Green Energy Panel at Midwest Lenders Conference in Chicago, IL

1. MIDWEST LENDERS CONFERENCE GREEN ENERGY PANEL Chicago, IL – September 28, 2017 Moderator: Rick Orf Deputy Chief Underwriter Berkadia Panelists: Jason Happe Director of Energy & Sustainability EBI Consulting David Wilderman Senior Production Specialist Tech. Division – Office of MF Housing Department of HUD – Headquarters Stephen Evanko Managing Director – Energy & Sustainability Dominion Due Diligence

4. Green MIP requires Green Building Certification, Energy Efficient design and commitment to benchmark the property 221(d)(4) NC or Gut Rehab example Design Construction Occupancy Green Building Certification Award NGBS Consulting NGBS Verification • Green Building Commitments • Form HUD-92013-D • Green Rider Green Recognition Energy Design Modeling (SEDI) Energy Performance 15 months Ongoing Data Collection Annual Energy Star Benchmark (SEP) Energy Data Acquisition Plan Closing * Non-conforming CAP

5. Projects must select and obtain a green building certification HUD approved options for New Construction Considerations for green building certifications • Cost and feasibility • Local regional incentives • Architect and developer experience • Marketability National Regional Niche Super Green

6. Statement of Energy Design Intent (SEDI) = Energy Benchmark of the Building/Property Design • Projection of future energy use, post completion of construction or energy retrofit • Requires energy modeling by experienced, accredited professionals using approved modeling tools • Score is only as accurate as the data input, including defined design parameters and proficiency and experience of the energy modeler

7. Project teams can leverage the energy modeling process to identify the most cost-effective approaches to achieve a SEDI score of 75+ • Case Study: • 18 low-rise garden style buildings • 380 dwelling units • South Region (~3,200 HDD, ~900 CDD)

8. Projects must also produce an Energy Data Collection Plan and commit to annual Energy Star Portfolio Manager benchmarking (SEP) Data Plan Requirements Interim Sampling Routine • Must demonstrate the owner’s understanding of utility data needs, management procedures for obtaining data, and technical solutions • Detail periodic steps and technology to obtain, organize, store and report data to the EPA Portfolio Manager system • Detail the roles & requirements of each utility provider at a specific property • Include details regarding • Tenant cooperation • Impact of turnover • Potential tenant resistance • If whole building data is available, it must be used • If not available then utility data from 25% of units must be collected. Data sources must be randomly selected, provided the following are proportionately represented by the sample set: • Unit types • Buildings • Each size (s.f.) and direction (N, E, S, W) of unit exterior wall elevation • Each building floor or level • Each materially different HVAC package • A properly selected sample may be repeated year to year for annual HUD SEP compliance Source: “Green MIP Reduction The Destination, and the Way to Get There” HUD-FHA MF Production Webinar, 8/25/2016 Note: This sampling plan is not compliant with EPA EnergyStar building certification

9. Green MIP requirements at closing commit the project to obtain the green certification and to conduct annual energy benchmarking • Form HUD-92013-D: Owner’s Certification and Acknowledgement for Program Obligation For Broadly Affordable, Affordable, Green/Energy Efficient Multifamily Housing Mortgage Insurance Premiums • Statement of Energy Design Intent (SEDI) showing EPA Portfolio Manager score or 75 or higher • Signed by qualified professional preparing the report • Evidence of green building certification in drawings and schedules • Note: NGBS, LEED, etc on the construction drawings title page • Green Building Scoring spreadsheet • Required milestones for the green building standard incorporated into the construction schedule (e.g. onsite verification) • Green Rider: Borrower’s Obligation to Maintain Project’s Energy Performance as Consideration for MIP Reduction • (Optional): Letter of Attestation from the Green Consultants that the project is on track to meet the green requirements. Should include the Green Consultant’s credentials and experience • Energy Data Acquisition Plan demonstrates the owner’s plan to obtain energy data and complete annual Statement of Energy Performance (SEP) benchmarking in EPA Portfolio Manager

10. Experienced, accredited modelers will ensure robust and appropriately conservative modeling Example of how differences in modeling can impact property energy use Source: Analysis to demonstrate some parameters and modeling assumptions can affect an energy forecast. To avoid cherry-picking extremes this is based on an above-code Multifamily property in Virginia which represents a moderate climate

