Page 145 - The Green Building Bottom Line The Real Cost of Sustainable Building

124 CHAPTER 4

in 2006 as we sought to refinance a portfolio of six sustainable properties (retail, office,
and residential in four markets in the Southeast). Our first approach was, however,
clumsy and taught us the importance of correctly framing our pitch to the financial
community: less in terms of our passion for developing a different way, more in terms
of long-term value enhancement of the asset.
It was the spring of 2006. Martin (our CEO), Colin (our COO), and I put on our
dark suits and fancy ties and traveled to New York to visit several banking institutions.
At that time, our naïve if heartfelt pitch was along the lines of, “Hey, we have a port-
folio of cool green properties for you to finance....” And they were cool: an early
LEED office/retail building listed on the National Historic Register, the first LEED
retail shopping center in the country, a mixed-use office/residential rehab of a 19th-
century mill that runs entirely off hydroelectric power and sells the excess power back
to the grid, an office building that became one of very few in the country to receive a
LEED for Existing Buildings certification. The reaction from these prestigious banks
was a mix of interest and caution. Mostly, they were skeptical about this green stuff.
One very reputable bank essentially said, “Gee, thanks for coming guys, but please
take the elevator and get off on the second floor. Go see our community banking team.
I’m sure they could give you a $10,000 grant or so...” This was embarrassing, as we
were actually trying to refinance a sizeable portfolio of properties with an overall
occupancy rate of close to 95 percent and a high degree of credit-worthy tenants, pro-
viding solid returns in line with the markets in which they were located.
We realized we were not speaking the right language. At that time, green developers still
conveyed a certain stereotypical image among financiers—tree-hugging, Birkenstock-
wearing individuals willing to build something that cost too much as part of a goofy
fad (although I must say the financial industry is now quickly catching up on the ben-
efits of building sustainably). We realized that we needed to reframe our work as stan-
dard fare enhanced by green attributes, not as an exotic offering the financial community
might have a hard time understanding.
And so we reframed the pitch. We started with the validity of the real estate, the
types of properties, the prime locations, the quality of the tenants, the rent roll, and
the appeal and look of the properties. Then, once the key values of our properties had
been determined, we noted “Oh, and by the way, these properties happen to be high-
performing buildings with better energy efficiency, and are eco-friendly.”
Bingo...doors started to open! In the financial and insurance sectors, green construc-
tion needs to be framed in terms of its high performance, reduced exposure to energy
cost volatility, and longer-term retention of value than its environmental friendliness
(or the values-centric orientation of a company). Once the value of the real estate was
established using standard evaluative criteria, the value of green was seen as a very
important add-on. It not only generated additional value but also provided a differ-
entiation factor.
Once doors started to open, there was a keen interest in refinancing this portfolio.
We worked on the future cash flow projections, taking into account the proven savings
that had been realized over the previous year or so, thanks to the energy efficiency and
water saving elements we’d put in place. We worked on every cash flow for every prop-