How to use Asset Sustainability & Long Term Planning to ... 2017/How to use asset... · Confidential & Proprietary How to use Asset Sustainability & Long Term Planning to get the

Confidential & Proprietary

How to use Asset Sustainability &

Long Term Planning to get the Funding

you need

Jeff Johnson Vice President, Ameresco

Asset Sustainability

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Confidential & Proprietaryameresco.com

• Commercial real estate for 27 years

• Work experience with Air Force, outsourced providers (JLL), investors (LIM) and Corporate (IMS Health)

• Have worked for over 30 Corporate clients (BoA, Citi, AT&T,

Coke, BellSouth, Brown-Forman, Duke Energy, CalPERS, Deutsche Bank, McDonalds, New York Life, Capital One, Deutsche Bank, McDonalds, New York Life, Capital One)

• Experience with portfolio strategy and optimization, consulting, freehold acquisition & disposition, lease transactions; lease administration, project management and facilities management

• B.S. Civil Engineering USAF Academy ‘89

Introduction and background


I. Positively enhance your Real Estate and its impact on

“Quality of Teaching & Learning”

II. Turn a static (tactical) capital plan into a dynamic

(strategic) process

III. Enhance your business case process and increase your

chances for success

Strategic Outcomes for Today

Capital Planning

Challenges


Capital (Asset) Planning is:

• Difficult & hard to quantify• Difficult to accomplish

• Difficult to prove value

• Hard to prove out accomplishments

• Benchmarks, past experience used as

relevant

• Can be very subjective, relies on expert

opinion

• Tools to accomplish are primitive

• Typically never get all the funding you

really need• Operations team swing into action to

accomplish heroic repairs on assets

which should have been replaced

A show of hands


Capital Planning Best Practice:

Using a Benchmark or

2%-4% of Replacement Cost

• Example:

Higher Education Portfolio: 88 buildings, 3.5 msf

Replacement Cost of Portfolio: $605,500,000

• Annual Capital* Request:

$12,110,000/yr - $24,220,000/yr($172/SF x 3.5msf x 2% - 4%)

*Capital Renewal not Capital Investment

Common Benchmarks for infrastructure renewal

A show of hands

The “Spreadsheet”

Con’s• Static picture• Can be subjective• Single year view• Lack of depth results in risk tactics being used

Pro’s• Higher confidence level on condition of

component• Lower effort and cost than conditions based

survey

Con’s • Static picture• Costly to implement• Single year view• Takes a lot of time to implement• Hard to quantify and roll up the “so what?”

Conditions Based Survey“Muster the troops”

Pro’s • Quick & Easy to accomplish and understand• Lower effort and cost than conditions based survey

Asset Planner

Pro’s • Dynamic picture• Faster, Cheaper than Condition based surveying• Enables Condition based survey set-up at a

fraction of cost and time• Executive ready business case output• Lead with engineer based analytics and

experience• Multi-year view

7


Spectrum of approaches


Balancing act – Competing demands

Copyright 2012

Capital budgets constrained /

Growing deferred maintenance

Operating costs continue to grow

Changing functional demands

On-going building deterioration

Energy Goals

Programming demands to

attract and maintain students


Managing Risk

“Deferred maintenance is the practice of postponing maintenance activities.

Generally, a policy of continued deferred maintenance may result in higher costs, asset failure,

and in some cases, health and safety implications. Wikipedia”

Deferred Maintenance is everywhere

Deferred Maintenance is a cycle

Deferred Maintenance is a RISK to your organization

Deferred Maintenance results in premature life cycle

expiration, creating more costly repairs to address

failure, and increasing exposure to risk.

$1 deferred becomes $4 of maintenance over time**Rick Biedenweg, former AVP of information resources at Stanford university

Yet, Deferred Maintenance is a Best Practice


Asset Planning (2.0)(Next Generation Stuff…)


Predictive Life-Cycle Forecasting

PredictiveLife-Cycleforecasting

• Real Estate (buildings) and it’s infrastructure (components) are

engineering based solutions that have engineering principals

associated with how they behave and/or last = life-cycles

• Those behaviors are influenced by maintenance practices and

environmental conditions = life-cycle modification

• If you understand those implications you can predict when life-cycle

failures should happen = predictive life-cycle forecasting

EXAMPLE DATABASE: 3.2bsf, 66,000 facilities, tracking for 27 years


Move from Static to Dynamic Planning


Conditions Based Survey“Muster the troops”


