March 2018 - Sachse Construction
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Month: March 2018

DTE Plan Doubles Renewable Energy Investments

by Sachse Team

 

DTE Energy plans to add 1,000 megawatts of solar and wind power by 2022, doubling its current capacity and investments in renewable energy.

The locations of the proposed renewable power sources were not announced.

If approved this year by the Michigan Public Service Commission, these new renewable energy projects would represent an $1.7 billion investment in Michigan. The additional 1,000 megawatts, primarily wind, would power more than 450,000 homes and increase DTE’s renewable energy portfolio standard to 15 percent of generation, up from about 10 percent.

In what is known as an “integrated resource plan,” which electric companies are required to submit every five years with the MPSC under the state’s 2016 energy legislation, DTE has proposed to increase its renewable energy capacity to 2,000 megawatts from the current 1,000 megawatts that would power 850,000 homes, or nearly 40 percent of its 2.2 million electric customers in Michigan.

Crain’s previously reported that DTE plans to add 4,000 megawatts of renewable power over the next 20 years as it retires several aging coal-fired plants. DTE told Crain’s earlier this month it would announce a major renewable energy wind project in the range of 150 megawatts, so the announcement Friday of 1,000 megawatts indicates DTE has had a bigger plan in the works to more than double down on renewables.

“The plan we have filed takes another significant next step toward our goal of cutting carbon emissions by more than 80 percent by 2050 while continuing to deliver reliable and affordable power for our 2.2 million customers,” DTE Energy Chairman and CEO Gerry Anderson said in a statement.

“Due to our substantial investments and use of renewable energy, DTE has already reduced its carbon emissions by nearly 25 percent by driving investments of approximately $2.5 billion over the last 10 years in Michigan’s renewable energy sector and adding 1,000 megawatts of wind and solar capacity.”

DTE also has asked the MPSC to approve its proposed $1 billion, 1,100 megawatt gas-fired power plant in St. Clair County. A decision is expected in April. The company says it wants to break ground on the project in 2019 and begin producing enough electricity to power 850,000 homes. The proposed gas plant and renewable energy projects would power more than 80 percent of DTE’s customers, the company said.

DTE Energy Co. has faced opposition from environmental and renewable-energy groups to its gas plant who say the gas plant will cost ratepayers $340 million more than it would spend investing in renewable energy and various efficiency programs. The MPSC recommended approval of DTE’s plan, but noted the commission could require DTE to resubmit its plan under the state’s new energy law IRP requirements.

DTE says building the gas plant is the least costly option for customers, will help it reduce carbon emissions by 30 percent by 2030 and will replace some lost jobs due to coal plant closures in St. Clair County.

In its IRP, DTE also said it wants to offer a new renewable energy program designed for large business customers seeking to reduce carbon emissions to invest in renewable energy. The program could provide an additional 300 megawatts of renewable resources beyond those proposed to meet the 15 percent RPS requirement. DTE offers a slightly different MIGreenPower voluntary program to residential customers where people pay extra on their monthly bills to support renewable energy capacity.

Businesses have increasingly been interested in converting to renewable energy, with some setting a goal to convert to 100 percent renewable sources.

The IRP plan also includes the launch of a pilot program for battery storage technology aimed at improving the reliability of energy provided from wind and solar power, areas that environmental groups have encouraged DTE to invest in. Battery storage technologies hold much promise, but experts say more research and development is needed to improve efficiencies.

Under an IRP, regulated utilities like DTE are required to develop long-term plans on how they will meet electricity demand in their service areas. The plans also must include evaluations of energy waste reduction, supply sufficiency, demand response and the impact of state and federal environmental regulations. Any new generation source is required to be the lowest-cost and best option.

By adding another 1,000 megawatts of renewable energy, DTE also appears to be trying to save money on development costs by gaining tax credits, which will phase out over the next five years, and take advantage of historic low prices for solar and wind technology.

Legislation that grants the 30 percent federal tax credits for solar begins to phase down in 2020 to 26 percent, 21 percent in 2021 and down to 10 percent in 2022 for commercial. Residential solar tax credits expire in 2022. Wind tax credits end in 2019.

DTE is announcing more renewable energy, which it will build and bill customers for, after it recently told the MPSC that it will not need at least 104 megawatts of renewable electricity from several small hydroelectric, landfill gas and biomass entities that it has under contract.

The small renewable energy operators contract with DTE and with Consumers Energy Co. under a federal law, Public Utility Regulatory Power Act, passed in the 1970s to encourage small renewable energy generation under 20 megawatts. Under PURPA, utilities must pay the price based on the “avoided costs” to generate the same amount of power used in the current standard power-generation source, which used to be coal and now is a hybrid combined natural gas cycle source.

