Jodi Summers = Industrial Real Estate

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CAN U FIND FINANCING FOR GREEN IMPROVEMENTS?

by Jodi Summers

Environmentally conscious real estate leases faster and at better terms than traditional buildings, yet it is extremely difficult for property owners to finance green upgrades. A recent McGraw-Hill survey concluded that building owners looking for finances to pay for energy retrofits for their properties are often are forced to rely on their personal resources rather than outside funding.

Granted, there are some options green loans, but the routes are not traditional. The government and utility companies are doing their share to facilitate green loans. Out of the box choices may include ESCO (energy service company) financing, energy service agreements, government loan programs, PACE (property assessed clean energy) programs, and on-bill utility financing.

Richard L. Kauffman, senior advisor to the secretary, Department of Energy suggests that owners should be look to capital market investors, state bonds, local banks and government incentives to generate the necessary capital for individual green improvements to their existing commercial buildings.

If you want to try the traditional route, instead of asking the bank for a green loan, try rolling the cost of energy efficient improvements into a building retrofit or renovation. This is an easy way to sidestep lenders’ reluctance to loan on green improvements as a stand-alone investment.

The issue at hand many banks is that green lending is a new thing. They have yet to assimilate green loans in into their underwriting programs…which may require years of data for evaluating risk and assessing the long-term financial impact from green investments.

Research and statistics show that Energy Star and LEED-certified buildings can attract higher rents and generate increased demand from tenants < and that a green property can garner a better lease rates and higher sales price. Lenders aren’t persuaded by research. They want empirical data on risks, and actual cost vs. performance data, not just assurances of what a new technology is expected to deliver.

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http://www.costar.com/News/Article/Financing-Green-Part-I-Funding-Energy-Efficient-Retrofits-and-Overcoming-Uncertainty/138550?ref=100&iid=282&cid=383F14EEE265B182474DA2442BACBBBF

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MORE GREEN BUCKS ARE AVAILABLE

By Jodi Summers

Heads up to the accounting department > you may think your company has a green policy, but many businesses are missing key green financial opportunities. The reason? A lack of communication / collaboration between tax and sustainability departments.

Here’s the rub > 28% of tax directors believe their company has a sustainability strategy or is developing one, compared to 90% of CSOs recently surveyed by Ernst & Young LLP. Get on it before you CEO finds out. Think RSIO > Reduce, Switch, Innovate, Offset

“Reducing energy consumption and carbon emissions, switching to alternative energy and fuel sources, innovating for cleaner technologies and offsetting carbon emissions – all of these efforts have tax considerations,” said Paul Naumoff, Global and Americas Leader of Climate Change and Sustainability Services and CleanTech Tax Services. “Companies with tax departments that aren’t taking sustainability efforts into account are missing an opportunity.”

Apparently, many businesses are leaving green of money saving opportunities on the table. Only 16% of companies with an environmental sustainability strategy have their finance departments actively involved, according to the Ernst & Young survey titled “Working Together: Linking sustainability and tax to reduce the cost of implementing sustainability initiatives.” The survey featured responses from 223 senior executives at companies. Of the survey respondents, 19% were Chief Sustainability Officer (CSOs), while 81% were tax directors or their equivalent.

All cushy with their positions, employees are not keeping up to speed with state and local green incentives, as more than 37% of survey respondents are unaware of incentives for sustainability initiatives. Sure, more than 80% of finance department are aware of federal tax deductions for energy efficient buildings and incentives for renewable energy, but when it came to state tax credits and incentives, awareness levels hovered around 50%…and a meager 17% noted that their companies actually use available green incentives. In other words, companies are spending a lot more money than they need to spend.

Ernst & Young LLP notes that a company can effectively internally communicate sustainability initiatives and identify incentive opportunities throughout the organization by framing the discussion in broad categories:

· Reduce consumption of natural resources and carbon emissions.

• Switch to alternative energy and fuel sources.
• Innovate and develop new clean technology and less carbon-intensive or lower-emitting products and services to meet the demands of the transforming economy.
• Offset carbon emissions.

Opening up a corporate dialogue using RSIO framework allows companies to better identify incentives and tax credit opportunities related to their sustainability initiatives > improving their return on investment.

Some national examples of incentives include:

Reduce

· Federal: IRC Section 179D: An energy efficiency tax deduction for commercial buildings can help reduce the cost of green building strategies and help building owners minimize energy consumption and improve energy efficiency.

• LEED Buildings: Businesses can make use of the framework provided by the Leadership in Energy and Environmental Design (LEED) to achieve specific environmental sustainability metrics in their building construction. LEED incentives are currently offered by 5 states, 18 counties and over 69 cities and towns. These include property tax abatements, income tax credits, and non-monetary benefits such as expedited permitting.

Switch

· Federal: IRC Section 45 & 48: For facilities that produce and sell electricity generated from certain renewable resources, Section 45 provides an annual credit per kilowatt hour of energy sold to an unrelated person or company for each of the first 10 years of operation of a renewable energy facility.

