Kilroy Realty: Brannan Portfolio

Disovered 39% unlevered IRR and 23% unlevered IRR in two buildings

Kilroy Realty is an environmental leader in CRE and was looking for a comprehensive way to reduce energy costs, mitigate their environmental impact, and generate an attractive unlevered return.

Kilroy Realty is a publicly traded (NYSE : KRC) real estate firm committed to taking an integrated approach to acquisitions, financing, property development, construction management, leasing, property operations, and long-term strategic portfolio development. They partnered with Carbon Lighthouse to achieve all three.

Kilroy owns two full service gross office buildings on Brannan Street in San Francisco’s SoMa neighborhood, a particularly competitive market due to the many tech companies based there. The building located at 250 Brannan is a single tenant, 93,000 square foot, three story office building built in 2001. A stone’s throw away is 301 Brannan, a 74,400 square foot, six-story multitenant office building built in 1989.

167,400 sq ft

Zero Project Investment

$276,000 Lifetime Savings

Find out how much ROI we can produce.

Financials

Carbon Lighthouse identified and delivered projects that if paid for up-front would have yielded Kilroy a 39% unlevered IRR at 250 Brannan and a 23% unlevered IRR at 301 Brannan. Instead of paying upfront, Kilroy opted to pay over time resulting in $0 of out-of-pocket costs while still earning a combined lifetime savings of $276,000. First year savings are $26,900. Additionally and in alignment with Kilroy’s sustainability goals, carbon emissions were reduced by 886 tons per year, the equivalent of planting 20,000 trees.

“The Carbon Lighthouse team is highly competent and professional, and my engineers reported that they really liked working with the CL team.”

Kilroy Realty
Sara Neff, VP of Sustainability

The Nuts & Bolts: Our Process

Our engineers deployed sensors in both buildings to collect data that even the most sophisticated Building Management System (BMS) is not equipped to capture. This level of detail identified a unique opportunity to overhaul the HVAC controls and BMS at 250 Brannan. Using the unique in-building data they collected from our sensors, our team upgraded and web-enabled the HVAC system controls. These updates resolved several long standing controls problems between central controllers and unit controllers, also resolving building pressure issues that had been causing problems for years. Other upgrades our engineers made on their path to delivering Kilroy large returns were upgrades to the boilers and parking garage exhaust fans, and a new level of increased control over operations including fixture by fixture occupancy sensors in some tenant spaces.

At 301 Brannan, Carbon Lighthouse’s sensors and analysis revealed fewer opportunities for improvements resulting in a more limited scope of improvements. One opportunity they did reveal was to separate the controls for the central air handler unit from the central boiler and cooling tower. This allowed our team to install a warm-up period that would lock out outside-air when the building was unoccupied, significantly reducing the energy required to reach a comfortable temperature for the office spaces. Occupancy data collected led our team to make some lighting upgrades as well, replacing halogen lights with LEDs and upgrading stairwell fixtures from T12s with magnetic ballasts to T8s with bi-level control.

These two Carbon Lighthouse projects generated deep savings for Kilroy at no out-of-pocket cost. Kilroy now enjoys a leasing advantage in one of the most competitive CRE markets in the country, earned a great return, and helped the firm demonstrate their commitment to sustainability through action.

ClientKilroy Realty
ProjectKilroy Realty: Brannan Portfolio
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