$1 billion in retrofit financing from Community Preservation Corporation

People always ask ‘where’s the beef’? when it comes to green finance.

Of course, they’re asking who’s making money available to develop or retrofit buildings to sustainable standards.

You should pay attention to the recent announcement from the Community Preservation Corporation (CPC), to bring $1 billion in energy efficiency retrofit financing to multifamily property owners in New York. This should provide a great energy efficiency financing model for others to duplicate.

The newly formed CPC Green Initiative aims to be an industry pacesetter by proving that seemingly disparate public and private entities can foster new and creative green finance solutions. According to Michael Lappin, CPC President:

“We anticipate financing retrofits for up to 15,000 apartments over the next few years. But to change the urban landscape we will also need to adjust the financing landscape.”

This program is notable because it includes participation by the great range of potential sustainable finance partners — an affordable housing lender, a GSE, pension funds, private lenders and utility companies.

Key financing components:

• $150MM in construction funds will be provided by the New York Building Revolving Fund for properties needing extensive renovation. That fund is backed by proceeds from Deutsche Bank, HSBC and other lenders.
• $300MM will come from New York pension funds.
• Freddie Mac will fund permanent loans for buildings not requiring the above construction loans.
• Freddie Mac has also committed to buy $500 million of loans from this program.

By directly incorporating efficiency retrofits into the loan process as well as requiring ongoing monitoring regimes through the loan life-cycle, we feel the CPC and its funding partners are taking the long-term holistic perspective that we believe is essential.

With a sizable partners including Freddie Mac, Deutsche Bank and the NY State Pension Fund, the CPC will need to fill a role that we find essential – being a strategic hub were investors and key stakeholders can find expertise and guidance.

This kind of pooled investment and lending commitment that relies on multiple layers of funding solutions is one that we are seeing on current projects. We think these kinds of well-designed and sufficiently capitalized partnerships will compliment local government funding.

We’re sure that we’ll see more structures like the CPC Green Initiative emerging on the market. Let us know if you are aware of any similar programs for commercial properties in your area.

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Will green finance ultimately be local?

What’s the best way to concentrate our money to fight climate change? At the national level? More subsidies for clean industries or incentives for individuals?

Today’s Green Inc blog post examines the idea that cities are the most likely agents for positive action against climate change, since the authors see “uncertain prospects for a global treaty in Copenhagen”, which means “that local communities will need to lead the way on climate change.”

The column’s authors pose the  idea that, “like politics, action on climate change is ultimately local”.

It is estimated that cities contribute somewhere between 30 and 41 percent of global greenhouse gas emissions. The estimate has a large range because no one is really certain of how to measure this particular statistic. Nevertheless, GHG emissions at even the lower end of that range makes cities key actors in reducing greenhouse gas emissions.

Nearly two years ago, we posted that cities would lead most positive progress on green building and climate change.

[Local governments] have become sustainability’s cowboys, driving their own resource, energy and climate change policies, since the federal government can not deliver a comprehensive enough solution that preserves their viability. Since real estate has been outed as the big consumer of city resources and energy services and the big contributor to regional carbon output, it is fair to say that investors will have to think about investment markets in terms of resource and energy sustainability in addition to classic real estate fundamentals so that they can remain relevant to their municipal partners.

As of this date, about 1,000 U.S. local governments have signed commitments reduce greenhouse gas emissions within their jurisdictions.

What could this mean for green finance? A lot, we believe.

We have just seen local governments flexing their muscle with a major share of U.S. stimulus funding going for local government initiatives for green buildings, energy efficiency retrofits, home weatherization and green jobs. Tax lien financing, a local government finance innovation, which is growing rapidly here in California, is catching on nationwide.

With banks still navigating a tough economy and not offering the kinds of products and amount of capital needed, there seems to be both need and opportunity for local governments to become primary suppliers and coordinators of the finance for sustainability.

If you agree with the Green Inc’s columnists’ analysis of the global climate change situation, they really don’t have much choice.

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• Photo credit: istockphoto/Daniel Schoenen - Solar Building.

Key events on energy efficiency finance and triple bottom line investing

Meet us at the the following events. We’ll be presenting about:

- energy efficiency financing

- responsible property investment metrics for high performance portfolios

- taking the green economy to the next level

In the weeks ahead, Lisa Michelle Galley will be featured at a number of key industry conferences. The topics covered by Lisa and other leading voices in the sustainable investment community will highlight the  latest trends and provide a valuable forum to learn about innovative solutions to some of the most pressing challenges facing the green building and finance sectors.

Presentation on Energy Efficiency Financing

GSMI -The Sustainable Buildings Series: Retrofits

October 21, 2009; 11:15am – 12pm, Mission Bay Conference Center at UCSF
Lisa will cover the key considerations for different types of energy efficiency financing.  From there she will talk about how owners can more effectively coordinate their energy efficiency financing efforts across their portfolios. Lisa will be co-presenting with Peter Liu of New Resource Bank.

Presentation on Metrics for High-Performance Portfolios

Responsible Property Investing Council: 2009 ULI Fall Meeting
November 04, 2009 – Joint session of RPI and Sustainable Development Councils
Moscone Center South, San Francisco
Along with co-presenters David Wood, of the Responsible Property Investment Center and  Jean Rogers of ARUP, Lisa will offer fresh insights and recommendations developed in a year long study of the development and application of  responsible property investing metrics on institutional real estate portfolios. Lisa and Jean will discuss how the real estate investment ‘system’ has been impacted by sustainability.

