Green Buildings in Practice: Experiences of a German Investment Company

Transcription

1 Exportinitiative Energieeffizienz Green Buildings in Practice: Experiences of a German Investment Company

2 Exportinitiative Energieeffizienz The green success story (?)

3 The green success story (?) Dramatic increases in green building certifications

4 The green success story (?) Various studies indicate positive economic impact

5 The green success story (?) But

6 The green success story (?) Less than 0,01% of the total number of new project developments p.a. are being certified Percentage of total residential area (Germany) Source: Dena Report 2011

7 The green success story (?) The importance of sustainability ratings and certificates is still seen as quite low 0 = Very low importance 5 = Very high importance Sustainability Certificates Source: Roland Berger, Sustainability in Real Estate Management, 2010

8 Exportinitiative Energieeffizienz The issues

9 The issues Every stakeholder has a different definition of Green Authorities (Compliance with regulation) Society (Protection of the environment) Tenants (Lower cost and better image) Investors (Higher, stable returns) Managers (Better efficiency and letting) Developers (Price premium and marketing)

10 The issues PATRIZIA IMMOBILIEN AG Residential (Investment / Management) Commercial (Investment / Management) Special RE Solutions (incl. Project Development) Total Assets 5,0 bn Units under Management* 38,900 Investment Funds 19 * excluding funds

11 The issues Why do investors go green? Maintain / Increase Value Reduce Energy Costs Reduce Operating Costs Better Image Reduce Emissions Work Environment Increased Productivity Source: Roland Berger, Sustainability in Real Estate Management, 2010

12 The issues The Economics (1) 10,000 sm office building (completed 2008) Option 1: DGNB Bronze (no building upgrades) yield reduced from 6.00% to 5.89% Required rent increase from 11.15/sm to 13.70/sm Option 2: DGNB Silver (building upgrades required) yield reduced from 6.00% to 5.49%

13 The issues Key issues: Costs for building upgrades and/or certification are fixed, but the economic benefit cannot be clearly substantiated with current data Final certification level unknown at project start Key benefit of certification focused on marketing for specific tenant groups (e.g. banks, creative industries, healthcare, etc.) Green features are difficult to factor in property valuations Existing lease contracts: Limited ability to push through rent increases to compensate for upgrades and certification costs

14 The issues Key issues continued: Low investment returns (typically < 5,0% cash yield) create high risk adversity Very limited willingness by tenants to accept rent increases related to energetic upgrades Tenant focus on soft factors (location, proximity to transportation, etc.) over building efficiency Limited government subsidies and uncertainty regarding new legislation (e.g. higher depreciation for energetic upgrades)

15 The issues The investor s view: Yes to Green - but only as long as this does not mean a sacrifice in investment returns

16 Exportinitiative Energieeffizienz Change in the Making

17 Closing the value gap between green buildings and standard buildings Change in the Making Rising energy costs > more focus on efficiency New legislation (e.g. EnEV 2012) Increased cost security due to better database and more experience of planners Incorporation of sustainable design features in property valuations Focus on new construction and higher end properties, where tenants are able/prepared to absorb the additional costs

18 Change in the Making The Economis (2) 118 high-end residential units in Frankfurt (under construction) Pilot project for DGNB residential certificate Pre-certified at DGNB Gold level No additional costs due to integrated planning and high overall construction standard Economic sustainability

19 Change in the Making In Transition Pecentage of certified properties in portfolio Factors for value increase of real estate assets 0 = Very low importance 5 = Very high importance Location Green Certification Type of use Tenant structure Age In 5 yrs Building condition Today Other Today In 5 yrs Source: Roland Berger, Sustainability in Real Estate Management, 2010

20 Change in the Making What needs to happen? Appropriate distribution of risks, costs and savings between investor and tenant (green leases, regulation, tax benefits, etc.) Implementation and standardization of green features in valuation methods / better databases More focused marketing (e.g. LEED) Integration of sustainability goals in company strategy and better alignment with organizational structure / processes

21 The issues The investor s view: Yes to Green because otherwise you risk sacrificing investment returns

22 Exportinitiative Energieeffizienz Thank you.