Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable PropertiesA general consensus has emerged on the fundamental attributes of a sustainable property. Oneof the earliest general definitions of sustainability was adopted in 1987 by the United NationsWorld Commission on Environment and Development (WCED), which defined “sustainabledevelopment” as “development that meets the needs of the present without compromising theability of the future generation to meet their own needs” 8 .Another good succinct definition from the YourBuilding.org website is:A sustainable commercial building can be defined as a building with planning, design,construction, operation and management practices that reduce the impact ofdevelopment on the environment. A sustainable commercial building is alsoeconomically viable, and potentially enhances the social amenity of its occupants andcommunity. 9Mass transit orientation, community connectivity, and related land-use and planning issuesare a critical component of developing sustainable communities and regions, as well asbuildings. Sustainable building research and certification systems have historically notadequately addressed these types of sustainable concerns and issues, focusing more onproperty specific and/or technological issues. Recent changes in LEED have put morepriority on site related considerations and organizations like the Urban Land Institute, aleader in the “Smart Growth” movement for years, continue to push these issues to theforefront. 10Although there is a general consensus on the range of environmental outcomes that asustainable building should strive for, there is no consensus on how such outcomes shouldbe achieved, measured, certified, or valued. Fortunately, traditional real estate underwritingand valuation methods and practices are well suited to deal with thesecomplexities.C. Sustainable Property FeaturesOne way to “define” a sustainable property is by its combination of sustainable featuresand attributes, as illustrated in the outline of the key sustainable building features of atypical office property shown in Exhibits III-1. Sustainable certifications like LEED®,BREEAM (U.K., Europe), GreenStar (Australia), CASBEE (Japan), or Green Globes(US, Canada) can be achieved through adoption of a wide combination of differentsustainable features, processes and outcomes.8 Report of the World Commission on Environment and Development, United Nations, 1987.9 Danielle McCartney and Patrick Burke, “Definition of Sustainable Commercial Buildings,” September 27, 2007(http://www.yourbuilding.org/display/yb/Definition+of+sustainable+commercial+buildings)10 ULI’s publication in 2008 of “The City in 2050: Creating Blueprints for Change” and “Climate Change, Land Useand Energy 2009:Investment Niche or Necessity?” in late 2009 are good examples of their continuing work in this area.18