Green Roofs - Living Architecture Monitor - Fall 2011 - (Page 12)

THE BUSINESS CASE Discount rate Although common throughout Europe (and certainly not a new strategy), some developers in North America perceive green roofs as a potential risk (compared to the black or white alternative), and there is potential risk of acceptance due to the required ongoing maintenance for the occupants. If this is a concern, selecting the discount rate and an appropriate contingency is necessary. Timeline TABLE 2: BUILDING-LEVEL FINANCIAL IMPACTS OF A GREEN ROOF ON INVESTOR/OWNER/OCCUPIER Impact on Investor/owner/occupier for Installation, Replacement & Maintenance, Stormwater & Energy Initial Premium (extra cost) $114,238 -$7,075 (nearly zero) 6.5 193.8% 4.2% Net Present Value Payback, years (based on 50-year average of annual savings) ROI (50 years with interest on initial investment) Internal rate of return (IRR) The timeline of the investment also needs to be considered. Green roofs pose a lifetime of at least twice that of a conventional black or white roof, however commercial investors may only be interested in a 20-year or less investment. In that time, a black or white roof may not need to be replaced. However, long-term holders, like the federal government may have a timeline of 50 years. In this case, the replacement cost needs to be included in the analysis for the conventional roof and even the green roof (approximately in year 40), as well as a placing premium on green roof replacement. A multi-course extensive green roof was analyzed. Nominal growth rates such as labor and materials, stormwater costs, energy prices, carbon (if valued), community benefits (inflation), rent, absorption and retention were included in the cost-benefit analysis. Stormwater equipment costs (equivalent BMP/equipment cost for stormwater management) and surcharges (stormwater utility fee and water impervious charge in the District of Columbia), heating and cooling savings (and carbon savings associated with the energy savings), and carbon sequestration were included in the cost-benefit analysis. As a result, a 12,000-square-foot green roof on a building in Washington D.C. resulted in a net present value of -$7,075, a payback of 6.5 years and a return on investment (ROI) of 193.8%. Additionally, a real estate assessment analyzing the risk (capitalization rate), average rent, average vacancy, absorption and tenant retention in Washington, D.C. were included in the cost-benefit analysis. Finally, the cost-benefit analysis reviewed the affect on the community by valuing the benefit green roofs have on biodiversity and habitat, air quality, heat island (energy and peak demand) , and the wastewater treatment plant. The assumptions and results of the analysis are shown in Figure 1 and tabulated in Table 2. TABLE 3: SENSITIVITY ANALYSIS Variable Roof lifetime (one-year change) Installation costs Maintenance Costs Discount rate Heating/cooling savings Stormwater Equipment Cost Green roof risk contingency Disposal costs SENSITIVITY ANALYSIS A sensitivity analysis was performed to identify the more important variables based on their impact on the total net present value. Table 3 ranks the most important variables affecting the net present value of the green roof, where the roof life and installation cost have the greatest affect on the net present value. The cost of a green roof is a major factor for a developer or building owner. Capital costs, maintenance costs, and expected roof membrane longevity are the major factors affecting the net present value. It is important to understand that this analysis was conducted using current data. As more and more green roofs are installed and their performances are monitored the installation costs, maintenance fees, and perceived risk of the 12 LIVING ARCHITECTURE MONITOR FALL 2011 http://www.mycorrhizae.com http://www.mycorrhizae.com

Table of Contents for the Digital Edition of Green Roofs - Living Architecture Monitor - Fall 2011

Green Roofs - Living Architecture Monitor - Fall 2011
Contents
From the Founder
Strata
On the Roof With…
Research
Marketing
Policy: The Game Changer
Policy: Toronto’s Green Roof by-Law
Policy: Energy Code Break-Through
Tools
GRHC: Update
GRHC: Welcome New Members
On Spec

Green Roofs - Living Architecture Monitor - Fall 2011

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