[Vihreä Foorumi 26.4.] Maija Virta, FIGBC

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[Vihreä Foorumi 26.4.] Maija Virta, FIGBC

  1. 1. World Sustainable Building Conference – Helsinki 2011 Integrating sustainability considerations into decision making processes of the Real Estate industry : a case study of valuing sustainability aspects of an existing building Frank Hovorka - Caisse des Dépôts et Consignations Vinh-Nghi Tiet - ICADE REIM Deutschland GmbH 1
  2. 2. World Sustainable Building Conference – Helsinki 2011What is it about?Many Factors influence investment decisions in Real Estate, especially in commercial Real Estate Location Type of use Tenancy Rent levels Lease duration Building standards and Equipments MarketThe Asset Value factors in all those aspects into one Key Indicator 2
  3. 3. World Sustainable Building Conference – Helsinki 2011What is it about?Are Sustainability considerations taken into account in valuing a building? If yes, what is « sustainability » worth? Are Sustainability considerations taken into account in valuing a building? If yes, what is « sustainability » worth? Are investment decisions sustainable? Can a long-term investment strategy also lead to a short-term increase of value for an investor? How much is a Green Certificate (LEED, DGNB, BREEAM, HQE…) worth?There is no consensus for now and many debates 3
  4. 4. World Sustainable Building Conference – Helsinki 2011What is it about?A case study to illustrate how sustainable decision making could look like A case study on an 22.000 m2 office building in Berlin built in the 1930s, with heavy refurbishment needs. Integrating results of Life-Cycle environmental and costing assessment of decisions Different refurbishment scenarios were considered with different time scales Assumptions were made on the resulting evolution of significant parameters of the existing building valuationAmong the different valuation tools, the Discounted Cash Flow method was chosen 4
  5. 5. World Sustainable Building Conference – Helsinki 2011Numerical toolsGHG Emissions  Life Cycle Analysis  A cradle-to-grave analysis over 50 years  Consideration of energy savings, fabrication, repairs Based on DGNBTotal expenses  Life Cycle Costing methodology  Dito LCA  No distinction between investor and userValuation:  Discounted Cash Flows (other methods available: sales comparison approach etc.) N CFn CFN +1 NPV = ∑ + n =1 (1 + r ) r−g n Exit value 5
  6. 6. World Sustainable Building Conference – Helsinki 2011 Integrating sustainability features into valuation methods: Example DCF-Method6 Source T. LUTZKENDORF
  7. 7. World Sustainable Building Conference – Helsinki 2011 Scenarios and assumptions Begin of works 2010 2020 Type of renovation Progressive obsolescence of the asset (steady-state scenario) Scenario no investment costs NP no energy savings (non plausible) Cosmetic repair with no improvement of physical propertiesF 150€ repairs per window every ten years, repairs spread on 3years Scenario 0  no savingso Windows replacement improving energy efficiency from U= 3 to 1,1c W/m²K), made on-site with tenant staying in the rental area, hardened FSCu Scenario certified wood. Scenario 1 1-2s  1250€/unit, realization spread over 4 years Savings: -25% of final energy consumption (100 → 75 kWh/m²) High-performance replacement (made on-site as in scenario above ) 2000€/unit in current prices but with sinking investment costs (1800€ in Scenario Scenario 2 2020) 2-2 savings: -31% of final energy consumption (100 → 69 kWh/m²) 7
  8. 8. World Sustainable Building Conference – Helsinki 2011 Scenarios and assumptionsOccupancy scenario Rental scenario More ambitious refurbishments lead More ambitious refurbishments lead to ... to ... •... reduced vacancy periods •... A decrease of the ancillary costs between leases for the tenant •... Longer leases •At first no increase of the rent, rent •Higher maximum occupation increase only at lease renewal or new leaseVacancy rate of the building Rent increase schemeVacancy between leases: 6  3 months 8Mean lease duration 7  8 months
  9. 9. World Sustainable Building Conference – Helsinki 2011 Scenarios and assumptions *obtained from the existing valuation report **used to determine residual value at the exit year (Gordon Growth Model).Vn = CFn+1 (discount - growth) 9
  10. 10. World Sustainable Building Conference – Helsinki 2011Results: Life Cycle Environmental assessment Life Cycle Analysis – CO2 emissions (in tCO2-eq) linked to a window over 50 years 10
  11. 11. World Sustainable Building Conference – Helsinki 2011Results: Life-Cycle Costs Life Cycle Costing. Cumulative discounted investment and energy expenses linked to a window over 50 years (in €) 11
  12. 12. World Sustainable Building Conference – Helsinki 2011 Results: Discounted Cash Flows Comparison scenario 0 / scenario 1 Cash flows - (future values in €/year) Rents (€/m².mth)Statistical variationof the parameters Montecarlo simulation 12
  13. 13. World Sustainable Building Conference – Helsinki 2011Results Sc1: Increased value 2.563.504 € Required investments over 50 years 1.705.000 € 13
  14. 14. World Sustainable Building Conference – Helsinki 2011Authors Frank Hovorka Director Sustainable Real Estate - MRICS Caisse des Dépôts et Consignations, France frank.hovorka@caissedesdepots.fr Vinh-Nghi Tiet Director Sustainability and Development ICADE REIM Deutschland GmbH, Germany DGNB Auditor – LEED Green Associate vinh-nghi.tiet@icade.eu Vinh-Nghi Tiet - ICADE REIM Deutschland GmbH

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