The problem: The value of the 629,000-square-foot (58,436 m²), 34-story Phoenix Tower in Houston was declining. Energy costs were rising alarmingly.
The solution: Extensive retrofits that increased the value of the property. Electrical consumption has been reduced 60% and water usage has been slashed 28%.
The savings: More than $200,000 annually.
The results: Increased leasing at Phoenix Tower, more satisfied tenants, an improved bottom line, and a more valuable property.
What was accomplished at Phoenix Tower can be a blueprint for owners, developers and asset managers in this challenging real estate environment, says Leo H. (Toby) Daley, Jr., vice president at Wakefield, Massachusetts-based Franklin Street Properties Corp. (FSP), the sponsor of the building ownership entity. “You might say Houston’s Phoenix Tower has risen again,” says Daley with a smile. “Through hard work, well-thought-out plans, coordinated actions and the years of experience of one of the best firms in the business – Hines – Phoenix Tower today is one of the most sustainable, most efficient, and most sought after addresses in Houston.”
Improvements at Phoenix Tower ranged from the installation of energy-efficient exterior glass panels and the renovation of the common areas to a total recalibration of the building’s energy system and the implementation of central plant optimization involving the coordination of 500 individual office thermostats. During the transformation by FSP and Hines – one of the leaders in global sustainability – a Jack Nicklaus-designed putting green atop the building’s ninth floor Sky Terrace was added.
“Our ability to understand the mechanical, electrical, plumbing and controls infrastructure of a building, often separates Hines from others in the industry,” says Andrew Kitchens, LEED AP, Hines vice president of Engineering Services who helped start the firm’s engineering best practices program. “In operating the various systems in buildings, Hines is like a symphony conductor. You can have the best violin and the best bass and other instruments but unless someone is focused on making the best music, all that goes to waste. We take all the many variables in a building – chillers, control valves, sensors, air dampers, etc. — and operate them sequentially like a beautiful sonata.”
That’s music to the FSP’s ears. When it acquired Phoenix Tower in 2006 at an attractive price, FSP realized that the aging structure would need to be updated to unlock its true value. Working with Hines – whose LEED portfolio (certified, pre-certified or registered) consists of 202 projects totaling 107 million square feet (9,940,625 m²), significantly more than any other U.S. developer – FSP created and implemented a significant capital improvement plan to bring the building up to today’s standards. That blueprint included new glazing, insulation, elevator modernization, updated mechanical systems, renovated common areas, etc. – items that were not just meant to improve energy efficiency, but were also critical to the safety, comfort, aesthetics and marketability of the building. FSP worked with Hines and several consulting engineering firms to develop a comprehensive improvement plan, timeline and budget. The main issue? Black stains covering a substantial portion of the building’s glass exterior.
“The black stains were actually areas on the back of the glass spandrel panels – the glass that hides the view of the ceiling and floor areas from the exterior – where the opaque backing had peeled away and detached from the glass, causing light to enter the space and appear as a dark blemish from the outside,” says Daley. “In addition to being aesthetically unappealing, the failing spandrel panels allowed heat to build up, resulting in escalating cooling costs. Hines managed the replacement of some 6,000 5-by-6-foot spandrel panels with new, silver reflective, energy efficient glazing. New fireproofing and rigid insulation panels were installed behind each spandrel panel, further increasing the building’s energy efficiency. The result? A safer, more energy efficient and much more attractive, banded glass office tower.”
Architectural updating included renovating the Sky Terrace, installing a green roof, and creating a new entrance to the building facing the garage to make the structure more user-friendly. “We added the putting green because it’s a one of a kind feature for a commercial office building,” says Donald H. Emerson, Hines property manager at Phoenix Tower. “It is an inviting place for tenants to relax and to recharge. It is used by some tenants for team building. About 30% of tenants have direct views of the green.”
Today, Phoenix Tower is consistently focused on energy performance and environmental responsibility. It has earned an ENERGY STAR label for every year since the U.S. Environmental Protection Agency (EPA) extended the ENERGY STAR program to commercial real estate. Hines also implemented its hugely successful GREEN OFFICE® for tenants at Phoenix Tower which encourages tenants to identify and implement no-cost and low-cost alternatives to operating in a standard indoor office environment. “Understanding current and past energy use is how Phoenix Tower identifies opportunities to improve energy performance and gain financial benefits,” says Emerson. “Assessing performance is the periodic process of evaluating energy use for all major systems in the building and establishing a baseline for measuring future results of efficiency efforts.”
Adds Daley: “We always considered options in terms of how much ‘bang-for-the-buck.’ Energy improvements have to be an improvement over what exists today and make economic sense, with a reasonable payback period that fits within the parameters of our pre-acquisition plan. FSP and Hines are in communication on a daily basis to continue to make the building even more efficient, with the latest coup being pending LEED EB Gold certification.”
For owners contemplating an intensive building makeover like Phoenix Tower, FSP’s Daley advises:
- Don’t just put lipstick on a pig. “Tenants today are too savvy to be fooled. They will find out independently if the building has antiquated or inefficient systems.”
- Create the best possible renovation plan. “It is critical to understand what you need to do and how much it might cost before you pull the trigger. If you have a bunch of unknowns, you might get burned.”
- Pick the best team. “If you need to replace the building’s skin, don’t select a mom and pop management company who’s never done it before. Pick the best – like Hines – who has years of experience.”
- Work within established parameters. “A timely execution is paramount. A delayed project could be a missed opportunity for signing a large tenant.”
Daley says FSP views the entire process as a journey not a goal. “There is always more to do to keep the central plant functioning efficiently. You cannot rest just because you’ve done one project.”
Emerson agrees, noting that companies contemplating a building refurbishment should:
- Make sure the owner has a vision and desire and financial wherewithal to support a sustainable, ongoing, energy-efficient program.
- Hire a firm that is focused on sustainability, has programs in place, a proven track record, and can deliver.
- Include people from various industries to effect change; sometimes owners and the management group can’t do it alone.
“Thanks to FSP’s foresight and Hines’ years of experience operating buildings around the world, Phoenix Tower is a state-of-the-art, highly energy efficient structure that just happens to be 26 years old,” says Emerson. “FSP sought the best ways to upgrade the building – not necessarily the cheapest. It paid off. FSP trusted Hines to do what it does best: operate a building for the lowest cost utilizing state-of-the-art, sustainable technology. It’s been a perfect partnership.”