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BUSINESS NEWS CHRISTA MCAULIFFE BRANCH LIBRARY DESIGNED BY FINEGOLD ALEXANDER ARCHITECTS RECEIVES LEED SILVER CERTIFICATION Finegold Alexander Architects announced the new Christa McAuliffe branch library in Framingham has received LEED Silver Certification. Named for Framingham native lay astronaut/ teacher Christa McAuliffe, who died in the 1986 Challenger space shuttle explosion, the newly opened 17,000-square-foot branch embraces contemporary sustainable design. LEED-certified buildings achieve quantifiable energy efficiency, cost-savings, and reduced greenhouse gas emissions. “The design team approached the project holistically to create a beautiful, functional, and sustainable library that reflects the spirit of McAuliffe. The building features a soaring wing-shaped roof lifting over the main reading areas,” said Ruth Winett, library trustee and president, Framingham Public Library Foundation. “The contemporary interiors capture elements inspired by space travel, including 5,200-square-feet of windows,

maximizing natural light, a key feature of the sustainable measures.” “Sustainability was considered from aspirational and technical perspectives with sensitivity to initial and future costs,” said Tony Hsiao, principal, director of design, Finegold Alexander Architects, “The windows are a design element, while providing natural daylight to offset energy demands. The roof is set up for photovoltaics when funds become available in the future.” Features include a reading room, dedicated children’s library, 50-person capacity meeting room, 21 internet-enabled computer-stations, two study rooms, and on-site parking. Key sustainable design elements include the following: ❚ ❚ 21 percent reduction of overall energy use ❚ ❚ 26 percent reduction in potable water use via water-efficient landscaping ❚ ❚ 78 percent of regularly occupied areas provide natural daylight

❚ ❚ 49 percent of site is open space without including off-site reserve ❚ ❚ 90 percent of storm water runoff from average annual rainfall is captured and treated, includes a detention/infiltration system to reduce quantity and improve quality of runoff ❚ ❚ 94 percent of construction waste was diverted from landfill ❚ ❚ 97 percent of wood value is FSC Certified ❚ ❚ Alternative Transportation-Public Transportation Access, easy access to bus stop ❚ ❚ Walkable distance to school, restaurants, retail, senior center, and community services, and near a future “rail trail” for biking and walking ❚ ❚ Green Housekeeping Program The United States Green Building Council developed the LEED rating system to certify buildings as meeting a specific set of standards for green building.

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or under-influence a stock price indication. ❚ ❚ Case in point – C. I received an inquiry related to the issue of non-operating assets on the balance sheet, specifically ex- cess cash. Firm C’s ownership in another company that sold produced $1 million in extra cash and the question that arose is how to deal with it in the context of Firm C’s formula. To maintain consistency from year to year, when an abnormal event influences the financial measures, such as excess cash, it is appropriate to remove the non-operating asset from the balance sheet, derive the price result from the formula, then add back the non-operating asset. This will help to maintain a certain level of stability in a stock price and account for a non- operating asset that may only be on the books temporarily. ❚ ❚ Case in point – D. Similar to balance sheet challenges, if a firm’s formula is using metrics derived from the income state- ment, careful consideration should be given to confirm that the measurement used is representative of normal operating conditions. Firm D’s formula uses earnings before taxes as one of the metrics. Historically, the company’s profitability has been relatively consistent until recently when an extraor- dinary event took place, costing the firm a significant amount of money that greatly diminished profitability in that year. It is my position that the extraordinary expense should be added back to the earnings before calculating the stock price to reflect normal operating conditions. If your firm is using a formulaic process to develop a stock price it should be used with care and an in-depth understanding of multiple influencing factors. We suggest that every firm periodically test its formula by going through a formal valuation process. It is a reasonable investment to stay on top of formula pricing results that are being trusted by you and those buying into firm ownership. TRACEY EAVES, MBA, CBA, CVA, BCA, CMEA is a member of the valuation consulting team at Zweig Group. Contact Tracey at teaves@ zweiggroup.com or directly at 505.258.8821.

In addition, the two owners with a majority of the shares have discovered that their individual shares are worth less than they anticipated. So, how will this issue be resolved? Likely the firm will (1) Modify its formula to represent a pricing structure more representative of a minority interest level, (2) Modify the language in the existing shareholder agreement, (3) Value the shares of the two senior people as a control block of stock, which will require the sale of that stock as a block when they are ready to exit, and (4) Invest in a peri- odic formal valuation in an effort to monitor formula results and confirm that they are within a reasonable range of fair market value. “We suggest that every firm periodically test its formula by going through a formal valuation process. It is a reasonable investment to stay on top of formula pricing results that are being trusted by you and those buying into firm ownership.” ❚ ❚ Case in point – B. Firm B was using a formula comprised of multiples applied to net service revenue and EBIT, add- ing cash and subtracting debt. Within the span of one year, the formula produced a per share stock price more than 30 percent below the previous year that was not warranted, even acknowledging some changes in financial performance. Therefore, the formula had a high level of sensitivity to the metrics combined with the multipliers. So, how was this issue resolved? We revalued the firm’s stock at fair market value to provide a reasonable guideline to the shareholders to modify the formula. Besides the full-blown formula problems that we see quite frequently, there are also specific metric issues that can over-

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

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