1. ERES 2010 Arch. Simone Spreafico Engagement Director, Investment, Engagement Director, Investment, Advisory & Valuation Division Advisory & Valuation Division GREEN BUILDINGS: INSTRUCTIONS FOR USE 1

2. ERES 2010 Arch. Simone Spreafico AGENDA  MARKET PERFORMANCE: THE LINK BETWEEN BUILDING AND FINANCIAL PERFORMANCE  CURRENT VERSUS GREEN CONTRACTS  REAG & ECOMAG :A JOIN TO SATISFY ALL STAKEHOLDERS GREEN BUILDINGS: INSTRUCTIONS FOR USE 2

3. ERES 2010 Arch. Simone Spreafico Energy Park = 57.500 square metersBeni Stabili Towers= 45.000 square meters GREEN BUILDINGS: INSTRUCTIONS FOR USE Porta Nuova= 360.000 square metersLaurentina = 6.500 square meters 3

4. ERES 2010 Arch. Simone Spreafico ENERGY EFFICIENCY BUILDINGS BUILDINGSSUSTAINABLEBUILDINGSSUSTAINABLEBUILDINGSGREENBUILDINGSGREENBUILDINGS ECONOMICS, FINANCIAL, ENVIRONMENTAL AND SOCIAL EFFICIENCY ECONOMICS, ENVIRONMENTAL AND SOCIAL EFFICIENCY ECONOMICS AND ENVIRONMENTAL EFFICIENCY GREEN BUILDINGS: INSTRUCTIONS FOR USE ENERGY EFFICIENCY RENEWABLE ENERGIES POLLUTION REDUCTION HEALTH & SAFETY INDOOR AIR QUALITY LOCAL MATERIALS SPACE PLANNING EFFICIENCY PUBLIC BENEFITS RISK MITIGATIONS ENERGY EFFICIENCY RENEWABLE ENERGIES POLLUTION REDUCTION HEALTH & SAFETY INDOOR AIR QUALITY LOCAL MATERIALS ENERGY EFFICIENCY RENEWABLE ENERGIES 4

5. ERES 2010 Arch. Simone Spreafico HANDS ON GREEN BUILDINGS  Green Building Feasibility Study  Green Building Advisory  Green Building Risk Analysis  Costs - Savings Green Building Analysis  Green Building Financial Performance  HVAC Installation Quality Control  Sustainable Building Certification  Performance monitoring analysis on site construction HANDS ON GREEN BUILDINGS  Green Building Feasibility Study  Green Building Advisory  Green Building Risk Analysis  Costs - Savings Green Building Analysis  Green Building Financial Performance  HVAC Installation Quality Control  Sustainable Building Certification  Performance monitoring analysis on site construction GREEN BUILDINGS: INSTRUCTIONS FOR USE 5

6. ERES 2010 Arch. Simone Spreafico ENERGY AUDIT SUSTAINABILITY CERTIFICATIONS SUSTAINABLE DUE DILIGENCE ENERGY AUDIT SUSTAINABILITY CERTIFICATIONS SUSTAINABLE DUE DILIGENCE ECONOMIC ANALYSIS FINANCIAL ANALYSIS RISK ANALYSIS ECONOMIC ANALYSIS FINANCIAL ANALYSIS RISK ANALYSIS SHOULD INVESTORS CONSIDER GREEN BUILDINGS IN THEIR PROPERTY DECISION? GREEN BUILDINGS: INSTRUCTIONS FOR USE 6

7. ERES 2010 Arch. Simone Spreafico THE INVESTORS MAY CONSIDER BOTH: BUILDING FEATURES OUTCOMES AND FINANCIAL OUTCOMES SUSTAINABLE SITES WATER EFFICIENCY ENERGY & ATMOSPHERE MATERIAL & RESOURCES INDOOR ENVIRONMENTAL QUALITY INNOVATION & DESIGN PROCESS DCF ANALYSIS TANGIBLE AND INTANGIBLE REVENUES POSITIVE AND NEGATIVE RISKS PAYBACK, IRR AND ROI SENSITIVITY ANALYSES FOR DIFFERENT STAKEHOLDERS GREEN BUILDINGS: INSTRUCTIONS FOR USE 7

