Retrofitting properties for the future

Taurus Investment Holdings, a Boston-based real estate private equity manager, has identified the key conflict for commercial property owners: is it better to tear down obsolete properties and start afresh? Or is the best option to retrofit existing assets ahead of an industry-wide goal of carbon-neutral buildings by 2050? 

The answer is clear, but complicated, says Chris Gray, chief technology officer at Taurus’s retrofit subsidiary RENU Communities. With projections that 50-65 percent of all buildings standing today will still be in place by 2050, it is clear virtually all buildings that exist today will have to be retrofitted. 

“I don’t think finding the money is the hard part. Lenders are beginning to give a premium term to loans with a green aspect or a sustainability focused use. You can get lower interest rates or more attractive terms,” Gray says. “There are other, harder questions.” 

RENU was created as an internal energy services subsidiary of Taurus with the aim of designing and implementing decarbonization strategies for assets within the firm’s portfolio. Taurus last fall closed on the recapitalization of a pair of multifamily properties in Florida that Taurus owns with Aegon Asset Management via ESG-centric decarbonization venture.

The properties, Lofton Place Apartments in Tampa and Rosemont at Windermere in Orlando, will receive similar but distinct retrofits. “They have similar geographies, in a marine-type, hot and humid environment and while there are similarities in our approach, the plan for each property is different because each unit in the building has different exposures and layouts,” Gray says. 

RENU’s plans are different for each building and take in myriad considerations. “We take each building as an entity and a system in and of itself and we look at the vintage, the construction of the property and its mechanical systems and the local utility environment. We also look at the local renewables environment to determine what is best for that particular property. When we make an acquisition, we evaluate the funding needs upfront and we then figure out how to use each one of those buckets to make sure we have the funds we need.” 

A key part of any retrofitting strategy is thinking about the envelope of a building, which separates the inside of a building from the outside. But again, any changes to a building need to take the asset’s attributes into account. 

“You hear about retrofits where people talk about replacing windows and doors and that makes sense,” Gray says. “But in some cases, you can improve returns with other retrofit improvements. For areas where there are very high temperature differences between indoor and outdoor temperature, it makes sense to replace doors and windows. But for areas in the South, where that differential is less, it makes less sense. Location has a significant amount to do with what you do with the envelope.” 

One of the hardest questions is how to approach any necessary changes. 

“Owners will be faced with the question of, ‘Do I tear down this building and start a new or do I invest in reducing the energy consumption in the existing building?’ When you tear down a building, you have embodied carbon in the construction material and you would have to abandon that and then take on additional embodied carbon for the new building.”