Page 146 - The Green Building Bottom Line The Real Cost of Sustainable Building

GREEN IS THE COLOR OF MONEY 125

erty for the ensuing five years to come. This resulted in some interesting discussions
with the potential financing entities, the financial broker, and us. It was very inspiring
as first the broker “got it” and finally so did the lenders. Everybody recognized the value
of the future enhanced cash flows. True financial analysts don’t simply consider the
first year’s net operating result to determine the value of the properties. They will also
consider the projected cash flows in the years to come. In this case, the improved future
cash flows enabled the lenders to recognize a greater value of the properties.
Since lenders provide loans on a loan-to-value basis, this enabled us to extract a lot
more of our capital than we had originally anticipated. We were looking for $60 mil-
lion in refinancing and ended up with $72 million. Some would say that this is due to
being in the market at the right time with the right product. Maybe, but I sincerely
believe that a good part of the additional recognized value of the assets was due to the
projected improved cash flows resulting from our investment in green. We had real-
ized a 20 percent value enhancement to our portfolio through our refinancing efforts,
amounting to $15 million in value creation (see Table 4.5). Even if only a quarter of
that value increase was owing to the green aspects of our sustainable portfolio, the
value enhancement would have amounted to almost $4 million, not bad for those early
years of climbing the learning curve of sustainable development.

ATTRACTING ADDITIONAL DEVELOPMENT WORK
In Chapter 1, we considered the additional business development work that began to
come our way in light of our sustainable ethos. As noted in this earlier chapter, our com-
pany fields quite a number of third-party development projects, selecting only a few
that we feel fit with our capabilities, interest, and expectations of partner alignment. It is
our feeling that part of the reason others approach us is owing to our values-centric orien-
tation. But part of the reason also is owing simply to the fact that we have experience
developing green projects. It is reasonable to expect that other green real estate compa-
nies will also see additional business development work as the market demand for green
expands (but the current supply of those with actual experience is still rather limited).
How much additional business development should a company expect? The
answer depends a great deal on the size of one’s company, the capacity the company

TABLE 4.5 VALUE ENHANCEMENT OF MELAVER, INC.’S SUSTAINABLE
PORTFOLIO

BUDGETED ACTUAL VARIANCE
ASSUMPTIONS PERFORMANCE VARIANCE ($) (%)

Value of sustainable $75,000,000 $90,000,000 $15,000,000 20%
portfolio
Loan-to-value 80% 80%
Financing available $60,000,000 $72,000,000 $12,000,000 20%