ADVANTAGE • FirstService Residential • 1

FirstService Residential

ADVANTAGE

SPRING 2016

In Pursuit of Green Power, Kips Bay Towers Purchases Renewable Energy Certificates The board of Kips Bay Towers Condominium, in its endless quest to implement sustain-able measures at its Midtown East complex —which comprises 1,118 apartments and spans 7.5 acres—expressed an interest in purchasing renewable energy. By pursuing this eco-friendly endeavor, the board would be helping to offset the amount of electric-ity generated by fossil fuels as well as sig-nificantly reduce its emissions of carbon dioxide and other pollutants.

After learning from FirstService Residen-tial’s energy subsidiary, FS Energy, just how affordable Renewable Energy Certificates (RECs) are, the board voted unanimously to proceed.

“The decision to move to ‘green power’ is just the latest effort over the last decade to make our community more sustainable,” says Nicholas Holt, Vice President of the Kips Bay Towers Board. Having installed solar roof panels and LED lighting, imple-mented electronics and textile recycling

programs, as well as an organic refuse collection program,

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FirstService Residential Buildings Net Nearly $1 Million in Dividends through Safety GroupFirstService Residential is pleased to re-port that 265 properties in our management portfolio collectively received $981,639 in dividends by participating in Safety Group #561—the largest and most successful Workers’ Compensation Safety Group for real estate in New York State.

The Safety Group declared a dividend of 22.5% for the 2014–2015 policy period. In the majority of cases, this dividend is in ad-dition to the 20% upfront discount FirstSer-vice Residential clients receive off the stan-dard rates.

A safety group is a program that enables employers to pool their insurance premiums with the goal of reducing Workers’ Compen-sation costs. When claims for a safety group come in significantly below the industry standard, a dividend is declared and re-turned to the employers.

Dividend checks have been deposited in the operating account of participating buildings.

2 • FirstService Residential • ADVANTAGE

by Kelly Dougherty, Director, Energy Management, FS Energy

As part of New York City’s Greener, Great-er Buildings Plan, in 2012 the city enacted Local Law 87 (LL87) which mandates all buildings over 50,000 square feet complete an energy audit and retro-commissioning study of base building systems once every 10 years. The law defines base building sys-tems as: the building envelope, HVAC (heating, ventilating and air conditioning) systems, conveying systems, domestic hot water sys-tems, and electrical and lighting systems.

By working directly with auditors and engineers, the purpose of LL87 is to help building owners and operators (1) ensure their build-ing’s mechanical equipment is operating efficiently, and (2) identi-fy project opportunities, known as Energy Conservation Measures (ECMs), to further reduce energy consumption.

Your building’s due date for filing its audit is determined by the last digit of the tax block number as shown below:

6 7 8 9 0 1 2 3 4 52016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Auditors and retro-commissioning agents who perform and sign-off on the work are required to have certain certifications and/or professional licenses. (Please refer to the chart on page 4.)

Selecting Your Local Law 87 FirmIdentifying and selecting a qualified and reputable firm to perform your LL87 project can be a daunting process. Many new firms have joined the market since this law was enacted which has created a broad range of services and experiences. That’s why it is important to seek proposals from multiple firms and request:

• Staff resumes indicating required certifications

• Two to three previous LL87 clients that can be contacted for recommendations

• Sample LL87 Report and Energy Efficiency Report (EER)

• Project timeline

• That the firm includes, as part of their fee, training of the building staff during and after the retro-commissioning study

• That the firm addresses any questions, interviews, or correc-tions presented by the DOB after the report is submitted.

A critical component of selecting the right firm is cost. Prices can vary drastically, which will require decision makers to compare each of the proposals. As a general tip, if one of the firms is dramat-ically higher or lower than the others, it’s important to investigate why and make a fair comparison between proposals. Comparing past reports will help you understand what you are getting from each firm before making a final decision.

Planning for Success—Setting a TimelineStarting the process early will ensure that your building selects the right firm and you get thorough results instead of rushing to make the deadline. The retro-commissioning part of the law requires that buildings with heating and cooling systems be tested in summer and winter operation. Therefore, it is important to allow enough time for your retro-commissioning agents to test the equipment and for the building to correct any deficiencies found.

The Energy Efficiency Report (EER) must be submitted to the DOB by December 31st of the year the building is required to comply. Buildings that do not submit their report will be issued a Major Class 2 violation and be fined $3,000 the first year and $5,000 each subsequent year until the report is submitted. You will re-ceive the best results when you plan ahead, budget appropriately, and give the selected firm 16–18 months to complete and submit the report.

