Value Beyond Cost Savings - Green Building Finance Consortium

Appendix GSustainable Property Cost-Benefit ChecklistPotential Property Benefits Description of Benefit Applicability Analysis 106Given the deterioration of the debt financing market,which accelerated in the fourth quarter of 2008, (interestrates up 2% or more, loan to value limits closer to 50%than 70%, and more severe debt service coverage ratio,reserves, holdbacks, and guarantees against rolloverrisk), the marginal benefits of sustainable propertyinvestment will continue to be dwarfed by broader capitalmarkets changes. However, certified sustainableproperties, or at least properties with some combination ofsustainable features, have a good chance of becoming aminimum standard or strategic imperative that couldsignificantly increase access and provide somepricing/terms advantage to financing.While rates and terms may be slow to be revised, it is alsolikely that private “sustainable” property financing will beavailable from most conventional sources, rather thanrelegated to specialist “green” lenders or investors.3. Downsizing of some systems(HVAC, etc.)Developing sustainable properties, particularly certifiedproperties, requires additional expenditures not requiredfor conventional properties. Offsetting these additionalcosts are reductions in costs due to the down or rightsizing of some systems, like HVAC systems. For example,a smaller, less expensive HVAC system may be possiblewhen energy costs are significantly reduced. Additionally,as more space users start to view sustainability as aprerequisite for a Class A building, more cost-effectivesustainable products/features may replace more expensiveproducts previously considered essential to a Class Aproperty.The key issue here is in reviewing cost estimatesunderwriters/valuers should understand that both highercosts in some areas, and lower costs other areas is thenorm for sustainable property developments. Propertieswith no such trade-offs may be exposed to excessivecosts.4. Reduce number andmagnitude of change ordersSustainable properties can experience fewer and lesssignificant change orders due to more forward-thinkingdevelopment processes. Depending on the magnitude andnumber of change orders, costs can be substantial.Properly run sustainable property investments will involvemore significant upfront planning involving keystakeholders, including the owner, architects, engineers,building operators, and others, enabling bettercommunication and a more clear understanding of the255