Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiesneed to accept and “own” the qualitative nature of their work, and get down to businessdoing a better job of it.C. Step 1: Select Financial Model1. Investment ContextThe starting point for underwriting a sustainable property is to clearly understand theinvestment decision being addressed, and the context in which the decision is being madeas was presented above in Chapter II.Clear delineation of the decision and investment context is critical to selecting the bestanalytic methods, determining data requirements, assembling the underwriting team andpreparing effective support for the decision.The type of financial analyses required is significantly influenced by the sustainableproperty investment decision (see Exhibit II-3 in Chapter II). New construction, retrofits,existing building acquisitions, or leasing and financing decisions have always requireddifferent models and data. Sustainable property financial analysis requires some newthinking and analytic techniques to properly collect and analyze the data inputs to themodels, but the fundamental approaches to decision-making used by the real estate industrywill remain largely the same.2. Sustainable Property Financial Analysis AlternativesFinancial analyses alternatives can logically be separated into four categories:a) Traditional Sustainability Financial Analyses;b) Traditional Real Estate Financial Analyses;c) Sustainability Sub-Financial Analyses; andd) Public Sustainable Benefits AnalysesA summary of the approximately forty sustainable property financial analyses alternativesis presented below in Exhibit V-2 and in substantial detail in Appendix F. More detaileddescriptions; examples, observations and key links are also provided in Expanded ChapterV and in the Research Library under index codes 1.1 to 1.5.100