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INDIANAPOLIS-Energy costs are a very high proportion of controllable costs for Simon Property Group Inc., the locally based giant shopping center owner. “In late 2003 we started looking at this with a magnifying lens,” says George Caraghiaur, VP of energy services.

“In 2004 we took a best practices approach to managing energy at our regional malls and set priorities and a goal of focusing on decreasing energy costs.” The company has 193 regional malls, and the three most significant criteria guiding what properties to target first were: centers where costs were highest, where there was an identified need for renewal of infrastructure, and where other active renovation was underway.

As a first step, Caraghiaur says Simon invested $25 million in the, approximately, 48 properties that represent one quarter of its total regional mall portfolio. Between 2004 and 2006, the initiative resulted in a savings of $11 million annually in operating costs at those locations and cut absolute corporate energy use for operations under Simon’s operational control by 9.7%.

Another 50 Simon regional malls are in the energy savings pipeline at an estimated investment of an additional $25 million, Caraghiaur reports. While Caraghiaur acknowledges that the investment to date is larger than the savings, he tells GlobeSt.com, “this is the gift that keeps on giving. We’re putting together new numbers on the initial properties now. There’s enormous potential.” Based on the measures in place, he anticipates payback on the opening investment within four to five years.

Savings were achieved in three primary ways: focusing on best practices in operations for equipment in place, investing in more efficient equipment, and measuring the results for individual mall managers. Within those parameters the solutions ranged from simple to sophisticated.

Examples on the simple side include tightened control over lighting in vacant space, the adjustment of temperature set points, and utilization of outside air for cooling where possible. On the investment side, Simon installed more efficient lighting systems, boilers and energy management systems.

The efforts have created interest among tenants, and, at their request, Simon is sharing its best practices. “We’re also installing meters to provide incentives for tenants,” Caraghiaur says, “and we work to help them qualify for and obtain energy rebates.”

On April 1, the Environmental Protection Agency named Simon Property Group a 2008 Energy Star Partner of the year in recognition of its reductions in greenhouse gas emissions. Simon is the first REIT to win the award in the past five years and one of just three commercial real estate companies to be so recognized by the EPA this year. The others are CB Richard Ellis Group Inc. and TIAA-CREF, and their efforts will be explored in upcoming GlobeSt.com articles.

Having previously received Energy Star Partner honors, two real estate companies, Houston-based Transwestern and San Antonio-based USAA Real Estate Co., netted the highest honor, “sustained excellence,” this year, as GlobeSt.com reported. That award recognizes significant and continued strides in reducing greenhouse gas emissions through energy efficiency. In all, the EPA honored 74 companies across a broad spectrum of the US economy.

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