As many of you know, we believe that green building is the ECONOMICALLY prudent way to go. That is the entire thesis of my Cornell Hospitality Quarterly article entitled "The Compelling Hard Case for Green Hotel Development."

Still, I was pleasantly surprised when two new items ended up on my desk this week. They are both further demonstration confirming the hard economic value of green development. 

The first item was the LEED Gold certification awarded to one of my favorite luxury hotels, Montage Beverly Hills under the direction of my friend, Ali Kasikci. The second was a new study published by two professors documenting a very strong economic premium in both rental and value (sales price) for green buildings based upon data from 553 green projects. The numbers may even amaze you (more than a 31% value premium). 

Montage Beverly Hills awarded LEED Gold certification

Awarding of LEED Gold to Montage Beverly Hill and residences should forever silence the skeptics who argued that green hotel development and sustainable operations are incompatible with luxury -- much less ultra-luxury -- hotels and hotel mixed-use.
 
Montage Beverly Hills became the first ultra-luxury LEED Gold hotel, and one of only four LEED Gold hotels (of any standard) in the world. Montage Beverly Hills is also the first newly constructed mixed-use hotel and residential project to be LEED certified as a single development, denoting it as a high performance building that is a responsible, efficient and healthy place to live and work.

"We're gratified to have created and be operating Southern California's first hotel and residential project to obtain Gold level certification," said Alan J. Fuerstman, Founder and CEO of Montage Hotels & Resorts.

"It's a fitting tribute to our development team, our construction team, the City of Beverly Hills and the ongoing efforts of the entire Montage Beverly Hills staff that luxury and sustainability can be synonymous," he said.

The 201-room ultra-luxury Beverly Hills Montage and residences opened November 2008 to international acclaim as one of the most beautiful luxury hotel mixed-use projects in the world. What else would you expect from a team led by Alan J. Fuerstman, Founder and CEO, and his hand-picked Managing Director for this property, Ali Kasikci? As the first luxury hotel built in Beverly Hills in more than 16 years, it has created quite a stir and become a new "home" for many travelers, locals and residents. 

Ali Kasikci is a dear friend, and one of the greatest hoteliers in the world. Click here to read more about here Ali Kasikci and Montage Beverly Hill's success story. And it was really personally satisfying to see the press release this week that Montage Beverly Hills was officially awarded LEED Gold certification!

There are a lot of feathers in a lot of caps that are well deserved from this accomplishment:

• Alan J. Fuerstman, CEO of Montage Hotels & Resorts
• Kim Richards, President of The Athens Group, together with Jay Newman who was project manager for the hotel developer 
• The mayor and City of Beverly Hills in this landmark success story of a public-private partnership 
• HKS Hill Glazier, architects for the project

Even the myth that luxury hotels cannot be sustainable has been shattered with beautiful luxury hotels gaining LEED certification, like Montage Beverly Hills.

And just a few days ago, my friend Meng Li, a LEED AP whom I met through JMBM's 2008 Hotel Developers Conference, sent me a copy of a new study published by two professors at the University of Reading, documenting a very strong economic premium in both rental income and asset prices (sales price) for green buildings based upon data from 553 green projects. The numbers may even amaze you (more than a 31% value premium). "Green Noise or Green Value? Measuring the Price Effects of Environmental certification in Commercial Buildings" was published by Franz Fuerst and Patrick McAllister, through the auspices of the School of Real Estate and Planning, Henley Business School, University of Reading. It was based upon a large set of data provided by the CoStar Group. 

Meng is working with a specialty technical services firm that provides energy efficiency solutions for new construction and major renovation. He is also a research associate at the Center for Energy and Environmental Research (CIDEA) at the Universidad Tecnológica Nacional in Argentina, where he specializes in feasibility analysis of sustainable building developments, especially LEED certified buildings.

A new study with empirical evidence of rental and asset sales premiums for GREEN buildings. 

This study has all the makings of a real landmark and a turning point in how private capital views the value of green buildings -- or rather a turning point in recognition of the values already being ascribed in the market place. Adam Smith likes green buildings!

The paper seeks to provide empirical evidence on the price differentials -- both rentals and asset sales price -- between LEED/Energy Star Properties and Noncertified Commercial Buildings in the United States.

Here are a few observations about the study and its background observations: The 40 pages of this scholarly analysis can be a bit daunting, but the highlights are easy to grasp:

• Buildings account for more than 20% of greenhouse gas emissions 
• Many governments have mandated better environmental practices
• Voluntary environmentalism is also being driven by market-based economics
• Price signals are central to the operation of markets providing the information basis for the allocation of resources
• There is a frustrating shortage of empirical data on the economic value of green buildings
• In this empirical analysis, LEED- and Energy Star-certified buildings were compared to a sample of noncertified buildings in the same metropolitan areas

The study included data on 110 LEED and 433 Energy Star properties and thousands of noncertified properties. Here are the results:

• LEED and Energy Star certified buildings have rental premiums of 10% or more 
• LEED and Energy Star certified buildings have a 31% or more transaction price premium 
• The higher the energy efficient rating, the greater the premium for both rentals and transaction prices

To follow what is going on in the hotel industry with sustainability, be sure to subscribe to Glenn Hasek's GreenLodgingNews.com. 

Jim Butler
Chairman, Global Hospitality Group
Jeffer, Mangels, Butler & Marmaro LLP
1900 Avenue of the Stars, 7th Floor
Los Angeles, CA 90067-4308
(310) 201-3526 direct
[email protected]
www.HotelLawBlog.com