Multifamily property investors and lenders are seeing an increased demand for Green building initiatives by Fannie Mae, Freddie Mac and the Federal Housing Administration, especially when acquiring or refinancing older properties, according to Randy Ward, Managing Director of Agency & Multifamily Services at CBRE Assessment & Consulting Services.
In response to this demand, more and more investors and their lenders are requesting a Green PNA from their 3rd party physical due diligence providers as part of their loan underwriting and property assessments. A Green PNA is a technical property condition report that blends aspects of a Physical Needs Assessment (PNA) and an Energy Audit.
The purpose of a Green PNA is to analyze and make recommendations concerning the physical condition of a multifamily property with an emphasis on energy and water efficiency improvements. Well-known Green PNAs in the marketplace are the Fannie Mae Green Rewards and Green Preservation Plus Programs, Freddie Mac’s Green Rebate and the HUD Green Physical Needs Assessment (GPNA).
Green PNA’s and ensuing Green capital improvement upgrades can benefit borrowers through financial loan incentives, tenants through reduced utility costs, lenders through improved property condition and the overall community by reducing demand on natural resources.
“By obtaining Green PNAs and implementing Green property improvements and upgrades, owners and borrowers can take advantage of beneficial loan terms, help provide more affordable housing through lower utility bills, meet federal guidelines for energy efficiency, and participate in nationwide energy and water usage reductions that can conserve our natural resources,” said Mr. Ward.
The major framework of a Green PNA is the PNA report (aka PCA or PCR). A PNA is important for clients seeking to know the condition of a multifamily property they may be financing, selling or purchasing. A PNA is typically used by multifamily lenders or investors in support of loan underwriting, risk management, transaction negotiation or capital needs planning.
The Green portion of the Green PNA is the Energy Audit (Green Report), which identifies multifamily property energy and water consumption metrics and potential savings and efficiencies for these systems.
The typical Energy Audit will analyze and benchmark HVAC systems, water fixtures, appliances, hot water heating, building envelope performance, and other relevant systems and components. The Energy Audit will identify inefficiencies and waste, recommend upgrades, and show a simple payback analysis for system upgrades that can reduce multifamily property energy and water usage significantly on older properties.