- Richard Gatto
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Lenders Get Green
Marketing green is a new step in the emergence of sustainability. In a tight credit environment when rates have climbed and LTVs have dropped, green may offer a way to ease the underwriting criteria on a deal.
The green-building revolution is spreading, and the underwriting community has embraced sustainable design because it enhances marketability and income. To illustrate, net rent in a particular office market may include a $15 psf in base rent and another $8 in common-area costs – the latter driven largely by energy and water-use costs. It adds up that if you reduce that common-area cost and pass the savings along to the tenant, your building will be more attractive because it operating costs are lower.
Community banks in environmentally conscious markets or in areas where local building requirements foster sustainable projects are offering standard loans with terms favoring green development. In San Francisco, the New Resource Bank offers qualifying green projects a generous loan-to-value ratio of as much as 80 percent, and a slightly better interest rate than it does to conventional project developers. Green lenders look for incremental steps such as preferential review, quarter-point interest-rate discounts, longer amortization and relatively small changes in return for LEED or Energy-Star certification.
In Houston, the Green Bank recently moved into a 20,000 SF headquarters specifically designed to earn LEED’s gold certification. Previously known as the Redstone Bank, it was acquired by a local banker who rebranded it as Green Bank and launched in January of 2007 with a focus on sustainability. Just 1 ½ years later, Green Bank has $275 million in assets and is creating a group of environmentally conscious companies and individuals. One vital goal is to educate team members to identify green-oriented customers, whether they are recyclers or LEED-certified construction space users.