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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   July 2013

A Display of Sustainability

Explain the benefits of green construction to borrowers and lenders

A Display of Sustainability

Although not embraced as quickly as some might have hoped for, green construction is gaining traction across various property types — from office properties to community buildings. Several factors have contributed to its popularity, including new technologies that slowly have helped reduce costs. In addition, builders have come to recognize the value of potential savings and available tax credits, as well as the impact that the desirability factor can have on a commercial  property’s appeal.

With this growing interest, commercial mortgage brokers should be on the lookout for the business opportunities associated with this trend. These opportunities can be in sectors that are not the most common for mortgage brokers. For example, attentiontogreen-buildingpracticesisbeing paid by those responsible for building cultural organizations and other community-based constructions. Unlike traditional office spaces, projects like museums, schools and other organizations that foster community interaction hold more possibility to easily integrate green practices because their designs and purposes offer more flexibility to architects and builders

For developers of these projects, the most formal way to demonstrate a commitment to green-building practices is by seeking the Leadership in Energy and Environmental Design (LEED) certification. A voluntary, consensus-based, market-driven program, LEED provides third-party verification of green buildings, according to the U.S. Green Building Council (USGBC). It also provides building owners and operators with “a framework for identifying and implementing practical and measurable green building design, construction, operations and maintenance solutions.

Benefits

Because LEED certification is a voluntary process, organizations that opt to follow through with this certification exhibit their commitment to the community, care for the world and overall leadership. LEED-certified projects also can benefit from publicity gained by inclusion in the USGBC’s directory of registered and certified projects. But these are not the only advantages of green building. Commercial mortgage brokers can bring to clients’ attention the many financial benefits to consider from LEED certification, including:

  • Competition: Green buildings are more attractive to buyers, tenants and investors. 
  • Fewer health concerns: Preparations for LEED certification minimize health hazards and can reduce the risk of health-related lawsuits.
  • Various incentives: LEED-certified construction and projects that implement green practices without seeking certification may qualify for tax rebates, tax credits, zoning allowances and many other incentives from city, state and federal organizations.

Many of these incentives are in place to reduce energy and water consumption, as well as limit carbon dioxide emissions. To understand the scope of this goal, simply look at a few of the staggering statistics from the U.S. Environmental Protection Agency(EPA). For instance, in the U.S., buildings account for: 36 percent of total energy use; 12 percent of total water consumption; 65 percent of total electricity consumption; and 30 percent of greenhouse gas emissions, according to  EPA figures.

Green buildings are designed to conserve energy and water, as well as reduce landfill waste and harmful greenhouse gas emissions. When these purposes are achieved, green construction generally reduces operating costs and increase asset value — two factors that are major indicators of property performance in lenders’ eyes.

Development issues

Although construction in itself may not fall within the scope of commercial mortgage brokers, their knowledge of what it takes to achieve a LEED certification can help them make more informed decisions about the properties involved in their deals.

Here are some construction aspects that your clients should consider when they are seeking LEED certification, particularly for properties like cultural organization facilities or other community-based structures.

  • Recycling opportunities: In an existing structure, if the whole structure or significant portions of it can be updated or reused, this allows for preserving and recycling materials and history.
  • Thermally efficient “skin” around the building: This can provide an added layer of insulation and high-performance windows.
  • Natural light: It should be used wherever possible but especially in gallery and studio spaces, which can help reduce energy costs and provide a beneficial environment conducive to creative activities.
  • Daylight dimming system: This can be used to supplement natural light with artificial light as required.
  • A photovoltaic array: Typically located on a roof, a photovoltaic array allows for a portion of a building’s energy to be generated from sunlight.
  • High-efficiency plumbing and mechanical equipment.
  • A naturalized ventilation system: This allows for the building to be cooled with outside air, when possible.
  • Recycled, local and low-emitting building materials: These should be used wherever possible.
  • Efficient landscape materials: These should utilize native plants and minimize runoff from storm water.

Construction companies

If your clients are looking for a construction company to partner with, they first should check if the company has an environmental-management policy. Within this policy, the company should commit to several practices, including:

  • They should be dedicated to minimizing their impact on the environment. The company also should ensure compliance with contract requirements, environmental laws and regulations.
  • They should manage the use of hazardous materials and products. The company should ensure that effective measures are in place to protect human health and the environment when such materials must be used, stored and disposed of. 
  • They should promote reduction, reusing and recycling in all activities.
  • They should ensure efficient use of materials and resources throughout jobsites (including water, electricity, raw materials and other resources).
  • They should be committed to the restoration and rehabilitation of all temporary construction areas. 
  • They should be focused on protecting wetlands, streams, rivers, lakes and coastal waters, as well as trees, vegetation, steep slopes and highly erodible soils.
  • They should integrate the consideration of environmental concerns and impacts into decisionmaking and activities.

Construction companies can demonstrate their commitment to such practices through periodic internal audits, policy reviews and corporate-culture education.

Communication

In green construction, it’s important that everyone is on the same page with regards to outcomes and expectations. For example, your clients may relay to general contractors that the project is planned to apply for LEED status. General contractors, inturn, should communicate that with the subcontractors because specific requirements must be met, and so on. In addition, understanding this information upfront permits more realistic budgeting, tracking, documenting and general due diligence. For example, construction sites should be kept clean and free from dust as much as possible. Energy-efficient mechanical equipment is also critical, and although expensive upfront, an eventual payout can be realized. Recycling of materials and buying products made from recycled materials should be planned and implemented. Given the level of documentation required for LEED certification, it may be necessary to work with outside consultants to keep track of these initiatives.

• • •

Whether a project gets LEED certification or simply implements green-building practices without applying for certification, green construction has a profound impact on the natural environment, economy and public health. It also offers many long-term financial benefits to developers, which commercial mortgage brokers should bring to the attention of borrowers and lenders alike.   


 
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