Innovate

· Federal: The U.S. Department of Energy’s (DOE) Funding Opportunity Announcements: DOE provides grants for energy efficiency and renewable energy projects.

Offset

· Companies looking to invest in developing countries can leverage Clean Development Mechanisms (CDMs), which, as defined in the Kyoto Protocol, allow companies to invest in projects in developing countries that can be shown to measurably reduce greenhouse gas emissions. After a CDM project has been implemented, project participants receive Carbon Emission Reduction (CER) credits. Companies in industrialized countries can credit the CERs earned through their investments in CDM projects toward their emission targets, sell their CERs to buyers in other industrialized countries or trade them on global carbon markets.

In California, check with Sacramento and local governments to find benefits specific to our area. Sites like www.ey.com/climatechange are a recommended place to start.

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http://www.prnewswire.com/news-releases/companies-missing-opportunities-to-see-green-with-sustainability-efforts-143302926.html

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10 WAYS TO MAKE YOUR FACILITY MORE ENERGY EFFICIENT

Edited by Jodi Summers

We all need to live greener. Here are some innovative, inexpensive approaches to greening your real estate:

1. Start with a clean slate. Instead of reducing consumption, start with nothing and justify how much energy you actually need. Do you need to install a high-efficiency air conditioner or are you able to retrofit the building so effectively that it doesn’t need air conditioning? Limbo, limbo, limbo how low can you go should your approach to building energy performance.

2. Mind the Gaps. Air infiltration grows with time. Check the weather-stripping at doors and windows and seal those cracks. Don’t know where to start? Get a building energy audit (through your utility) with infrared imaging to show exactly where the heat is escaping. You will be surprised at what you see.

3. Simple task, big saving. Install light switches with built-in occupancy and/or daylight sensors in every room. Buy task lamps so employees have spot lighting as needed. Create a lighting landscape; you’ll realize you probably need only half the level of ambient lighting you’re using. And if your HVAC system isn’t programmed, that is a 21st century must-have for homes and commercial buildings.

4. Retro Fits. Retro-commissioning applies a quality assurance process “retroactively” – to an existing building. It consists of investigating how and why a building’s systems are operated and maintained and identifying ways to improve overall

building performance.

5. Community Green. Support energy efficiency financing programs in your community, and chamber of commerce. New programs may include third-party businesses paying for efficiency upgrades through your property taxes (PACE) and “on bill” through your utility. Properties greened through these programs produce predictable, replicable and relatively low-risk value in energy efficiency.

6. Golden State. California is the Golden State, clear up the window clutter and let the sun shine in. Perhaps a little selective demolition to open up the work areas, improves the space plan, and let the sun shine in. An easy fix > a fresh coat of light-colored paint and replace those depressing yellowed ceiling panels. Watch your employees get more enthusiastic about coming to work.

7. Film your windows. Window films have transformed in the past decade. Gone are the tinted sun shades. New retrofit films are practically clear and achieve nearly 50% heat rejection – both inside and outside, depending on the season. Combine this with sealing and retrofitting your windows for exceptional performance.

8. Ducts + seals. We’re not talking wildlife here. Recent studies indicate that leaking ductwork is one of the primary construction defects in both commercial and residential buildings, with common repercussions resulting in 10-25% leakage in commercial buildings and ridiculously more in homes. Do yourself a fever and check existing ductwork for leakage. A number of terrific elastomeric products are available for addressing this.

9. Made in the shade. Add awnings, trees, green roofs. In Southern California we need to do what we can to cool our buildings. Indirect lighting is much more effective than the sun streaming through your afternoon energy.

10. Congratulate yourself. Human behavior has a huge impact on energy efficiency. Studies suggest people influence building energy consumption between 12-17%. Create a green team, install a real-time energy and water consumption display, monitor every aspect of the building’s performance and reward facilities staff for great management.

Bravo.

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http://www.greenbiz.com/blog/2011/12/28/10-ways-boost-your-buildings-energy-efficiency-2012

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NEW GREEN GOLD @ LAX

by Jodi Summers

Los Angeles International Airport has the world’s first LEED Gold Aircraft Rescue and Fire Fighting facility. The Gold certification recognizes the project’s efforts at maximizing operational efficiency while minimizing negative environmental impacts.

Also known as LAFD Station 80 at Los Angeles International Airport, the building has incorporated a slew of green features, which yield energy cost cuts of 35% per year. Green upgrades include low-flow plumbing systems which reduce annual water usage by 39%. Water savings have further been achieved via utilizing more than 2,000 gallons of reused water for dust control in place of potable water.

The facility has installed a high-performance heating, ventilation and air conditioning unit which resets temperatures to optimum efficiency while maintaining the comfort level of the building occupants. Presence of occupancy-sensor controlled lighting fixtures contributes to the sustainability factor by reducing energy consumption.

