Sustainable Land Development Today - September 2008 - (Page 16)

FINANCE Oases of Capital Even during a funding drought, sustainable projects can be attractive to investors. By Frank Hill In one of the most serious economic downturns in recent history, as major financial institutions clamp down on loans and lines of credit, some pools of money remain that can offer capital support for sustainable projects. This article takes a look at three such operations that offer potential sources of capital through various methods, from those who connect developers and investors to those who oversee directfunding pools. Making connections Sustainable projects appear to be gaining a leg-up in the financial community, according to Lisa Galley, principal at Galley Eco Capital, LLC, based in San Francisco, California. In the future, projects that are not built based on the triplebottom-line balance between people, planet and profit may be considered the riskier investment. “A property may need a risk-premium adjustment if it is not built sustainably. That hasn’t happened yet, but it is getting more currency amongst institutional investors,” Galley said. “Green capital—debt and equity earmarked for the development of new sustainable buildings or the green retrofit of existing buildings—is definitely on the rise, albeit with an uneven distribution of capital types.” Galley Eco Capital seeks to connect developer with investors as several national and regional real estate investment pools have established green real estate funds—in theory adding up to a few billion dollars in earmarked capital—with a business plan of providing equity capital to sustainable real estate. Each program has adopted its own set of criteria regarding socially responsible approaches that they use to vet potential developments. On the debt side, the 16 September 2008 Sustainable Land Development Today availability of earmarked funds for lending on sustainable real estate has not been growing as fast. Galley Eco Capital provides a suite of integrated financial services to real estate investors who are using “green” initiatives and strategies to improve the value of their assets. The firm looks at all the capital questions and issues that a developer will encounter when they bring a green real-estate deal to market. “We use our background as investment analysts, former investment bankers and our ability to structure capital to put together transactions,” Galley said. “Typically, the groups we talk to and work with are trying to create certified green investments.” Their expertise applies to everything from new mixed-use and commercial/industrial developments to adaptive reuse of existing property. “We place the knowledge that a developer would typically have to assemble from many different locations throughout the industry: tax knowledge, real estate investment knowledge, funding and financing information, the sourcing of partnerships,” Galley said. “Companies like ours are going to be in demand because it speeds up the time to market.” When a project has been identified, Galley’s team of financial professionals examines the overall underwriting of the project, how it competes in the capital markets, what green strategies are proposed and then work to assure that the value of those strategies are quantified correctly. “That means coming up with accurate rates of return and pay-back analysis of the upgrades or the components,” Galley said. It also means making sure the developer is sourcing the maximum amount of tax credits and rebate incentives available. Meanwhile her firm maintains relationships with new and emerging green funds and tracks their investment programs. That allows her to provide excellent information to developers on what they look for in an investment, so that the developer can tailor the project to be received in the best possible light. “We use our traditional banking and capital skills to structure partnerships to do business with those investors immediately by accessing equity capital,” she said. “If necessary, we can come in and assist to do due diligence, underwriting and closing services for those transactions as well.” Separating truly sustainable projects from those that are more traditional developments that incorporate a few green elements is a challenge for a financial industry that likes to base its decisions on quantifiable data. How do you measure sustainablility? Galley favors the concept of responsible property investment —the triple-bottom-line approach—which is socially and environmentally progressive while generating market rates of return for investors. But the concept is new space for most people. It is a space that is literally forming before their eyes. “I think some SLDI (Sustainable Land Development International) members have a lot of experience in this area. They have been sustainable before sustainability was really a known term,” she said. “But this is really the first or second year that the institutional world has come out in a big way and started to express a preference for green investment.” Most institutional investors she has worked with focus heavily on greenbuilding certification, possibly because Lisa Galley, Galley Eco Capitol

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Sustainable Land Development Today - September 2008 Contents Our Voice The Bottomline Editorial Board SLDT Resources Digging Deep Oases of Capital Build a Better Business on an Interactive, Virtual Landscape Regulation SLDI in Focus �� SLDI Sponsored Summit �� Workshops �� Bookstore Tee’d Up for Sustainability Retention Solutions Wastewater Redevelopment Industry News Marketplace Products/Services Showcase Advertiser Index The Last Word

Sustainable Land Development Today - September 2008

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