Why colleagues are attending our Competitive Edge 3 workshop

I regularly talk with colleagues about how and why they are using green finance, to make sure our course content is at least meeting, if not exceeding, their needs.

Here are the perspectives of Jon Gibson and Rowan Edwards, who’ve already signed up for the upcoming Competitive Edge 3 workshop, Communicating the Value of Green Building Using Principles of Real Estate Finance.

The workshop is happening on June 24, 2010, here in San Francisco (download the course flyer here↓).

Why Jon and Rowan will attend this class

Jon Gibson, Hedge Fund Accountant, San Francisco

My background is in accounting for hedge fund portfolios, but I am transitioning into a green real estate finance position. I found the green finance series extremely valuable in helping me find my way; I have learned about the green real estate value proposition (the basic financial underpinnings), met many industry contacts-from architects and engineers to financiers, lawyers, and investors-who now serve as a network of resources, and developed a sense of the market. The guest speakers, drawn from a host of high-level public and private organizations, were exceptional.

The extensive (and high quality) handouts have allowed me to continue to learn and enrich myself long after the course was over. Lisa, George and the rest of the team (including USGBC-NCC) do a great job organizing, presenting and making sure each participant has several great takeaways.

Rowan Edwards, Sustainable Developer, San Francisco

My interest in Galley Eco Capital seminars is to find new ideas. As a sustainable business developer I am looking for new opportunities that may exist, not only in light of the current economic situation, but because innovative methods always seem to flourish and gain traction in times like these.

We have seen that other methods of financing exist like micro-financing (Grameen), and on the horizon, B-to-B micro lending. It is exactly this type of out -of-the-box thinking that creates new opportunities. It is this new way of thinking that would be the primary reason for taking the green real estate financing seminar.

With LEED and The Living Building Challenge gaining momentum, fostering a new language, and offering long-term value for all stakeholders, the time is at hand to capitalize on new innovative methods. I look to Galley Eco Capital to be the thought leader in this direction.

More About → Competitive Edge 3: Communicating the Value of Green Building Using Principles of Real Estate Finance

» Click here to find out more about the workshop and register today for early bird pricing!

» Click here to download the flyer↓

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Put Fortune 500 Product Innovations to Work for Your Green Initiatives

Now that the economy appears to be improving, we expect billions of dollars of fresh capital to flow into green development and energy efficiency retrofits over the coming years.

However, we also know that many firms are still hesitant to proactively green their portfolios and financial offerings. We think we know why and have new tools to boost their confidence.

These practitioners are saying something that the green building crowd simply can’t ignore. They feel they’re in a Catch-22: they know their companies are at risk if they don’t go green, but they don’t have a clear view of the possible results of committing their capital to green investments at a meaningful level.

Even though researchers have published studies indicating that green properties earn an average 3% higher valuation, or 16% higher net operating income, that still doesn’t mean that you are going to make that on your properties. It doesn’t mean that your particular tenants are going to pay you more rent on a given date. Nor does it mean that you will absolutely realize these results upon sale of your particular green assets.

The truth that leaves these firms skittish is that realizing the value-add of green depends on many variables for which no data exists. Not only must you do the right things, but the sub-market around your asset has to do (enough of) the right things, too, in order for you to be properly rewarded for your sustainability initiatives.

That’s a very hard disclaimer for many investors, lenders and governments to tell their shareholders and voting taxpayers.

So we’re stuck, right?

No, we’re not. There is a much better way.

What Real Estate Can Learn from the Fortune 500

We noticed that leading global players – players like VeriSign, SAP, Genesys, etc. – face similar issues as commercial real estate investors.

They also have the predicament of committing billions of dollars each year to create new or revamp existing products and services in an unclear business environment. The B2B product development gurus who work for these companies told us about the secret sauce of their success – what has made the difference between so-so and blockbuster products, even when the economy is tough.

It turns out that Fortune 500 companies reduce their investment risks within new/revamped product and service initiatives by using sophisticated “voice of the customer research” (VOCR) tools very early in the design process. These tools gather how customers perceive and experience their products and services, which is perhaps the most difficult information to obtain. It is also the most valuable for developing new products and services – particularly the kinds of products and services that are very new to an industry, like green building and energy efficiency.

The B2B product development gurus stressed that these techniques minimize capital at risk because the company obtains key insights up front on what might enhance their product’s success with their customers. Products and services can then be further developed to fit customers’ needs as closely as possible. Often times, these methods reveal data about unspoken or hidden needs customers have never clearly expressed, leading to innovative product breakthroughs.