Taking the Green Economy to the next level

Sustainable Industries Economic Forum in San Francisco
November 19, 2009; 9:30am -10:15am
St. Regis Hotel, San Francisco
Lisa will join a panel of industry leaders including Paul Hawken, author and CEO of the Pax Engineering Group, to discuss some of the most challenging aspect of successfully implementing triple bottom line solutions and how we can take the green economy forward. The event will offer valuable perspective on growing strategic partnerships as a core aspect of sustainable business.

If you would like to meet us at any of these events, please email us info@galleyecocapital.com

News about future events is available through our website.

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Get plugged in:

• Sign up for our list on our green finance training page, to get info on upcoming workshops, which go deeper into the green business case.
• Do you like this post? We’d love to hear your comments and suggestions.
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• Photo credit: Flikr/manu chao by Michale.

3 ways monitoring building performance can help you innovate

While some property owners may look upon increasing building energy performance requirements as a burden, we think that early adaptation of your portfolio to these new regulations opens up opportunities to innovate within your platform.

As reported by The Real Estate Development Law Blog, Washington State’s SB 5854,  following the “lead” of USGBC’s Building Performance Initiative and California’s AB 1103, will (when passed) require the use of Energy Star Portfolio Manager as its benchmarking tool for calculation and reporting of building energy performance data to be provided to a prospective buyer, lessee or lender.

The promised benefit is more effective market transformation via reporting transparency on existing buildings. However, we also know about lots of frustration from owners, who find additional regulations for existing buildings to be burdensome.

But it doesn’t have to be that way.

In fact, early compliance with these new regulations might open up unique opportunities for property owners to get ahead of the pack in achieving competitive advantage for their firms.

How to create opportunities from compliance…

The September 2009 Harvard Business Review focuses on sustainability and innovation. In it, authors Nimudolu, Rangaswami and Prahalad lay out the typical phases companies go through to build a sustainability platform.  Interestingly, that process begins at the place where many portfolio owners are at now today – compliance with new regulation.

They argue that early adaptation of a property portfolio to comply with anticipated sustainability regulation opens up the potential for innovation in several ways:

1.    First mover advantage: First movers on compliance gain knowledge and time to experiment. Adopting emerging energy reporting compliance standards (whether binding or not) provides property owners critical time to develop solutions best suited to their portfolios and fosters genuine best practices.

2.    Lower overall costs of compliance: Conforming to the highest compliance standards allows for scale benefits across markets and better insulates diversified portfolios from changing legal regimes. Attempting to  create and manage different compliance approaches based on lowest local thresholds is costly and inefficient.

3.    Critical stakeholder development: Early adoption of the tougher building performance reporting standards sets the stage for better relationship building with city officials in the markets where the company operates. Property owners with building performance data in hand will become preferred partners of city officials because they are able to prove that they are the better partner than their competitors. This creates meaningful advantages in terms of future permitting and entitlement actions, as well as allowing those owners preferred status in helping the city adopt other emerging standards.

Embracing building energy reporting early across your portfolio can be a catalyst for innovation that spurs market leadership, enhancing asset value sooner and better than your competitors. Early adopters to emerging building performance measurement requirements will position their businesses to outpace the competition and secure deeper relationships with capital sources and policy makers.

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Get plugged in:

• Do you like this post? We’d love to hear your comments and suggestions.
• You can contact us to discuss or initiate a project here.
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• Photo credit: istockphoto.com: Dave Bolton/”Blue Glass”.

$2 Million Grant for Affordable Zero Energy Housing Village

Bold stimulus and green building plans associated with AB32 are moving from the drawing board to the construction site.

West Village Community Partnership received a $2 million grant from the California Energy Commission for the study and development of advanced energy strategies for a 220-acre, 4,000 student and faculty housing development for UC Davis. The grant award came under the CEC’s Public Interest Energy Research (PIER) Program for Renewable-Based Energy Secure Communities (RESCO).

The grant essentially funds a living laboratory type of study of different energy applications to be designed for and installed in the community.

The developer and UC Davis will be studying how to put together an optimal mix of renewable technologies for the project — including creative financing structures to overcome the first-cost barrier for ultra-efficient green design as well as documenting resident behaviour; whether they actually save or waste more energy in this type of development.  Since the project will be built in several phases, the developer will have a chance to improve each new phase’s energy delivery plans, based upon what is learned by studying prior phases.

I love the intersection of the real estate story with the AB32/2030 Challenge issues– they’re already putting together a mixed use addressing pent up demand in the student and faculty housing market in that area. UC Davis ground leases the land to the developer. His focus will be on getting the project financed, built and sold (and paying ground rent of some amount, of course). The project was reportedly already sustainably designed before the grant was awarded. Now grant money will pay for the advanced energy requirements and “study” (read: actually do) the creative financing.

We also point out that one word is missing from both the story and the project website:  “LEED”. As much as the sustainability of the development is being touted, there is no mention of the design guidelines adhering to any particular third-party rating system, like LEED.

And what about the sustainability objectives?

• Housing units are to be sold at below market prices to attract top talent and students to the University.
• On-site renewable power generation.
• Strong focus on alternative transportation: bicycling and biking will be preferred mode of transport to campus for residents.
• Community layout takes advantage of sun and natural breezes.
• Landscaping is integrated with storm-water systems to cleanse run-off and create habitat areas

The energy strategies to be included are path-breaking for a development of this size. Those to be included and studied with grant funding are:

• energy-efficiency measures in building design (passive and active)
• demand response
• distributed solar photovoltaic to create electricity from the sun
• distributed solar thermal on homes to pre-heat water
• biogas coupled with fuel cell to generate electricity
• advanced energy storage using modern battery techniques
• smartgrid technology to efficiently manage energy supplies

Photo credit: Flickr / Shazari - Eggheads

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