As high-performance commercial buildings become commonplace in the market across the U.S., financial institutions are increasingly in need of education and real-world examples of how these buildings’ green characteristics benefit the bottom line and affect their value.
Recognizing this, the Institute for Market Transformation (IMT) has released two new resources to assist lenders in better understanding the financial benefits of high-performance buildings.
Earlier this month, at the Innovations in Clean Energy Finance IV summit in New York City co-hosted by Citi, the Environmental Defense Fund, and Elevate Energy, IMT Executive Director Cliff Majersik announced the release of “High-Performance Buildings and Property Value: A Primer for Lenders.”
This new guide, produced in collaboration with the Appraisal Institute and funded by the District of Columbia’s Department of Energy and Environment (DOEE), breaks down the components of a building’s value and examines best practices for properly incorporating green features.
“For more than a decade, IMT has worked on developing, supporting, and promoting best practices at the intersection of valuation, financing, and sustainability to illustrate how improved building performance can — and should — be recognized in the real estate market,” Majersik said.
“This new guide builds upon past collaboration between IMT and the Appraisal Institute and further illustrates that the market values high-performance buildings. It is incumbent on lenders to fully reflect this reality in their appraisal and underwriting processes and this guide points the way.”
In addition to examining the four components of value with an eye on how green features fit in, the new guide also provides key advice on navigating the appraisal process to ensure that it better evaluates and reflects the value of high-performance buildings.
It was designed as a companion piece to past work co-produced by IMT and the Appraisal Institute, such as the 2013 guide “Green Building and Property Value: A Primer for Building Owners and Developers” and the 2012 report for appraisers, “Recognition of Energy Costs and Energy Performance in Real Property Valuation.”
“The Appraisal Institute is proud to share its thought leadership to lenders on this important topic,” said Appraisal Institute President M. Lance Coyle, MAI, SRA. The Appraisal Institute is the nation’s largest professional association of real estate appraisers with nearly 21,000 professionals in almost 60 countries. “As green and energy-efficiency features become increasingly common in the marketplace, this guide should prove extremely valuable in helping lenders understand the valuation of high-performance buildings.”
In conjunction with the publication of the new guide, IMT has also released “Smart Investments in Energy Efficiency,” a case study of energy efficiency improvements undertaken at The Portrait Building, an office building in downtown Washington, D.C.
Examining three recent energy efficiency improvements made to the building, the case study shows how these measures not only improved the building occupants’ comfort but also provided large benefits to the property’s bottom line, adding a potential $11.6 million to the value of the property.
Both the new lender guide and The Portrait Building case study are available for free download at imt.org.
“High-Performance Buildings and Property Value: A Primer for Lenders” can also be found on the Appraisal Institute and DOEE websites at appraisalinstitute.org and doee.dc.gov, respectively.