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Come to the Green Building Finance & Investment Forum
2008-02-01 08:05:00
I'm spreading the word about the Green Building Finance & Investment Forum, 20-22 February here in San Francisco. Its tailored especially for green real estate investors, developers and their capital sources. (Full disclosure:My firm, Galley Eco Capital, is a leading conference sponsor.) Registrations are coming in at a pretty good pace and we are expecting a great crowd. There's a great lineup of Industry Pacesetters -- that's Green Journey talk for the early adopters within institutional real estate -- those who are already committed to building and operating green real estate. They'll be talking about how they're making good returns by building and retrofitting green. I'll be teaching a class, moderating a panel on triple bottom line investing as well as on another panel talking away about, guess what -- green finance. There will be a diverse group on that panel, covering emerging topics such as renewable energy finance, green real estate securitization as well as t...
More About: Green Building

Industry Pacesetter: Digital Realty's LEED-Gold Datacenter
2007-11-04 01:47:00
Hurray! Digital Realty Trust (NYSE: DLR) recently announced that its datacenter at 350 East Cermak Road in Chicago has earned the first LEED-Gold certification in the US for a datacenter from the USGBC.Click here to see more details on the property.Note that none of the information available reports on the targeted performance improvements that are expected because the building has undergone a green renovation. Digital Realty also reports that they are currently greening several other buildings in Chicago, Northern Virginia and Santa Clara with the goal of either LEED Silver or Gold for all of them. Green Datacenters are a Great Leap Forward for Green Building While all green real estate is good, a green datacenter gets special attention due to its deep impact on energy savings over conventional buildings and the great expansion of green building best practices for existing buildings.Dave Ohara, who writes for Microsoft’s TechNet magazine, reported that “datacenters c...
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Extinct Debt Terms & Agency Muscle in Multifamily
2007-11-01 20:12:00
Here's a quick update on the pulse of the debt market:Earlier this week, I had the great pleasure of spending time with colleagues at the Counselors of Real Estate at their annual convention here in San Francisco. During a Capital Markets forum, the panel was asked their views about the types of deals lenders are willing to do these days, in light of the currently constrained credit markets. That discussion humorously morphed into "what kinds of debt terms are extinct these days". So here are a couple of the debt market's newest extinct species:Full Term I/O: Lots of nods on this one -- wide agreement that lenders are back to old school underwriting, requiring at least 25 to 30 year amortization for most loan terms over three years. On a 5+ year loan, the borrower may be able to get up to two years I/O. Cashout Refi: In light of rates, spreads and cap rates having moved up, creating the risk of lowered valuations, lenders are particularly hard-pressed to finance profit-taking any...
More About: Agency , Terms , Debt , Extinct , Muscle

Market Risk Analysis: Peak Oil and Investment Real Estate
2007-10-29 10:52:00
Synopsis & Recommendation Energy company officials have estimated that global oil production will start to decline in the near to mid term (“peak oil”), if it has not started already. Experts warn that there is a strict correlation between economic growth and oil supply. Properties currently in design and construction will probably be put in service at or near the time when peak oil is expected to occur. Real estate practitioners must incorporate a more thorough assessment of energy availability and pricing within their transaction underwriting as well as think about shifting their development focus to more resilient properties and investment scenarios. The (Latest) Download on Peak Oil Check out Biopact's very instructive report on the connection between peak oil and economic decline. Not only have energy company executives largely agreed upon peak oil occurring around 2010-2012, experts stress that the prolonged, permanent decline in global oil production can trigg...
More About: Estate , Real Estate , Market , Investment , Analysis

Warning: Common Sense Lurks Behind Integrated Design
2007-10-27 04:05:00
Have you ever been on a project team with or for a commercial real estate owner who had high expectations of their new green building project? Or maybe the better question is, who hasn’t?Timothy Corbett, President of SmartRisk, recently cautioned an audience at the AIA’s conference on public space and design to carefully manage an owner’s heightened expectations of green buildings. If the finished product doesn’t meet their expectations, ‘then lawsuits and claims could follow’. No duh. When I read through Corbett’s examples of green building lawsuits and claims, I began to think that someone on those project teams also drove their car around with hot coffee between their knees. Corbett is quoted as saying that the best way to manage the exposure to such claims is “direct contact with the client”. Another duh. All of the green building professionals that I know continually stress that an integrated design process from the very beginning helps...
More About: Design , Sense , Common , Warning , Common Sense

