ERES 2010 Arch. Simone Spreafico Engagement Director, Investment, Engagement Director, Investment, Advisory & Valuation Division Advisory & Valuation Division

ERES 2010ERES 2010 Arch. Simone SpreaficoArch. Simone Spreafico

Arch. Simone SpreaficoArch. Simone Spreafico Engagement Director, Engagement Director,

Investment,Investment, Advisory & Valuation DivisionAdvisory & Valuation Division

GREEN BUILDINGS: INSTRUCTIONS FOR USE

1


AGENDA

MARKET PERFORMANCE: THE LINK BETWEEN BUILDING

AND FINANCIAL PERFORMANCE

CURRENT VERSUS GREEN CONTRACTS

REAG & ECOMAG :A JOIN TO SATISFY ALL

STAKEHOLDERS


2


Energy Park = 57.500 square metersBeni Stabili Towers= 45.000 square meters


Porta Nuova= 360.000 square meters Laurentina = 6.500 square meters

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ENERGY EFFICIENCY ENERGY EFFICIENCY BUILDINGSBUILDINGS

ENERGY EFFICIENCY ENERGY EFFICIENCY BUILDINGSBUILDINGS

SUSTAINABLESUSTAINABLEBUILDINGSBUILDINGS

SUSTAINABLESUSTAINABLEBUILDINGSBUILDINGS

GREENGREENBUILDINGSBUILDINGS

GREENGREENBUILDINGSBUILDINGS

ECONOMICS, FINANCIAL, ENVIRONMENTAL ECONOMICS, FINANCIAL, ENVIRONMENTAL AND SOCIAL EFFICIENCYAND SOCIAL EFFICIENCY

ECONOMICS, FINANCIAL, ENVIRONMENTAL ECONOMICS, FINANCIAL, ENVIRONMENTAL AND SOCIAL EFFICIENCYAND SOCIAL EFFICIENCY

ECONOMICS, ENVIRONMENTAL ECONOMICS, ENVIRONMENTAL AND SOCIAL EFFICIENCYAND SOCIAL EFFICIENCY

ECONOMICS, ENVIRONMENTAL ECONOMICS, ENVIRONMENTAL AND SOCIAL EFFICIENCYAND SOCIAL EFFICIENCY

ECONOMICS AND ECONOMICS AND ENVIRONMENTAL EFFICIENCYENVIRONMENTAL EFFICIENCY

ECONOMICS AND ECONOMICS AND ENVIRONMENTAL EFFICIENCYENVIRONMENTAL EFFICIENCY


•ENERGY EFFICIENCY•RENEWABLE

ENERGIES•POLLUTION REDUCTION

•HEALTH & SAFETY•INDOOR AIR

QUALITY•LOCAL MATERIALS•SPACE PLANNING

EFFICIENCY•PUBLIC BENEFITS

• RISK MITIGATIONS

•ENERGY EFFICIENCY

•RENEWABLE ENERGIES

•POLLUTION REDUCTION

•HEALTH & SAFETY•INDOOR AIR

QUALITY•LOCAL MATERIALS

•ENERGY EFFICIENCY

•RENEWABLE ENERGIES

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HANDS ON GREEN BUILDINGS

Green Building Feasibility Study

Green Building Advisory

Green Building Risk Analysis

Costs - Savings Green Building Analysis

Green Building Financial Performance

HVAC Installation Quality Control

Sustainable Building Certification

Performance monitoring analysis on site construction

HANDS ON GREEN BUILDINGS

Green Building Feasibility Study

Green Building Advisory

Green Building Risk Analysis

Costs - Savings Green Building Analysis

Green Building Financial Performance

HVAC Installation Quality Control

Sustainable Building Certification

Performance monitoring analysis on site construction


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•ENERGY AUDIT

•SUSTAINABILITY CERTIFICATIONS

• SUSTAINABLE DUE DILIGENCE

•ENERGY AUDIT

•SUSTAINABILITY CERTIFICATIONS

• SUSTAINABLE DUE DILIGENCE

•ECONOMIC ANALYSIS

• FINANCIAL ANALYSIS

• RISK ANALYSIS

•ECONOMIC ANALYSIS

• FINANCIAL ANALYSIS

• RISK ANALYSIS

SHOULD INVESTORS CONSIDER GREEN BUILDINGS IN THEIR PROPERTY DECISION?


