Studies have repeatedly shown that green buildings out perform their peers with respect to rent, sale price, and other financial performance metrics. Investors have taken notice, and they are looking for the tools and information needed to guide investments in green. This expert panel will introduce cutting-edge research and new tools to help understand the financial performance of green buildings as individual assets and as part of real estate investment trusts and mortgage-based securities. This exceptional group will provide state-of-the-art insights into the present and future of green building finance.

1. Financing (Green) Buildings
Chris Pyke, USGBC
James Finlay, Wells Fargo
Chrissa Pagitsas, Fannie Mae
Nils Kok, UC Berkeley & GRESB

2. Why are owners building/retrofitting green
buildings?
! Increased net income &
sales price
! Increased demand from
tenants and institutional
investors
! More and stricter
environmental regulation
! Risk-mitigation strategies
Source: Eichholtz, Kok and Quigley (2012)

3. What is EEF?
IT DEPENDS!
! Generally:
! Energy Efficiency Financing (EEF) is capital ($$)
used to construct or retrofit properties to use less
energy than conventional buildings
! There is no one definition of EEF

4. EEF can be…
! A lower interest rate
! The provision of more debt than allowable under
conventional underwriting
! A different appraisal or property condition process
! A certification or label disclosed to investors

5. Who can use EE Financing?
1. Single Family Residential: 1-4 5. Multifamily: 5+ units, affordable
units. Generally owner-occupied. &market rate,
Value <$1M. rental apartments, condos &
coops. Value $1MM to $200MM+.
2. Small Commercial & Industrial:
6. Special purpose:
Small owner-user. Value < $2M.
Gas station, fast food, hotel/motel,
theater, data centers. Value $1MM
3. Medium Comm. & Industrial:
to $20MM+.
Larger owner-user/part owner-
user, local investor. Value $2M to 7. MUSH:
$10M. Municipal, University, Schools,
Hospitals. Value $1MM to $300MM
4. Large Commercial & Industrial: +.
Multi-tenant leased investment
Value >$10M.

6. What is the financing process?
Needs
capital
to
acquire
a
property;
refinance
an
exis-ng
property;
or,
make
improvements
Owner
to
an
exis-ng
property
Lender
Investor
Available
sources
of
capital
to
the
Owner
uses
provides
provides
owner
own
Cash
Debt
Equity
Final
permuta-on
of
financing
Lender
sells
Lender
holds
Investor
tool
MBS
Loan
holds
Shares

7. How do our organizations fit in?
Needs
capital
to
acquire
a
property;
refinance
an
exis-ng
property;
or,
make
improvements
Owner
to
an
exis-ng
property
Lender
Investor
Available
sources
of
capital
to
the
Owner
uses
provides
provides
owner
own
Cash
Debt
Equity
Wells
Fargo
&
Fannie
Mae
Final
permuta-on
of
financing
Lender
sells
Lender
holds
Investor
GRESB
tool
MBS
Loan
holds
Shares

8. Connecting the EEF pieces
! Wells Fargo: How appraisals impact EEF
! Fannie Mae: Example of a Green Loan and Green
MBS combination
! GRESB: What investors want to see regarding
sustainability of portfolios

9. Wells Fargo
Environmental Loans & Investments

10. Define the Investment Risk
High
Low
Unknown
Money flows to
Risk
Risk
Risk
investments
Corp.
Junk
U.S.
???
when there is a
Bonds
Treasury
clear and
Not
measurable risk
OK
OK
OK
adjusted rate of
return.

11. Environmental Loans & Investments
Financing is not the problem, poorly defined risk is the problem
Compelling motivation by owners is lacking, there is always owner risk, “skin
in the game”
Rewards for investing in upgrades are:
1. Hard, quantifiable – Simple cost savings
2. Soft Qualitative – Risk, quality, reputation; health + productivity
3. Reversion – Added value at sale
EE risks/benefits are complex, tools and experts lacking, specific hurdles
vary by tribe

12. Environmental Loans & Investments
Risk rungs during the development cycle
1. Idea in the shower
2. Ink on paper - - - - - - - - - - Appraisal Values
3. Entitlements - - - - - - - - - - - - As-Is Value
4. Vertical construction - - - - - - - At Completion Value
5. Stabilized occupancy
6. Stabilized history (3 years) - - - Stabilized Value

13. Construction lending/investment is “special”
§ As Proposed value is about the future
§ As-Is value is about now and past performance
The Mortgage/Investment Chain - all of tribe must agree
Owner
RE
agent
Appraisal
Reviewer
Occupants
Appraisal
Chief
Credit
C
level
Management
Firm
Officer
Exec
Government
Examiner
Opera/ons
Banker
Appraiser
Loan
Staff
Underwriter

