Craig's Corner For Counsel: Green Real Estate

Tuesday, March 31, 2009 - 01:00

"Going green" has multiple meanings for in-house real estate attorneys. Whether handling leasing, construction, land use or zoning matters, corporate counsel need and demand advice on sustainability issues and requirements.

"Going green" in the corporate real estate context came up in a recent conversation with Robert Koen, co-head of the real estate group in DLA Piper's New York office and editor of The Real Estate Finance Journal published by West; and Jeff Keitelman, real estate partner in DLA Piper's Washington, D.C., office and leader of the firm's Real Estate "green team."

Craig Miller: What does it mean for a corporation to be green in terms of real estate and how it uses and maintains its buildings?

Jeff Keitelman: There is no standard. In general, the C suite in companies has mandated for various reasons - some of which are monetary and some of which are just good corporate citizenry - to be green. Generally, this means that they have internally developed sustainability principles, standards and goals about how they can improve their corporation's impact on the planet.

We work with companies to figure out what the executives mandated regarding going green and how to implement those mandates in the real world. For example, we look at existing leases and existing buildings, new leases and new buildings, and how the green mandates affect buildings the company owns or leases. Specific issues include: how do they deal with capital improvements and operating expense pass-throughs, construction matters, uses within buildings and remedies? "Going green" also includes simple issues like how they recycle. We then work to ensure that their documentation expresses their desires.

Another substantial challenge is to anticipate the issues of working with a landlord or a contractor who may not be on the same page as to how to implement and document the green solutions that will govern the parties for years. There's no cookie-cutter solution, at least not yet. A landlord and a tenant can have very different views on what it means to be sustainable.

Craig Miller: Given the economy, are companies receptive to green initiatives?

Jeff Keitelman: It's interesting; a lot of the companies that are on the cutting edge of corporate sustainability are doing it whether or not it may cost them initially. Their goal is to be a good corporate citizen and they know (and it has been proven) that it will adhere to the bottom line over time. Once you get on that program, even with the economy the way it is, I have not seen companies cut back on this. I've seen landlords say, "I was going to build a LEED (Leadership in Energy and Environmental Design) Platinum building but instead I'll build something LEED-like or LEED-lite."

Robert Koen: The upside on market deterioration in major metropolitan markets is that solid corporate tenants of some size have far more negotiating power than they have had for many years. They likely will be able to dictate in one way or another that the developer/owner build, renovate or otherwise adhere to a LEED standard or adhere to one of several green policies in the operation of the building. The potential exists for this period to be one in which green initiatives can be achieved.

Craig Miller: Is it time for green real estate to be on the radar for more corporations and businesses?

Jeff Keitelman: Many companies are saying, "Yes, we want to be green but what does that mean and how do you actually do it?" or "Should we or do we have to do it yet?" We work with one company in particular that has had green initiatives on their radar at a very high level for about five years. Those initiatives have made it down to the practical application level for the last year or two. The company is considered on the cutting edge of "going green." Their company performance and sound business practice are the envy of their peers.

Robert Koen: Clearly this is, or should be, on their radar. Companies recognize that developing and implementing green goals is good business and can potentially result in significant energy savings over time.

Robert Koen's journal, The Real Estate Finance Journal, is available on the West Web site at www.west.thomson.com. Keitelman recently co-authored a report titled "Green Leasing: What to Look For and What to Avoid" for the Jones Lang LaSalle Web site. Craig Miller is vice president of the Corporate Sales & Marketing division for West, part of Thomson Reuters.

For additional insight on real estate law, the following Westlaw databases and publications also are available:

Environmental Liability and Real Property Transactions (ENVLRP)

Federal Environmental Regulation of Real Estate (FEDENV)

Federal Environmental Regulation of Real Estate Law Digest (FEDENVDIG)

Federal Land Use Law & Litigation (FEDLANDLAW)

Greener Management International (GREENMGMT)

Sustainable Development Law & Policy (SUSDLP)

Global Environmental Change Report (GLECR)