DTE told the MPSC that it won’t need these contracts when they begin to expire in 2024. DTE’s decision on some PURPA contracts is under appeal.

“Beyond this plan, DTE will continue to add additional renewable energy resources,” Anderson said. “Reducing our company’s carbon emissions and developing cleaner sources of energy is a key priority for us. This work will also bring positive economic impacts such as job creation and local community revenue.”

In its statement, DTE said it has studied the engineering and the economics of Michigan’s energy future for two years before announcing last year its initiative to reduce carbon reduction emissions by more than 80 percent by 2050.

“We’ve concluded not only that the 80 percent reduction goal is achievable, it is achievable in a way that ensures Michigan’s power is safe, secure, affordable, reliable — and sustainable,” Anderson said. “There doesn’t have to be a choice between a healthy environment and a healthy economy, although the debate often gets framed that way. We can have both, if we invest in a smart way.”

Here are some additional highlights of DTE’s IRP:

  • The Pine River wind park will come online later this year and the Polaris wind park in 2019. The wind parks have capacity to generate up to 330 megawatts.
  • Another two additional wind parks are on the drawing boards that will provide a combined 375 megawatts and begin operation in 2021 and 2022.
  • Installing approximately 15 megawatts of new Michigan-based solar capacity over the next three years, increasing DTE’s solar capacity by almost 25 percent over the next three years.

Detroit-based DTE Energy’s electric utility serves 2.2 million customers in Southeast Michigan and its natural gas utility serving 1.3 million customers in Michigan.

The DTE portfolio also includes non-utility energy businesses focused on power and industrial projects, natural gas pipelines, gathering and storage, and energy marketing and trading.

Over the past several years, DTE’s earnings have been driven by non-utility business, primarily its gas pipelines and storage operations. In fiscal 2017 ended Dec. 31, DTE reported $153 million in profits on its gas pipeline business compared with $143 million on its electricity business and $53 million on natural gas sales.

DTE earned $1.1 billion in 2017, or $6.32 per share, compared with $868 million, or $4.83 per share in 2016. DTE also saved about $190 million from federal tax reform.

Apartments Outperform Office, Retail, Industrial Properties: NMHC Research

by Sachse Team

Apartments outperform other commercial real estate property types, on both a risk-adjusted and unadjusted basis, regardless of holding period, geographic region, metro size, and growth rate according to new research from the National Multifamily Housing Council Research Foundation.

In the first work of research funded by NMHC’s Research Foundation since it was launched in late 2016, Professors Dr. Mark J. Eppli (Marquette University) and Dr. Charles C. Tu (University of San Diego) examine a wide range of property and financial market characteristics to try to determine if apartment market over-performance stands up to the test of time.

“Over the last three decades, apartments have become a desired asset class among both domestic and foreign real estate investors because of their strong returns coupled with relatively low risk,” said Mark Obrinsky, NMHC’s Chief Economist. “Despite the different characteristics of apartment, office, retail, and industrial properties, one might expect competitive markets to reduce, even eliminate, the higher risk-adjusted returns on apartments. This research finds that not to be the case, however.”

According to the authors, part of the reason that apartment returns outperform other asset classes is because investors tend to underestimate capital expenditures for both office and industrial properties.

Drs. Eppli and Tu examined a wide range of property and financial market characteristics to try to find insights into expected investment returns. One result they documented is that acquiring properties immediately after a downturn boosts returns.

“We are delighted to publish this first research report from the NMHC Research Foundation,” said NMHC President and CEO Doug Bibby. “As the multifamily industry grows in sophistication, so must the quality and breadth of our analysis. Filling that need was our goal in creating the Foundation and this paper is one of many forthcoming works that will provide leading, actionable information for the apartment market.”

Lower-Income Americans Drive Consumer Sentiment to 14-Year High

by Sachse Team

America’s low-income earners boosted consumer sentiment to a 14-year high this month, while confidence among the nation’s highest earning workers fell.

The University of Michigan on Thursday said its consumer-sentiment index was 101.4 in March, down from an initial 102.0 reading for the month. The original and updated figure for March are both the highest levels since 2004. Economists surveyed by The Wall Street Journal had expected the final reading to remain at 102.0.

The index was 99.7 in February, the second-highest reading since 2004.

March’s gain from February was largely driven by lower-income households’ rising optimism, signaling that the U.S.’s tight labor market, which is pulling workers from the sidelines and pushing up wages in pockets of the country, could be making consumers giddy.