Galley Eco Capital has carefully adapted VOCR tools to work specifically for the real estate finance and investment sector as well as municipalities engaged in energy efficiency and green building programs. They are available within a branch of special services called Real Estate Innovation Advisory®. REIA now offers special collaborative forums that power green initiatives by enabling investors, lenders and governments to collaborate with their customers on their green space, investments, and service offerings.

Join an upcoming Mini-forum at Competitive Edge Workshop #3

If you are attending Competitive Edge Workshop #3 on June 24, you’ll participate in a mini-version of an interactive Real Estate Innovation forum titled, What Real Estate Investors Think about Your Products & Services (And How You Can Communicate Their Value).

Whether you are a real estate practitioner, investor, service provider or government employee, you will have hands-on involvement in learning how owners perceive green building products and services. You will take away insights about interactive forums as well as specific content that is immediately applicable for your own business.

Understand Your Customers, Minimize Investment Risk and Boost Investment Value

If you don’t have the voice of your tenants, borrowers, partners and customers influencing the development of your green building space, products, services and offerings, then you are missing an incredible opportunity to bring more certainty to your capital programs. You could also miss the chance to find more breakthrough ways to do smarter green initiatives.

Call me today to talk about how Real Estate Innovation Advisory® Services can help you gain clarity about enhancing your existing products and services or get customer input on new ones.

Galley Eco Capital helps Helsinki to reduce carbon emissions

San Francisco-based sustainable finance consultancy Galley Eco Capital was announced as part of a winning team for the redevelopment of the Jatkasaari district in Helsinki, Finland, which will be an urban zone with low or no carbon emissions.

Sitra, the innovation agency of the Finnish government, revealed today that the winning team for their “Low2No” development design competition was made up of Arup, Saurbruch Hutton, Experientia and Galley Eco Capital. The multi-national team was selected out of 74 initial entries, for their “C_life – City as Living Factory of Ecology” project.

Galley Eco Capital  brings their unique perspective as an international sustainable finance consultancy with a focus on creating green and socially responsible finance and investment programs.  Galley Eco Capital’s work complemented the architectural and consumer behavioral aspects of Jatkasaari by contributing new ways for finance to transform both the district and Helsinki market, to positively impact people’s lives.

The competition jury stated that the innovative monetary/economic model presented contributed significantly to the team’s clear top-down as well as a bottom-up strategy for leveraging the Jätkäsaari opportunity, in the spirit of the Low2No challenge.

Sustainable finance for Jatkasaari and Helsinki

While other team members devised the design, energy and consumer behavioral strategies for the project, Galley Eco Capital’s responsibility was to create an economic and funding model, which would support the project by integrating traditional and socially-responsible capital sources and products at a regional market level and set the right incentives to achieve maximum effect in terms of emissions reduction, energy efficiency and resource savings.

Starting with a thorough analysis of Sitra’s environmental and socially-responsible real estate objectives, the Finnish climate change agenda, and Finland’s participation within the global environmental finance markets, Galley Eco Capital developed ways to create a reliable pipeline of green mortgage, environmental, energy and carbon finance capital for Jatkasaari.

These products would all seamlessly connect with the traditional Finnish financial network to form a holistic financial system. Delicate synthesis was also required to create a flexible market structure, which would monetize available sustainability benefits while adequately funding the Jatkasaari project throughout construction and operation.

About Galley Eco Capital

Using their expertise in designing and implementing sustainable finance and investment programs, Galley Eco Capital’s strategies help investors, lenders and regional governments to bridge traditional with green finance and efficiently monetize the available sustainability benefits embedded within their real estate and renewable energy initiatives.

Galley Eco Capital’s unique approach assures more successful solutions through the application of interaction design principles, driven by culturally-aware, user-centric perspectives and underpinned by long years of international real estate and capital markets experience.

The strategies help drive positive change by:

• developing debt and equity financing structures based upon the value-add contributed by sustainability and energy efficiency,
• synthesizing traditional with emerging green financial products into holistic financial solutions,
• sourcing and structuring incentives and government subsidies to offset program costs,
• designing and monitoring sustainable investment performance measurement to assure positive program impact

Over the next 6 years, the Jatkasaari district will be designed, constructed and opened to the public. From there, the sustainable ideals that govern its day-to-day life will act as a model and example for the rest of Helsinki, Finland and the world. Through Galley Eco Capital, San Francisco will be a vital part of this journey.

For more information on the Low2No project, or on Galley Eco Capital, contact Lisa Michelle Galley, Managing Principal, at +1 415 655 6668, or via email at “lisa at galleyecocapital dot com”.