Here is a timeline to help your building plan accordingly:

22–24 mos. Request 3–4 bids and interview qualified firms

20 mos. Sign contract with qualified firm

6–20 mos. Firm performs audit and retro-commissioning study

4–6 mos. Ensure all retro-commissioning deficiencies are corrected (DOB may require receipts or time cards to show proof of work) and that the firm has verified the work was completed

2–3 mos. Sign-off on report and required DOB forms provided by the firm completing the work

1 mo. Receive final documentation from firm and proof of sub-mission to DOB

After submission

DOB will email instructions on how to pay the filing fee; set up LL87 results and findings presentation with all relevant parties

Understanding and Getting the Most Out of Local Law 87

ADVANTAGE • FirstService Residential • 3

Maximizing the Value of Your Building OperatorsLL87 is as an opportuni-ty to identify where your building is wasting energy and money. Buildings will see the best results when the staff is learning from the engineer performing the work. When the staff is engaged they will be a part of the solution that allows your building to con-tinue to operate efficiently long after the study is complete. Here are some tips to ensure engagement:

1. Have the staff meet with the selected firm before the study begins to discuss the process, engineer’s needs, and timeline

2. Have them work side-by-side with the firm during the ret-ro-commissioning study to understand how the engineers are testing the equipment and what they are looking for

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Lighting Retrofits Result in Financial Savings and Environmental BenefitsFS Energy recently facilitated lighting upgrades for dozens of FirstService Residential managed properties. Replacing common area bulbs and fixtures with highly efficient, ENERGY STAR-qualified LED lighting technologies yields significant reductions in energy use and costs while delivering more aesthetically-pleasing illumination. Here are two case studies:

Financial incentives for lighting efficien-cy projects are available. If your building is interested in reducing its costs and energy use through a lighting upgrade, please contact Kelly Dougherty of FS En-ergy at (212) 324-9035 or Kelly.Dough-erty@fsenergyservices.com.

Bryant Park Tower The Silk Building

Project Cost $24,900 $27,100

Con-Ed Cash Incentive $8,500 $12,650

Cost to Building $16,400 $14,450

Estimated Annual Cost Savings $15,775 $13,370

Estimated Annual kWh Reduction 75,120 kWh 63,665 kWh

Estimated Payback Period <1.1 years <1.1 years

3. Encourage staff to ask questions so they “own” and under-stand their building systems

4. Have the firm meet with the staff to discuss the results of the study and best practices in moving forward including opera-tions and maintenance adjustments.

What To Do After The Completed Report is DeliveredAfter receiving your LL87 report, it is important to be engaged in the results. This is your opportunity to get an overview of how your building operates and what projects can be done to reduce con-sumption and costs.

Here are some tips to keep the momentum going:

1. Set up a LL87 results presentation with the firm, building staff, building owners, and your property manager

2. Discuss which Energy Conservation Measures (ECM) the building should implement immediately and which mea-sures should be planned for the future

Bryant Park TowerThis 89-unit condo-minium, located at 100 West 39th Street in Manhattan, replaced or retrofit 445 fixtures. On top of a 65% reduc-tion in electrical energy consumption, the en-tire cost of the project will be recouped in just over one year.

The Silk BuildingThis 90-unit condomini-um, located at 14 East 4th Street in Manhattan, replaced or retrofit 308 fixtures. On top of a 58% reduction in electrical energy consumption, the entire cost of the project will be recouped in just over one year.

You will receive the best results when you plan ahead, budget appropriately, and give the firm 16 – 18 months to submit the report.

4 • FirstService Residential • ADVANTAGE

Energy Report Card produc-tion, and historical energy

assessments.

Our partner firms have agreed that the sum of the services provided by FS En-

ergy is equivalent to 30% of the total project cost. There-

fore, FS Energy will retain 10% of the savings for its services and

the remaining 20% will be passed on directly to FirstService Residential clients.

FS Energy’s partnerships will:

• Reduce the overall cost of LL87 for your property

• Provide guidance and subject matter experts to your property regarding LL87 to ensure maximization of audit findings and retro-commissioning measures

• Ensure vendors have the re-quired certifications and ex-perience to effectively per-form this work.

For more information regarding LL87, visit www.nyc.gov/html/gbee/html/plan/ll87.shtml or con-tact FS Energy at (212) 634-5500 or info@fsenergyservices.com.

