Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiesresources been spent on commissioning, measurement, and verification, as well as thetraining of occupants and staff?The Framework also prompts feature-based questions like: are the features and systemsspecified in the building pioneering, or do they have proven track records? (Pioneeringsystems, features or materials are not necessarily negative because significant benefits canbe achieved, but there may be some additional risk that will offset the benefits of theirimplementation unless properly mitigated.) Fortunately, the sustainable property investmentmarket is significantly more mature today than even a few years ago, enablingsignificant risk mitigation through proper attention to process and features performanceissues.5. Priority of Government Regulations and IncentivesGovernment regulations and incentives are a more important part of the economics andrisks of sustainable properties and must be more diligently underwritten.Government IncentivesSignificant benefits are available from local, regional, state or provincial, and federalgovernments as well as utilities and other organizations. These benefits can be quitesubstantial and include:• Increased Floor Area Ratio and zoning/density bonuses• Expedited permitting and approvals• Design and code flexibility• Rebates, construction cost off-sets, grants• Financing assistance, subsidies• Tax benefits: Federal, State, and Local—credits, favorable accounting treatment(Tenant Improvements, etc), tax reductions, etc.• Government mandated carbon trade valueThe specific sustainability or energy efficiency thresholds required by each governmentallevel in order to obtain incentives must be identified and evaluated. These thresholdsshould then be compared to the project’s actual or projected sustainable outcomes/performance to enable an assessment of the magnitude of potential benefits. Betterunderstanding and articulation of a property’s potential public benefits can reduce the risksof achieving benefits.Many lenders are also resistant to “crediting” value added by incentives, tax benefits andother subsidies because they might not be available to them if they must foreclose on aproperty, and governments can change/modify benefits. Borrowers must address these152