Value Beyond Cost Savings - Green Building Finance Consortium

Appendix FSustainable Property Financial Analysis AlternativesAnalysis/Model Description/Commentary Key Links/Examplesare typically brought in late in a project where budgets havebeen blown and short-term cost cutting is the requirement.Accordingly, particularly with developers who will not hold theproject property long term, “value engineering” decisions aremade based on simple payback or an initial comparative costbasis, ignoring the longer term value that can be generatedthrough operating cost, or replacement cost savings.Fundamentally, value engineering as currently practiced doesnot take into consideration all the value and risk implications ofsustainable property investment. Even if it is done correctly, itutilizes life cycle costing as its primary financial analysisvehicle, and thus does not take into consideration any valueconsiderations beyond cost. That said, if sufficient time isspent up front during the workshop or Charrette phase, and athorough understanding of what “value” will mean for theoccupants of the building or potential investors is undertaken,a more thorough consideration of value implications could beapplied in the determination of the value standards on whichcost based value engineering would be implemented.7. ENERGY STARBuilding UpgradeValue Calculatorfor OfficePropertiesThe Building Upgrade Value Calculator estimates the financialimpact of proposed investments in energy efficiency in officeproperties. The user, representing scenarios and conditionspresent at their properties, bases the calculations on datainput. Required inputs are limited to general characteristics ofthe building, plus information on the proposed investments inenergy efficiency upgrades.The calculator’s analysis includes the following information:• Net investment• Reduction in operating expense• Energy savings• Return on investment (ROI)• Internal rate of return (IRR)• Net present value (NPV)• Net operating income (NOI)This tool provides a combination of the metrics identified in theDescription/Commentary section and can be found on the EPA’sENERGY STAR website at:http://www.energystar.gov/index.cfm?c=comm_real_estate.building_upgrade_value_calculator224