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Green Finance for Affordable Housing

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Tips on developing a green finance program for your affordable housing portfolio.

Tips on developing a green finance program for your affordable housing portfolio.


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    • 1. Green Finance for Affordable Housing BrightTALK Webcast Wednesday, June 17, 2009 Lisa Michelle Galley
    • 2. About Galley Eco Capital June 17, 2009 BrightTALK: Green Finance for Affordable Housing Transaction Range
      • Real Estate $20mm+ / Portfolio’s welcome
      Capabilities
      • Financial services and management consulting for green projects. Business intelligence, designing funding programs, financial modeling and transaction assistance.
      Sectors
      • Sustainable Real Estate & Renewable Energy
      Markets
      • Nationwide
      Structures
      • Investment Programs, Hybrid Debt/Equity Structures, Energy-Savings Financing Structures.
    • 3. June 17, 2009 BrightTALK: Green Finance for Affordable Housing Presentation Outline
      • Introduction to Green Finance
      • The Pillars of Green Finance
          • Benchmarking
          • Underwriting
          • Strategic Funding
          • Integration
      • How’s your Program Working?
    • 4. Do you include green finance tools or techniques in your existing program right now? June 17, 2009 BrightTALK: Green Finance for Affordable Housing Introduction to Green Finance: Survey Question
    • 5. A system of public and private market financial mechanisms that promote sustainable real estate. June 17, 2009 BrightTALK: Green Finance for Affordable Housing Green Finance Rewards Resource Value Integrative Intentional
    • 6. How is Green Finance Different?
      • Short to mid-term financial outcomes
      • First costs
      • Income & Expenses
      • Simple Payback
      • NPV
      • ROI / IRR
      • Socially responsible expectations & sustainability outcomes
      • Life Cycle Cost Analysis
      • Income & Expenses
      • Savings
      • Avoided costs
      • ROI / IRR / NPV
      • Simple & VAR Paybacks
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing Traditional Green
    • 7. Why Green Finance is Important for Affordable Housing
      • Building environmental and economic value for low-income households
      • “ For low income individuals, the real inflation rate is 7%-10% p.a. due to their greater exposure to food and energy price increases combined.”
      • Ken Rosen, Rosen Consulting
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 8. June 17, 2009 BrightTALK: Green Finance for Affordable Housing
      • Introduction to Green Finance
      • The Pillars of Green Finance
          • Benchmarking
          • Underwriting
          • Structuring Incentives
          • Integration
      • How’s your Program Working?
    • 9. Are you utilizing a benchmarking standard across your entire portfolio, for both existing assets and new construction? June 17, 2009 BrightTALK: Green Finance for Affordable Housing Benchmarking: Survey Question
    • 10. What is Benchmarking?
      • Process of comparing your properties’ energy and environmental performance against third-party, agreed upon standard of sustainability and energy efficiency.
      • Improves asset competitiveness- transparency and adherence to industry established best practices.
      • Establishes environmental/energy efficiency performance goals for affordable housing
      • Establishes recognizable value for stakeholders:
        • Capital sources
        • Local government
        • Tenants
      • Green ratings criteria marketplace is maturing: number of options for both new construction and existing residential projects
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 11. Common Elements of any Benchmarking Standard
      • Energy Usage
      • Water Consumption
      • Waste
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 12. Benchmarking Standards
      • LEED for Homes (US Green Building Council)
      • New construction: single family and multifamily properties up to 4 floors (midrise pilot currently in testing)
      • Initiative for affordable housing
      • 8 rating categories (location/linkages, water efficiency,
      • energy & atmosphere, etc)
      • 18 performance prerequisites
      • 4 rating levels
      • GreenPoint RATED (Build it Green)
      • New construction and existing single family and
      • multifamily properties
      • 5 rating categories
      • California based rating system
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 13. Benchmarking Standards
      • LEED For Homes: Energy performance is at least
      • 15-20 percent better than a comparable home built to code. The average pilot LEED Home offered utility
      • savings of 40 percent.