Bioregionalism & Green Finance: “It’s the (sustainable) economy, stupid”

At least, that’s what Luke Lowings seems to be saying, in his review of Pooran Dersai’s new book, One Planet Communities. And he’s not making a bad point. It’s time that a solid discussion of finance accompany visionary development.

Dersai’s new book espouses “practical bioregionalism” — focusing on architectural principles for building a whole community — as opposed to just the sustainability of individual buildings. He argues for applying principles of bioregionalism to create sustainable communities (definition of bioregionalism here).

Lowings’ main complaint about One Planet Communities is that its heavy focus on building sustainable communities ignores the parallel task of creating a sustainable economy to support them.  My brow furrowed as I realized that, if this was Lowings’ chief complaint, then he’s probably very depressed about everything he reads on sustainable buildings. To date, not many have been able to lay out a cohesive set of principles and practice for the kind of finance that truly supports sustainable communities at a regional level. So I feel Lowings’ unfairly picks on Dersai about a general problem in the market, not for any particular failing on Dersai’s part.

Financial Infrastructure Needs to Support Sustainable Communities

Nonetheless, Lowings still has a good point –> the current availability of financial tools and resources for green real estate developers and investors is more of a swap meet than a market. It does not offer the depth and breadth of organized infrastructure that bioregions can rely upon.

• Recently, there have been a glut of new studies and tools dealing with narrowly defined pieces of individual building-related financial problems — green lease clauses, detailing paybacks on specific retrofit measures, and the potential value-add of third party certification to individual green buildings.

• On the funding side, the owner’s discovery and selection process requires trudging through a a swamp of new incentives, stimulus funding plus the byzantine tax and regulatory requirements that accompany them. To come up with a green business case on their own, they have to hopscotch around, stitching together those new green funding sources with their traditional capital relationships. Repeat that whole process again, for every single building they intend to green.

• It’s no wonder that nearly 70% of the participants who attended one of our recent webinars, indicated that they were not applying for or using any sort of incentives whatsoever. Why not? Too confusing to figure out!

The final wrinkle relates back to our post last week on green building valuation. In order for finance to support sustainable communities, the investment real estate community will have to be able to assign a value to amenities such as community farms and more schools. There would have to be a cultural shift towards more long-term economic stability as opposed to above-inflation rental growth. From today’s standpoint, that is a very tall order.

Bioregions don’t fit neatly into industry accepted conventions of primary and secondary real estate markets. Real estate fundamentals are driven by global and national market forces, not just regional ones. Capital markets these days cannot exist exclusively within a fenced-off business territory.

So I think that the sustainability movement has to acknowledge a certain level of hype that is accompanying the bioregion vision and incorporate a sober view of global demographics and economics in their economic planning.

Case Study: The Preserve - an official candidate “One Planet Community”

Can bioregionalism completely address some of the ills we see within our communities? Hmmm…. maybe.

GlobeSt.com has put out the word on A.G. Spanos’ announcement of a $2 billion “environmentally and economically sustainable” community that will generate 12,000 jobs and over $15 million in annual revenue for Stockton, CA”.

This community, called ‘The Preserve’, is also endorsed under review for endorsement by the One Planet Community, which gave is considering the endorsement in exchange for the development subscribing to its ten principles that address public transit, economics,natural habitats, energy and water, jobs, education and well being.

Two things come to mind as I read this announcement:

#1: Stockton, California has a foreclosure rate of 15% vs California’s 9.5% and the US rate of 6.72%.

# 2: The Stockton, CA metropolitan statistical area posts unemployment of 15.5%. It is ranked 359 out of the total 372 MSA’s tracked by the Bureau of Labor Statistics.

Which leads to my main question:

Can installing a bioregion heal an ailing city?

Seriously.  With stats like those above, can the City of Stockton truly afford to support a brand new 1,800 acre community — whose tax benefits won’t be fully evident for many years to come?

My long career of lending other people’s money into many MSA’s has taught me to be cautious when I hear about multi-billion-dollar new developments going into distressed communities — green or not. The US real estate industry is littered with tales of failed revitalization efforts tied to grand master-planned schemes, which absorbed huge amounts of a suffering town’s resources, but actually took a very long time to return relatively little to the residents who needed the relief.

The complete terms of the Preserve development are not yet known, so the jury’s out on the ways in which Stockton will be impacted. But real estate financing history suggests that these kinds of deals only make sense to the developer if they are getting the land at a very low price (or for free) and the city is contributing advantageous financing terms (big infrastructure bonds, etc).

The city hopes for larger tax revenues from the new businesses and residents in years to come after everything is built. Any rewards for the residents won’t be evident for years — after all, houses don’t make long-term jobs. It works the other way around.

Lots of cities forget that. They also forget that, in 15-20 years when the promised development is fully operational,  the real estate cycle will be in a much different place than when they signed the deal.

