My main takeaway from the recent MBA CREF/Multifamily Housing Conference was the amount of excitement regarding the green financing programs from Fannie Mae and Freddie Mac. With mortgage rates rising, there is significant interest in these programs as a way to reduce loan costs. Further, some of the properties see this program as a way to increase their curb appeal and marketing by promoting the property’s sustainable/energy savings improvements.
The most common question at our meetings was with regard to the new 25% threshold which replaced the previous thresholds of 15% and 20%. I told clients that there are some projects in which it might be a little harder to qualify or where additional initial investment is required. However, overall, we’ve seen pretty similar rates of qualification. In the past, for example, you might only have to replace 50% of the toilets in a multifamily development to hit the water reduction mark whereas now 100% replacement is required. Similarly, on the energy side, we have found that hitting the 25% requires implementation of additional measures that could have previously been left undone.
Along with the increase in the minimum savings threshold, some of the requirements regarding the age of property and investment per door were dropped. With this change, we are seeing buildings as new as 10 years old qualifying for the program. Additionally, while some additional work is required in one area to hit the threshold, as noted above, we are also seeing some parts of the project drop out as the minimum investment per door is no longer a requirement. In the end, while many properties can now take advantage of the program, the main obstacle would be at a property that had a relatively recent major renovation and is already generally energy and water efficient.
I also received many questions about the types and locations of properties that are eligible for the programs. The programs are open to all multi-family properties regardless of size or configuration. We have worked on three-story buildings with 40 units and complexes with 30 buildings and over 400 units. Although some energy savings measures are more applicable in areas with more extreme heating or cooling seasons, the location of the property is generally not significant in qualification.
At GRS Group, we are an approved provider with both Fannie Mae and Freddie Mac for these programs, and we’ve rolled out a new pre-qualification service. Through this service, we can start to analyze your project and give you some initial feedback. It’s not a guarantee that somebody will qualify, but at least they can know if there is no chance they will qualify, or if it’s too expensive to qualify, so they can have some initial feedback before embarking on the whole process. GRS can catch potential issues right at the beginning and warn people about what we see, so they know what’s coming as they move along in the process.
Want to learn more about these programs or have questions? Need help navigating the process? Please be in touch with me at firstname.lastname@example.org. Further information is also available on our website at www.grs-global.com/green.
About the Author: Sol Rosenbaum, PE, CEM, CPMP is the Director of Green & Energy Projects for GRS Group. He has over 15 years experience in the energy engineering field covering all aspects of their implementation. Please be in touch if you have any questions about this program or other related green projects. Sol can be reached at 646-828-9048.
About GRS Group:
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.