Building Investments that Beat Wall Street

One look at the Wall Street Journal and its easy to think you've missed the boat. Stock and bond returns are plummeting and for those with cash on hand, it is hard to know where to park your hard earned dollars. Well there is a
great place that's safer and it's right under your nose.

Take a look at your building and the stack of capital investments that have been proposed for the next few years. Depending on the life of the investment, the ones with paybacks of two years return yearly dividends up to 45 percent (15-year life), the ones with paybacks of three years return yearly dividends up to 27 percent (15-year life) and the ones with paybacks of four years return yearly dividends up to 18 percent (15 year life). These are terrific returns considering the very low risk. But don't make the common mistake of only looking at the payback. Investing in a project that
has a one-year payback and only lasts one year has a return on investment of zero-even less if inflation chews up the purchasing power of the savings. A one-year payback for a one-year device is a horrible investment.

If your money is sitting in the bank earning 3.5 percent, a five-year CD earning 7 percent, or in a mutual fund earning 10-15 percent, perhaps its time to move it. You might even be able to borrow for less and pocket the spread.

Here are three great building investments that make the point:

A small warehouse installed 6 lamp T5 High Output lighting fixtures with
occupancy sensors costing $8,885 to save $1,533 per year in electric costs
over the 13-year project life. The simple payback was 5.8 years. This
equates to a return on investment of 9.6 per year over the 13-year life
without the PSNH incentive. With the PSNH incentive, the payback was 3.6
years and the return on investment was 20 percent per year.

A NH town hall recently upgraded its lighting system with LED exit signs,
occupancy sensors, compact fluorescent lightbulbs and T8 flourescent light
replacements. The project payback without the PSNH incentive was 2.8 years.
This equates to a return on investment of 27 percent per year over the
12-plus-year life and more if it lasts longer and/or energy costs go up.

A NH convenience store recently updated the controls on its walk-in
coolers and door heaters and installed night setback thermostats. The
project payback without the PSNH incentive was 2.3 years. This equates to a
return on investment of 37 percent per year over the 15-year life and more
if it lasts longer and/or energy costs go up.

When you invest in yourself, often times the tangible benefits of energy savings, labor savings, maintenance savings, and raw material savings are complemented with intangible benefits that bring intangible dollars to the bottom line. For example, investments that enhance workspace comfort and safety can improve productivity and product quality and yield significant, yet difficult to measure savings.

Finally, if these returns aren't as attractive as the other financial vehicles you have access to, consider the plant investment to diversify your financial holdings. A well designed portfolio balances risk, reward, control and market response. Building investments are controllable and will likely provide greater savings when the economy (and financial markets) turn sour by hedging against the future cost increases you would have faced as energy prices increase.

So the next time you are presented with an opportunity with a payback, find out the life of the opportunity and do the math. You'll be surprised how attractive investing in yourself can be.

Rob Leatherbee, PE CEM, is a senior engineer with Public Service of New Hampshire.