Bioregionalism principles can certainly play a key role in stabilizing Stockton’s economic outlook, but I bet that the City of Stockton could probably accelerate healing of its distress with a large scale, pragmatic energy efficiency financing program for its existing building stock as well as existing businesses to reduce cost of operations, spur green collar jobs and prevent further bleeding of existing jobs. Stockton appears to have a deal in the works with utility, PG&E, but I’m talking about a bigger, farther reaching kind of program which would encompass other forms of green finance beyond that supplied by the public utility.

Long-term healthy jobs and an educated workforce are the DNA of every healthy real estate market — not to mention, sustainable communities. With all due respect to The Preserve, I don’t think that every city  needs to necessarily go through the long, expensive process of building big new green communities to get there. And I always have lots of questions when ailing cities start agreeing to these projects, since they are usually in the worst position to really reap the benefits.

The good news is that, “swap meet” aside, there are great green finance options available that, when properly structured, can support cities like Stockton to implement either energy efficiency, new green development, or both. The key is to focus on these options very early in the process and, as Luke Lowings suggested, to make sure that sustainable finance doesn’t take a back seat to sustainable community building.

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Things you might want to know:

• We’d love to hear your comments and suggestions.
• You can get Our Green Journey by email.
• You can contact Galley Eco Capital to discuss or initiate a project here.
• Sometimes you can see what we’re doing on Twitter.
• Photo credit: Stockton, CA Boom Town by Joguldi (Flickr).

Yudelson: ‘You should be tougher’ on non-LEED West Village

Your input is requested on a very important matter!

Yesterday, I highlighted the UC Davis West Village student/faculty housing development getting a $2 million grant from the California Energy Commission.

I also noted the project not adhering to LEED guidelines or any other third-party rating standard for that matter.

That definitely caught the attention of none other than Jerry Yudelson — a Green Journey reader with regular comments — who took me to task on not going deeper on the lack of third-party rating standard for the project.

His point:

Like this story, but you have to be tougher in your commentary. Not only is LEED not mentioned, thus no third-party accountability, but CEC did not require it as a condition of the grant, going against a clear requirement for all new state buildings. Also, there are no clear sustainability objectives: e.g., housing to use no more than 5 kWh/sq.ft./year for heating, cooling, hot water and lighting, no more than 50 gals/capita/day water, 100% use of certified wood, no use of PVC, etc. Without these touchstones/benchmarks, the so-called “sustainable design” is not ground-breaking at all, just a grab bag of technologies and design approaches.

I gotta admit: Jerry’s making a big point. It is true that not even the most minimum standard for energy and water saving guidelines were agreed for the project, despite it being a deal controlled and co-sponsored by the University of California (sponsorship from ground lessor relationship). Adding to that, the project received funding from the California Energy Commission, a big proponent of green building in general.

Here at Galley Eco Capital, we’re aware of several large developments in California that have gone through an extensive environmental review and entitlement process taking many years. The sustainability requirements that they were required to adhere to were baked into the deal years ago, somewhere during the process.

Should the developer feel compelled to achieve LEED-certification anyway?  I know that we USGBC supporters would want them to do so.

They finally achieve entitlements now, years later, during a new era that expects more vigorous, sustainable land use, transportation, environmental and building policy. I am not 100% sure about whether this is the case for West Village, but it fits the fact pattern.

Other developments, such as the Catellus Mission Bay project here in San Francisco, encountered a similar situation with their entitlements. In Mission Bay’s case, the master developer did not have to require LEED-certification from vertical developers, but some — Alexandria and McCarthy Cook, for example — built buildings to LEED-Silver, anyway.

In their case, these vertical developers needed LEED-certification from a marketability standpoint, to remain competitive with UC San Francisco or the large biotech and pharma companies on the prowl for new space. The West Village developers are marketing the units at below market prices, so assuming the pent up demand remains strong, they will not face any marketing risk associated with the fact that their product is essentially “self-certified”. Here the real estate story could trump the broader trend towards going green.

Your turn: What do you think?

• Should we be harder on the West Villages of the world, who are getting grant funding for “research” even as they avoid adhering to the most minimal third-party certification?
• Are we not hard enough?
• Are their efforts really just a ‘grab bag of technologies and design practices like Jerry says?

Please send me (and Jerry) your point of view. I will compile all the messages and share with those who respond.

We like this kind of issue here on Our Green Journey, because we want an authentic discussion first amongst finance and investment professionals — no fluff. That’s the only way that we are all going to create better, more sustainable results for our communities.

So tell it like you really see it. Your input would be very much appreciated.

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