You see them advertised all over: those shiny new buildings that are both luxurious and eco-friendly. But does buying a "green" unit make you better off? Not according to the developer of one such condo project. A building in Harlem advertises itself as "the hybrid home," where "luxury meets green." I recently asked the developer to explain what economic advantage his building's green features had given to its buyers.
His answer? "None."
Ah, the things people say when they don't know you're a reporter (though I was holding one of those flipbook notebooks).
The developer, Ron Moelis, was addressing a conference sponsored by the Urban Land Institute about how to build housing that working-class and middle-class people can afford in pricey areas. At the panel -- in the lobby of the Kalahari in Harlem, which Moelis' L+M Development Partners built with a Harlem partner, some Goldman Sachs equity and a big loan from JPMorganChase -- he explained that the green features didn't give buyers better pricing on mortgages or faster closings.
Aren't green features supposed to save money? Sure. And wouldn't that make green buyers better mortgage risks? Maybe. But green claims often outpace green reality. Moelis had "big fights with the engineers," he said, because the purported energy-saving measures in common areas couldn't produce verifiable cost savings compared to other jobs.
Developers often tell reporters that they go green because "it's the right thing to do." But it's an open secret that many buildings (like the Kalahari) boast of building to the famous LEED standard without actually getting certification. The other open secret is that LEED ratings have historically measured promises, not results. (LEED's governors promise that's changing now, as I'll detail in a future post.)
So lenders discount such claims. Green buildings have their fans: Moelis said the city (which basically donated the land) liked the green features, and so did the community. And sure, you'll probably save some money on your utility bills. But, says Moelis, "I didn't see lenders reacting in any way."
Indeed, while Moelis was talking, a slide from his PowerPoint behind him showed why. The Kalahari, the slide said, was "designed to consume 31% less energy than a standard building."
Designed to, sure. But does it? It's hard to know. Here's hoping Moelis' candor inspires homebuyers and lenders to demand measurable green performance -- and reward those who produce it.