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THE INVESTORS MAY CONSIDER BOTH:BUILDING FEATURES OUTCOMES AND FINANCIAL OUTCOMES

• SUSTAINABLE SITES

• WATER EFFICIENCY

• ENERGY & ATMOSPHERE

• MATERIAL & RESOURCES

• INDOOR ENVIRONMENTAL QUALITY

• INNOVATION & DESIGN PROCESS

• DCF ANALYSIS

• TANGIBLE AND INTANGIBLE

REVENUES

• POSITIVE AND NEGATIVE RISKS

• PAYBACK, IRR AND ROI

• SENSITIVITY ANALYSES FOR

DIFFERENT STAKEHOLDERS


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MARKET PERFORMANCE: THE LINK BETWEEN BUILDING AND FINANCIAL PERFORMANCE

BUILDING PERFORMANCE

FINANCIAL PERFORMANCE

MARKETPERFORMANCE

REGULATORS SPACE USERS

INVESTORS

REGULATORS SPACE USERS

INVESTORS

Analysis on 59 LEED* USA Existing Buildings

IRR minimum = 11%

maximum PBP = 9 years

Implementation costs= 0,08$ sf

Sales price premium: 5,8%-31% Energy Star

Sales price premium: 9,9%-35% LEED

Analysis on 59 LEED* USA Existing Buildings

IRR minimum = 11%

maximum PBP = 9 years

Implementation costs= 0,08$ sf

Sales price premium: 5,8%-31% Energy Star

Sales price premium: 9,9%-35% LEED

* Envision Realti, June 2009


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And in ITALY?

IN USA THE MOST LEASES ARE ON A FULL SERVICE BASIS POTENTIAL GROSS INCOME

+ Base Rental Income

+ Operating Expenses

+ HVAC and electric Income

+ Others

POTENTIAL GROSS INCOME

- Vacancy & Collection Loss

- Property Management

- Operating Expenses

-- Municipality Taxes

-- Agency

TOTAL OPERATING EXPENSES


+ Base Rental Income

+ Operating Expenses

+ HVAC and electric Income

+ Others


- Vacancy & Collection Loss

- Property Management

- Operating Expenses

-- Municipality Taxes

-- Agency

TOTAL OPERATING EXPENSES

AT THE MOMENT CONTRACTS ARE BASED ON THE AREABUT IN FUTURE THEY CAN BE ALSO ON UTILITIES BASIS


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A GOOD THING TO DO IS TO CHANGE THE RENT AND LEASE UP CONTRACTS

PROPERTY RENT ON AN AREA

BASIS

PROPERTY RENT ON AN AREA

BASIS

PROPERTY RENT ON A FULL

SERVICES BASIS

PROPERTY RENT ON A FULL

SERVICES BASIS

REAL ESTATE ENTREPRENEUR

RENEWABLE ENERGY ENTREPRENEUR

REAL ESTATE ENTREPRENEUR

RENEWABLE ENERGY ENTREPRENEUR

AT THE MOMENT IN FUTURE


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LEASE CONTRACTS MAY GAIN BENEFITS FROM BETTER BUILDING PERFORMANCE

AND FINANCIAL PERFORMANCE

CON

TRACT

% OWNER

% TENANT


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CASH FLOW ANALYSIS 1 2 … … n-1 n+ Base Rental Revenue - Base Rent AbatementsBASE RENTAL INCOMEADD:+ Energy Saving+ Water Saving+ Space saving+ Health and Worker Saving Costs (Productivity)+ Energy Producing+ Government Incentives(+ Green Certification sell)+ Turnover Vacancy- Capital expendituresPOTENTIAL GROSS INCOME - Vacancy & Collection Loss EFFECTIVE GROSS INCOME- Operating Expenses- Real Estate Taxes(+ Green Design, Construction & Contracts)- Property & Agency- Insurance cost- Maintenance CostsNET OPERATING INCOME

100%



A case study in Rome CO

NTRACT

?% OWNER

? % TENANT

12

100 %



IRR = 11%

ROI= 10%

Pay Back Period = 11 years

Implementation initial costs= 300 euro/s.m.