“All of the March gain in the Sentiment Index was among households with incomes in the bottom third… those in the middle third were unchanged, while the Index fell among households in the top third,” said Richard Curtin, the Michigan survey’s chief economist.

Meanwhile, some of the country’s highest earners expressed concerns with current economic policies, including the Trump administration’s recent tariff announcements. This offset positive reactions to the late-2017 tax overhaul among this higher income group.

Overall, measures of how consumers feel about the economy have climbed since President Donald Trump was elected and have been buoyed by strong economic growth, low unemployment and rising wealth related to home prices and repeated stock-market highs.

Research Illustrates Four Types of Asset Management

by Sachse Team

Much has been written in this space about the working relationship between asset and property managers. That conversation took major strides recently as the Institute of Real Estate Management hosted its third annual Commercial Summit at the Peninsula Hotel in Manhattan.

That forward movement came in the form of a question: What steps can property and asset

managers take to better understand the challenges and needs each side deals with? The question was posed by Dustin Read, PhD/JD, assistant professor of property management and real estate at Virginia Tech. Read has been working for more than 18 months with IREM on an exploration of the relationship between the two separate but so closely tied disciplines with the goal of establishing better understanding between the two.

There is a catch-22 of sorts that exists not only in commercial real estate, but in business in general. Namely, as a Gallup study recently pointed out, few successful executives are promoted to managerial positions because they excel at management. Rather, they are put in charge of teams of people as a reward for profits raised or margins widened. The management piece is the part they need to make up—for better or worse—on their own.

Happily, the discussion at the Peninsula revealed that property and asset managers alike are acutely aware of the need to listen and communicate. They clearly see these as twin keys to opening the door of improved understanding, which in turn leads to greater efficiencies; higher motivation; and, ultimately, a more effective team. The discussion revealed the importance of communicating, on one side, the goals and expectations of the ownership entity and, on the other side, the need to relay any roadblocks to achieving those goals and satisfying those expectations.

This awareness dovetails nicely with the groundwork previously set by Read and IREM, which to date has produced the first three in a series of books exploring the role of the real estate asset manager.

Such a transparent relationship doesn’t exist in a vacuum, of course, and as Read pointed out, it must be done within a corporate culture that supports dynamic communication. As one third-party property manager told Read in a previous interview, “The most successful firms I have worked with take the interaction between acquisition/brokerage and asset/property management very seriously. They have done a great job of bringing these two key sides of our industry together, and in turn, they have grown tremendously.”

Achieving that level of success takes a specific type of talent. Read’s research identified four separate buckets into which asset managers tend to fit. He acknowledged that these are by nature highly generalized, and each one brings its own issues to the table, and only one stands the best chance of ringing that bell.

One bucket contains those companies in which the “management” part of the phrase “asset management” refers to an “analytical function and managing properties to glean information about asset performance.” But it doesn’t refer to managing people. “While there’s certainly a human resource element to it, these are the spreadsheet people,” he told the audience.

The transactional bucket holds professionals “who may not have the strongest financial acumen, or the best people skills, but they are all about driving revenue growth.”

There is an operations bucket, filled with asset managers who are property-facing and “are very good at managing the property manager.”

The fourth bucket holds what Read called “the unicorn, the comprehensive asset management organization, the professionals with really diverse skill sets, who can perform the high-level financial analysis and motivate and lead a team.”

But now for the issues. Read said the financially-oriented asset manager tends to lack the implementation expertise or the ability to see “what dominoes an asset management recommendation might set off.” The transactional asset manager can drive value, but can lose sight of “the other stuff, like how to manage a property on a day-to-day basis.” Operationally-oriented asset management organizations can get engagement from the team, but they tend to have a property-facing view, and can “lose sight of real estate in the broader context, as an investment vehicle.”

The issue with the comprehensive asset manager is that she or he is as rare as a unicorn. What Read defines as the “hub” of the wheel, they seem to have it all and “can coordinate between property managers, construction people and leasing teams. But they are hard to find . . . and hard to retain.”

But that is also the sweet spot, the point where true asset management and all of the responsibilities and capabilities implied in the name, come together. It is the essence of the organization profiled by the property manager in the above quote.

Communication and motivation are not just altruistic, touchy-feely, kumbaya concepts. Organizations that can embody the full range of the traits described here, that can promote open dialogue, create an atmosphere of mutual respect and encourage an unencumbered exchange of ideas—while manifesting the financial, transactional and operational needs of ownership—optimize the relationship with the property management function.

It is a win/win/win, for the asset manager, the property manager and, ultimately, the bottom line.

