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02/27/2003 |

Strategic alliance has bottom line results

CarrAmerica prides itself “in anticipating the changing needs of a changing marketplace.” In so doing, the Washington, D.C.-based real estate investment trust (REIT) has evolved into a premium provider of quality office product in national growth markets. Presently, CarrAmerica owns, develops, and/or operates more than 40 million square feet of office properties in 12 markets throughout the United States. In keeping with its identity as an office innovator, the organization has developed far-reaching strategic relationships to increase its Funds From Operations (FFO), including a significant agreement that is lowering costs associated with procuring and administering energy commodities with Ameresco Inc., Framingham, MA.

According to CarrAmerica Managing Director of Operations Rich Greninger, “California was nearing deregulation that began to impact us in 2000. Our executive management team determined and challenged Operations to develop an energy strategy that would effectively manage the risk and opportunities in a deregulated marketplace. We sought to find a partner that would be capable of supporting our needs in each of our 12 markets in a multiple of areas. Around that time, we entered into a service agreement relationship with DukeSolutions, Charlotte, NC (later purchased by Ameresco Inc. in March 2002), which covered five areas:

1) Bill Paying, in which Duke handled payment and administration processes between CarrAmerica and its associated utility and energy companies.

2) Information Management, whereby all information for a bill was loaded into a mega-database to allow CarrAmerica staff to review energy profiles and energy usage in each building in real time over the Web, then benchmark markets to help drive changes in engineering behavior.

3) Transitional Services, that ensured rate plan negotiations with regulated entities were favorable to CarrAmerica properties.

4) Supply Management, to secure deregulated energy from suppliers in a way that effectively managed the risk and opportunity for savings.

5) Efficiency Services, which was set up to reduce energy consumption in CarrAmerica’s capital projects.”

 

As the relationship matured, so did the agreement. Barry Krell, the vice president of Special Projects at CarrAmerica charged with managing the relationship with Duke/Ameresco, explains. “Of the five original service agreements, we now have three with Ameresco: the information, which was key – the Bill Paying – outsourcing it, getting rid of late payments, and being able to see real time on the Web; Transitional Energy, in which we’ve done only a few deals; and Supply Management. Here, in the three areas in which we are deregulated [Dallas; Orange County, CA; and the Washington, D.C. area], we’ve realized material savings in getting the best deals for our buildings.”

Center to the alliance’s success was an executive-driven mandate from CarrAmerica to develop such a program, notes Bryant Lee, Ameresco. “CarrAmerica decided what it needed to do and what it wanted to do, and [the program] was given the appropriate level of executive support, both through the deal negotiation and then through the implementation,” he says.

“Especially in a multi-market company,” adds Greninger. “Collaboration can be difficult at times, and when you have a top-down mandate to come up with a strategic national program, it certainly improves the ability to execute.”

Walter Jones, supply management consultant, Ameresco, concurs with this assessment, further noting, “Internally, CarrAmerica has set up a management and decision-making infrastructure to analyze deals and, more importantly, to execute deals. By efficiently filtering the information out to the folks at specific buildings, CarrAmerica is able to execute deals with suppliers, and suppliers are able to offer deals knowing that Carr is a serious player in this market. There’s a whole circle of communication that really works in this relationship.”

Today, Greninger notes that CarrAmerica’s energy strategy and implementation “is all part of a composite of what our brand stands for: We’re an aggressive management company looking for ways to improve our tenants’ quality of life every single day.”

The far-reaching benefit of savings is another factor.

“Based on the bare economics of the first three years of the Carr/Ameresco relationship,” explains Greninger, “we’ve been able to beat the standard tariff. In other words, what 80 to 90 percent of commercial procurers of energy (commercial office landlords) pay, we’ve been able to beat that by about $4 million – which is being produced predominantly in just three markets.

“As important, is that when you’re running a national company with 12 different markets – and we try to run our company more decentralized than centralized – we’ve achieved greater benefit in having professionals like Ameresco helping us with the negotiation of contracts and agreements to make sure that, first and foremost, we’re going to secure reliable energy; and, secondly, we’re not accepting too much risk for the benefit of achieving savings.”

Linda K. Monroe (linda.monroe@buildings.com) is editorial director, Jana J. Madsen (jana.madsen@buildings.com) is senior editor, Leah B. Garris (leah.garris@buildings.com) is editorial coordinator, and Robin Suttell is contributing editor at Buildings magazine.


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