Sales Price premium: up to +16%

Rent Price premium : up to 8%

IRR = 11%

ROI= 10%

Pay Back Period = 11 years

Implementation initial costs= 300 euro/s.m.

Sales Price premium: up to +16%

Rent Price premium : up to 8%

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REAG Valuation Analysis on a few Italian Buildings


MARKET

RISK OUT

BUILDING

PERFORMANCE

PROCESS

PERFORMANCE

REGULATION

USE

MAINTENANCE

LOCATION

RISK OUT

REGULATION

BUIDING

PERFORMANCE

PROCESS

PERFORMANCE

MARKET

USE

MAINTENANCE

LOCATION

What about INITIATIVE RISK for Office Property?


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• RETURN ON “IMAGE”• HIGHER OCCUPATIONS RATE • HIGHER PIL• TERRITORY VALORIZATION• REQUALIFICATION OF OBSOLETE PUBLIC REAL ESTATE ( Project Financing) • FOREIGN CAP ATTRACTION

• RETURN ON “IMAGE”• HIGHER OCCUPATIONS RATE • HIGHER PIL• TERRITORY VALORIZATION• REQUALIFICATION OF OBSOLETE PUBLIC REAL ESTATE ( Project Financing) • FOREIGN CAP ATTRACTION

• IMPROVED MARKET VALUE•EMPLOYEE HEALTH• PRODUCTIVITY• SKILLED WORKERS RETENTION• SAVING OPERATING COSTS

• REDUCED INFRASTRUCTURE COSTS , PUBLIC GRANTS, FAVORABLE FINANCING AND TAX BENEFITS• ADDED VALUE RELATED TO HIGHER BUILDING PERFORMANCE BENEFITS AND FINANCIAL BENEFITS• VACANCY REDUCTION AND FASTER BUILDING OCCUPATIONS• BRAND AND RETURN ON IMAGE • DEVELOPMENT RISK REDUCTION• MAXIMIZING OF ROE AND FASTER PAYBACK

• LESS RISK IN THE LONG RUN• BETTER SURETY IN REFUNDABLE THANKS TO VACANCY REDUCTION• HIGHER TRANSPARENCY IN DOCUMENTATIONS THANKS TO GREEN RATING• HIGHER STABILITY IN REVENUES/DEBITS RATIO

• MORE STABLE RETURNS DUE TO LESS VACANCY IN THE LONG RUN • HIGHER VALUE IN COMPARISON WITH TRADITIONAL BUILDING• HIGH PROFILE COMPANY ATTRACTION• HIGHER SPACES FLEXIBILITY AND RATIONALITY • HIGHER TENANTS RETENTION• HIGHER BUILDINGS PRICE (sell/rent)• LESS OPERATIONAL AND MAINTENANCE COSTS• GOVERNMENT INCENTIVES

• MORE STABLE RETURNS DUE TO LESS VACANCY IN THE LONG RUN • HIGHER VALUE IN COMPARISON WITH TRADITIONAL BUILDING• HIGH PROFILE COMPANY ATTRACTION• HIGHER SPACES FLEXIBILITY AND RATIONALITY • HIGHER TENANTS RETENTION• HIGHER BUILDINGS PRICE (sell/rent)• LESS OPERATIONAL AND MAINTENANCE COSTS• GOVERNMENT INCENTIVES

• HIGHER PRODUCTIVITY FOR HIGHER INNER AIR QUALITY • HIGHER ATTRACTION OF SKILLED WORKERS• IMPROVED MARKET VALUE• OPERATIONS AND MAINTENANCE COSTS SAVING

• HIGHER EFFICIENCY AND MANAGEMENT CONTROL • SAVING CONSUMPTION• LESS CO2 EMISSIONS

WHO SHOULD INVEST IN GREEN BUILDINGS AND

WHY?

• NEW MARKET ENTERING• PARTNERSHIP• EUROPEAN FUNDINGS • GOVERNMENT INCENTIVES & BENEFITS• SUPPORT TO COMPANIES

PARTNERSHIP EUROPEAN FUNDINGS SUSTAINABLE CERTIFICATION LABELS


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Documents

ERES 2010 Arch. Simone Spreafico Engagement Director, Investment, Engagement Director, Investment, Advisory & Valuation Division Advisory & Valuation Division