      • (Source: Health Homes Institute)
      • GreenPoint RATED: Energy performance must
      • exceed Title 24, California’s energy code, by at least 15 percent ; recycle at least 50 percent of construction and demolition waste.
      • (Source: Build It Green)
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 14. Benchmarking Standards: ENERGY STAR for Multifamily
      • Operated by the US Environmental Protection Agency (EPA)
      • ENERGY STAR qualified new homes are 15% more energy efficient than homes built to the 2004 International Residential Code (IRC), and are typically 20–30% more efficient than standard homes.
      • Multifamily buildings can be qualified under ENERGY STAR for New Homes:
        • Multifamily (up to 3 floors): Qualified
        • Multifamily (4 - 5 floors): Can qualify if each unit has separate
        • heating, cooling, and hot water systems.
        • Multifamily (high-rise): Program under development,
        • currently available in New York, Wisconsin, and Oregon.
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 15. June 17, 2009 BrightTALK: Green Finance for Affordable Housing
      • Introduction to Green Finance
      • The Pillars of Green Finance
          • Benchmarking
          • Underwriting
          • Structuring Incentives
          • Integration
      • How’s your Program Working?
    • 16. Are you utilizing conventional underwriting metrics to calculate your ROI from sustainable real estate projects? June 17, 2009 BrightTALK: Green Finance for Affordable Housing Green Underwriting: Survey Question
    • 17. Green Underwriting: Mixed-Use Case Study June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 18. Green Cash Flow Factors
      • Energy Cost Savings
      • Faster absorption
      • Rental premiums
      • Enhanced retention
      • Lower discount rate
      • Increased property taxes for superior market value.
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing Positives Negatives
    • 19. Applying Green Finance to Affordable Housing June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 20. Isolate primary NOI impacts from green design
      • Operating Expenses
      • Greater Efficiency
        • Common area electricity
        • Common area gas
        • Common area water
        • Common area sewer
        • Unit electricity
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
      • Income
      • Better Marketability
        • Lease-up absorption
        • Tenant retention
        • Residential electricity
        • allowance reduces total
        • cost of occupancy.
    • 21. Catalogue secondary project opportunities & risk mitigants
      • Transit Oriented Development (R.E. Quality)
        • Car-sharing / public transit access
        • Neighborhood amenities
      • Community Risk Mitigation (Wins Permitting Preference; avoids carbon tax)
        • Reduced carbon footprint
        • Fewer single occupancy vehicles
        • Housing of at risk population: affordable senior rental apartments
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 22. June 17, 2009 BrightTALK: Green Finance for Affordable Housing
      • 72 affordable senior rental apartments, over 70,000 square feet of grocery-anchored retail space, and a 90-room boutique hotel.
      • Near net-zero energy, mixed-use urban project.
      • LEED ND Pilot Project, targeting LEED™-NC Platinum certification.
      • 160 kW Solar Photovoltaic System
      • Geothermal Heating/Cooling
      Mixed-Use Case Study (Northern California)
    • 23. June 17, 2009 BrightTALK: Green Finance for Affordable Housing
            • Results
      • Reduced energy and water use
      • On-site generation of electricity and
      • heating/cooling capacity
      • Potentially higher than market rents
      • Faster lease-up
      • Lower operating costs
      • Financial incentives lower construction
      • costs
      • Walkable urban environment
      • Carbon neutral
      Green Finance: Mixed-Use Case Study A sustainable investment strategy enhances value and hedges against risk (financial, market, operating, regulatory) Future proofing your Investments
    • 24. June 17, 2009 BrightTALK: Green Finance for Affordable Housing Year 1 reduction: $24,500 Annual electricity cost (per NRSF) Annual gas cost (per NRSF) Annual water & sewer cost (per NRSF) Year 1 reduction: $5,500 Year 1 reduction: $17,000 Total year 1 reduction (common areas): $47,000 Owner case: operating expense reductions (common areas) Mixed-Use Case Study Mixed-Use Case Study Mixed-Use Case Study
    • 25. Mixed-Use Case Study: Green Value Proposition June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 26. June 17, 2009 BrightTALK: Green Finance for Affordable Housing Year 1 tenant savings (all units): $36,000 Tenant case: electricity savings Annual Electricity Use (per unit) Annual Electricity Cost (per unit) Annual reduction (per unit): 4,000 kWh Year 1 savings (per unit): $500 Mixed-Use Case Study Mixed-Use Case Study
    • 27. California Utility Allowance Calculator (CUAC) June 17, 2009 BrightTALK: Green Finance for Affordable Housing
      • A new tool that creates an energy consumption model for affordable housing projects applying for Low-Income Housing Tax Credits (LIHTC).
