Jeff Feinstein ’85 finds green investment a hedge against a down economy
Our gas-guzzling, carbon-spewing automobiles draw a lot of the blame for the build-up of greenhouse gases most scientists say is making the world warmer. That’s led to a worldwide flurry of investment in biofuels research and more fuel-efficient vehicles–even hybrid diesel Kenworth semis, built by Paccar in Kirkland.
(Courtesy The Schuster Group)
But amid all that traffic, a quiet community of builders and designers is starting to speak up, saying that if we want to make real reductions in energy use, we just have to look closer to home–to our houses, offices, and high-rise condos.
“The emissions of CO2 from buildings have a greater impact on the environment than cars do,” says Jeff Feinstein (‘85 Bus. Admin., cum laude), a principal with The Schuster Group, a Seattle real estate investment and development firm.
Recognizing that, more and more Northwest builders are incorporating environmentally friendly touches into their projects, says Michael Wolcott, the director of the newly formed Institute for Sustainable Design at Washington State University, which aims to provide industry with architects, engineers, and construction managers used to working collaboratively on buildings that take advantage of their natural surroundings to cut energy and water use.
“This is a strong trend going on,” Wolcott says. “It’s a trend that’s outlasting some of our financial woes right now, especially in the Northwest.”
It turns out that saving the planet, one construction project at a time, can be quite lucrative for investors. A recent report in McGraw Hill Construction called green building “the bright spot in an otherwise tough economy.” The industry journal reported that green buildings are less affected by the down market compared to non-green building, and homebuyers are willing to pay more for a green home.
Feinstein agrees. “We believe that we have proven in our own developments that green buildings are more attractive for tenants, more attractive for homeowners,” he says. “Tenants are willing to pay more to be in a green building, they have higher rates of occupancy.”
Feinstein didn’t set out to be a tree-hugging do-gooder. He got his start as an entrepreneur in Pullman, running a screening-printing business in his spare time that made shirts for fraternities and sororities on Greek Row. If you’ve still got your souvenir sweatshirt from an early ‘80s Lake Coeur d’Alene cruise buried in some remote corner of your closet, chances are it came from Feinstein.
After graduation, he went into the technology business, and as that boomed in the ‘90s, he started investing his extra cash into a Seattle real estate business run by his childhood friend, Mark Schuster, who had developed an eye for picking buildings that could be bought, upgraded, and flipped.
“He was my real estate proxy and I just kept giving him money,” Feinstein says. “He kept giving me good returns.”
Finally, Feinstein decided to join Schuster’s company, becoming its president and chief fund-raiser. One of the first big projects he worked on was raising cash for Schuster’s first high-profile green project, Mosler Lofts.
Mosler Lofts was Seattle’s first high- rise condo to be granted silver certification under the U.S. Green Building Council’s Leadership in Energy and Environmental Design program–LEED. It’s won a slew of architectural awards for Schuster and its designers at Mithun from the National Association of Homebuilders, the American Institute of Architects, and Seattle Home Magazine.
It was a little ahead of its time, Feinstein says, and it was Schuster’s idea. “He wanted to build this all-green condominium in 2003. This is before ‘An Inconvenient Truth’ and the movement behind it. He thought it was the right thing to do.”
As it happens, they timed it just right. When the building came on the market in 2007, they found buyers liked the wide range of environmentally minded features, like the Energy Star-rated appliances, water-conserving plumbing fixtures, certified sustainable bamboo floors and a hybrid vehicle recharging station in the underground parking garage. The condos also have a modish industrial vibe, quartz countertops and an open floor plan. The fact that it overlooks the Seattle Center from the trendy Belltown neighborhood also helps.
Best of all, from an investor’s perspective, is the fact that within a year of its completion, 149 of the 150 units in the building have sold, at prices ranging from $449,000 to nearly $1.4 million. This, even though existing home sales in King County have fallen more than 30 percent in the past year, according to the Washington Center for Real Estate Research at WSU, while median sale prices slid nearly 10 percent.
At the same time, they’ve also found tenants for all of the building’s ground-floor retail space.
“We offered a differentiated product in a crowded market. There are many [not-green] projects with 30, 40 units still on the market,” Feinstein says. “We think we’re right on with the green building movement.”
Schuster Group is not alone, says WSU’s Wolcott.
For a variety of reasons–some cultural, some driven by government regulation –Washington is emerging as a leader in the green building movement. Washington was the first state to adopt a Built Green standard (originally developed in Boulder, Colorado). Today, fully a quarter of all homes built in King County earn Built Green certification.
“Seattle, Portland, Vancouver–this area is real active,” Wolcott says. “You talk to the major architectural firms and they say they hardly do a project any more that isn’t LEED-accredited.”
“There’s something like 22 LEED-certified buildings going up between Bellevue and Seattle,” Feinstein adds.
