Commercial Mortgage Lending - Green Projects Get Funded

Like it or not, environmentally conscious, orof the property. Lenders know that green means
“green” principles have come to dominateefficient and, when they evaluate a project for
the field of commercial real estate development andfinancing they want to be assured that the funds
commercial mortgage lending. Green building andthey invest will be used cost-effectively and that the
sustainable design are now the standard in newbuilding will be economically viable.
commercial construction and residential developments.Environmentally sound buildings can cost substantially
And, with local and national governments gettingless to operate than comparable buildings that
greener all the time, look for energy and resourcedisregard such efficiencies and tenants and their
efficiency to become mandatory, with greenclients report higher customer satisfaction rates when
mandates being placed directly into building codes.doing business in them. To a lender, whose capital is
Funding sources such-as banks, Wall Street brokers,secured by the building, this translates into higher
insurance companies and hedge funds, are followingquality collateral and makes their investments more
suite and these principles are rapidly becoming a partsecure.
of the commercial mortgage industry.As a commercial real estate investment banking
The US Department of Energy’s Center forprofessional, I can attest to the fact that developers
Sustainable Development recently reported that 40%who choose designs that are not green will find it
of the entire world’s energy supply is used byvery difficult to raise capital or secure loan approvals
buildings. That’s a huge number. And, in thefor their projects. We are in the midst of a sever
United States, construction accounts for our largestliquidity crisis; construction money is in short supply.
manufacturing sector, representing a staggering 13%Lenders are giving priority to green development
of US GDP and nearly 50% of total wealth creation.leaving very little capital available for conventional
Even tiny percentage gains in efficiency can amountconstruction.
to massive over-all energy savings.The Federal Government’s LEED (Leadership in
Both institutional and private lenders as well as theEnergy & Environmental Design) rating system
REIT, (Real Estate Investment Trust) hedge fundawards silver, gold and platinum certification to
and private equity industries have all embraced thebuildings that reduce waste and save energy and
environmental building movement. Green is the colorlower costs. LEED certification is almost (although not
of money and green is the color of commercialofficially) a mandatory requirement in-order-to get a
mortgage construction lending now and into thebig construction project funded today.  
future. Lenders love green construction becauseBeing green is no longer just the passion of the
good for profits as-well-as being good for the planet.activist anymore; it is the new emerging standard in
Energy costs money, resources cost money andcommercial construction as-well-as commercial real
cleaning up messes’ costs money. Saving energy,estate finance. Investors and developers who need
saving resources and sustaining a site all save money,commercial mortgages will do well to pay attention to
during construction and throughout the operational lifethis trend.