Why Environmentally Friendly Assets Mean More Green For Your Portfolio
Whether you already own “green” property or are looking to make the green leap, Fannie Mae has several options with its new group of Green Financing programs. The Fannie Mae Multifamily Green Initiative was created to provide loans for properties investing in energy efficient, cost-cutting improvements and lifestyles. The Green Initiative program allows for an increase of 5% in loan proceeds as well as a 10 basis points (bps) reduction off the all-in interest rate.
Additionally, Fannie Mae offers Green Rewards, the Green Building Certification Pricing Break and Green Preservation Plus as a part of Green Financing. The Green Financing program supports:
- Properties seeking to make energy-saving and water-saving property improvements;
- Properties already Green Building Certified;
- Affordable and conventional properties nationwide;
- Acquisition, Refinance or Supplemental loans;
- Multifamily, Cooperative, Seniors, Military & Student (Fannie Mae, 2016, para. 1)
What Loans Are Offered for Green Multifamily Properties?
Green Rewards are offered by Fannie Mae Multifamily to provide lower pricing and additional loan proceeds to fund green property improvements. For loans provided through Green Rewards, there are no restrictions to the loan term or loan amount.
For owners that are ready to improve and repair their property following the loan close, Green Rewards offers Refinance, Acquisition, and Supplemental loans while Green Preservation Plus offers Refinance and Acquisition loans.
Green Building Certification Pricing Break provides Refinance, Acquisition, and Supplemental loans for owners of Green Building Certified properties prior to rate lock.
Is Going Green Really Worth It?
By tracking energy and water costs over time, property owners can discover huge potential for saving money and making improvements. On average, a commercial building wastes 30% of its energy consumption. By transforming multifamily investment properties into green institutional assets, you can gain earn back that 30% plus all of the financial and environmental benefits that come along with being environmentally responsibly and savvy.
Many apartment owners increase rates they charge tenants in order to keep up with the rising costs of water and energy. Potential tenants may be discouraged by low affordability and higher costs due to inefficient water and energy systems. With environmentally friendly improvements, multifamily property owners can effectively minimize and even eliminate the excess expenses associated with wasted energy that is passed on to renters.
Making the Smart Upgrade
The Fannie Mae Multifamily Green Initiative offers various loans for multifamily property owners undergoing smart upgrades and green renovations. To receive a loan, an applicant must agree to use a percentage of the proceeds to finance energy-efficient upgrades and retrofits. Improvements that are covered with these loans include electricity-generating systems, upgrades needed to obtain Green Building Certification and water-saving and energy efficient equipment.
Although going green is truly a life long pursuit, green improvements to property must be made within the span of a year. Throughout this period, property owners must track the property’s total water and energy costs and usage with the Energy Star Portfolio Manager and submit the Energy Star Score each year. Lenders will verify the completion of the agreed‐upon property improvements and verify reductions in energy use.
Water and Energy—Cost Cutting Basics
Review and determine how much you are currently spending for energy and water. This will help you identify target areas for necessary improvements. Start your green process by making low or no cost improvements. Then, begin by gradually upgrading to efficient products and energy-saving systems. Improvement ideas may include using Energy Star products and rebates. You can also consider installing or upgrading to:
- Installing a reflective and/or a solar panel roofing system
- Upgrade windows to Energy efficient windowpanes
- Use awnings above windows to cut down on cooling and heating costs
- Upgrade to energy efficient lights
- Use ENERGY STAR products and rebates.
After energy saving renovations are made, the utility expenses of water and light are cut dramatically. The cost of maintenance and operation will also decrease if energy efficient products and designs are used.
Create New Revenue with Green Upgrades
With lower costs across the board, from a decrease in water and energy costs to money saved from green tax breaks and green solar powered systems, the property’s asset value and affordability will dramatically increase. This new affordability will attract more tenants and generate more income. Additionally, the production of surplus energy created with self-sustaining energy systems can generate new streams of income as well.
Getting Your Green Building Certified
The Fannie Mae Green Initiatives program was created through a partnership with Fannie Mae Multifamily and the US Environmental Protection Agency to create the Multifamily 1-to-100 Energy Star Score for Multifamily. Following Fannie Mae’s 2012 nationwide survey of 1000 multifamily properties, the US EPA launched its 1-to-100 Energy Star Score for Multifamily on September 16, 2014.
With the launch of the 1-to -100 Energy Star Score for Multifamily properties, you can now earn Energy Star certification, awarding properties with superior energy performance. Being Green Building Certified means that a multifamily property meets the criteria for environmental sustainability, including water and energy efficiency. Owners of newer property that are already environmentally friendly can apply for certification as well as owners of improved property that has been retrofitted for efficiency. Using the energy star portfolio manager, multifamily property owners can benchmark their property and earn a certificate upon receiving a property score of 75 or more.
Once a Green Building is certified, renters should expect to see a decrease in water and energy costs. Living in an apartment that has been retrofitted with sustainable systems also allows renters to enjoy a space that adapts to climate changes more comfortably. With increased efficiency and sustainable properties, owners can expect the property sales prices to increase as well.
Properties that have Green Building Certifications qualify for interest rate reductions with their loans. However, the property must receive its Green Building Certification by the time the loan is closed.
With So Many Options, Why Not Go Green?
With so many options available for the green-minded Multifamily business owner, why not transform your property into a green asset? Whether using Green Initiatives or Green Rewards to improve sustainability or achieve Green Building Certification, it definitely pays to evaluate our business practices today to plan for a greener tomorrow.