Green Lease Case Study: Spang Mountain

SPANG MOUNTAIN

GREEN LEASE CASE STUDY

ENERGY EFFICIENCY: A PRIMARY

CONCERN

THE CHALLENGE Energy efficiency at Spang Mountain is a primary concern for owner John McGovern. The 100,000 square foot property was masonry-built by Mcgovern’s great-great grandfather in 1887 and posed significant opportunity for undertaking energy efficiency improvements. To get the ball rolling, the Council of Smaller Enterprises (COSE) energy team conducted a comprehensive energy assessment in the property’s conditioned spaces and identified priorities for energy conservation measures (ECMs).

THE SOLUTION COSE audited the building systems, including the building envelope, lighting, cooling, heating, domestic hot water, miscellaneous equipment, and operational/maintenance procedures. Some of the identified ECMs ranged from behavioral actions such as reducing lighting utilization levels and managing plug loads, to more extensive upgrades such as retrofitting the existing lighting to high-efficiency lighting with controls.

LED LIGHTING: Because of its significant energy savings, potential reduced maintenance and overall efficiency improvements, LED lighting was one of the first recommendations made by COSE. As a result, Spang

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Spang Mountain The Spang Mountain building in Cleveland’s Barber Vega Queen neighborhood broke ground in 1888 as the first location of J. Spang Baking Company. John McGovern’s great-great-grandfather Julius Spang built the commercial baking empire of ‘home-baked breads’ and fry cakes from a home enterprise to one employing over 400 people across three bakeries in northeast Ohio.

In the 1920’s the J. Spang Baking Co. operated a fleet of 100-plus red electric delivery trucks from its three locations. This ensured safer, quicker, and pollution-free deliveries despite an average range of 35 miles per charge.

The property rapidly expanded from 1888-1920, encompassing 100,000 square feet (Sq ft.) in four buildings. Since closing in the early 1950’s, the space has been primarily rented to companies in the light industrial sector; including metal stamping, die cutting, welding, and box making.

WHEN MCGOVERN TOOK OVER MANAGEMENT OF THE BUILDINGS IN 2013, HE BROUGHT HIS PASSION FOR COMMUNITY, EDUCATION, ECOLOGY, AND ADAPTIVE REUSE TO THE HISTORIC BUILDING, NOW CALLED SPANG MOUNTAIN.

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Mountain is moving forward with the installation of LED lighting systems.

INSULATION: Additional measures such as insulation, air sealing, a new natural gas infrared heating system upgrade, and windows were also identified, but have long paybacks that may be considered at a later date. However, when combining the ECMs that have quick paybacks with those ECMs that have long-term paybacks, the measures average out to a 5.5 year payback. And if all ECMs are implemented, the facility can expect to reduce natural gas consumption by 24 percent and electricity consumption by 17 percent.

WASTE MANAGEMENT: Together with current tenants, Spang Mountain is working to develop a waste management strategy for the building, including (where practical) the sharing of recycling and other waste facilities by the occupiers of the building.

Adequate space will be set aside for the storage of recyclables to aggregate, collate, and simplify the process for everyone—this service may be extended to the nearby residential neighbors. Appropriate recycling arrangements for atypical recyclable goods (electrical items, printer cartridges, fluorescent bulbs, batteries, and similar items) will be pursued by Spang Mountain.

A deep energy retrofit is a whole-building analysis and construction process that achieves much larger energy cost savings—sometimes more than 50%, spread over several years, and significantly improves the building value.

GOING GREEN: With each impactful renovation project, Spang Mountain intends to highlight the sustainability components with signage to educate the community. For instance, they will soon be planting trees, using signage to highlight the carbon offset and water capture that each tree produces.

ENVIRONMENTAL FACTORS: In order to attract and retain tenants, he knows that the building also needs to feel comfortable, provide low operating expenses, and provide a healthy environment for all.

TODAY, THE BUILDING IS GOING THROUGH A LONG-TERM TRANSFORMATION DESIGNED TO RECONNECT THE HISTORIC STRUCTURES TO THEIR NEIGHBORHOOD, SPURRING STRONGER COMMUNITY ACTION TOWARDS A MORE INCLUSIVE AND EQUITABLE ENVIRONMENT.

