Green development – and by association, green lending – is so new, it is little wonder it can be hard for the industry to reach a consensus. Is the US Green Building Council the de facto standards developer in this space, or should developers look to other standard setters as well? Will more cities adopt green building codes, or will it just be limited to the two coasts? And more recently, are lenders willing to cut a deal on a green building, or does their underwriting ignore the case for ROI?There is a school of thought [see "Industry Waits for Green MBS" on this page] that has found that lenders do not price the ROI for green development into their debt and equity products. Indeed, one attorney tells GlobeSt.com that green financing is, instead, priced at a risk premium because the technology is unproven.Here to make the case otherwise is Alice Cook, director of sustainability of New York City-based Time Equities Inc. She is an environmental engineer by training and is heading up the company’s sustainable design department. Cook’s experiences thus far? Lenders are neutral, and in some cases, a green building is a positive in landing finance.
GlobeSt.com: Tell me about your experiences with construction costs for a green project.
Cook: On large construction projects, perhaps surprisingly, if the project is green it is not a big concern. A bank would want to see roughly where [the additional costs] fall in the budget. But we are finding it to be not so much a premium as an item that rolls into the budget.
GlobeSt.com: What about for smaller-sized loans?
Cook: Most of our projects are large, so I can’t speak to that. But I have observed more scrutiny in smaller loans. But even this does not appear to be a deal-breaker. A developer may need to provide more back-up about the payback, the ROI, is my understanding.
GlobeSt.com: Are there any signs or developments in the industry you can point to as reason to hope financing might ease for this particular product?
Cook: Yes, the Clinton Climate Initiative is working to establish more creative financing options. What it is doing is very exciting. (Rolled out last June, the CCI is, among other measures, partnering with ABN AMRO, Citi, Deutsche Bank, JPMorgan Chase and UBS, which have each committed $1 billion to finance energy-efficient upgrades in 16 participating cities https://www.globest.com/news/934_934/more/161886-1.html).
GlobeSt.com: Do you think the CCI has positively influenced lenders?Cook: It’s hard to say. A lot of what the CCI hopes to realize is still very much in the works and the end goal may seem hazy to some. But there is movement and willingness on the part of lenders, from my vantage point in the market anyway, to create something that works.