      • More accurately estimates project utility costs.
      • Tool Location: http:// www.gosolarcalifornia.org/affordable_housing/cuac.html
    • 28. June 17, 2009 BrightTALK: Green Finance for Affordable Housing
      • Introduction to Green Finance
      • The Pillars of Green Finance
          • Benchmarking
          • Underwriting
          • Structuring Funding
          • Integration
      • How’s your Program Working?
    • 29. Are you comprehensively sourcing and mapping funding opportunities across the capital supply chain? June 17, 2009 BrightTALK: Green Finance for Affordable Housing Financial Incentives for Green Building: Survey Question
    • 30. June 17, 2009 BrightTALK: Green Finance for Affordable Housing Financial Incentives for Green Building: A Missed Opportunity Source: National Real Estate Investor 2007 Green Building Survey
    • 31. Financial Incentives for Green Affordable Housing: Sources June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 32. Comprehensively Source Funding June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 33. Strategic Funding Supply Chain June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 34. June 17, 2009 BrightTALK: Green Finance for Affordable Housing
      • Introduction to Green Finance
      • The Pillars of Green Finance
          • Benchmarking
          • Underwriting
          • Structuring Incentives
          • Integration
      • How’s your Program Working?
    • 35. Is your team good at creating synergies between ‘all of the above’? June 17, 2009 BrightTALK: Green Finance for Affordable Housing Financial Integration: Survey Question
    • 36. Competitive Green Finance Program
      • A multi-disciplinary team with joint responsibility for positive performance.
      • Benchmark audit lists and reporting.
      • Documented underwriting protocol tailored for green economic performance (resident business case).
      • Updated Strategic Funding Map addressing total supply chain.
      • Green O&M
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing
    • 37. June 17, 2009 BrightTALK: Green Finance for Affordable Housing
      • Introduction to Green Finance
      • The Pillars of Green Finance
          • Benchmarking
          • Underwriting
          • Structuring
          • Integration
      • How’s your Program Working?
    • 38. Checklist for Improving your Green Finance Program June 17, 2009 BrightTALK: Green Finance for Affordable Housing 1. I know which of my project’s green features can help to improve net operating income. 2. We are capturing the maximum amount of financial incentives available for our projects. 3. We are aware of the emerging debt and equity underwriting standards for sustainable real estate and are able to show property performance based on these new standards. 4. We are building and/or retrofitting green based upon a third party rating system (ie, the USGBC LEED rating system)
    • 39. Checklist for Improving your Green Finance Program June 17, 2009 BrightTALK: Green Finance for Affordable Housing 5. We are able to design and build green at nearly the same cost as conventional construction. 6. We understand what types of financial tools and metrics to use when underwriting green real estate. 7. We know how federal, state and local regulatory changes are affecting our property portfolio and future development activities. 8. We have implemented best practice risk management reviews to reduce the financial risks within our portfolio.
    • 40. Green Finance Services, Resources, Training
        • Galley Eco Capital
        • Lisa Michelle Galley
        • Managing Principal
        • (415) 655 6668
        • [email_address]
        • SITE: http://www.galleyecocapital.com
        • BLOG: http://www.galleyecocapital.com/our-green-journey
      June 17, 2009 BrightTALK: Green Finance for Affordable Housing