TIAA-CREF Environmental Initiative

Update for Asset Managers

October 2 and 7, 2008

2

Review of the Environmental Initiative

• Benefits– Financial– Environmental– Enhance corporate image

• Goals– Reduce environmental footprint– Demonstrate market leadership– Create market differentiation– Reduce energy intensity 10% by 2010

• Opportunities– Reduce expenses through no- and low-cost solutions – Increased NOI and enhanced asset value

3

Initial Approach

• All properties– Office investments – Multi-family– TIAA-occupied – New construction

• Energy management first– Responds to growing demand for green and increased

awareness of environmental concerns– Leads to increased tenant retention and attraction– Hedges against rising costs of energy– Increases property values

• Water efficiency and waste management are underway

4

Environmental Initiative Activities

Portfolio-Wide Evaluation

Analyze Data

Make Recommendations

Implement Solutions & Track Results

Gain Recognition

Continual Reassessment

5

Activities to Date

• Established a baseline from which to measure progress • Conducted training for property managers & engineers• Identified trends and opportunities• Conducting property assessments and making

recommendations for office and multifamily properties• Began implementing property improvements

• Obtaining ENERGY STAR labels for qualifying office buildings

• Earned recognition as an ENERGY STAR Partner of the Year award winner and ENERGY STAR Leader

6

Ongoing/Upcoming Activities

• Quarterly reporting to asset managers• Maintain benchmarking data and track changes• “Change the World, Start with ENERGY STAR” –

CFL campaign for office tenant employees, multifamily residents, and TIAA-CREF employees

• Replace incandescent lights with CFLs in apartment homes in MFH properties

• Regular property manager, engineer, and tenant communications via WebEx and direct contact– Encouraging building staff to expand tenant communications

about sustainable practices

7

Ongoing/Upcoming Activities (continued)

• Implement first set of standard operating procedures• Data collection on:

– Energy purchasing in deregulated markets– Overtime air charges to facilitate an equitable and consistent

approach• Continue pursuing ENERGY STAR labels• Evaluate feasibility of LEED-EB certification• Develop property marketing materials• Engage with industry groups• Translate savings into dollars and carbon emissions

reductions• Upgrade common areas in MFH communities, focusing on

low-cost solutions

8

Your Role in the Environmental Initiative

• We need your help to reach the10% energy reduction goal• Utilize property visits and talk with property managers/chief

engineers• Observe:

– Best practices– Opportunities for improvement– Red flags and “greenwashing”

• Nick is the liaison/translator between the involved groups• Communicate with us and leverage:

– Property management roundtables– JDM accessibility

9

Often Overlooked Opportunities

• Don’t condition space unnecessarily– After hours– Leasing situations– Construction situations/TI’s

• Engage gas and electric service providers for unlisted rebates/incentives

10

Acquisitions

• During due diligence, request ENERGY STAR rating or energy data in order to get a rating

• Collect data for preliminary LEED assessments

• Look for energy saving opportunities

• For new acquisitions, request last 12 months of utility data to begin benchmarking

11

Disposition Checklist

Up-to-date ENERGY STAR rating ENERGY STAR label, if achievable LEED assessment Environmental assessment

Environmental savings example:- The average ENERGY STAR rating for office buildings is

50, so a building rated 70 is 20 points better than average- Compared to an average building, a hypothetical 300,000

square foot building rated 70 saves:- 1,500,000 kWh of electricity per year- $165,000 in energy costs per year- 2.5 million pounds of carbon emissions

12

Regional Trends

• In the Northwest – running out of capacity

• In California – skyrocketing energy rates

• In the Southwest and other areas – dwindling water supplies

13

National Trend: Increasing Water Rates

National Average Rate Increases over Select Two-Year Periods

14

National Trend: Demand for Green Buildings

CoStar Data on Occupancy of ENERGY STAR Buildings

15

National Trend: Demand for Green Buildings

CoStar Data on Direct Rental Rates for ENERGY STAR Buildings

16

National Trend: Demand for Green Buildings

RREEF Data on LEED Certified Buildings

Vacancy Rates in Office Space

Office Space Rents per SF

All LEED Buildings LEED Class A All Class A (LEED + non-LEED)

17

National Trend: Increasing Waste Production

Per Capita Averages (in lbs) - U.S. Waste

While recycling rates are higher, Americans still send substantially more to landfills today than we

did 25 years ago.

Waste hauling charges are increasing due to higher fuel costs.

 Waste

GeneratedRecycled

% Recycled

Sent to Landfill

1980 3.66 0.35 9.6% 3.31

2005 4.54 1.08 23.8% 3.46

18

National Trend: Utilities Offering Incentives for Reducing Demand

• Rebates available for…– Lighting retrofits & controls, HVAC upgrades, other

customized energy efficiency measures, renewable energy, irrigation systems, water heaters, appliances

– Commercial buildings and multifamily communities– Retrofits and new construction

• Financial and technical assistance with recommissioning studies, energy audits, building tune-ups, demand response programs

• Incentives come from utilities, local water districts, municipalities, state and federal governments, etc.

19

National Trend: The New “Green Lease”

• What is a green lease?– Communicates green operational practices, equipment

standards, and goals– Creates financial incentives for investments in environmental

upgrades or technologies– Details tenant’s responsibilities for limiting energy & water

consumption and participating in recycling program– Sets minimum green standards for tenant improvement projects– Requires that maintenance and repairs must follow the building's

green strategies• Engineers are increasingly reviewing leases to ensure energy

efficiency and other technical requirements are sound• BOMA Green Lease template available

20

Additional Trends

• Expedited building permits for green buildings

• Increasing tenant demand for sustainable buildings and green leases– IBM– Toyota– Bank of America– Many more