11. The hardest part is securing the energy data Data Collection Options Master Metered Utilities Tenant Paid Utilities Request Whole-Building Aggregated Data from Utilities In limited regions, utilities will provide the whole-building aggregated energy data without requiring individual releases Limited availability Secure Tenant Authorization/Release Tenants sign release form allowing the owners to request energy usage from the utility (req. @ least 25% sample of representative units) Time consuming and challenging to secure releases Install Energy Data Loggers Install digital, remote reporting master metering data logger upstream of tenant meters to capture all usage Modest upfront cost Collect monthly utility bills for every meter associated with the property Lenders should request this energy data ASAP Do not wait until ordering CNA!

12. The MAP guide specifies the required review and underwriting duties for the Lender Source: 2016 MAP Guide Appendix 5 Section G

13. SEP and Energy Audit Professional Qualifications • SEP and ASHRAE Level II Energy Audits must be prepared by a qualified professional, such as: Auditors must have a minimum of 3 years work experience evaluating multifamily

14. Case Study #1 • Existing building Refinance MAP 223(F) • 3 Stories Garden Style with 480 units built in 2014 • Common Space (Clubhouse, Pool, Gym) • Individual Meters with a Tenant Landlord Agreement • Energy Star Score 65 • ASHRAE Energy Audit completed ECMs identified • Time of day lock out schedule for common spaces • Minimum and maximum apartment setpoints • Reduction of site lighting • Changing HW heater setpoint and placing on a schedule

15. Case Study #1 Cont. • Benefit to Owner • Achieved MIP Reduction • Reduced Maintenance Costs for building operation • Approximate saving 16% of operations cost • Extended life of HVAC and Plumbing equipment on average by 2 years • Was able to use energy success to market building with an Energy Star score to tenants

16. Case Study #2 • Existing Building Refinance with a Green Certification • MAP 223(A7) • 5 Stories Garden Style with 775 units built in 2012 • Mixed Use space (Retail, Pool, Gym) • Individual Meters • Was not able to get 100% of utility bills from the Electric Provider • Energy Star Score of 79 • 25% sample of utility bills accepted thru Energy Star • Must be representatively sampled: • Unit types • Buildings • Each size (sq ft) and direction (N,S,E,W) of unit exterior wall • Each building floor or level • Each materially different HVAC package

17. Case Study #3 • Existing Building Refinance • 3 Stories Garden style with 310 units • Common Space (Clubhouse, Pool, Gym) • Individual Meters (Currently) • Was able to get 100% of utility bills from utility provider • Parking Deck • Benchmark score of 92 without all the tenant information but 100% of common space. • ASHRAE Energy Audit completed ECMs identified • Time of day lock out schedule for common spaces • Minimum and maximum apartment setpoints • Reduction of site lighting • Balanced building to reduce humidity issues in Common Areas • Installed a Meter for future reporting

18. Case Study #3 Cont. • Benefit to Owner • Achieved MIP Reduction • Reduced Maintenance Costs for building operation • Approximate saving 14% of operations cost • Extended life of HVAC and Plumbing equipment on average by 4 years • Was able to use energy success to market building with an Energy Star score to tenants

19. Lender Responsibility • Engage early for Benchmark and Energy Star Certification • Accurate Property Description and Details • Provide Borrower utility data for 12 Months • Electric, Gas, Natural Gas, Heating Oil, etc • Complete info no older than last bill of 120 days • Must have actual usage not an average • Assist in site visit coordination • If Energy Audit is needed • Engage Quickly • Assist in site visit coordination • Schedule call with owner and EBI to discuss ECMs • Provide a Data Collection Plan to HUD

20. Common Pitfalls Refi 223f Refi Common Mistakes • Insufficient/Wrong Energy Data • Incorrect Property Descriptions • Number Stories • Building Usage • Building Type • Gross Sqft • Mixed Use vs Common Space • Retail Centers • Gyms • Restaurants • Stores • Average Data vs Actual Usage Data • Cost instead of Usage • Wrong Information provided by utilities • Address • Usage