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CERTIFICATEPROGRAM

Developed by:

With generous support from:

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ENERGY TECHNOOG!E"#ND RE# E"T#TE "TR#TEGY

CO$R"E !N"TR$CTOR: Honey BerkTechnology Specialist, CUNY Building Performance La

CUNY !nstitute "or Uran Systems, City College #f Ne$ York

CO$R"E %

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RE# E"T#TE "TR#TEGY #ND

ENERGY DEC!"!ON": P%&T '

WEE& %

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WEE& %: L(%&N!N) #B*(CT!+(S

Describe the diferences between operational andspeculative real estate value

Explain what the term energy eciency means in thecontext o this course

Name three actors that support the business case orincreased value through energy eciencyimprovements

Illustrate how cash ows through a real estate asset

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WEE& %: RE#D!NG"

The Real Estate Game, Poorvu !illiam "# $%arvard&'D(#

)hapter *+ ,he &ame

)hapter -+ .sing Numbers in /eal Estate

0Investment /eturns rom /esponsible PropertyInvestments1 Pivo 2 3isher $-445(#

0&reen Noise or &reen 6alue71 3uerst 2 8c9llister$-4**(#

0:ease;

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1. Cash Flow: Properties withstrong >nancial perormanceand higher net operatingincomes $N?I( generally havea higher value

2. Capital Appreciation:

Properties in strong mar@etsand with strong mar@etpositions can increase invalue over time

Discussion

/eview the AEP Portfolio

#)hoose two properties anddiscuss the value o each withregard to cash ow capitalappreciation#

HOW !" '#$E RE#!(ED !N RE# E"T#TE)

!mage credit assimo Catarinella, -ia .ikimedia Commons/

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 ,he term ener! conser"ation #easure $ECM% has

been used in slightly diferent ways in various contexts# 3or

9EP we de>ne an energy conservation measure as+

&The in"est#ent o' resources in e(uip#ent)

#aterials) or practices 'or the purpose o'

achie"in re*uce* ener! consu#ption.+

WH#T DO WE *E#N

+Y ENERGY CON"ER'#T!ON *E#"$RE")

!mage credit Tony Boon, -ia .ikimedia Commons/

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HOW DO ENERGY CON"ER'#T!ON *E#"$RE"

#DD '#$E)

Operational ,alue-FinancialPer'or#ance

*# /educe energy costsAofset increases

-# /educe maintenance expenses

B# Increase net operating income $N?I(

peculati"e ,alue-Mar/etPer'or#ance

C# .pgrade building uality

# Increase tenant retention and rentpremium

F# 9ddress mar@et demand or

sustainable space

G# 9dvance sustainability goals 2positively impact companyHsreputation

# Improve employee productivity

!mage credit "istarol, -ia .ikimedia Commons/

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Reulator! Co#pliance

*# 3acilitate compliance with a growing patchwor@ oederal state 2 local statutes regulations andordinances

-# Position the property rom ederal state 2 local

incentives and tax credits or energy;ecient buildings

En"iron#ental Footprints

B# /educed use o nonrenewable energy resources

C# :owered organiJational carbon outputs

HOW DO ENERGY CON"ER'#T!ON *E#"$RE"

#DD '#$E)

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E0ERG TAR properties ha"e:

-#GK higher N?I

#-K higher rents

*#BK higher occupancy rates

*-#5K lower per s# t# energyexpenses

*4K sales price premium

ith #ore 3oor area an* ener!

use than an! other 4uil*in t!pe)

o5ce 4uil*ins o6er reat

potential 'or positi"e i#pact.

Discussion

Draw on your

experience+ %ave you

seen these @inds o

results in your

company portolio7

%ow about in other

properties across

your state or

metropolitan region7

WH#T !" THE ECONO*!C C#"E ,OR EC*")

Sources0 '/ !n-estment &eturns from &esponsile Property !n-estments0 (nergy (fficient, Transit1oriented and Uran

&egeneration #ffice Properties in the US from '22314556, Pi-o 7 "ischer, #ctoer 4553

4/ "uerst, "ran8 and c%llister, Patrick 9)reen Noise or )reen +alue: easuring the Price (ffects of (n-ironmental Certificationin Commercial Buildings,; School of &eal (state and Planning, Henley Business School, %pril 4

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E7ercise

.sing a property rom the AEP Portfolio calculate

the net operating income

$N?I( using the Excel

cash ow model# 'ee how

N?I changes when you+

*(6ary energy costs andsources

-(9dLust or net vs#

grossAhybrid leases

B(8odiy other

assumptions#

HOW DOE" C#"H ,OW THRO$GH

# RE# E"T#TE #""ET)

Real Estate Income:

Total 8ase Rent 9Escalations ,acanc! Allowance ;

Inco#e

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E7ercise

.sing a property rom

the AEP Portfoliocalculate the netoperating income$N?I( using the Excelcash ow model# 'eehow N?I changeswhen you+

*( 6ary energy costsand sources

-( 9dLust or net vs#grossAhybrid leases

B( 8odiy otherassumptions#

Re"enueE7penses

= ?perating expenditures $?PEM(= )apital expenditures $)9PEM(=  ,ax liabilities= 3ines or ees

Inco#e 9 Re"enue E7penses ;0OI

$0et Operatin Inco#e%

HOW DOE" C#"H ,OW THRO$GH

# RE# E"T#TE #""ET)

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HOW DO ENERGY CO"T" ,!T !NTO

+$!D!NG C#"H ,OW)

Ener! CostConsi*erations

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WEE& %: !N1CL%SS (>(&C!S(S

)hoose at least two properties rom the 9EP Portolio andcalculate their net operating incomes $N?I( using the attachedExcel document# $,he spreadsheet is embedded with awor@able cash ow model#(

Next experiment with variations in the >gures that you use as

the basis or calculation $e#g# energy costs water costsreplacement reserves etc#( and observe how N?I changes withvariations in your assumptions# !hich items might be reducedwith ew negative conseuences7 %ow might doing so afectthe buildings pro>tability7

!rite up your observations and submit your write;up $as a!ord document( and the saved Excel spreadsheets or bothproperties through the )ourse 8odule below#

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WEE& %: H#(.#&?

In *;- pages consider 3uerst 2 8c9llisters Lournal articleO&reen Noise or &reen 6alue7O as well as your readings romPoorvus The Real Estate Game#

= !hat does the research say about green real estate7 Isevidence o a price premium persuasive7

= !hat are two @ey added expenses associated with thegreen certi>cation o a property7

= 9re some certi>cation ramewor@s more valuable thanothers7 !hat actors may be at issue7

= %ow might green real estate >t into Othe gameO that

Poorvu describes in the >rst chapter o his boo@7