LOCAL LAW 87 REQUIRES ENERGY AUDIT RETRO-COMMISSIONING

Definition A systematic process of identifying and developing modifications and improvements of base building systems

A systematic process of optimizing the energy efficiency of existing base building systems through the identification and correction of deficiencies

Building Must Implement Measures Identified

NO YES

Systems Required to be Checked in Heating and Cooling Operation

NO YES

An individual performing or supervising work necessary to conduct the energy audit and retro-commissioning must be:

• a registered architect or licensed professional engineer in New York State with appropriate audit or retro-commissioning qualifications, or

• a DOB registered energy auditor or retro-commissioning agent with approved training

Certified Energy Manager (CEM), Certified Energy Auditor (CEA), Building Energy Assessment Professional (BEAP), High-Performance Building Design Professional (HBDP), Multi-Family Building Analyst, or NYSERDA Flex Tech Consultant

Accredited Commissioning Process Authority Professional (ACAP), Certified Building Commissioning Firm (CBCF), Certified Building Commissioning Professional (CBCP), Certified Commissioning Professional (CCP), Commissioning Process Management Professional (CPMP), or Existing Building Commissioning Professional (EBCP)

DOB Forms EERC1 & Reporting Tool EERC2 & Reporting Tool

Filing Fee $375

Local Law 87continued from page 3

FS Energy’s partner vendors have agreed to reduce their fee by 30% for FirstService Residential properties.

3. Develop a plan to finance future measures based on ROI

4. Set up an annual energy meeting to review energy bills for unusual increases that may be the result of system issues.

FirstService Residential Value Driven ServiceIn an effort to reduce the complexity and costs incurred by First-Service Residential properties in complying with LL87, FS Energy has set up a vetting and partnership program with 12 qualified vendors. After analyzing the proposals and filings from among 28 firms that have performed LL87 work at over 100 FirstService Resi-dential properties, we believe these select vendors deliver the best services at the most competitive rates.

Well in advance of your building’s compliance deadline, FS Energy will choose a handful of firms to bid based on their expertise and experience with your property’s specific systems. Of course, the board may obtain additional bids from other vendors. FS Energy will then review and present the proposals to your property man-ager and the board.

As an additional benefit, FirstSer-vice Residential clients will pay less for LL87 services as a result of lower fees negotiated by FS En-ergy. This discount is in exchange for work that will be provided by FS Energy’s Data Team, which includes collecting and submit-ting historical energy data, utility bill analysis, typology collection,

ADVANTAGE • FirstService Residential • 5

Meet FS Energy’s Kelly Dougherty: Efficiency Advisor for Boards and Property Managers

Fueling the Smoking Debate: Co-op Liable for $120K Over Secondhand Smoke InfiltrationIn Reinhard v. Connaught Tower Corp. & Ol-ick, a state Supreme Court judge recent-ly awarded more than $120,000 in back maintenance, interest and attorney fees to a co-op shareholder who claimed that cig-arette smoke from other apartments had permeated her unit and rendered it uninhabitable.

In his decision, Justice Arthur Engoron wrote: “This Court...is only saying that if you want to avail yourself of the right to rent out residences, you assume the obligation to insure that your tenants are not forced to smell and breathe carcinogenic toxins.”

The judge determined that “signif-icant cigarette smoke permeates and pollutes the apartment.” He then essen-tially ruled that landlords, including co-op boards, are responsible for ensuring that smoke doesn’t pass from one unit to anoth-er. The judge recognized that it could be ex-

As FS Energy’s Director of Ener-gy Management, Kelly Dougherty supports FirstService Residen-tial boards, building owners and property managers by analyzing and developing energy efficiency projects in their buildings. Dough-erty works directly with industry leaders and government agencies to keep her clients informed on the latest technologies, regula-tory requirements, and incentive programs. She also develops educational seminars for the company’s property managers and building staff to help our clients operate their buildings in an efficient manner.

Dougherty brings to her role over 12 years of facilities support, HVAC system operation, energy efficiency retrofits, and proj-ect management expertise which she amassed during pre-vious roles at Air Ideal Inc. and Insight Civil Engineering. Her strengths lie in developing long-term strategies for her clients by implementing energy efficiency projects that reduce ener-gy use and costs.