Average, Typical Building Uniformat II Categories

Components

ASHRE

(HVAC

Only)

BOMAHUD

GPNA

Fanne

Mae

D3022 Hot Water Boilers 25 30 25 30

D3023 Furnaces 18 18 20 20

D3031 Chillers 20 21 20 15

D3034 Packaged Air Conditioning Units 15 25 15 15

D3041 Air Distribution Systems 27 30 35 30

D3045 Exhaust Ventilation Systems 20 19 20 13

D3051 Terminal Self-Contained Units 10 15 15 15

D3053 Unit Heaters 13 14 25 20

D3054 Fan Coil Units 20 20 30 25

D3055 Fin Tube Radiation 25 25 50 30

D3057 Radiant Heater Units 25 25 50 30

D3058 Package Units 15 15 15 15

D3058-D Make-up Air AHU 15 25 15 15

D3060 Controls And Instrumentation 15 18 18 30

D3098 Electric Baseboard Heat 10 10 30 25

Useful Life Resources (Years)

STATIC DYNAMIC


Move from Tactical to Strategic Planning



TACTICAL STRATEGIC


• Increase current funding

• Short-term operational savings

• Long-term savings strategies

• Redevelopment strategies, …

Establish

Targets

Identify

Solutions

Execute• Funding sources

• Annual budgets

• Projects (budget/schedule/quality)

• Accountability / Transparency

• Deferred maintenance (DM)

• Facility Condition Index (FCI)

• Unfunded Liability (UL)

• Energy Use / Carbon FootprintNEEDS

STRATEGIES

& SOLUTIONS

IMPLEMENTATION

Asset Planning Process

Copyright 2012

Decision Development Framework

Capital Creation Strategies


Physical Asset Criteria

• Building Condition Needs

• Unfunded Liability

• FCI

Utilization Criteria

•Facility utilization

•Enrollment Forecasting

•Space use

•Own vs. lease

Real Estate Criteria

•Asset Valuation

•Land Valuation

Environmental

Criteria

•Carbon Footprint

•Energy Conservation

•Renewable Solutions

Financial Criteria

•Capital Costs

•Operating Costs

•Capital Creation Strategies

•Incentives

Tools

Processes

&

Policies

Decision Development Framework

• Asset Planning Dashboards

• Maintenance & Service Management

• Energy use and optimization

• Finance, Accounting, etc

Accomplish “True” integration of data and decisions

17



Case Study Example

18

• Project from 2011

• 46 Buildings including admin, teaching, dorm, lab, research,

maintenance and fleet garages

• 1.6 million square feet

Challenges: • No Sustainable Asset Management Plan

• Capital Budget requests based on last year

• Unknown funding needs

• Assets in various states

• Local talented students studying elsewhere

• Programming challenges


Unique Data Development : Best Practices

✓ Quickly establish Life Cycle cost profiles for all assets utilizing data

modeling techniques

✓ Consistency and Standardization

DATA VALIDATION

▪ Incorporation of

existing Data

Sources

▪ Staff Interviews

▪ Targeted On-site

Validation

Life Cycle

Forecast for

each Asset

Validation of

Asset Templates:

Data Development Process

Confidential & Proprietary Copyright 2012

MODEL

Life Cycle

Cost

“Templates”

Basic Asset

Details:

▪ Age

▪ Size

▪ Number of

Floors

▪ Use / Type

of Asset


Projected Capital Needs

Anticipated Funding Level


Projected Total Liability

Unfunded Liability

$2M / Yr

Projected Unfunded Liability

Asset Sustainability Target

$3M / Yr

22



▪ Industry Standard Index Used to Track Condition

Performance of Facilities / Portfolios

FCI =Renewal and Repair Costs

Replacement Cost

GOOD Range: FCI (0% - 5%)

FAIR Range: FCI (5% - 10%)

POOR Range: FCI (10%-30%)

CRITICAL Range: FCI (> 30%)

Sustainability TargetSustainability Target

Asset Sustainability Target = Facility Condition Index (FCI)


Projected Facility Condition Index

Copyright 2011

Critical FCI

Poor FCI

Sustainability Target


Projected Funding Target

Copyright 2011

Critical FCI

Poor FCI



FCI (Current Year)

