Last week New Jersey Governor Jon Corzine unveiled the state's first comprehensive Energy Master Plan (the Plan) since 1995. The Plan serves as a blueprint for a multitude of energy initiatives proposed for implementation over the next 12 years. The Plan emphasizes energy and conservation measures that mandate enhanced building and appliance codes and regulations for new and existing buildings. Many of the Plan's proposals, if enacted, undoubtedly will devalue New Jersey's real estate assets and require substantial capital investment to achieve compliance.
Who Should Be Concerned?
- Owners of existing and planned industrial and commercial properties such as office buildings, warehouses, manufacturing facilities and shopping centers
- Owners of existing and planned multifamily apartment buildings
- Builders of residential housing and developers of mixed use projects
- Owners of large facilities such as hospitals, nursing homes and casinos
- REITS and other owners of multiple locations
Why Be Concerned?
- Aggressive, mandatory energy efficiency and green building standards that are 30 to 50 percent higher than current standards are proposed. The standards will require an enormous capital investment to achieve compliance. For example, in order to achieve a 30 percent higher energy efficiency standard (the minimum proposed) for an office building of 180,000 square feet built in the 1980s, a $2,000,000 investment (almost $12/s.f.) with a 17+ year payback period will be required. Applying this financial burden over an inventory of buildings spells financial disaster.
- Time of sale restrictions that will require
compliance with certain energy standards as a precondition to the
transfer of all types of property – residential,
commercial and industrial. As proposed, these restrictions will
prohibit the lawful transfer of title and also further depress an
already stagnant real estate market.
These proposals, absent effective advocacy, will be seriously considered and likely adopted by the Board of Public Utilities, which is responsible for implementing the Plan. However, if properly organized and represented, the stakeholders in the real estate community can play a leadership role in the development of responsible policies that will assist in the accomplishment of the goals of the Plan and avoid causing undue harm or unintended consequences to real estate companies and property owners.
Fox Rothschild has been intimately involved in the preparation of the Plan and will be included in the proceedings that will implement it. Steven S. Goldenberg, who is chair of the firm's Energy & Public Utilities Practice, contributed to the preparation of portions of the Plan and has been appointed by Governor Corzine to act as a Stakeholder Representative to the newly formed State Energy Council, to be comprised of the heads of the BPU, DEP and Department of Community Affairs, which will decide key Plan issues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
