Economic Realities for Sustainable Real Estate
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Economic Realities for Sustainable Real Estate. 34 th Annual Real Estate & Economics Symposium Fisher Center for Real Estate & Urban Economics University of California at Berkeley. Green Retrofit Lending. Enterprise Overview.

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Economic realities for sustainable real estate

Economic Realities for Sustainable Real Estate

34th Annual Real Estate & Economics Symposium

Fisher Center for Real Estate & Urban Economics

University of California at Berkeley

Green Retrofit Lending


Enterprise overview

Enterprise Overview

Our mission is to create opportunity for low- and moderate-income

people through fit, affordable housing and diverse, thriving

communities

Since 1982, Enterprise has invested more than $11 billion to build or

preserve more than 300,000 homes across the United States

We are a leading provider of financial and intellectual capital for

affordable housing development

Environmental sustainability is embedded in our mission and will

ultimately infuse all aspects of Enterprise’s activities and operations


Retrofit process

Retrofit Process

Review Building Portfolio

Select Building to Receive Energy Audit

Choose Energy Auditor

Perform Building Audits

Review Audit Results, and Select Upgrades

Cost and Bid Out Improvements

Finalize Funding / Financial Package

Install Improvements & Monitoring System

Verify Installation

Train residents and maintenance staff

Monitor savings and health improvements

Make Adjustments (As Necessary)


Economic realities for sustainable real estate

ENERGY SAVINGS, WHAT SAVINGS?

  • Audit Findings from 32 Buildings:

  • From the Bay Area (19 buildings) and LA (13 buildings)

  • Master metered (17) and Individually metered (15)

  • Low rise (10) and High rise (22)

  • Total 2,227 units

  • Audit Findings from 32 Buildings:

  • From the Bay Area (19 buildings) and LA (13 buildings)

  • Master metered (17) and Individually metered (15)

  • Low rise (10) and High rise (22)

  • Total 2,227 units


Economic realities for sustainable real estate

AUDIT FINDINGS

  • Reduction in energy costs over existing conditions:

  • Utility savings* in master metered buildings ranged from a low of 10% to a high of 47%; average = 26%

  • Savings in buildings with a combination of master and individually metered utilities ranged from 19% to 45%; average = 28%

  • Per unit savings averaged at $270 per unit per year

    * Gas, electric & water


Economic realities for sustainable real estate

WHERE DID THE SAVINGS COME FROM?

  • Efficiency Measures that resulted in the highest Savings to Investment Ratio:

    • Domestic Hot Water

    • Interior Lighting

    • Thermostats

    • Exit Lights

    • Low Flow Toilets

    • Heating boiler

    • Air Handling Units

  • Retrofit cost per unit – ranged from < $1,000 / unit to a

  • high of $11,000 / unit; average = $5,000 / unit


Economic realities for sustainable real estate

The Bay Area Multifamily Fund (BAM Fund)

  • An innovative effort to improve energy and water efficiency in older affordable multifamily buildings

  • Provides free energy audit, technical support, and favorably termed debt.

  • Leverages other resources

  • Located in nine county Bay Area


Economic realities for sustainable real estate

GOALS of the BAM Fund

  • Improve property cash flow

  • Improve health of buildings and residents

  • Reduce greenhouse gas emissions

  • Link to green jobs programs

  • Enable retrofits to occur more quickly than a full rehab

  • Prove the concept that energy savings can be projected with accuracy and monetized to drive debt that can be raised from the capital market.


Economic realities for sustainable real estate

BAM Fund Loan Terms

  • Interest Rate5%

  • Loan Term10 years

  • Debt Coverage Ratio 1.15 – 1.25

  • Security/Collateralunsecured; flexible guaranty

  • Repayment Sourceamortized monthly payments

Loans repaid with savings achieved as a result of the energy and water efficiency improvements


Economic realities for sustainable real estate

Projected Energy Savings and Debt Service Calculations

EXAMPLE #1: Oakland, 98 units of family housing

Historic mid-rise building

COST OF IMPROVEMENTS: $358,182 ($3,654/unit)

ENERGY SAVINGS: $13,327/year

DEBT LOAD:$83,770

Projected Energy Savings Over

Current Use: 17% (includes water)

Exhaust Fan Testing


Economic realities for sustainable real estate

Proposed Financing Scenario

DEBT$ 83,770

Weatherization$ 142,472

CA Solar Thermal $ 50,000

Rebate Program

City Housing Funds $ 81,939

$ 358,182


Economic realities for sustainable real estate

Example #1 Project Budget Scenario


Learnings to date

Learnings to Date

  • Energy savings may not be adequate to support the level of debt desired

  • Owners are wary of borrowing based on “projected” energy savings

  • The energy audit process is complex….need to be clear about assumptions being inputted into the energy model, and the outputs desired

  • Monitoring utility data pre and post retrofit will be extremely important to proving that energy savings can be projected and monetized to leverage capital


Economic realities for sustainable real estate

www.enterprisecommunity.org


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