Economic Realities for Sustainable Real Estate

Green Retrofit Lending

34th Annual Real Estate & Economics Symposium

Fisher Center for Real Estate & Urban Economics

University of California at Berkeley

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Enterprise Overview

Our mission is to create opportunity for low- and moderate-incomepeople through fit, affordable housing and diverse, thriving communities

Since 1982, Enterprise has invested more than $11 billion to build orpreserve more than 300,000 homes across the United States

We are a leading provider of financial and intellectual capital foraffordable housing development

Environmental sustainability is embedded in our mission and willultimately infuse all aspects of Enterprise’s activities and operations

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Retrofit Process

Review Building Portfolio

Select Building to

Receive Energy Audit

Choose Energy Auditor

Perform Building Audits

Review Audit Results, and

Select Upgrades

Cost and Bid Out

Improvements

Finalize Funding / Financial Package

Install Improvements & Monitoring

System

Train residents and maintenance

staff

Monitor savings and

health improvements

Verify Installation

Make Adjustments

(As Necessary)

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ENERGY SAVINGS, WHAT SAVINGS?

Audit Findings from 32 Buildings:

From the Bay Area (19 buildings) and LA (13 buildings)

Master metered (17) and Individually metered (15)

Low rise (10) and High rise (22)

Total 2,227 units

Audit Findings from 32 Buildings:

From the Bay Area (19 buildings) and LA (13 buildings)

Master metered (17) and Individually metered (15)

Low rise (10) and High rise (22)

Total 2,227 units

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AUDIT FINDINGS

Reduction in energy costs over existing conditions:

Utility savings* in master metered buildings ranged from a low of 10% to a high of 47%; average = 26%

Savings in buildings with a combination of master and individually metered utilities ranged from 19% to 45%; average = 28%

Per unit savings averaged at $270 per unit per year

* Gas, electric & water

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WHERE DID THE SAVINGS COME FROM?

Efficiency Measures that resulted in the highest Savings to Investment Ratio:

Domestic Hot Water Interior Lighting Thermostats Exit Lights Low Flow Toilets Heating boiler Air Handling Units

Retrofit cost per unit – ranged from < $1,000 / unit to ahigh of $11,000 / unit; average = $5,000 / unit

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The Bay Area Multifamily Fund (BAM Fund)

An innovative effort to improve energy and water efficiency in older affordable multifamily buildings

Provides free energy audit, technical support, and favorably termed debt.

Leverages other resources

Located in nine county Bay Area

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GOALS of the BAM Fund

Improve property cash flow

Improve health of buildings and residents

Reduce greenhouse gas emissions

Link to green jobs programs

Enable retrofits to occur more quickly than a full rehab

Prove the concept that energy savings can be projected with accuracy and monetized to drive debt that can be raised from the capital market.

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BAM Fund Loan Terms

Interest Rate 5%

Loan Term 10 years

Debt Coverage Ratio 1.15 – 1.25

Security/Collateral unsecured; flexible guaranty

Repayment Source amortized monthly payments

Loans repaid with savings achieved as a result of the energy and water efficiency improvements

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Projected Energy Savings and Debt Service Calculations

EXAMPLE #1: Oakland, 98 units of family housingHistoric mid-rise building

COST OF IMPROVEMENTS: $358,182 ($3,654/unit)ENERGY SAVINGS: $13,327/yearDEBT LOAD: $83,770

Projected Energy Savings Over Current Use: 17% (includes water)

Exhaust Fan Testing

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Proposed Financing Scenario

DEBT $ 83,770

Weatherization $ 142,472

CA Solar Thermal $ 50,000Rebate Program

City Housing Funds $ 81,939

$ 358,182

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Example #1 Project Budget Scenario

Toilets (dual flush converters) $5,288

Lighting controls $1,087

DHW - Boiler Replacement $15,217

Exit lights $4,935

HHW - Boiler Replacement $51,712

Roof insulation $18,406

Roof covering $115,500

Common Area Refrigerator $646

DHW - Solar preheat array $122,067 Public toilet replacement (low flow) $823

Service doors (flush metal) $7,109

Windows - wood $3,878

Smoke/Fire Detectors $11,515

TOTAL 358,182

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Learnings to Date

Energy savings may not be adequate to support the level of debt desired

Owners are wary of borrowing based on “projected” energy savings

The energy audit process is complex….need to be clear about assumptions being inputted into the energy model, and the outputs desired

Monitoring utility data pre and post retrofit will be extremely important to proving that energy savings can be projected and monetized to leverage capital

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