Demand For Office Amenities Is Not Being Met

by Sachse Team

Amenities have become a competitive differentiator in new apartment developments and now that trend is making its way to the office sector. Unlike the multifamily space, though, many landlords have not yet gotten the memo, leaving their tenants frustrated with their lack of options, according to a new report by HqO, a tenant engagement application for commercial landlords. “B2B, in general, always seems to lag trends in the B2C world and that is happening in real estate,” Chase Garbarino, CEO and co-founder of HqO, tells GlobeSt.com. “Residential groups and hotels are out in front providing different services to their tenants and now you are starting to see more office landlords moving in that direction.”

An HqO survey found that that tenants are extremely amenity driven but only 26% felt that there were enough offerings at their current office building. 35% of tenants said their office building has no amenities, 31% said their office building has some amenities but they wished there were more to choose from, and 6% did not know if their office building offers any amenities.

Of all the different types of amenities that tenants have access to, survey data show preference for fitness and wellness and food and beverage focused offerings. Tenants were given the option to choose up to three amenities and experiences most important to them:

  • 62% chose fitness & wellness offerings such as onsite gyms, visiting nutritionists, spin & yoga classes
  • 62% chose food deals, such as discounts to local lunch spots
  • 38% chose networking opportunities, such as events at their office building with expert panels or free classes and courses for professional development
  • 38% chose convenience services, such as dry cleaning, pet care or childcare
  • 21% chose beer and wine experiences, such as wine tastings or happy hours in the lobby of the office building
  • 15% chose beauty experiences, such as monthly mani/pedis or hair blow-drys in the office building.

“Anything that can make tenants’ lives more efficient, tenants seem to desire that,” Garbarino says.

There are notable examples of office landlords offering such tenant amenities usually in trophy buildings located in gateway buildings but it is still rare to see such offerings in commodity buildings. Garbarino thinks that might change as property managers develop the necessary tools and skill sets to manage such amenities. “It’s tough to expect people who’ve been doing a certain job — taking care of the physical building, collecting rent — to develop amenity procurement and coordination skills overnight,” he says. “But when we talk to landlords they will tell us that they know they need to move in this direction.”

Sound Health: How Tranquility Rooms can Heal Caregivers

by Sachse Team

In hospital environments, staff can be inundated with noise—loud sirens, patients in pain, machines beeping—it’s a reflection of policies and regulations creating a dehumanized healthcare experience. But sound—through multisensory environments like the “Tranquility Room” at Sibley Memorial Hospital in Washington, D.C.—can also be healing, by promoting a culture of quietness, enhancing environments not just for patients, but to also care for those who take care of others.

Throughout this blog series, we’ve underscored the importance for compassion towards staff—through the partnership between Gensler, sound alchemist Yoko Sen, and the Johns Hopkins Sibley Innovation Hub to develop the Tranquility Room. This room has had a profound effect on staff, with the hospital embracing self-care and mindfulness methodologies. Recently, we introduced the Tranquility Room concept at STIR: The Experience Lab—an unconventional conference or “unconference,” a convergence of 300 healthcare executives and practitioners curated through moving music, spoken word, and inspiring talks to push the conversation forward to make healthcare better. Here’s what we learned.

The tranquility room pop-up

During the “experience salon” at STIR, attendees interacted with the Tranquility Room Pop-Up—a collaboration between Gensler, The Experience Lab, Yoko Sen, and filmmaker Louie Schwartzberg with products provided by Keilhauer, Buzzispace, and Body Sound. The concept created an immersive experience by tapping into the senses through visual projection, sound, and aromatherapy. As people queued up to enter the room, our live feedback indicated that the vast majority were entering the room with a “not tranquil” state of mind. After about five minutes, visitors came out of the room saying, “Amazing,” Wow,” “I’ve never experienced that before,” and “Loved It!”

Upon diving deep with attendees, some questions and comments became glaringly important:

  • This is great, but how do I get my nurses to the room?
  • How do I keep a room like this going, self-sustaining?
  • Who is giving permission for my nurses to take a break?
  • Where do I locate this room in my hospital? Is it right outside the unit?
  • What role will the location have in instilling the culture to take a break?

Operational changes for a successful tranquility room

Based on our experience at Sibley and STIR, the feedback we received requires inquiry into the methods to encourage a Tranquility Room to go beyond concept and intention towards analysis on the institutional changes that can strengthen the momentum for the project. Three key factors contribute to a successful Tranquility Room:

  1. You need an executive champion – Hospitals and medical organizations need at least one person at the executive level to be a champion of the project. They are the change agents that can invoke an institutional shift by accepting phenomenon’s like nurse fatigue, supporting resilience training of staff, and ultimately propelling the project.
  2. You need a budget, and a realistic one – A Tranquility Room project cannot move forward without adequate funds that are set aside of the hospital budget. A modest budget emphasizes starting small, allowing for iteration, and encouraging staff feedback, reinforced by design thinking.
  3. You need a dedicated project manager – A project manager gives the project authenticity to the hospital by having a dedicated person manage all the parties involved while maintaining the vision and aspirational goals and providing oversight of the executive champion, facilities management, staff, and the design team. They own the mission.

