Economic Realities for Sustainable Real Estate Green Retrofit Lending 34 th Annual Real Estate & Economics Symposium Fisher Center for Real Estate & Urban Economics University of California at Berkeley

2 Enterprise Overview Our mission is to create opportunity for low- and moderate-income people through fit, affordable housing and diverse, thriving communities Since 1982, Enterprise has invested more than $11 billion to build or preserve more than 300,000 homes across the United States We are a leading provider of financial and intellectual capital for affordable housing development Environmental sustainability is embedded in our mission and will ultimately infuse all aspects of Enterprise’s activities and operations

3 Retrofit Process Review Building Portfolio Select Building to Receive Energy Audit Choose Energy Auditor Perform Building Audits Review Audit Results, and Select Upgrades Cost and Bid Out Improvements Finalize Funding / Financial Package Install Improvements & Monitoring System Train residents and maintenance staff Monitor savings and health improvements Verify Installation Make Adjustments (As Necessary)

4 ENERGY SAVINGS, WHAT SAVINGS? Audit Findings from 32 Buildings:  From the Bay Area (19 buildings) and LA (13 buildings)  Master metered (17) and Individually metered (15)  Low rise (10) and High rise (22)  Total 2,227 units Audit Findings from 32 Buildings:  From the Bay Area (19 buildings) and LA (13 buildings)  Master metered (17) and Individually metered (15)  Low rise (10) and High rise (22)  Total 2,227 units

5 AUDIT FINDINGS Reduction in energy costs over existing conditions:  Utility savings* in master metered buildings ranged from a low of 10% to a high of 47%; average = 26%  Savings in buildings with a combination of master and individually metered utilities ranged from 19% to 45%; average = 28%  Per unit savings averaged at $270 per unit per year * Gas, electric & water

6 WHERE DID THE SAVINGS COME FROM? Efficiency Measures that resulted in the highest Savings to Investment Ratio:  Domestic Hot Water  Interior Lighting  Thermostats  Exit Lights  Low Flow Toilets  Heating boiler  Air Handling Units Retrofit cost per unit – ranged from < $1,000 / unit to a high of $11,000 / unit; average = $5,000 / unit

7 The Bay Area Multifamily Fund (BAM Fund)  An innovative effort to improve energy and water efficiency in older affordable multifamily buildings  Provides free energy audit, technical support, and favorably termed debt.  Leverages other resources  Located in nine county Bay Area

8 GOALS of the BAM Fund  Improve property cash flow  Improve health of buildings and residents  Reduce greenhouse gas emissions  Link to green jobs programs  Enable retrofits to occur more quickly than a full rehab  Prove the concept that energy savings can be projected with accuracy and monetized to drive debt that can be raised from the capital market.

9 BAM Fund Loan Terms Interest Rate5% Loan Term10 years Debt Coverage Ratio 1.15 – 1.25 Security/Collateralunsecured; flexible guaranty Repayment Sourceamortized monthly payments Loans repaid with savings achieved as a result of the energy and water efficiency improvements

10 Projected Energy Savings and Debt Service Calculations EXAMPLE #1: Oakland, 98 units of family housing Historic mid-rise building COST OF IMPROVEMENTS: $358,182 ($3,654/unit) ENERGY SAVINGS: $13,327/year DEBT LOAD:$83,770 Projected Energy Savings Over Current Use: 17% (includes water) Exhaust Fan Testing

11 Proposed Financing Scenario DEBT$ 83,770 Weatherization$ 142,472 CA Solar Thermal $ 50,000 Rebate Program City Housing Funds $ 81,939 $ 358,182

12 Example #1 Project Budget Scenario Toilets (dual flush converters)$5,288 Lighting controls$1,087 DHW - Boiler Replacement$15,217 Exit lights$4,935 HHW - Boiler Replacement$51,712 Roof insulation$18,406 Roof covering$115,500 Common Area Refrigerator$646 DHW - Solar preheat array$122,067 Public toilet replacement (low flow)$823 Service doors (flush metal)$7,109 Windows - wood$3,878 Smoke/Fire Detectors$11,515 TOTAL358,182

13 Learnings to Date  Energy savings may not be adequate to support the level of debt desired  Owners are wary of borrowing based on “projected” energy savings  The energy audit process is complex….need to be clear about assumptions being inputted into the energy model, and the outputs desired  Monitoring utility data pre and post retrofit will be extremely important to proving that energy savings can be projected and monetized to leverage capital

14