"This is something the market wants and I am willing to bet that it will happen by the end of the year," Mike Italiano, head of the non profit Capital Markets Partnership, tells GlobeSt.com. We spoke to Italiano the day after he announced several new investment mechanisms for green development at the New York Stock Exchange.

GlobeSt.com: First, tell me about the green CMBS. Why did it fail and why do you think that it will come to market eventually.

Italiano: Four months ago we almost had one. We had the approval of all the financial institutions. It was derailed because of internal politicking. The market wants a transaction like this. These building have a higher value collateral and they outperform their peers in terms of rental rates and occupancy. Also energy costs are going to keep rising substantially over the next ten years, making these building even more attractive.

GlobeSt.com: How would such a deal be structured?

Italiano: Not that much differently than a typical CMBS. The main difference is that the bond would be backed by mortgages scored with our own underwriting standard. It would make the most sense to use Fannie and Freddie paper. Investment banks can participate using credit wraps. There are a lot of ways the market can participate.

GlobeSt.com: You mentioned Fannie and Freddie. That means multifamily, of course. I didn't realize there were enough LEED rated or green multifamily properties for even one securitization.

Italiano: Our underwriting allows for other sustainable attributes. We have an initial stock of 800,000 homes that would qualify for securitization and 100,000 commercial buildings.

GlobeSt.com: Outside of its community benefits, easier and cheaper financing has been the holy grail for sustainable development. It never seems to happen though. Have we finally reached that point?

Italiano: Yes, I think we are there. We just released a study that shows sustainable building investment is more profitable and less risky. This was a survey of 25 financial institutions that hold $3.3 trillion in assets. So I do believe that green buildings are finding financing and refinancing easier. We have started, for example, a green building refinancing program that is in the pilot stage. Also Congresswoman Caroline Maloney, chair of the current Joint Economic Committee, is planning on holding hearings on green building financing this fall.

GlobeSt.com. There were other sources of finance you introduced at your press conference.

Italiano: Yes, those are good examples as well. There are about five separate funds launching right now that are focusing on green building. The Community Reinvestment Fund USA, for example, is investing in LEED and Energy Star buildings in cities that qualify for New Market Tax Credits. The e3bank provides a cheaper cost of capital for these buildings. The Renewal2 Investment Fund is another example of a fund investing in LEED and Energy Star buildings, but it is not tied to a particular location.

Instant Insights /

Capital Markets Partnership's Mike Italiano

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