8. ERES 2010 Arch. Simone Spreafico MARKET PERFORMANCE: THE LINK BETWEEN BUILDING AND FINANCIAL PERFORMANCE BUILDING PERFORMANCE FINANCIAL PERFORMANCE MARKET PERFORMANCE  REGULATORS  SPACE USERS  INVESTORS  REGULATORS  SPACE USERS  INVESTORS Analysis on 59 LEED* USA Existing Buildings  IRR minimum = 11%  maximum PBP = 9 years  Implementation costs= 0,08$ sf  Sales price premium: 5,8%-31% Energy Star  Sales price premium: 9,9%-35% LEED Analysis on 59 LEED* USA Existing Buildings  IRR minimum = 11%  maximum PBP = 9 years  Implementation costs= 0,08$ sf  Sales price premium: 5,8%-31% Energy Star  Sales price premium: 9,9%-35% LEED * Envision Realti, June 2009 GREEN BUILDINGS: INSTRUCTIONS FOR USE 8

9. ERES 2010 Arch. Simone Spreafico And in ITALY? IN USA THE MOST LEASES ARE ON A FULL SERVICE BASIS POTENTIAL GROSS INCOME + Base Rental Income + Operating Expenses + HVAC and electric Income + Others POTENTIAL GROSS INCOME - Vacancy & Collection Loss - Property Management - Operating Expenses -- Municipality Taxes -- Agency TOTAL OPERATING EXPENSES POTENTIAL GROSS INCOME + Base Rental Income + Operating Expenses + HVAC and electric Income + Others POTENTIAL GROSS INCOME - Vacancy & Collection Loss - Property Management - Operating Expenses -- Municipality Taxes -- Agency TOTAL OPERATING EXPENSES AT THE MOMENT CONTRACTS ARE BASED ON THE AREA BUT IN FUTURE THEY CAN BE ALSO ON UTILITIES BASIS GREEN BUILDINGS: INSTRUCTIONS FOR USE 9

10. ERES 2010 Arch. Simone Spreafico A GOOD THING TO DO IS TO CHANGE THE RENT AND LEASE UP CONTRACTS PROPERTY RENT ON AN AREA BASIS PROPERTY RENT ON A FULL SERVICES BASIS  REAL ESTATE ENTREPRENEUR  RENEWABLE ENERGY ENTREPRENEUR  REAL ESTATE ENTREPRENEUR  RENEWABLE ENERGY ENTREPRENEUR AT THE MOMENTIN FUTURE GREEN BUILDINGS: INSTRUCTIONS FOR USE 10

11. ERES 2010 Arch. Simone Spreafico LEASE CONTRACTS MAY GAIN BENEFITS FROM BETTER BUILDING PERFORMANCE AND FINANCIAL PERFORMANCE CONTRACT % OWNER % TENANT GREEN BUILDINGS: INSTRUCTIONS FOR USE 11 CASH FLOW ANALYSIS12 … …n-1n + Base Rental Revenue - Base Rent Abatements BASE RENTAL INCOME ADD: + Energy Saving + Water Saving + Space saving + Health and Worker Saving Costs (Productivity) + Energy Producing + Government Incentives (+ Green Certification sell) + Turnover Vacancy - Capital expenditures POTENTIAL GROSS INCOME - Vacancy & Collection Loss EFFECTIVE GROSS INCOME - Operating Expenses - Real Estate Taxes (+ Green Design, Construction & Contracts) - Property & Agency - Insurance cost - Maintenance Costs NET OPERATING INCOME 100%

12. ERES 2010 Arch. Simone Spreafico GREEN BUILDINGS: INSTRUCTIONS FOR USE A case study in Rome CONTRACT ?% OWNER ? % TENANT 12 100 %