The building has made extensive use of low VOC paints, adhesives, and sealants in the interior to upgrade indoor air quality. Other eco-friendly features include use of 20% of reclaimed materials during construction, and recycling or salvaging over 99% of construction debris.

All of these green elements have given LAX’s Aircraft Rescue and Fire Fighting facility LEED Gold certification from the US Green Building Council. It is the second building at LAX to incorporate LEED standards and receive LEED certification. The first building to incorporate LEED standards was the $737-million renovation of the Tom Bradley International Terminal – the first-ever for a renovation project at a U.S. airport. It received LEED Silver certification.

Los Angeles World Airports Executive Director Gina Marie Lindsey said, “The LEED Gold certification reflects our commitment to contribute to Mayor Antonio Villaraigosa’s vision of making Los Angeles the cleanest big city in America, and is in keeping with a sustainable ‘green’ building policy adopted by our Board of Airport Commissioners that commits us to incorporate LEED standards in all our future construction projects.”

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http://www.worldinteriordesignnetwork.com/news/los_angeles_airports_aircraft_rescue_and_fire_fighting_facility_wins_leed_gold_111122/

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4 WATCHPOINTS 4 INDUSTRIAL REAL ESTATE INVESTING

By Terica Kindred

While investing in domestic real estate is simple in theory, it is rarely easy in its execution. There is much involved – from banks’ stringent requirements and the glut of paperwork to overriding labor, market, and macroeconomic conditions.

Even beyond the predictable hardships associated with due process and protocols of purchasing domestic real estate, there are a myriad of “controllable risks” that, if ignored, can threaten, undermine, and even devastate an investment at large.

Here are 4 key risks every domestic real estate investor must know if they want to overcome the litany of hardships associated with today’s real estate investment landscape:

1.) Price perception. Simply put: do not assume that a low price is a good deal. Beyond price, investors should focus on other key facets that determine property value – namely location. When vetting a residential real estate purchase, focus on where it is located, including what subdivision and school district it is in as well as research the overall demographics of those that live there. Find out if the residence is in a rental or multi-owner neighborhood, which is a good indicator of how neighbors will treat your property and theirs relative to curb appeal and otherwise…all, of course, factors that affect the value. Another component is what the residence in question would rent for should you need to go that route as recourse or intention. With some time and effort applied to some simple research for information that is readily available, your price perception may be readjusted to understand whether that low price is actually the good deal that it appeared.

2.) Contracts and paperwork. It is imperative for you or a legal representative to actually read all of the language in any contract or piece of paper you sign, however copious that it may be. There can be terms that are not conducive to property investing, such as “deed restrictions,” which actually limit the allowable percentage markup on resale. In fact, some stipulate that you cannot sell a house for 120% above what you bought it for during the time period .Rules such as these can be too restrictive for professional home “flippers.” Deed restrictions ride with the property, so even if the ownership name changes, you can not get around it. Deed restrictions are also problematic due to a three-month waiting period to sell, which makes valuation difficult and creates a painful delay when faced with a rapidly declining market.

3.) Deal structure. How a deal is structured directly impacts the required cash flow. Many make the mistake of calculating equity and translating that into a monthly cash flow, which can make the deal seem better than what reality delivers. Deal structure decisions should also involve property estimating property taxes and related due dates. In this case, your only source of information should be county-driven facts and figures. Whether taxes seem high, low, or in-line, call the county and check to make sure because your scenario may differ from the prior owner’s situation. For example, if the property you are going to be buying is a foreclosure and the person living in it was a senior citizen they may have had a homestead exemption whereby the county allowed a tax reduction. However, as an investor, you are going to pay top-dollar for your property taxes. Other key deal structure considerations are insurance rates, management fees, vacancy rates and repair costs, which all have their own set of intricacies that you must investigate when considering the deal structure of your potential real estate investment.

4.) Exit strategy. In the realm of real estate investing, not having a clearly defined, pre-planned exit strategy even before purchasing a property can be a financial death knell. Knowing you will ultimately re-sell a property at the onset requires that you consider – and actually vet – all viable options and channels suited for the property at hand. While many investors choose to rehab and flip properties themselves, another highly profitable strategy to consider is simply wholesaling it to another investor on an “as is” basis. This can reduce your financial exposure and liquidity to facilitate future investments.

The bottom line? If you properly vet each and every domestic real estate investing opportunity that may seem like a “no brainer” at surface level, then you are more likely to increase the viability, profitability and sustainability of your domestic real estate investment portfolio.

Global real estate investing authority Terica Kindred is the Founder and CEO of OutEstate Investments, specializing in helping citizens in the U.S. and from around the world invest in the U.S. real estate market to help stimulate the American economy. Terica has started businesses on five different continents, and she is also an author, speaker, business consultant and investment strategist. Kindred will soon release her newest book, ‘The Next Global Millionaire,’ offering nine secrets to becoming a successful global investor or entrepreneur. She may be reached online at www.tericakindred.com.

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http://www.tericakindred.com

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