Transforming Building Markets, or Transforming Marketing?
2007-10-17 07:08:00
Bill Walsh's reprinted article in GreenBiz.com with the same title as above passionately highlights the insidiousness of greenwashing within the building materials sectors, but his thoughts address a similar concern across the entire spectrum of real estate development. When Home Depot invited suppliers to submit products for consideration in its Eco-Options program, manufacturers claimed that more than 60,000 of the items currently on the shelves were already "green." According to the New York Times, "Plastic-handled paint brushes were touted as nature-friendly because they were not made of wood. Wood-handled paint brushes were promoted as better for the planet because they were not made of plastic." In these heady days of sustainability's emergence within the commercial real estate industry, how will we hold each other accountable for true market transformation and not cleverly marketing the status quo? Click here to read the article in its entirety and share your comments with us.
More About: Marketing , Building , Markets , Tran

San Jose's 50 Million Square Foot Vision
2007-10-16 07:14:00
Co-Star and others featured San Jose Mayor Chuck Reed's big ten point vision that will green San Jose in fifteen years by 2022.Called the Green Vision , this plan artfully concentrates the vision's outcomes around "10 far-reaching goals that address energy consumption, water use, greenhouse gas emissions, and other environmental impacts". Sounds nice, but the real estate market underwriter in me still makes me roll my eyes a little because it is intuitively doubtful that such big numbers can be achieved. Plus success will be measured several city administrations into the future leaving me wondering whether realistic accountability can be implemented.Nevertheless, it was still interesting to do a little fact checking to better assess San Jose's current real estate and sustainability context. Keeping this type of info in mind helps with future assessment of the Green Vision as it evolves.What Kind of Impact Will Retrofitting 50 Million Square Feet Have?The vision calls for retrofi...
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LEED: Avoid Underwriting Misconceptions
2007-10-14 22:49:00
Do you prepare your non-green project budget and then add your “green costs” on top of it? At which LEED-rating do you think you own a distinctive higher value green asset? Think that ‘integrated design’ is only interesting for the architects and engineers? Read on. I’ve blogged before about Davis Langdon’s update study on LEED-rated project costs and recently saw a talk by one of their architects, Lisa Fay Matthiessen, that went substantially beyond just concluding that LEED projects do not necessarily cost more than non-green buildings. She spoke in depth about the source of misconceptions about LEED project costs and shared a surprise that challenges our current knowledge of LEED-ratings and the associated project costs. Recap of Davis Langdon’s Findings In case the study is still sitting on your “weekend reading” stack, here are the Cliff Notes takeaways:Many projects are achieving certification within their budgets and in the same cost range as non-LEED proje...
More About: Avoid , Misconceptions

Help! Need to Lose Two Tons Fast
2007-10-10 07:55:00
So I just learned that I have a carbon score of 415 and must lose two tons of carbon output, just to put a mere 10% dent in my estimated individual carbon emissions. Ouch! And that's after taking into account that we don't even drive our car more than once a week.When I heard that Earthlab was providing Al Gore's Alliance for Climate Protection website with a carbon calculator, I decided to give it a test drive. There are quite a few out there, and I am still on the lookout for the ultimate user friendly model that my clients and colleagues can work with without much difficulty.Earthlab's Live Impact Calculator provided an interesting experience, since it satisfied the need for instant gratification on a key level: you get immediate info on how specific lifestyle changes reduce your carbon output plus you are encouraged to make a personal pledge to improve your carbon footprint. Most calculators just move you over to the 'buy offsets here' screen and send you on your way.Lea...
More About: Fast

Talking Points on the New Green Bonds
2007-10-09 08:11:00
credit: photosfromonhigh/flickrAre you on the lookout for how green commercial real estate will be financed in the future? Did you know that Congress has already made $2 billion in private tax exempt bonds available for green commercial real estate projects? What about how they are structured – possibly shaping the future green commercial real estate debt market? Green Bonds are a first-of-its-kind pilot financing created by Section 701 of the American Jobs Creation Act of 2004. The Council of Development Finance Agencies summarized the basics of this newest trial debt initiative in an online ‘explainer’ memo, which outlined some of the qualifying criteria: Size: Projects must include cleanup of a brownfield site and contain 1 million square feet of building space or at least 20 acres. Mandatory LEED certification: 75 percent of the square footage of commercial buildings, which are part of the project must be registered for LEED certification. Energy Use Reduction: Pr...
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The Lender Case for Going Green
2007-10-05 06:09:00
I had a good time this afternoon with the USGBC Chapter BayLUG (Bay Area LEED User Group), along with Chris Bartle of Green Key Real Estate. I gave a banker's perspective on green commercial real estate and Chris shared his expertise on the situation for green residential. My synopsis on financing green commercial real estate:Many real estate deals are sidelined now due to current capital market conditions.The positive business case for going green is being heard by financial institutions. I receive a strong, constant flow of positive anecdotal evidence that green buildings deliver superior economic performance.Financing green buildings is hampered by poor integration of the players.While an investment in a green building creates much additional value overall, there is an uneven allocation of that economic upside among the different players -- lenders are not seeing a tangible (read: cash) value-add for financing green, and so have been sluggish to establish green lending programs....
More About: Case , Going , Goin