For a time, there was debate over Built Green, with some builders complaining that its features raised the cost of new homes. But while it may raise construction costs, green-built buildings are cheaper to operate. “When you look at operating costs on top of that and depreciate it over the life of the building, there’s no question about that,” Wolcott says. “It is just good business.”
WSU’s new Institute for Sustainable Design aims to train workers in the techniques of designing and building these new green structures. The program was launched this past fall, after a $500,000 donation from Weyerhaeuser and input from a half-dozen or more of the state’s leading architecture and construction firms.
A generation ago, architects and engineers began designing climate-controlled buildings. They’d essentially seal off the interior of the building from the outside world, and use machines to control the temperature and humidity.
But today, Wolcott says, designers think differently. If you’re smart, you can situate your building so as to take advantage of sunshine to heat and light the building and natural breezes to cool it. If you plan ahead, you can position trees close to the building or hang plants on the ledges to provide shade in summer. You can build roof-top cisterns to capture rain water to flush toilets and irrigate the landscaping.
All of those things cut energy use and utility bills–and a building’s carbon footprint–but pulling them off means careful planning and the ability to work together, Wolcott says.
“Architects will come up with concepts, they’ll hand off pieces to the landscape architects, they’ll hand off pieces to a civil engineer, then everyone turns the whole thing over to the construction manager,” says Wolcott. That’s old school, and not in a good way. “Getting real gains across the system takes all groups working together.”
“The biggest difference that we see is how we look at these designs,” he says. “The design
is looked at really for a more integrated basis.”
So WSU’s new Institute will take a multi-disciplinary approach to teaching building design.
“Right now, civil engineering, architecture, and construction management is all separate with little communication between them,” Wolcott says. “Now, we’re trying to integrate approaches, teach the same language.”
The effort started this year by incorporating sustainability concepts into the curriculum for freshman students in the construction engineering courses. Eventually, the goal is to assign capstone projects for seniors in all the building design majors that will “integrate, right off the bat, architecture, civil engineering, landscape architecture, and interior designers” to work on group projects.
Wolcott says he hopes to eventually include mechanical and electrical engineers and construction management majors in the courses to help them all learn how to speak a common language of green.
The exercise is far from academic. McGraw-Hill Construction says that the annual value of green construction projects in the United States has shot up over the past three years from $10 billion in 2005 to as much as $49 billion this year. It’s likely to triple between now and 2013, the journal says. Even with the economy in recession, builders are likely to put up $41 billion worth of green apartments and condos in 2009, and 16 percent of all new U.S. construction will be green within five years, McGraw-Hill Construction reported after surveying its readers.
The change in political climate could accelerate that. President Obama, in his 30- minute infomercial during the election campaign, made particular mention of McKinstry, a Seattle engineering company that’s a leader in green construction. Obama called McKinstry “a model for the nation.”
“They’re retrofitting schools and office buildings to make them energy efficient, creating jobs, saving their customers money, reducing carbon emissions, and helping to end our dependence on Middle Eastern oil,” Obama said, promising public support for more such companies nationwide.
And on a regional level, new pollution control requirements aimed at protecting Puget Sound could force more builders to adopt green building measures, Wolcott says.
“This isn’t just sort of a fad, but it’s a lasting trend,” Wolcott says.
It’s a trend that Feinstein at The Schuster Group plans to cash in on. Even as the credit markets collapsed last fall, he was busy raising money for a new investment fund. His goal: raise $100 million to buy real estate and build green projects. He’s got $35 million so far, he says, and they’ve bought their first parcel, another lot in Seattle’s Belltown.
“It’s a two-story building and we have a permit to go 13 stories tall,” Feinstein says.
The problems in Seattle’s commercial real estate market–the knock-on effect from Washington Mutual’s collapse, which emptied out vast amounts of prime office space–were actually good, he says, because before you can sell high, you’ve got to buy low.
“Valuations are coming down,” Feinstein says. “That’s good for us on the buy side. What are we seeing here? We’re seeing office soften because of the obvious effects of WaMu and others, we’re seeing residential soften–high-rise condominiums specifically. We want to come in and buy and add value to the property by greening it up and then re-tenanting.”
Unlike electric cars or biofuels, green buildings are an environmentally friendly business whose time is now. “There are components available, materials usable now. It’s not futuristic. The technology is here and available,” he says. “Even hybrids have a very high cost to purchase. The return on investment isn’t there. You see people doing it because it’s the right thing to do.”
And if the rest of America wants to see how it’s done, the Northwest is ready, Feinstein says. “We’re creating an economic profit, supporting the environment, and supporting the communities that we participate in.
“Culturally, we’re an entrepreneurial kind of first mover. Given our tree-hugging ethos, we really grabbed onto this.”
Bryan Corliss (’86 Comm., cum laude) is a Marysville-based freelance writer.