Underwriting Green Buildings

NASA's Marshall Space Flight Center Opens Eco-Friendly Engineering Building

By GreenerBuildings Staff
Published: June 9, 2009

HUNTSVILLE, Ala. -- NASA's George C. Marshall Space Flight Center cuts the ribbon on a new state-of-the-art $30 million facility, the second of three designed according to green building standards for the center's engineering complex.

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Nestle, Seventh Generation, Atlanta Building Land LEED Gold, Tower HQ Gets Platinum

By GreenerBuildings Staff
Published: June 8, 2009

WASHINGTON, D.C. -- A new bottling plant for Nestle Waters North America in Pennsylvania, the interior of Seventh Generation’s new headquarters facility in Vermont and a historic Atlanta office building receive LEED Gold green building certification, while new corporate offices for the Tower Companies snag a LEED platinum rating.

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Water to Rival Energy Efficiency as Key Concern in Greening Buildings: Report

By GreenerBuildings Staff
Published: June 4, 2009

NEW YORK CITY, N.Y. -- Managing water use is becoming increasingly important to commercial property owners, contractors, architects and engineers, and more than half say that water efficiency is an extremely important aspect of green building, according to a recent survey by McGraw-Hill Construction.

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By Dan Winters
Published December 3, 2008

Green building continues gaining market penetration given the significant increase in volatility on energy and water costs along with fast-emerging tenant sustainability mandates. In many major real estate markets, this dynamic is leading to a bifurcation in the leasing market where LEED-certified green buildings have some degree of competitive advantage over conventional non-green buildings.

For years it has been quietly stated by knowledgeable professionals that green buildings will attain competitive superiority in a down market where there is a flight to quality, both in leasing and in portfolio accumulation. That time has arrived and will be with us for the foreseeable future giving green building owners and developers an outstanding competitive position.

Green buildings that achieve energy and water efficiency metrics drive down a tenant's overall financial occupancy cost. They also help fulfill corporate sustainability policies and mandates; over 50 percent of Fortune 500 issued sustainability reports in 2007 and these are typically coveted credit tenants. Although there has been relatively little recognition of this market dynamic in the real estate finance community to date, this is likely to change over the next 12 to 18 months.

Depending on an asset's overall competitive set, market supply/demand absorption dynamics and changing tenant sophistication levels, strong operational cost containment coupled with a green market position can have a significant impact on financial performance. Factoring sustainability-related issues into financial underwriting — particularly energy and water efficiency, location and indoor environmental quality aspects — is fast becoming an important set of considerations when making financial-based decisions with 5- to 10-plus-year life spans.

Capital Markets Partnership

In early 2008, Evolution Partners and the Institute for Market Transformation to Sustainability (MTS) began developing an industry-wide underwriting standard for Wall Street, lenders, capital market investors and appraisers to use when analyzing both green and conventional buildings. Over the course of this past year, a group known as the Capital Markets Partnership (CMP) coalesced around this effort, reinforcing the glaring need to create a standardized system to identify financially tangible green attributes and incorporate them into the underwriting process at all levels of the real estate investment chain.

The CMP, through its association with MTS, is an American National Standards Institute (ANSI) accredited and audited standards developer. This group engaged a large number of real estate capital market participants in the consensus standard process that was developed through ANSI-approved protocols. This rigorous process engendered significant industry participation and input from major capital market participants resulting in a strong tool for capital market implementation.

The Green Building Underwriting Standard for both commercial and residential application was approved in early September and will be ready for adoption by the financial real estate community this fall. It is designed for use by all levels of the capital sector, including direct lending, CMBS underwriting, CMBS purchasing, private equity investing, REIT analysis and upstream investor reporting.