FCI (Year 5)

FCI (Year 10)

FCI (Year 15)

FCI (Year 20)

FCI (Year 25)

0.0% 10.0% 9.7% 29.0% 49.3% 54.1%

0.3% 7.4% 13.5% 19.9% 48.0% 51.2%

17.5% 31.6% 42.0% 50.9% 53.5% 55.4%

4.5% 8.5% 22.0% 33.8% 45.8% 49.4%

5.3% 5.0% 15.4% 37.1% 42.9% 48.2%

0.0% 0.0% 3.4% 6.3% 9.5% 30.5%

2.9% 7.0% 25.2% 37.0% 42.1% 46.0%

20.6% 29.5% 34.2% 44.5% 64.1% 68.1%

6.6% 14.4% 24.7% 25.6% 44.1% 55.5%

7.0% 8.0% 24.4% 30.6% 38.5% 55.9%

26.1% 30.9% 37.4% 42.8% 47.9% 49.9%

0.0% 0.0% 1.4% 17.9% 33.6% 40.6%

Building A

Building B

Building C

Building D

Building E

Building F

Building G

Building H

Building I

Building J

Building K

Building L

Life Cycle Impact over Time


Asset Optimization


STRATEGIES

& SOLUTIONS

IMPLEMENTATION

✓ Quantify Needs (Ops/Cap)

✓ 5 & 30 Year Capital Plan

✓ Dynamic Data Management

✓ Capital Leveraging

✓ Energy & Renewable Solutions

✓ Redevelopment Strategies

✓ Efficient Design

✓ Streamlined Tendering

✓ Construction Management

✓ Affordable Construction

✓ Green Technology

NEEDS


Establish Renewal “Reduction” Strategies to Reduce Risk

and Capital Renewal Liabilities

▪ Establish strategies that reduce renewal liability

▪ Present full range of fully leveraged & bundled solutions

combining capital creation strategies with operational savings

▪ Create effective business plan

▪ Develop communication plan

Strategies / Solutions

Copyright 2012


✓ Energy Conservation

✓ Deep Retrofits

✓ Renewable Solutions

✓ Maintenance Optimization

✓ Real Estate Strategies

✓ Redevelopment Strategies:

▪ New Infrastructure

▪ Existing Infrastructure

Leveraged and Bundled Capital Creation StrategiesTM:

Real Estate

Strategies

Maintenance

Optimization

Renewable

Solutions

Energy

Conservation

Redevelopment

Strategies

Optimized

Capital

Creation

Strategies

Capital Creation Strategies


Projected Unfunded Liability

Unfunded

Liability


$2M / Yr

$3.6 M/Yr


Capital Creation Strategy

Reduced

Unfunded

Liability

Short Term Energy Savings



Reduced

Unfunded

Liability

Maintenance and Operating Savings



Confidential & ProprietaryCopyright 2011

Reduced

Unfunded

Liability

Longer Term Savings – Deep Retrofits / Renewable Solutions



Confidential & ProprietaryCopyright 2011

Reduced

Unfunded

Liability


Real Estate & Community PartnershipStrategies


Confidential & ProprietaryConfidential & Proprietary Copyright 2011

Extended Life = 16 Years

FCI Reduction Strategy

5%

10%

30%


Asset Optimization


STRATEGIES

& SOLUTIONS

IMPLEMENTATION

✓ Quantify Needs (Ops/Cap)

✓ 5 & 30 Year Capital Plan

✓ Dynamic Data Management

✓ Capital Leveraging

✓ Energy & Renewable Solutions

✓ Redevelopment Strategies

✓ Efficient Design

✓ Streamlined Tendering

✓ Construction Management

✓ Affordable Construction

✓ Green Technology

NEEDS


I. Positively enhance your Real Estate and its impact on

“Quality of Teaching & Learning”

II. Turn a static (tactical) capital plan into a dynamic

(strategic) process

III. Enhance your business case process and increase your

chances for success

Strategic Outcomes for Today


Thank You!

Jeff Johnson

Ameresco

[email protected]

704-747-7792

mailto:[email protected]

Documents

How to use Asset Sustainability & Long Term Planning to ... 2017/How to use asset... · Confidential & Proprietary How to use Asset Sustainability & Long Term Planning to get the