Green Mortgages 2.0: Less Carbon & More Money
2007-09-26 07:09:00
Is your mortgage rewarding you for being an environmentally conscious homeowner?Not many can say ‘yes’, so read on. I was at West Coast Green over the weekend and learned that green home mortgages have undergone a radical revamp, and now help you to fight carbon emissions, boost your wallet and enable you to direct your investment to a complete supply chain of green investors. The Prototype: Energy Efficient Mortgages Energy Efficient Mortgages (EEMs) came about in the 1970’s when former President Jimmy Carter challenged government agencies to create home loans that counted energy and water savings as additional income for use in paying debt service. In the past ten years, EEMs from Fannie Mae, Freddie Mac, the Veterans Administration and the Federal Housing Administration have all offered homeowners the opportunity to stretch their debt-to-income ratios by slight amounts, so long as the loan was used to purchase a new energy efficient home or helped to install energy-saving ...
More About: Money , Carbon , Carb

Climate Change Legal Risks: Energy Companies Feel the Heat
2007-09-21 00:18:00
“Selective disclosure of favorable or omission of unfavorableinformation concerning climate change is misleading.” -- New York Attorney General Andrew M. Cuomo to Energy Companies Check out OneAtlantic.net’s excellent post on the creative use of existing law to sensitize corporate investment practices to climate change risks. Following predecessor Eliot Spitzer’s example, New York Attorney General Andrew M. Cuomo is using an almost forgotten law to investigate five energy companies, which intend to build coal-fired power plants. The Attorney General’s correspondence advises the energy companies that they should have made their investors aware “of the growing potential that they may be taking on big financial risks by building coal-fired plants.” The Attorney General’s overarching thesis is that publicly-traded companies are legally liable for taking undisclosed risks that could diminish their value to shareholders. The goal appears to be one of forcing polluti...
More About: Climate Change , Climate , Change

“Wash me… but don’t get me wet”
2007-09-17 02:28:00
Any German will immediately recognize the above saying about people who are less committed to something than they publicly profess. Environmentalists call it ‘greenwashing’. And here’s my devil’s advocate question: What if we are confusing a company’s incremental progress on a complex long-range strategy with hypocrisy? The Wall Street Journal has just updated us on General Electric’s (NYSE: GE) progress on its attention-grabbing Ecomagination strategy. It seems that there is resistance to Ecomagination’s promise and products from both customers and the ranks within and more limited C-level support than was widely assumed. To its credit, GE leads the pack in establishing top-level leadership on going green. And its stated approach, to bring innovative environmentally-friendly products to market without sacrificing profits, raised our expectations of the bottom line benefits of corporate social responsibility. Yet, GE’s current business reality is that it...

Is Subprime Lending Good for Green Real Estate?
2007-09-06 17:16:00
One of my friends, a sustainability consultant, called me up and what she actually asked was, "What is the connection between subprime lending and green?" She went on to explain that her firm had an internal pow wow on how the credit crunch might be affecting their real estate customers. What a great question. I immediately saw its Freakonomics potential. We talked about it at length and afterwards, I even related it to one of my institutional clients. He also reacted immediately, so I knew that I was on to something. It is always good thing for a sustainability consultant get some independent validation by investor.These days, real estate investors sail choppy waters in the capital markets Some cruise in elegant ocean liners, other in make halting headway in rugged frigates, and a few are surviving with flimsy canoes. So the current market's impact really depends on the condition of your fleet. Bloomberg chronicled the mood of anticipatory doom that is swirling about instit...
More About: Estate , Real Estate , Green , Real , Good

Getting Institutional Real Estate to Invest in Sustainable Buildings
2007-09-02 03:53:00
In my work, the hot question from my sustainability friends is “how do we convince lenders and investors to allocate capital towards green real estate?” They are baffled about why institutional lenders and investors often nod their heads politely in meetings, but are still largely noncommittal about writing the checks for green real estate, despite all of the verified proof of its superior investment performance. You would think that such a crowd would automatically embrace the higher return and value story. So why is that not happening, yet? A classic problem, really. The idea that people and companies will act to enlarge their own self-interest is accepted as conventional wisdom. Not true, says the Rockridge Institute's George Lakoff, people routinely make decisions and take actions, which are not in their self-interest. In Don’t Think of an Elephant, Lakoff explains that people’s actions are driven more by how the subject fits with their view of themselves in the wor...
More About: Estate , Real Estate , Buildings , Institutional , Real