GlobeSt.com: Tell me about your experiences with construction costs for a green project.
Cook: On large construction projects, perhaps surprisingly, if the project is green it is not a big concern. A bank would want to see roughly where [the additional costs] fall in the budget. But we are finding it to be not so much a premium as an item that rolls into the budget.
GlobeSt.com: What about for smaller-sized loans?
Cook: Most of our projects are large, so I can't speak to that. But I have observed more scrutiny in smaller loans. But even this does not appear to be a deal-breaker. A developer may need to provide more back-up about the payback, the ROI, is my understanding.
GlobeSt.com: Are there any signs or developments in the industry you can point to as reason to hope financing might ease for this particular product?
Cook: Yes, the Clinton Climate Initiative is working to establish more creative financing options. What it is doing is very exciting. (Rolled out last June, the CCI is, among other measures, partnering with ABN AMRO, Citi, Deutsche Bank, JPMorgan Chase and UBS, which have each committed $1 billion to finance energy-efficient upgrades in 16 participating cities http://www.globest.com/news/934_934/more/161886-1.html).
GlobeSt.com: Do you think the CCI has positively influenced lenders?Cook: It's hard to say. A lot of what the CCI hopes to realize is still very much in the works and the end goal may seem hazy to some. But there is movement and willingness on the part of lenders, from my vantage point in the market anyway, to create something that works.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
