Current Announcement
Announcement:The Green Building Finance Consortium has put out a new book called Value Beyond Cost Savings: How to Underwrite Sustainable Properties.
Details are attached.
Current Discussions
Group participant Larry Schnapf offers insights into Green Leases.
This is a worthy read!
Massachusetts Green Buildings Used 40 Percent More Energy Than Predicted
Full study can be downloaded here:
Summary from J Howry:
The 40% underperforming metric is supplemented by photovoltaic systems performing at ~80% of their projected contribution. Nothing like over exaggeration to give a good idea a bad name!
Does the building need to have gone through a LEED certification process so that the points have been applied for and confirmed by USGBC? Or is a LEED AP asked to evaluate the building and score potential LEED points (for a building not yet LEED certified)?
Good questions......there are certain points in LEED that require third-party certification [aka - actually achieving the LEED plaque] with water use reduction, stormwater reduction, and low VOC materials being the three that come to top of mind. However, there are certain 'observational' LEED points that dont require a plaque - proximity to transit, green roof, underfloor air, daylight/views that require both site / asset familiarity and LEED familiarity which, when signed off on by a certified environmental professional or a LEED AP, allow a non-certified asset to acquire points on the CMP Green Value Score.
The largest component of the formula is the asset's Energy Star score - I just met with the head of that program today and we talked, among other things, about the treatment of apartments. Because Energy Star doesnt currently cover apartments, CMP developed a proxy for scoring the asset so we can come up with a number to put in the Energy Star section of the CMP Green Value Score calculation and the Energy Star people were supportive of the general methodology we described.
The bottom line for your question is this - not having a LEED certification [NC / CS / EB:OM] eliminates an asset's opportunity for achieving 18 points under CMP - the max score an asset could achieve assuming a 100 Energy Star Score, climate neutrality through onsite / sourcing long-term renewable energy contracts, and a number of good locational attributes is 82 which is a top tier score.
For capital market guidance purposes in version 2.0 [pending release next week] we developed a three-tiered structure whereby Tier 1 assets score between 25-49, Tier 2 at 50-74, and Tier 3 at 75+. This is due to the pretty clear notion that assets that are 25 or higher are above the median EnergyStar score [63 or higher] and/or have a few select green characteristics. To get into Tier 2, assets will have a number of green attributes and a relatively high EnergyStar score....still may or may not be LEED certified.
Tier 3 assets are the top of the market where LEED plays much better and will have a number of green characteristics, a high LEED rating, and may be climate neutral. We have a 9-story 190,000 SF Class A office building in the DC suburbs that scores an 84 on the CMP standard so it's possible.
The tiers recognize the CMP raw score. Once we are able to collect data we will be able to come up with both a raw score and an indexed score to provide greater capital market analysis opportunities and decision/reporting metrics.
Dan Winters of the Capital Markets Partnership on why energy alone is not sufficient to show solid financial performance of buildings:
In an effort to be helpful in advance, here's a summation of what we've learned in CMP's ANSI process that resulted in the approved Underwriting Standard:
The identification of factual information that determines an asset's green building attributes contributing to areas of economic value / reduced investment risk (Reduced OpEx / Improved NOI / Relative Value Increase) was an area of lively discussion / debate during CMP's ANSI consensus process.......CMP members were intently focused on defining those green building attributes that had a tangible financial impact to the asset.
CMP's consensus was that energy-efficiency alone, while necessary, was not sufficient in determining the "green value" attributes impacting a property's value. The participants unanimously concluded roughly 15-20 USGBC-defined LEED credits across the various rating systems have a financial impact and/or reduce ongoing financial risks. These items went beyond energy use / consumption and include location, water use and disposal, waste disposal, indoor environmental quality issues, and other building-specific features that positively impact ongoing OpEx and/or financial risk compared to buildings without those features. Key is the last part of that sentence.....the risk profile of the subject asset compared to other assets in the market that do not have those features.
The key we saw with LEED was the verification process - this is a requirement when providing capital market confidence in the rating. This is one of the advantages of the ASTM standard we are engaged in developing which is why I support this process and look forward to continued engagement going forward.
It should be noted during CMP's ANSI process, all parties agreed it is difficult outside of LEED to truly verify certain things like water use reduction which is why the CMP Green Building Underwriting Standard relies on a drill-down into the LEED scorecard and achievement of a specific LEED credit as an underlying component.
The second component - the asset's EnergyStar score - gets to the heart of relative energy consumption by benchmarking the asset against a larger data set. This allows the Underwriting Standard to address energy consumption within the CMP Green Value Score by formulaically blending the energy points achieved on the LEED scorecard with the asset's EnergyStar benchmark score. Adding additional transparency, clarification and reporting on a building's energy-related aspects, particularly with focus on functional and operational detail by way of the ASTM process will be of significant benefit to the investment market.
The resultant product of the CMP member consensus process is the CMP Green Value Score which weighs financially-tangible 'green' attributes that impact value/risk by confirming:
1) the achievement of specifically identified LEED credits as scored by an Environmental Professional / LEED AP
2) determining and reporting the EnergyStar energy efficiency rating
3) certifying the building as climate neutral
After completing the Underwriting Standard process, each asset obtains a standardized score from the perspective of the economic value identifying a property’s green building attributes contribute to the assets investment risk profile. In pilots, CMP members / users continue to find the financial value / risk reduction orientation of the Green Value Score methodology well-suited in the context of a real estate transaction.
For additional backgorund, I'm including a link to a document on CapitalMarketsPartnership.com that goes into further detail on these aspects
Again, very sorry I cannot attend the meeting in Atlanta - I look forward to being an ongoing contributor and source of information as this process unfolds. Please contact me at any time.
Dan Winters, Managing Principal
Evolution Partners Real Estate Advisors
1511 Wisconsin Avenue NW, #200
Washington, DC 20007
202.997.3922 - p
202.338.2800 - f
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