14. Conclusions
• Have due diligence documentation
package ready
• Know members of your tribe
• Value beyond cost savings: risk,
reputation, value at sale
• High Performance building management
clarifies risk, creates data, adds value
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15. Fannie Mae Mission and Portfolio
! Fannie Mae provides liquidity, stability and affordability
to the secondary mortgage market
! Multifamily Guaranty Book of $190B
! 3.8M rental units
! Includes Market Rate, Affordable Subsidized and Affordable by Area Median
Income (AMI) properties
! 20% of U.S. Mortgage Debt Outstanding for Multifamily*
*As reported by Federal Reserve as of Q2 2010

16. What is “Green Financing” to Fannie Mae?
! Green Financing is capital (loan proceeds) that may result in:
! Reduction of operating costs for owner
! Reduction of utility costs for tenant
! Reduction of loan risk for lender
! Improvement of property quality for everyone
! Preservation of affordable / work force housing for Americans
! Through the investment in Energy and Water Efficiency
improvements, at the time of:
! Refinance of an existing Fannie Mae loan
! Acquisition of a property with a new Fannie Mae Loan that is
subsequently sold to Fannie Mae
! addition of Supplemental loan to an existing Fannie Mae loan.

17. Cycle of Financing
Owner
• Acquires
or
Refinances
Servicer
Lender
• Manages
Asset
for
life
of
• Underwrites
loan
&
orders
loan
reports
• Provides
primary
financing
Investor
Fannie
Mae
• Buys
MBS
based
on
• Provides
secondary
financing
informa-on
disclosed
• Securi-zes
Loan
into
MBS

18. Green Refinance Plus Terms
! Affordable Subsidized Multifamily Rental Buildings
! Acquisition/Rehab and Refinance deals
! 4-5% additional loan proceeds compared to
Fannie Mae’s regular DUS Affordable
Preservation execution
! Lower DSCR (1.15x)
! Higher LTV (85%)
Confiden-al
-­‐
Internal
Distribu-on

19. Connecting the Green Financing Components
Green
MBS:
Fannie
Mae
discloses
a
green
financing
solu-on
or
a
green
building
cer-fica-on
enabling
MBS
investors
to
deploy
their
investment
dollars
to
support
energy
and
water
retrofi[ng.
Green
Loan:
Fannie
Mae
provides
secondary
market
liquidity
Green
allowing
the
financing
of
energy
and
water
efficiency
improvements
Financing
or
to
support
proper-es
with
a
green
building
cer-fica-on.
Refinance
Green
Property:
Owner
improves
property
or
obtains/maintains
green
building
cer-fica-on.
Green
Acquisi-on
Building
Cer-fica-on
Energy
&
Water
Green
building
cer-fica-on
Supplemental
Efficiency
Improvements
by
third-­‐party
(e.g.
LEED,
Green
Communi-es)

20. Examples: Green MBS
Green
Financing
Product
Green
Building
Enhancement
Cer-fica-on
! Financed with Green Refinance Plus ! Has US Green Building Council’s LEED
! Financing provided for property certification Platinum level
improvements including replacing old ! Building design is 35% more energy-
inefficient gas-fired furnaces and installing efficient than code requires.
energy efficient lighting

21. What is GRESB?
GRESB’s added value
¡ Measure sustainability performance at portfolio level
¡ One approach and one methodology for listed property companies and
privately managed funds
¡ Aligned with international reporting frameworks (Global Reporting Initiative,
EPRA, INREV)
¡ Used as a due diligence and engagement tool by institutional investors
“GRESB’s mission is to enhance
shareholder value by evaluating and
improving sustainability practices in the
global real estate sector”

22. GRESB data used by 38 (global) investors…
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23. …and GRESB is supported by
All major industry associations across the globe
Supporting members
• Association of Institutional property investors in the • Property Council of Australia (PCA)
Netherlands (IVBN) • Real Property Association of Canada (REALpac)
• Association of Foreign Investors in Real Estate (AFIRE) • Responsible Investment Association Australasia (RIAA)
• Australian Council of Super Investors (ACSI) • United Nations Principles for Responsible Investment (UNPRI)
• British Property Federation (BPF) • Association for Real Estate Securitization (ARES)
• Danish Property Federation
23

24. About the GRESB Survey
• The basis for the benchmark
• Online survey, 35 questions
• Explicit link to Global Reporting Initiative (GRI) and EPRA/INREV
Best Practices Recommendations
• Methodology of GRESB scoring
• 8 aspects, focus on environmental performance
• Management & Policy vs. Implementation & Measurement
• New Development section for pure-play development funds
24

25. GRESB Methodology & Scoring
The scoring of individual questions in the GRESB
Survey is based on the relevance of the topic to
investors, with a strong focus on Implementation
& Measurement.
A selection of questions is scored based on
a respondent’s primary property type. As such,
GRESB takes into account the unique
characteristics of a property type not only in
benchmarking, but also in the scoring of Survey
questions.
25

26. Measuring sustainability performance
GRESB Four Quadrant Model
26

27. How due diligence and engagement works

28. Financing (Green) Buildings
Chris Pyke, USGBC
James Finlay, Wells Fargo
Chrissa Pagitsas, Fannie Mae
Nils Kok, UC Berkeley & GRESB