Sustainable initiatives are helping managers reduce costs, safeguard the environment and attract residents.
From light touch-ups such as weatherization and LED lighting to strategic initiatives like solar rooftops—and everything in between, including electric appliances tied to heat pumps, induction stoves and low-flow plumbing—apartment managers continue to seek sustainable ways to improve operations.
Their motivations run the gamut from a bottom-line focus on reducing costs to a more idealistic desire to create more sustainable communities, with investors and current and prospective residents potentially focused on both of those goals.
Comprehensive Program at Berkshire
Berkshire Residential Investments, a vertically integrated investment management company, owns, manages and oversees 480,000 units across its equity and debt portfolios. “We think about our sustainability program through a holistic effort that focuses on adding value and reducing risk to our investments while enhancing living experiences for our residents, taking into account efficiency and ROI,” says Hannah Tillmann, Vice President of Sustainability, who participated in a panel at this year’s Apartmentalize conference in Las Vegas about the topic.
The firm elevated its sustainability program in 2018, but was always committed to sustainable practices and efficiency measures at its properties, Tillmann says. The program, launched seven years ago, has resulted in an integrated set of strategies to monitor, track and enhance performance, in terms of environmental impact and efficiency as well as employee and resident satisfaction, she says.
Berkshire identified high-level environmental performance targets, including 10% reductions by 2025 (as compared to 2019) in energy, waste and greenhouse gas emissions, and 30% in waste, Tillmann says. For longer-held assets, the company is aiming to reduce landlord-attributed greenhouse gas emissions intensity by 50% by 2030.
“Those goals help us motivate ourselves and track our performance over time,” she says. “We can have that quantitative indicator of, ‘Are we actually improving from a financial and environmental perspective?’ At the property level, the short answer is: We’re consistently looking at opportunities to enhance value and reduce risk across the asset lifecycle.”
What that looks like varies by property, as far as initiatives like equipment efficiency, sustainable amenities and onsite renewable energy, Tillmann says. “We follow an intentional approach to sustainability improvements in each property and each investment portfolio.” she says. “We have different return expectations, hold times, market pressures, geographic constraints and investor requirements.”
Berkshire assesses and identifies efficiency opportunities, examines regulatory risk, reviews existing equipment and appliances and looks at resilience to physical climate hazards when conducting due diligence on a new investment, Tillmann says. The company creates a comprehensive sustainability scorecard summarizing these findings, which is shared with the company’s investment committee during the investment process, she says.
This process combines a desktop review of owner-provided materials in addition to an in-person energy audit, LED audit and electric vehicle (EV) charging station installation proposal for all new acquisitions, Tillmann says.
“For long-term holds with sustainability-minded investors, we will do an additional on-site solar feasibility assessment and a decarbonization assessment. Finally, we will bring in someone for a resilience assessment if we feel like the property is at a high risk for things like storms, flooding and certain acute hazards that could be detrimental to the asset.”
All of those findings are aggregated, and the teams determine which projects to underwrite for year one and which ones to reevaluate in future years, Tillmann says. Berkshire sustainability and utilities teams partner with third-party consultants to track and report energy, water and waste every quarter at each property, along with reporting on greenhouse gas emissions annually, she says.
The data is then used to track progress toward established targets, “but more importantly, it helps us look at the asset level for two things,” Tillmann says. “Does the property have operational issues that we could remedy? Does it look like the property is using more water than its peers, potentially indicating a leak, or old toilets that need replacement? Also, is the property trending in the wrong direction? Do we need an energy audit that would help us think through capital planning, to push the property to be more efficient?”
The wide geographic range that Berkshire covers requires monitoring regulations in numerous states, counties and cities, making sure properties are complying with all of them, as well as a long list of potential utility efficiency programs and rebates, Tillmann says. In the past two years alone, about 30% of the company’s properties have received a free utility audit to identify efficiency opportunities and Berkshire has taken advantage of more than $1.5 million in property-level rebate programs to perform upgrades, she says.
“We are continually evolving our program to focus on comprehensive sustainability management” Tillmann says. “Investor pressures are our biggest driver. We have investors that are coming in the door with capital, and they want us to not only leverage an efficiency-first mindset, but in certain portfolios, to be aggressive from a carbon perspective. They want to see efficient buildings. They want to see resilient buildings. They want to see buildings capable of retaining their value in the face of changing market dynamics and hazards.”
Intentional Focus at Cortland
Atlanta-based Cortland, with more than 82,000 units at approximately 220 assets in 23 markets, mostly in the Sun Belt and Mountain West, created the new role of Vice President and Global Head of Sustainability in 2022, as the firm saw a growing desire from investors to address ESG-related issues, says Cass McFadden, who was hired into that position, and who appeared on the same Environmental, Social and Governance sustainability panel at Apartmentalize as Tillmann.
Since then, McFadden has been overseeing the entire sustainability program, including energy, water and waste programming and reporting as well as tracking emissions, green certifications and building design. On the capital markets and investment side, McFadden coordinates reporting and interacts with investors, explaining the company’s plans.
“We had huge frame working opportunities before we pulled all the levers,” she says. “We asked, ‘Where are we headed?’” The company worked to put Net Zero 2050 in place, took active steps toward climate resilience planning and became a signatory to the United Nations Principles for Responsible Investment. “Under those frameworks, we started to track low-hanging fruit items,” she adds.
That led to focuses on renewable energy procurement as well as a portfolio-wide audit for energy, water and waste, McFadden says. “So, we could see, surgically, what opportunities we were missing with retrofits, and better maintenance onsite,” she says. “We introduced an annual greenhouse gas inventory so we could capture the scope. We collaborated with our procurement team to incorporate ESG factors into our new procurement software, so we could capture and report our sustainability procurement results.”
