Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable PropertiesSubstantial detail on sustainable property risk and risk mitigation is presented throughoutValue Beyond Cost Savings: How to Underwrite Sustainable Properties and the ExpandedChapters. While we endeavor to incorporate references and summaries of that knowledgein the discussion of the Underwriting Guidelines below, a complete assessment ofpotential modifications to traditional underwriting or due diligence practices will have toincorporate knowledge and risk analysis from other parts of the book and ExpandedChapters. Key underwriting guidance from the book and Expanded Chapters is found ineach Chapter:• Chapter II helps focus the Underwriting Approach required, by outlining howunderwriting will change based on the specific type of decision being made.• Chapter III summarizes the methods required to factor in specific “definitions” ofproperty sustainability into underwriting.• Chapter IV outlines the facts and methods necessary to incorporate the lessonslearned from prior experience with sustainable processes and features into theunderwriting approach. The sections in Chapter IV-C: Process Performance thatdeal with integrated design, contracts/legal, and commissioning are particularlyimportant, identifying key risk issues and best practices to mitigate potentialproblems.• Chapter V describes how risk analysis is incorporated into the financial analysisand valuation of sustainable properties. Section E: Assess Costs/Benefits ofSustainable Property, and the referenced 40-page GBFC Sustainable PropertyCost-Benefit Checklist; provide an organized guide to identifying and analyzingthe cost-benefit trade-offs at the property level. Section F: Evaluate theImplications of Costs-Benefits presents a “Net Impact” methodology to helptranslate costs and benefits into information that can be applied in a financialanalysis. In Section H: Risk Analysis and Presentation, key background on cashflow and building operating risks are summarized and a methodology forassessing and presenting risk in the context of sustainable decision-making ispresented.• The special challenges and issues involved in underwriting energy, space userdemand and service providers is highlighted in Chapter VI, given their importanceto sustainable property underwriting.The ideas and recommendations presented in Chapter VI are not meant to be exhaustive.This chapter focuses on underwriting modifications, which may be warranted for aparticular property due to its sustainability. Accordingly, we do not provide a completeassessment of the underwriting actions that need to be undertaken under each of thechecklist items, but focus on marginal changes to process and procedures. Many aspects ofthe underwriting process involve legal considerations including leases, contracts, mortgage147