Dougherty is currently a candidate for a Master of Science in Sustainability Management at Columbia University’s Earth Institute with a focus on corporate sustainability strategies, infrastructure resiliency development, and energy reduction planning. She can be reached at Kelly.Dougherty@fsenergy-services.com or (212) 324-9035.

tremely costly to prevent the smoke pass-ing from one apartment to another, but said that a landlord has the option of excluding smokers from the building. We understand the case is being appealed.

maintain “livable, safe and sanitary” apart-ment conditions.

“This is a trial court decision and does not have the same precedential impact of an ap-pellate court ruling,” says Ben Kirschenbaum,

VP & General Counsel, FirstService Res-idential, “but it does make it clear that a board of directors in any cooperative (and possibly a board of managers in a condominium) that ignores or gives limited responses to complaints of second-hand smoke is at risk of an ex-treme decision against it.”

Smoking bans in condo, co-op, and rental buildings, while still relatively rare, are becoming more common-place. Is this something that your

board might want to consider? It is not easy to implement, and you should discuss this with your building’s attorney before starting the process. As always, if you want addition-al practical advice, please consult with your FirstService Residential management team.

In a 2006 case, a Manhattan judge ruled that secondhand smoke is a breach of the “warranty of habitability,” a provision of state law that also played into Reinhard's case. It says that landlords or building own-ers (including co-ops) are responsible to

6 • FirstService Residential • ADVANTAGE

Our affiliate, FirstService Financial, Inc. (FFI), assists clients of FirstService Residential in obtaining financing at the most com-petitive interest rates and terms available. FFI has facilitated or assisted in loan placements in excess of $1 billion for cooperatives and condomini-um associations.

This recent transaction illus-trates why many of our clients choose to participate in FFI’s programs, which provide added value based on the global purchasing power of our parent company, FirstService Corporation.

“FirstService Financial proactively reviewed the status of our ex-isting debt and made a recommendation that enhanced our fi-nancial position long term,” says David Stern, Treasurer of Silver Towers Owners Corp. “Their professional guidance throughout the process, lending expertise, and extensive track record was a fantastic benefit offered through FirstService Residential as our management company.”

Silver Towers, a 377-unit cooperative in Kew Gardens, was four years into their existing interest-only fixed mortgage. The co-op was not considering refinancing since their existing debt was not maturing and their interest rate was locked at 4.25%.

The co-op was well maintained and financially sound with no need of additional capital. The structure of their initial loan includ-

ed a fixed seven-year term with a rate reset thereafter for the remaining five years.

Recognizing looming risk and an opportu-nity that could benefit the co-op, FFI

approached the building’s First-Service Residential manage-

ment team.

The rate was scheduled to reset in three years and the existing prepayment penalty was set to reduce from 4%

to 3%. After careful anal-ysis, FFI identified that the cost savings from a lower interest rate would far outweigh the

prepayment penalty cost. The board could also remove all of the risk with the rate reset by securing a new long-term fixed mortgage.

When presented to the board, they unanimously agreed with the recommendation and instructed FFI to move forward.

FFI conducted a thorough bid process, secured numerous term sheets from different lenders, and negotiated an aggressive 10-year interest-only fixed mortgage at 3.75%. The chosen lender was able to lock the interest rate at application and provide the borrower with a 90 day window to close the loan. This removed any risk with rising treasury markets during loan underwriting and

gave the borrower enough time to close the loan and take advan-tage of the reduced prepayment penalty.

The final loan terms reduced the co-op’s annual debt cost by over $47,000 and pushed the loan maturity from 2021 to the end of 2025. This gave Silver Towers four additional years of security and the ability to budget long term for their debt cost. The loan suc-cessfully closed within 90 days of application and the board was thrilled with the service.

FFI Solution for Silver Towers Owners Corp 377-unit cooperative in Kew Gardens, NY

New Mortgage Amount $10,500,000

New Interest Rate 3.75%

Term 10-year Fixed

Amortization Interest Only

• FFI locked in a rate of 3.75% on a 10-year fixed, interest only mortgage

• The board paid the prepayment penalty and closing costs out of reserves to avoid increasing the final loan amount

• The co-op was able to reduce their annual debt cost by over $47,000 per year, far exceeding the prepayment penalty

• The new loan extends the debt maturity through 2025, thereby increasing security and the ability to budget long term

• The entire process from application to closing took less than 90 days

To learn how FFI’s programs may benefit your property, contact Jor-dan Muchnick at (484) 398-6042 or jmuchnick@firstservice.com.

