Value Beyond Cost Savings - Green Building Finance Consortium

More documents

Recommendations

Info

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiessustainable feature or outcome, the problem of evaluating a whole building, with acombination of sustainable features and outcomes, is also difficult.One framework that we particularly like that assists in understanding the statisticalrelationship between building science and health is one created by Mark Mendell, anepidemiologist working at Lawrence Berkeley National Laboratories, and a board memberof the Consortium. Dr. Mendell has created a practical framework for categorizing thebasis for believing something causes an adverse affect. His “What We Know” frameworkis summarized below.Documented causal relationshipsSignificant, replicated, consistent, unbiased, dose-related, plausiblePersuasive scientific findingsReplicated, significant findings, and alternate explanations seem unlikelySuggestive scientific findingsBut “correlation does not prove causation”Beliefs based on informal observationsSometimes guides and predicts future science, but sometimes based on error,coincidence, or hidden factorsDr. Mendell’s framework is similar to a related framework used by the Institute ofMedicine in their official reviews of health issues.Dose-response relationshipsWhile the studies linking indoor environmental quality, lighting, daylighting, temperaturecontrol, noise, and other sustainable outcomes to building health or productivity are robustin many cases, the studies are often insufficiently specific to enable a clear relationshipbetween the amount of the sustainable outcome (lighting, noise, etc.) and building healthor productivity. Accordingly, it makes it difficult to assess whether a particular building,with its sustainable outcomes or designed outcomes, will be sufficient to achieve theresults identified in the studies.This book and the Expanded Chapters cover the issues of health and productivity in manyplaces. The six-step process for financial analysis (Chapter V, Section A), clarifies thesteps required to assess how occupant performance (including health and productivitybenefits) influences occupant space demand which then influences rent, occupancy, tenantretention and other financial performance variables. The evidence supporting howsustainable properties affect occupant performance is further detailed in Expanded ChapterIV, Section F-4, Expanded Appendices IV-C and IV-D, and expanded Chapter V, SectionC2.156
Value Beyond Cost Savings: How to Underwrite Sustainable Properties8. New Sustainable “Sub-Financial” AnalysisSustainability sub-financial analyses are those analyses and models that providequantitative insight/data that is typically combined with other information and analyses toaid valuers/financial analysts in their specification of key financial assumptions (rent, rentgrowth, occupancy, absorption, tenant retention, and operating costs) in a DCF analysis, orrelated traditional real estate financial model.Sustainable sub-financial analyses include Comparative First Cost Analysis, DCF Lease-Based Cost-Benefit Allocation Modeling, Health Benefits Analysis, Sustainability OptionsAnalysis, Enterprise Value Analysis, and Risk Analysis and Presentation (RAP). Whilemany sustainability sub-financial analyses are uniquely derived for specific propertysituations, the importance of quality independent analyses of this type is critical to thearticulation of value and risk in sustainable properties.The key point in understanding sustainability sub-financial analyses is that in most casesthese analyses do not result in specific data inputs that you can input directly into a DCFanalysis. As their name implies, these types of analyses provide information and insight,which is combined with non-sustainable considerations in the final selection of key inputssuch as rent, absorption and occupancy.For example, there are scores of studies that demonstrate the relationship between buildingoutcomes, such as increased ventilation rates, and improved health (reduction in sickbuilding syndrome or asthma, for example). However, even if a specific dollar health costsavings could be estimated for a building, further analysis (new “sustainable sub-financialanalysis) would have to be done to determine how the health cost savings would accrue toa potential space user.A health related sustainable sub-financial analysis for an owner-occupied building(corporations, governments, institutions, non-corporate business entities) would generatean analysis of potential occupant benefit that would depend on the level of health costspaid by the building owners for their employees and a few other factors. Much of thepotential health cost savings would accrue to the building owner-occupants.However, for an investor owned building, the key issue in estimating the financial impactsof health cost savings is to look at how tenants value such potential benefits, and then howthey value these benefits in the context of all the other benefits and factors that enter intotheir selection of space. Accordingly, any health cost benefits analysis is only acontributing factor to the development of financial inputs for a traditional real estateanalysis. However, such analyses, if independently done and appropriately presented, cansignificantly influence leasing and/or investment decisions resulting in improved financialperformance.157
Page 7 and 8:
Value Beyond Cost Savings: How to U
Page 10 and 11:
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29:
Page 30 and 31:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37:
Page 38 and 39:
Page 40 and 41:
Page 42 and 43:
Page 44 and 45:
Page 46 and 47:
Page 48 and 49:
Page 50 and 51:
Page 52 and 53:
Page 54 and 55:
Page 56 and 57:
Page 58 and 59:
Page 60 and 61:
Page 62 and 63:
Page 64 and 65:
Page 66 and 67:
Page 68 and 69:
Page 70 and 71:
Page 72 and 73:
Page 74 and 75:
Page 76 and 77:
Page 78 and 79:
Page 80 and 81:
Page 82 and 83:
Page 84 and 85:
Page 86 and 87:
Page 88 and 89:
Page 90 and 91:
Page 92 and 93:
Page 94 and 95:
Page 96 and 97:
Page 98 and 99:
Page 100 and 101:
Page 102 and 103:
Page 104 and 105:
Page 106 and 107:
Page 108 and 109:
Page 110 and 111:
Page 112 and 113:
Page 114 and 115:
Page 116 and 117:
Page 118 and 119:
Page 120 and 121:
Page 122 and 123: Value Beyond Cost Savings: How to U
Page 222 and 223:
Page 224 and 225:
Page 226 and 227:
Page 228 and 229:
Page 230 and 231:
Page 232 and 233:
Appendix FSustainable Property Fina
Page 234 and 235:
Page 236 and 237:
Page 238 and 239:
Page 240 and 241:
Page 242 and 243:
Page 244 and 245:
Page 246 and 247:
Page 248 and 249:
Page 250 and 251:
Page 252 and 253:
Page 254 and 255:
Page 256 and 257:
Page 258 and 259:
Page 260 and 261:
Page 262 and 263:
Page 264 and 265:
Page 266 and 267:
Page 268 and 269:
Page 270 and 271:
Appendix GSustainable Property Cost
Page 272 and 273:
Page 274 and 275:
Page 276 and 277:
Page 278 and 279:
Page 280 and 281:
Page 282 and 283:
Page 284 and 285:
Page 286 and 287:
Page 288 and 289:
Page 290 and 291:
Page 292 and 293:
Page 294 and 295:
Page 296 and 297:
Page 298 and 299:
Page 300 and 301:
Page 302 and 303:
Page 304 and 305:
Page 306 and 307:
Page 308 and 309:
Appendix HDiscounted Cash Flow Anal
Page 310 and 311:
Page 312 and 313:
Property Type: CBD OfficeSquare Fee
Page 314 and 315:
Page 316 and 317:
Page 318 and 319:
Page 320 and 321:
Page 322 and 323:
show all

Value Beyond Cost Savings - Green Building Finance Consortium

Create successful ePaper yourself

Delete template?

Save as template?