All told, the buildings span over 4 city blocks, with two primary tenants: Quality Die Cutting & Co. and Rust Belt Welding. These tenants, however, only occupy about 20,000 sq ft. of space, while the remaining 80,000 sq ft. is not yet occupied. In phase one of a multi-year development plan, McGovern is currently transforming 6,000 square feet of vacant ground floor space into work space with adjoining community space and an equallysized second floor is planned to house digital technology makers. Long-term, he foresees incorporating urban sustainability researchers and potentially a vocational education program for the community at large to share their expertise. By looking to the future through the lens of adaptive reuse and ecology, his goal is for artisans to inspire generations of students from across the globe.

FUTURE RETROFITS: Deep retrofits take time. While the transformation of Spang Mountain will require diligence, McGovern is starting by installing ECMs and sustainability components in his building that will entice, excite, and motivate tenants. As funds become available, deeper retrofits like the installation of a green roof or geothermal wells will be considered.

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A DIFFERENT TYPE OF LEASE ARRANGEMENT While none of the existing small or large tenants have signed leases, they have operated in the building under a “gentleman’s handshake” since at least 2013. Through COSE and the Institute for Market Transformation (IMT) green leasing initiative, recommendations were made for McGovern to adopt a Memorandum of Understanding (MoU) model as the first step toward integrating language that provides greater accountability and transparency.

The MoU will encourage greater dialogue on environmental issues between McGovern as the landlord and tenants of both new and existing spaces of the building.

Because there is no current lease in place, the MoU will alternatively outline a voluntary agreement between the landlord and tenants, which is not legally binding and can remain in place for any chosen length of time, and which can run alongside a lease if ever enacted. The MoU, however, cannot be enforced if either party is in breach of their obligations under the MoU.

While none of the existing tenants, small or large have leases, they have operated in the building under a “gentleman’s handshake”.

The MoU will address the following matters: • Promote and discuss strategies to improve the environmental performance of the building.

• Sharing of data on environmental performance and metering for different parts of a building.

• Limitations on the parties’ ability to do work to the building if it will adversely affect environmental performance of the building.

• Widen scope for the parties to carry out works which enhance environmental performance.

• Work to develop an energy strategy/policy for the building, and the tenant(s) will work to develop an energy strategy/ policy for all tenant space.

Efforts will be made by both parties to comply.

This MoU is specifically focused on assisting the landlord and the tenant collaborate on sustainable and energy-efficient building operations. It is designed to help tenants integrate green decisionmaking into building use and landlords to incorporate these

issues into building management and capital expenses. Where possible, it is encouraged that these green principles influence team selection, site selection, negotiations, lease language, tenant build-out and ongoing operations within leased space.

While the MoU model is not for all building owners, this innovative arrangement puts McGovern on the right path toward a more sound business plan and management of the Spang Mountain property.

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RICK B

BY BRICK

Most of Spang Mountain’s renovations are being done through self-funding, with the intent that Phase I of the renovations will be completed and the building ready to be occupied by mid-summer, 2016. Consideration is being applied to leverage financing, such as Commercial Assessed Clean Energy Financing (C-PACE), to tackle a larger space, and more projects to achieve revenue goals faster.

Cash flow is a serious concern for McGovern, and C-PACE would allow him to access financing with much longer terms to undertake qualifying energy efficiency and clean energy improvements on the building and repay the investment through an additional charge (“assessment”) on his property tax bill.

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BY EXAMPLE The original J. Spang Baking Company was a primary means of work for many area residents for over 70 years, and served as an anchor to the neighborhood.

By cherishing its history and reinventing the building’s purpose, McGovern hopes to attract a new generation of workers and businesses who will help sustain the building for another 100 years.

Over the next decade, McGovern plans to engage in small grant programs to intimately understand the neighborhood surrounding Spang Mountain and to engage the community in determining who the future tenants will be. Ultimately, he wants the property to become a beacon for the neighborhood and to serve as an example to the world—showcasing the great opportunities that exist in Cleveland.

RETURN ON INVESTMENT

Retrofitting an older industrial commercial building poses challenges.

By working through the complexities of renovating older buildings to be more energy efficient, McGovern is rewarded with a return on investment. The development becomes more eco-friendly, and building upgrades become beneficial to the surrounding neighborhood. Spang Mountain is striving to be an example of ecological design that addresses storm and sewer water diversion, energy efficiency, and alternative power—all while enriching and beautifying the physical landscape.

To that end, McGovern is looking to potentially upgrade the building using advanced technologies and sustainability practices such as heating the building with geothermal wells and/or solar thermal. And, with a premier crafter of bicycles and bicycle racks on site, Spang Mountain is likely to surpass any local goals for bicycle friendliness and to compete on a national stage.

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