OPERATE

Green Leases

As Green leases are gaining momentum, tenants and landlords are in the throws of defining what this means for lease negotiations. TPG is taking the following steps in regards to their green leasing efforts:

1. Incorporating green leasing provisions into their master lease for new green buildings and evaluating tools and strategies to address the split incentives dilemma;

2. Utilizing a proprietary set of green tenant improvement (TI) guidelines that will be incorporated into future leases early in the lease negotiation process. Compliance is still voluntary for tenants as TPG wants to avoid adding restrictions that will make its buildings less competitive in the marketplace; TPG’s vendors, however, are required to comply with TPG’s sustainability policies and TI guidelines;

3.In their existing buildings TPG is educating stakeholders about TPG’s LEED certification goals, sustainability policies, and green operation strategies; and

4. In new buildings that are pursuing LEED Core and Shell certification, TPG is including certain lease restrictions (such as lighting levels) that are necessary for the building to meet its sustainability targets and maintain its current high performance LEED rating.

TPG’s green tenant improvement guidelines and sustainability policies as well as the education of their brokers are critical elements in green lease development since they help tenants understand green building features and its benefits.

As an example TPG conducted a training seminar in Austin about LEED and green buildings. The seminar was accredited through the Texas Real Estate Commission to meet mandatory Continuing Education requirements for licensed brokers and salespeople. PG’s green tenant improvement guidelines and sustainability policies as well as the education of their brokers are critical elements in green lease development since they help tenants understand green building features and its benefits.

SPLIT INCENTIVE

The real estate world experiences “split incentive” dilemmas that hinder energy efficiency or green building investment.

Building owners who lease out space often have little incentive to build or renovate green or beyond minimum energy code because many of the benefits accrue to the tenants.

Tenants have little incentive to improve a leased space, since they are temporary in the space and the benefits may accrue to the owner or to the next tenant.