The company implemented pilot projects for water conservation, helping it to sense and mitigate leaks, while better understanding irrigation and how to conserve water.
The company has leaned into solar where the incentives make sense, which will probably be in fewer places due to the changed federal environment, although in certain markets, like Tucson, Ariz., they have it installed, operational and working well, and they’re looking to scale it up, McFadden says.
On the weatherization front, the company created a program a couple years ago to mitigate winter-related damages, ranging from wrapping pipes to keeping a spout open so a pipe doesn’t freeze to communicating better with residents about temperatures in their units, she says. “The following winter, we saw significantly less damage, across the board, which was proof that the program was working.”
Some efficiency projects are executed centrally. For example, the sustainability team and utilities group handled renewable energy procurement, so that operations people don’t have to think about those pieces, McFadden says. “We try as much as possible to take programmatic execution off their plate at the community level,” she says. “We want them to focus on the resident experience and anything else tactical that they need to address at the asset level.”
Midwood Investment
New York-based Midwood Investment & Development, which has more than 1,100 units nationally, has been retrofitting historic buildings for sustainability-related improvements, ones residents would like to see in the Pittsburgh buildings that General Manager Monica Frazier oversees, called The Cork Factory and Lot 24.
While this can be challenging in buildings designated as historic landmarks—the Cork Factory was built in 1901, for example—the company has been making upgrades like induction stoves and low-flow plumbing, says Frazier, who appeared on a separate Apartmentalize panel about maintenance and technology.
Midwood also has been exploring solar paneling on its roofs, although that’s a complicated calculation involving not only the costs involved but also whether the roof can structurally support them and whether the local weather will allow a building to be powered that way, Frazier says. “Sometimes, it’s just making sure there’s green space in these communities where it’s extremely dense,” she says.
The 96-unit Lot 24 building was LEED-certified upon construction, a designation that requires upgrades like low-flow toilet tanks to maintain over time, which can be challenging, Frazier says. The company has been actively exploring the certification process, while also encouraging NAA credentials for maintenance technicians that include sustainability. “We need to be multifaceted, responsible developers and operators,” she says. “If it’s feasible, we should do it.”
Advances in technology provide some of the solutions, such as leak detectors that can save many gallons of water and save costs for residents, Frazier says, adding that some larger companies are installing thermostats controllable from one’s desktop to manage air conditioning and heating. “Some technologies come onto the marketplace and then disappear—there’s a little bit of trial and error,” she says.
Impacting Resident Attraction, Retention
Multiple stakeholders are involved in this entire process, from investors to residents to third-party partners. Berkshire operates under the assumption that sustainable initiatives like green roofs, EV charging stations and green building certifications are seen as an amenity that tells prospective residents they are walking into an efficient building. “We believe that they are interested in that, and it may prompt them to walk into a building, as opposed to a comp down the street that doesn’t have that,” Tillmann says.
A resident sustainability survey conducted last year for the first time found that on a scale of 1 to 5, 81% were somewhat to very concerned about the climate and 87% were somewhat to very interested in a sustainable lifestyle (i.e., at least a 3 out of 5 on both counts), while the top three most important sustainable features were indoor air quality, recycling and energy and water efficiency.
“That feedback was in line with our expectations and further motivates us to pursue efficiency-first initiatives at properties that also save money,” Tillmann says. “But making sure we get that information to [prospective] residents is rather difficult. Efficiency is not visual. They’re looking for granite countertops and a cozy living space. There’s a disconnect. I don’t think I’ve seen the industry fully solve that communication problem of how you market, especially, efficiency to residents, unless you do an all-out education campaign.”
About half of buildings have some type of green-building certification such as LEED or National Green Building, and 90% of Americans recognize the Energy Star label for appliances, so those are relatively easy ways to make that connection, Tillmann says. And while it’s difficult to say whether a resident is walking into a building because of those features, they’re certainly helpful as part of offering “best-in-class service and excellent property management,” Tillmann adds.
Cortland is still figuring out how much resident attraction and retention is affected by sustainability programs and policies, McFadden says. The company sent out a community survey with ESG-related questions asking how residents would prioritize topics like energy efficiency, waste diversion, clean air and electric vehicle charging.
“The loudest part of that survey that residents always talk about is the waste component,” she says. “The compactor is full, there’s cardboard all over the place and it smells. [Second] is complaints around EV charging—if a charger goes down, and they’re not available, it causes dissatisfaction. We don’t take [those results] to mean that other components aren’t important to them. We still have work to do to figure out if it actually leads to a premium.”
Customers of Midwood Investment are becoming increasingly in tune with and aware of sustainability at a time when technology brings more information to their fingertips, Frazier says. “They’re paying for trash fees, for recycling programs,” she says. “I see my water bill is creeping up. It can be hard to explain. [Residents are] seeing that and asking the question, ‘How do I contribute to sustainability?’ We have a community garden at the Cork Factory. Residents love it. That circles back to customers wanting to contribute and be part of the solution.”
Midwood is working to create opportunities for them to do so while also educating them about the impact of sustainability initiatives the company is undertaking and how those impact residents, Frazier says. “They’re a driving force,” she says. “It depends on the demographic you serve....[Residents] want to know. They are interested. If we ignore that as multifamily operators, we are going to miss the mark. It’s not all quantitative—it’s how people feel this all comes together in their lifestyle.”
Ed Finkel is a freelance writer.