Lenders and Real Estate Investors routinely get Property Condition Reports on assets to assess the building condition and current and future costs of building maintenance, but Property Condition Reports can reveal more than cost estimates – they can identify many cost-savings measures.
A Green Property Condition Report (PCR), also known as a Green Physical Needs Assessment or Green Property Condition Assessment, offers the user advice on how to optimally run the asset that he or she is buying.
What is a Green Property Condition Report?
A Green Property Condition Report essentially combines a standard PCR and a streamlined Energy Audit to provide in-depth information on the building condition and increasing operational efficiency. For example, instead of simply identifying when equipment reaches its End of Useful Life, the Green PCR takes the approach of identifying when equipment costs more to run than makes sense, and looks at what the return on investment would be to replace it with new, energy efficient equipment – essentially asking “At what point does the energy saving associated with replacing the equipment meets the client’s ROI requirement?”
Some of the Energy Efficiency Measures (or “EEMs”) looked for during an Energy Audit include lighting upgrades, HVAC system maintenance or upgrades, building automation and controls (i.e. lighting and air conditioning at set levels and on a timer), office equipment energy, water and trash conservation, building envelope improvements or building retrocommissioning. Of course the recommendations will vary from building to building and depend on the client’s goals, but these upgrades can result in very measurable and substantial ROI in the form of reduced operating costs and increased building value. These elements can all be incorporated into the Green Property Condition Report.
Green PCRs also may also look at water-saving measures, renewable energy use, and potential recycled or otherwise “green” materials for renovations or additions. These items can increase operational efficiency, but “Green Labeled” buildings can also offer increased marketability, potential rent increases, increases in absorption and decreases in vacancy.
Green PCRs are highly customizable based on the client’s capital investment goals.
Financial Incentives for Conducting Green Property Condition Reports
Agencies including the Small Business Administration (SBA), Fannie Mae and Housing and Urban Development (HUD) offer financial incentives for doing Green PCRs or implementing the recommended EEMs.
Borrowers can increase their SBA 504 loan amount by up to $4 million by implementing projects that meet the SBA 504 new public policy goals of reducing energy consumption by 10% or generating renewable energy.
HUD’s Federal Housing Administration (FHA) and Fannie Mae recently launched a new Green Refinance Plus program to allow owners of existing affordable rental housing properties to refinance into new mortgages that include funding for energy- and water-saving upgrades, along with other needed property renovations. Under this program, borrowers must obtain a Green Physical Needs Assessment to identify property improvements that will reduce energy use and operating costs.
Additionally, many cities and states are mandating that building owners disclose their building’s energy efficiency or consumption. This energy disclosure information can also be identified during a Green PCA and/or an energy benchmarking study. Tomorrow one of Partner’s energy experts, Jason Mandler, will begin a blog series giving a rundown of the current energy disclosure requirements around the nation and what they entail.
By identifying opportunities to reduce building operating costs and increase building value, a Green PCR can point out the “green” you might otherwise miss.