Value Beyond Cost Savings - Green Building Finance Consortium

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Value Beyond Cost Savings: How to Underwrite Sustainable Propertiesprovider may be understood to be less risky to a more experienced serviceprovider.• Higher cost is a definite potential result of poor service provider capacity orquality. When demand exceeds supply, price will, and has, gone up for mostexperienced service providers. More importantly, those service providers withexperience significantly reduce the relative cost disadvantages of sustainableproperty investment. Major builders like Swinerton, Webcor, Turner and manyothers assert publicly that construction of projects that are certified LEED shouldcost little or no more than a conventional project.4. Service Provider Underwriting Best PracticesOne of the ways to address potential service provider quality problems is to carefullydesign contracts, carefully review warranties, and move towards performance-basedcompensation, at least for some parts of service provider compensation. Greaterspecification of goals and outcomes, as well as the specific process and approach that aservice provider will follow, can also be important.Credentials and education can assist in the “vetting” process of evaluating serviceproviders, but it will be important to understand the specific course of study andrequirements of accreditations, certifications or other professional labels that peopleacquire. A credential does not mean that a specific individual or firm will be better than anindividual or firm without such accreditation, but it shows a focus and willingness tounderstand the unique aspects of sustainable property investment that could make yourproject run smoother.Given that the service provider undersupply problem is not likely to be rectified in theshort term, owners and developers should also invest to train in-house staff in sustainablebuilding principles and practices. Some owners/developers complain that if they spend alot of money to train their people in sustainability they will just leave and get another job.This does happen, but owners/developers must remember that the alternative is that youdon’t train them and they stay.Another critical best practice element to understand is that sustainable practice is only aportion of what a real estate or a construction/development services provider needs toknow. Depending on the specific area of specialty, it is critical that owners/developers donot over-emphasize sustainable training or focus to the detriment of fundamental realestate and construction/development skills. For example, fundamental leasing,construction, or architecture skill, independent of sustainable knowledge, is critical tosuccessful projects. Owners/developers need to be careful trading off experience in thefundamental skill sets required to complete a project for a firm or individual’sspecialization on sustainable practice.160
Value Beyond Cost Savings: How to Underwrite Sustainable PropertiesFinally, there are a growing number of organizations that identify, assess, and certifyservice providers such as contractors, plumbers, electricians, commissioning agents, andother professions on their sustainability expertise. The credibility and rigor involved withthese different groups is highly variable. The key here is to understand explicitly therequirements for certification and/or listing in the directory and use the list accordingly.Even if a list requires no special requirements other than interest in sustainability, it couldbe useful.It should also be noted that, given the penetration of sustainability through every aspect ofbuilding design, construction and operations, sustainability training is now integrated intothe general education requirement for many professional certifications.Two interesting developments in the certification and assessment of sustainable servicecompanies are the B-Corporation (http://www.bcorporation.net/why) and the SustainablePerformance Institute’s (SPI) Green Firm Certification. Both these efforts aim atenhancing the independence and credibility of firm claims of sustainable operatingpractice and/or competence. 86In this section of Expanded Chapter VI we provide a more detailed presentation of the B-Corporation and SPI Green Firm Certification and discuss and what decision-makersshould look for in selecting three key sustainable properties service providers:• Design Team• Contractor• Asset ManagerE. Underwriting Energy/Carbon Reduction Investment1. IntroductionEnergy/carbon reduction is a critical driver of sustainable property value. Energy hasbecome more central to achieving and maintaining environmental certifications andmeeting corporate and regulator minimum occupancy standards. Accordingly, it is a keycontributor to property value beyond energy cost savings. In this section, we summarizesome of the key issues in underwriting energy/carbon reduction investment from a capitalprovider perspective. More detail is provided in this section of Expanded Chapter VI.Given the increasing attention being paid to climate change and the role of greenhousegasses in that change, public and private decision-makers are becoming increasinglyconcerned with carbon efficiency. Since the analysis and methodologies addressed in this86 The author has not done a detailed assessment of the claims and assertions of these two entities and their programs,but cites them as two interesting and credible efforts to address the issues involved in conducting due diligence onservice providers.161
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Appendix FSustainable Property Fina
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Appendix GSustainable Property Cost
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Appendix HDiscounted Cash Flow Anal
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Property Type: CBD OfficeSquare Fee
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Value Beyond Cost Savings - Green Building Finance Consortium

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