of the efforts that we took. I was looking for some way to do that other than hiring somebody to do a spreadsheet because that’s not the best way. I heard an Urjanet speaker at a conference in Chicago and I thought, “Wow, that’s exactly what we need to be doing for those 24 properties.”
Now that we have Urjanet, it will give us the data that proves that doing sustainable efforts actually saves money and increases the value of our properties. When I say saving money, it’s really saving consumption. When you look at it this year compared to last year, we may be higher in cost but the consumption is lower. As the price goes up, the cost is going to show that we’re spending more every year; but if our consumption is down, that’s really what we’re focused on.
AS: What advice would you give to others in your industry that are trying to do similar things?
RS: Just get started with something. That’s the first advice I heard at that NAA conference — that you just start somewhere. You start looking at DSIRE, which is a website that tells you which states and utilities are doing rebates. You start looking at your properties, at what you can do, what utilities are involved, what kind of rebates are involved and you start researching.
Also, you’ve got to involve your maintenance people and your managers. They’ve got to buy into it. The first two years I was in front of them at least semi-annually at meetings. Anytime the regional managers got together with their properties, I was there to share the results we were finding so that they’d buy into it. They really hadn’t paid attention to all of this. Now they pay attention to it. That’s huge. They don’t realize that water leaks can cost $20,000 in two days until you show it to them.
Ready to Get Your Own Sustainability Efforts Off the Ground?
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