Kevin Roberts:
Many building owners are not fully realizing the potential gains of capital improvement projects. The owner of the 1.8 million-gross-square-foot Pennzoil Place in Houston worked with Transwestern on an innovative rehabilitation that has attracted much industry attention. In a nutshell, what was implemented at Pennzoil Place that is so different?

Roger Vasquez:
Pennzoil Place consists of two 36-story, glass-walled buildings constructed in 1975. Following a multi-million dollar capital investment by owner Metropolis Investment Holdings Inc., the 40-year-old landmarks are successfully competing against modern-day office developments in downtown Houston. In June 2014, Pennzoil Place and Transwestern won Realcomm’s 2014 Digie Award for Most Intelligent Office Building as a result of the improvement plan. The owner completed a major overhaul of mechanical, electrical, plumbing, heating, air conditioning and ventilation systems, but the project’s unique feature is the addition of a Cisco fiber optic backbone that allows us to tie together all existing and future technologies in the buildings. Installing this Cisco IP centric technology has revolutionized the assets, and the way we manage them. The technology enabled Metropolis to implement energy-efficient strategies, save money on vendor services and generate new revenue streams.

From an engineering standpoint, tenant and building issues are addressed immediately, and can be done so remotely from an iPad or tablet. This innovative breakthrough saves time, improves service quality and increases tenant satisfaction. The Cisco system also allows tenants to save resources by tapping into the backbone for Internet service. For example, when one Pennzoil Place tenant leased expansion space in the connecting tower, it faced a $25,000 fee for the cross connection and was told it would have to wait six to eight weeks for service. Transwestern completed the job in two days at one-tenth the cost. Additional tenants are tapping the Cisco backbone for data services, creating a new revenue stream for the building owner. In addition, the Cisco backbone allowed Transwestern to replace the security vendor; providing integrated services in-house produces a savings of $80,000 per year. Cisco has produced a video (available in eight languages) showcasing how the system works in Pennzoil Place.

"In June 2014, Pennzoil Place and Transwestern won Realcomm’s 2014 Digie Award for Most Intelligent Office Building as a result of the improvement plan."

Roberts:
How did the investment in technology and sustainable improvements affect operating expenses at Pennzoil Place?

Vasquez:
Metropolis has been able to cut its electrical costs in half and pass the savings along to its tenants. In 2008, when Pennzoil Place was approximately 98 percent occupied, electrical cost totaled $4.3 million. In 2013, when the occupancy rate was the same and capital improvements had been completed, electrical cost dropped to $2.1 million. The savings are attributable to three factors:

Buildings with powerful energy programs can increase return on investment for owners. For instance, there are a number of energy-related rebate programs that owners are advised to consider. Stating approximate numbers, a $650,000 rebate was secured on a $5 million chiller project at Pennzoil Place, taking the payback period down to seven years. Also using approximate figures, a $170,000 rebate was achieved on an $800,000 lighting retrofit project, resulting in a shorter, 2.6-year payback period.

Roberts:
Pennzoil Place makes money through Demand Response. What does that program entail?

Vasquez:
Pennzoil Place participates in Demand Response, a nationwide initiative in which buildings are paid to reduce energy consumption and share their capacity with the nation’s three power grids during peak usage times to prevent blackouts. Most participants are manufacturers in industrial buildings that can shut down non-production areas to save energy or revert to their own power generator during the hottest part of the day; typically from 3 p.m. to 6 p.m. Pennzoil Place is one of only a few office properties in the U.S. that participates, and doing so was made feasible by the Cisco technology and our internal programs that provide superior control of energy usage. Pennzoil Place was showcased by Constellation Energy in a video discussing Demand Response.

Metropolis realizes three financial benefits by participating in Demand Response:

Building owners are encouraged to seek avenues to fully leverage investments in capital improvements. More specifically, owners can capitalize on a number of strategies and programs related to energy consumption. Doing so will maximize the value of their real estate.

Roger Vasquez

ROGER VASQUEZ is a director of engineering in the firm’s property management practice. He oversaw implementation of an innovative, multi-million-dollar capital improvement program at Pennzoil Place, a two-building office project with 1.8 million gross square feet. Vasquez has 30 years of engineering experience.

Roger Vasquez
713.250.2814
roger.vasquez@transwestern.com
transwestern.com
transwestern.com/houston

Kevin Roberts

KEVIN ROBERTS has overall responsibility for Transwestern’s Southwest operations, which includes Houston, Austin, San Antonio, New Orleans, Denver and Salt Lake City. In this role, he oversees the firm’s brokerage services, property management and development projects across the Southwest.

Kevin Roberts
713.270.3347
kevin.roberts@transwestern.com
transwestern.com
transwestern.com/houston