Value Beyond Cost Savings - Green Building Finance Consortium

More documents

Recommendations

Info

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiesprocess performance, feature or system performance, and building performance wasconfirmed in our review of performance literature and case studies.As our performance research continued, it became apparent to us that a sustainable propertyperformance framework that included just process, features, and building performance wasinsufficient to assist underwriters and valuers in their assessment of financial performance.As shown in Exhibit IV-1 above, there is no direct way to go from building performance tofinancial performance. Even if you know how much a building costs, its resource use,potential health or productivity benefits and related building performance statistics, theonly way to assess financial performance (return on investment, value and risk) is to assessthe market’s response to the building’s performance. Accordingly, GBFC’s SustainableProperty Performance Framework introduces market performance as the fourth critical typeof performance that must be measured at the property level to conduct proper financialanalyses.Finally, financial performance of sustainable properties is determined by evaluating howthe market’s response to the sustainable building will affect its financial inputs includingrent, occupancy, absorption, discount rates, cap rates, operating costs, entitlement benefits,and other key variables. Financial performance is measured by the resulting rate of returnor value that result from the input of the key financial inputs into a discounted cash flow orrelated model. Further, sustainable property financial performance must include a fullassessment of risk. For example, is a 15% return always better than a 7% return? No, itdepends on the nature of the risks taken to achieve the returns.GBFC’s Sustainable Property Performance Framework also provides a structure forunderwriters to use in their efforts to mitigate risks. Since most significant sustainableproperty investment decisions will be based on forecasted building performance (energyuse, occupant performance, development costs, etc.) underwriters are, or should be, focusedon reducing uncertainty and risk related to the forecasted performance. As has been provenin our research, risk and uncertainty around building performance can be significantlymitigated through underwriting of sustainable processes and features/systems.C. Process PerformanceStrong performance at the process level is the foundation for successful sustainableproperty investment. Building sustainability is fundamentally a process of best practicesthat leads to “sustainable” outcomes. It is critically important to get these processes right inorder to deliver a successful high performance building. Poor execution of these processescan lead to a variety of negative consequences, including underperforming systems,uncomfortable environments, or increased cost.There are scores of different sustainable property processes. We focus on seven keysustainable property processes that have been identified by our survey respondents, case34
Value Beyond Cost Savings: How to Underwrite Sustainable Propertiesstudies, and the literature as important potential sources of sustainable property failure andunderperformance:a. Integrated design/project delivery;b. Contracts/legal;c. Service provider quality and capacity;d. Energy use forecasting;e. Regulation and code compliance;f. Commissioning; andg. Measurement and verification.We provide a brief summary of our key findings and conclusions for each process below.In Expanded Chapter IV, we provide a more complete description of each process, discussthe risks inherent with the implementation, provide a summary of best practices, andidentify documents and web links that provide significant additional detail. Information onsustainable property processes and performance can also be found in the Research Libraryand Industry Links section of the Consortium’s website under index codes 15.4: ProcessPerformance; 6.0: Sustainable Property Features; and 28.0: Sustainable Property BestPractice Guides.a. Integrated Design/Project DeliveryIntegrated design (“ID”) is a design process that employs a collaborative, multidisciplinaryproject team throughout design in order to optimize the whole building. This is in contrastto conventional building design, where many individuals or teams are responsible foroptimizing their own particular system with limited interactive collaboration. Key risks ofintegrated design include buy-in and participation by all team members, maintenance ofcommunications, failure to get all participants to the table early enough in the designprocess, misaligned fee structures for service providers, and undocumented designdecisions.Ten best practice ideas are summarized below:1) Commitment from all parties. In the selection process, the developers should ask toughquestions to gauge a professional’s commitment to ID. Is it just lip service, or is it realcommitment? Do they have the experience of successfully applying sustainable IDtechniques to completed projects?2) Designating a member of the design team as the “integrated design coordinator.”This person must be involved from the earliest stage of development and should haveexperience delivering certified sustainable projects with ID processes. Given the highlycollaborative nature of this position, the coordinator must be an effective communicatorand a good negotiator.35
Page 7 and 8: Value Beyond Cost Savings: How to U
Page 100 and 101:
Value Beyond Cost Savings: How to U
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:
Page 124 and 125:
Page 126 and 127:
Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Page 134 and 135:
Page 136 and 137:
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Page 144 and 145:
Page 146 and 147:
Page 148 and 149:
Page 150 and 151:
Page 152 and 153:
Page 154 and 155:
Page 156 and 157:
Page 158 and 159:
Page 160 and 161:
Page 162 and 163:
Page 164 and 165:
Page 166 and 167:
Page 168 and 169:
Page 170 and 171:
Page 172 and 173:
Page 174 and 175:
Page 176 and 177:
Page 178 and 179:
Page 180 and 181:
Page 182 and 183:
Page 184 and 185:
Page 186 and 187:
Page 188 and 189:
Page 190 and 191:
Page 192 and 193:
Page 194 and 195:
Page 196 and 197:
Page 198 and 199:
Page 200 and 201:
Page 202 and 203:
Page 204 and 205:
Page 206 and 207:
Page 208 and 209:
Page 210 and 211:
Page 212 and 213:
Page 214 and 215:
Page 216 and 217:
Page 218 and 219:
Page 220 and 221:
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

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?