FFI Enhances Fiscal Status of Silver Towers through Creative Financing

Case Study

FirstService Financial

“FFI made a recommendation that enhanced our financial position long term.”

ADVANTAGE • FirstService Residential • 7

“Our community continues to be at the forefront in implementing sustainable initiatives,” says Holt.

“With each subsequent initiative, support grows for how we can even more effectively operate with minimal impact to our environ-ment,” adds Holt. “With the support of FirstService Residential, we were very pleased to learn just how affordable ‘green power’ is, and it became the proverbial ‘icing on the cake’ for our latest efforts at environmental stewardship.”

By leveraging the buying power of the FirstService Residential port-folio, FS Energy negotiated savings up to 90% off other methods of purchasing RECs. As a result, Kips Bay Towers will pay $0.0012/MWh versus rates as high as $0.029/MWh on the open market.

Renewable energy is as reliable as standard electricity service. Kips Bay Towers remains connected to the same regional power grid that previously provided its power.

What are Renewable Energy Certificates?RECs represent the environmental attributes (avoided emissions) of 1 megawatt-hour (MWh) of electricity generated from an eligible

Renewable Energy Certificatescontinued from page 1

visory services—at no cost—to help accelerate energy and water efficiency upgrades. The Retrofit Accelerator team can also assist with determining how to use your Local Law 87 audit to improve the value and sustainability of your property.

The panel—which included representatives from the Mayor’s Office of Sustainability’s Retrofit Accelerator team and multifamily properties that have gone through energy retrofits in their build-ings—covered retrofit strategies, rebate programs, and financing solutions available to help pay for improvements.

“While energy audits provide many beneficial efficiency opportu-nities, building decision makers often do not take the next step to execute projects—even those with a high return-on-investment,”

NYC Retrofit Accelerator Eventcontinued from page 8

says Aaron Mehta, Director, Energy Information, FS Energy. “The NYC Retrofit Accelerator is designed to help overcome these barriers.”

To learn more, please speak with your property manager, visit www.nyc.gov/retrofitaccelerator or call (212) 656-9202.

pounds of coal burned

tons of waste sent to the landfill

gallons of gasoline consumed

renewable resource, such solar or wind. RECs incentivize car-bon-neutral renewable energy by providing a production subsidy to electricity generated from renewable sources.

RECs provide a very accessible platform for going green. If your board is interested in offsetting your property’s carbon footprint, please speak with your property manager.

To learn how RECs are produced and how your building can use them to turn electricity into renewable power, watch this video: https://www.youtube.com/watch?v=LzPCdpBHvFI.

4,295,806

In just one year, Kips Bay Towers will reduce its carbon emissions by

or the equivalent of greenhouse gas emissions from:

3,999 metric tons

1,433

450,028

WHAT’S AN REC?1 Renewable Energy Credit (REC) = 1 megawatt-hour (MWh) or1000 kilowatt-hours (kWh)of renewable electricity

8 • FirstService Residential • ADVANTAGE

622 Third AvenueNew York, NY 10017www.fsresidential.com

Advantage is published for board members and owners of properties managed by FirstService Residential. While every effort is made to achieve accuracy in this publication, it is not intended as advice to any property, and FirstService Residential shall not be liable for any damages resulting from reliance on the accuracy of information contained herein.

Have a comment about this newsletter? Send an email to: news.ny@fsresidential.com.

FirstService Residential supports the highest social and environmental standards. We are contributing to conservation and responsible management by using FSC-certified paper and print products.

FirstService Residential Hosts NYC Retrofit Accelerator EventTo support our commitment to improving the efficiency of multifamily proper-ties throughout New York City, FirstService Residential hosted an informative presentation for board members that was jointly sponsored by the Mayor's Office of Sustainability and Manhattan’s Community Board 6.

The event focused on the NYC Retrofit Accelerator Program, through which board members and property managers have access to a team of building ex-perts who can provide independent, customized technical assistance and ad-

(L-R) FS Energy’s Aaron Mehta with panelists Luke Surowiec and Ali Levine from the NYC Retrofit Accelerator program; Victor Berrios, a FirstService Residential property manager; and Charles McNally, a co-op board member.

FirstService Residential’s Green MissionEnvironmental responsibility is a corporate value for FirstService Residential and our subsidiaries. By striving to set a green standard for the real estate industry, we aim to find opportunities—within our operations and for our clients—to develop innovative and cost effective solutions that promote environmentally sound practices.

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