Why the lights will stay on.

Along with the negative publicity associated with the California energy crisis over the past six months, a positive trend has begun to emerge in the New York real estate market: owners and managing agents have been stepping up their focus on conservation and energy awareness. Both the City and Con Edison, in conjunction with ownership organizations like REBNY and BOMA, have been out lining pro-active plans to avoid brownouts and blackouts this summer.

The most widely publicized efforts have been conducted by Con Edison and the City of New York on the subject of increased generation capacity. The addition of "temporary" generators that will provide almost 400 additional megawatts of power have garnered accolades from the real estate industry, yet angry tirades from several of the communities in which they have been situated. In addition, the Indian Point two-power plant located in Westchester County is once again operational. These solutions are deemed to be stop-gap measures and should afford New York City with some additional levels of confidence, ensuring that, given any unseen calamity, there will be more than enough electrical generation capacity for the next several years.

A less visible but equally important effort is being conducted behind the scenes by Insignia/ESG. Our initiatives are focused primarily upon energy reduction, conservation and emergency planning. With almost 28 million square feet under management in New York City, in some of the most prestigious and important buildings in the world, Insignia/ESG has initiated a pro-active plan aimed at minimizing the exposure to our owners.

Early this year, under the direction of Wayne Taub and Bob Breschard of Insignia/ESG, we commenced a multi-phased program in our buildings. First, we required that all our properties prepare an energy crisis contingency plan focusing upon three key areas: 1) central plant and base building operations; 2) tenant operations; and 3) blackout contingency plans. Detailed plans have been developed that identify the means and mechanisms to reduce and conserve power on either base building or tenant-run equipment. Emergency generator supported equipment has been identified and deficiencies noted and addressed.

We've also has established an in-house Energy Committee to focus upon the key issues that impact our properties, namely: electric power supply, energy conservation, energy demand reduction, portable emergency generator power and emergency preparedness. We solicited experts in each of these areas and prepared a series of recommendations and related initiatives which were shared with our owners. The positive response and acceptance from ownership and tenants has been overwhelming.

In addition, Insignia/ESG has been exploring numerous utility and government sponsored programs in an effort to bring about reduced consumption and lower operating costs at all our properties. These include Con Edison sponsored programs such as the Emergency Demand Response Program and the Voluntary Load Reduction Program both of which incentivise buildings to reduce power demand loads in exchange for significant economic savings. Plus, we have been working vigorously with General Electric Lighting and National Energy Services Corp. to evaluate and certify our buildings under the Energy Star Program sponsored by the EPA. A staged process, the Program examines the energy use of an entire building including lighting, operational efficiencies, building controls, load reduction strategies (such as those provided by Con Edison) and equipment upgrades. Se curing the Energy Star Building Label will certify that a property is in the top 25 percentile in energy efficiency. Ownership will know that its building is operating at the highest level of cost effectiveness.

Social consciousness is an admirable trait. Although it would be gratifying to think that most owners will readily spend money out of the goodness of their hearts to upgrade buildings, unfortunately this is New York real estate and money talks. In order for these programs to work, quantifiable bench marks need to be in place to measure savings. Energy accounts for at least 25 percent or more of a building's operating costs. The ability to prove that modifications to building systems and participation in energy conservation programs really work, will quickly equate to better economic returns. This pragmatic approach sits well with investors, lenders and owners alike.

In order to accomplish this goal, Insignia/ESG has partnered with some of the leading energy consultants in the country, including GE Lighting and National Energy Services to analyze and evaluate the properties we manage. Together, we are identifying measures that are tailored to each property, along with clear economic analysis. Thus far, the