Other tranquility room considerations

Finding the right space can be challenging since every space in an existing hospital is already accounted for another use or purpose. It’s imperative for leadership, the project manager, staff, and facilities to work together to carve out space. By focusing on creating a cultural shift centered on the well-being of staff, leadership must create mechanisms to grant staff permission to use the space, whether it’s the managing nurse, unit manager, or nursing supervisor. Signage and guidelines explain the protocol for using the space, and ultimately empower staff to use the space through a sustainable and prescribed method.

Health and wellness environments can succeed by taking an all-encompassing approach to design by factoring not just patients, but all users. The Tranquility Room signifies that our industry is pivoting its approach towards using space to create sound health for not just patients, but for caregivers as well, and that the needs of staff matter beyond measure.

The Latest Data in the Multifamily ‘Amenities War’

by Sachse Team

There’s been an explosion of amenities in the U.S. and Canadian multifamily construction sector. Package delivery centers have tripled in size. Simple bicycle “racks” have become bicycle “kitchens,” where residents can not only safely store, but also maintain and repair their $10,500 Bianchi Oltre XR4s.

Some properties now have dedicated rideshare areas for tenants to wait for their Uber or Lyft rides.

Multifamily residents are demanding high-end security systems, the latest smart home technology, “green” energy and water efficiency, and lightning fast WiFi. On the horizon: co-working and “maker” spaces.

Developers and designers are bending over backwards to provide more—and more elaborate—services and facilities for pets. Dogs, mostly. As for amenities for children, not so much. You’re more likely to find a doggie wash station than a children’s playroom in most multifamily complexes.

Anything that spells “wellness” is in high demand, thanks to the spike in asthma and allergies. Renters and condo buyers want to know about any “Red List” chemicals in the materials, building products, and finishes you’re using. Developers and their design teams are using fitness and nature amenities to get tenants and condo owners out of their living units and into the outdoors.

All these must-have extras add to the burden designers and contractors must contend with to meet the needs—and budgets—of multifamily developers and their customers—renters and condominium purchasers. Multifamily residential real estate is no longer just about location, location, location. There’s a new mantra: amenities, amenities, and more amenities.

Scientists Develop Method to Print in 3-D with Liquid

by Sachse Team

Scientists from the U.S. Department of Energy’s Lawrence Berkeley National Laboratory have discovered how to print 3-D structures comprising liquids, according to a news release from Berkeley Lab.

By way of a modified 3-D printer, scientists inject threads of water into silicone oil — essentially sculpting tubes made of one liquid within another liquid. Researchers attribute this advance to learning how to create liquid tubes inside another liquid and then automating the process.

The material, which has been printed in threads from 10 micron to 1 millimeter in diameter and up to several meters in length, could be used to construct liquid electronics that power flexible, stretchable devices.

 

Prior to the Berkeley Labs breakthrough, 3-D printing, sometimes referred to as additive manufacturing, was limited to working with solid materials, such as concrete. Even so, those solid materials offer scientists plenty of space in which to innovate.

HP last month introduced a series of printers that not only print in color, but also print with multiple materials simultaneously. This is done through voxel control; a voxel is a 3-D pixel the printers use to create objects and voxel control is what allows the printer to change the material being used to produce the final object.

The 3-D printing technology also could be instrumental onsite. Last December RCAM Technologies received a $1.25 million grant from the California Energy Commission to develop and test 3-D printing technology to construct concrete turbine towers onsite. This onsite method could yield 140-meter-tall towers. Comparatively, steel towers that must be transported to the site are only 80 meters high; the challenges of transporting these structures over roadways restricts the ability to use taller ones.

Magued Eldaief, CEO of BIM hardware-software technology company Prescient, sees not only automation and robotics continuing to infiltrate jobsites, he told Construction Dive last month, but 3-D printing as well.

“I believe 3-D printing will also play a big role as the cost and limitations of that technology evolve,” he said. All of those technologies will contribute to enhancing site productivity and eliminating human safety concerns.

Houses, too, will experience more 3-D printing innovation. Startup ICON, in partnership with nonprofit New Story, plan to use 3-D printing to build 100 printed homes in El Salvador by the end of the year. A printer designed especially for this project will manufacture a single-story, 650-square-foot concrete house in less than 24 hours.