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Deals & Dealmakers

New guide to help lenders with green building value

The Appraisal Institute, the Institute for Market Transformation and the District of Columbia’s Department of Energy and Environment has released a guide intended to help lenders understand the valuation of high-performance buildings.

“High-Performance Buildings and Property Value: A Primer for Lenders” helps lenders assess green and energy-efficient building features. This is important since collateral risks may be reduced if green premiums on such properties are being paid in the marketplace. The guide was released today at the Innovations in Clean Energy Finance IV summit in New York City co-hosted by Citi, the Environmental Defense Fund and Elevate Energy.

“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.

“As green and energy-efficient features become increasingly common in the marketplace, this guide should prove extremely valuable in helping lenders understand the valuation of high-performance buildings.”

The guide notes: “Credible appraisals must be well-supported by market data and information. In the case of a high-performance building, this includes information on the subject property that helps explain why it stand outs from its conventional peers.”

The new guide highlights the four components of value – revenue, occupancy, operating expenses and risk. “These categories also make the case for green appraisal value and should be considered by lenders both during appraisal and underwriting,” according to the guide.

The guide also helps lenders work with owners and appraisers in such areas as determining the scope of services, finding a qualified appraiser, making a data request list and interviewing an appraiser or appraiser manager.

“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,” said Cliff Majersik, executive director of the Institute for Market Transformation.

“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.”

The Appraisal Institute is the nation’s largest professional association of real estate appraisers with nearly 21,000 professionals in almost 60 countries.

The Institute for Market Transformation is a non-profit organization that promotes energy efficiency in buildings. The Department of Energy and Environment is the leading local authority on all environmental and energy-related matters impacting the District of Columbia.

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