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Green Buildings Expected to Receive Lower Financing

WASHINGTON, DC-Within the next three to five years, buildings that are not green will be underwritten to more stringent standards.

By Erika Morphy | Updated on June 22, 2008

WASHINGTON, DC-Today few lenders place much significance to a building’s green status – whether it is LEED certified or not – when putting together financing for the project. Even Wells Fargo, a bank that has financed a number of green buildings, does not have special criteria in place for these projects, according to comments made by James Finlay, VP – Commercial Appraisal Manager, at the bank at Real Estate Media’s RealShare Green Building conference, held in Washington, DC recently. These buildings do tend to receive competitive financing, he said, but that is primarily because they tend to be trophy or class A status projects.

Finlay is not alone in his assessment: also speaking at the Green Building conference were Steve Gossett Jr., VP of development for Transcend Equity, and Nicholas Stolatis, director of Strategic Initiatives for TIAA-CREF Global Real Estate. “There is no direct correlation between financing and green development,” Gossett commented during his panel session on green building finance, a statement echoed by Stolatis, who was sitting on the same panel.

It may be, though, that the industry is asking the wrong question. It’s not whether or when green buildings will receive more favorable financing. Rather, as many are beginning to suspect, the question is when lenders will begin to judge buildings that are not green as being functionality obsolete and thus riskier.

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