13. ERES 2010 Arch. Simone Spreafico GREEN BUILDINGS: INSTRUCTIONS FOR USE  IRR = 11%  ROI= 10%  Pay Back Period = 11 years  Implementation initial costs= 300 euro/s.m.  Sales Price premium: up to +16%  Rent Price premium : up to 8%  IRR = 11%  ROI= 10%  Pay Back Period = 11 years  Implementation initial costs= 300 euro/s.m.  Sales Price premium: up to +16%  Rent Price premium : up to 8% 13 REAG Valuation Analysis on a few Italian Buildings

14. ERES 2010 Arch. Simone Spreafico MARKET RISK OUT BUILDING PERFORMANCE PROCESS PERFORMANCE REGULATION USE MAINTENANCE LOCATION RISK OUT REGULATION BUIDING PERFORMANCE PROCESS PERFORMANCE MARKET USE MAINTENANCE LOCATION CONVENTIONAL BUILDINGGREEN BUILDING What about INITIATIVE RISK for Office Property? GREEN BUILDINGS: INSTRUCTIONS FOR USE 14

15. ERES 2010 Arch. Simone Spreafico DEVELOPERS FINANCIERS PROPERTY/ FACILITY TENANT / USERS OWNERS & INVESTORS PUBLIC ADMINISTRATION RISEARCH AND DEVELOPMENT COMPANY PRODUCING GREEN PRODUCTS CORPORATIONS RETURN ON “IMAGE” HIGHER OCCUPATIONS RATE HIGHER PIL TERRITORY VALORIZATION REQUALIFICATION OF OBSOLETE PUBLIC REAL ESTATE ( Project Financing) FOREIGN CAP ATTRACTION RETURN ON “IMAGE” HIGHER OCCUPATIONS RATE HIGHER PIL TERRITORY VALORIZATION REQUALIFICATION OF OBSOLETE PUBLIC REAL ESTATE ( Project Financing) FOREIGN CAP ATTRACTION IMPROVED MARKET VALUE EMPLOYEE HEALTH PRODUCTIVITY SKILLED WORKERS RETENTION SAVING OPERATING COSTS REDUCED INFRASTRUCTURE COSTS, PUBLIC GRANTS, FAVORABLE FINANCING AND TAX BENEFITS ADDED VALUE RELATED TO HIGHER BUILDING PERFORMANCE BENEFITS AND FINANCIAL BENEFITS VACANCY REDUCTION AND FASTER BUILDING OCCUPATIONS BRAND AND RETURN ON IMAGE DEVELOPMENT RISK REDUCTION MAXIMIZING OF ROE AND FASTER PAYBACK LESS RISK IN THE LONG RUN BETTER SURETY IN REFUNDABLE THANKS TO VACANCY REDUCTION HIGHER TRANSPARENCY IN DOCUMENTATIONS THANKS TO GREEN RATING HIGHER STABILITY IN REVENUES/DEBITS RATIO MORE STABLE RETURNS DUE TO LESS VACANCY IN THE LONG RUN HIGHER VALUE IN COMPARISON WITH TRADITIONAL BUILDING HIGH PROFILE COMPANY ATTRACTION HIGHER SPACES FLEXIBILITY AND RATIONALITY HIGHER TENANTS RETENTION HIGHER BUILDINGS PRICE (sell/rent) LESS OPERATIONAL AND MAINTENANCE COSTS GOVERNMENT INCENTIVES MORE STABLE RETURNS DUE TO LESS VACANCY IN THE LONG RUN HIGHER VALUE IN COMPARISON WITH TRADITIONAL BUILDING HIGH PROFILE COMPANY ATTRACTION HIGHER SPACES FLEXIBILITY AND RATIONALITY HIGHER TENANTS RETENTION HIGHER BUILDINGS PRICE (sell/rent) LESS OPERATIONAL AND MAINTENANCE COSTS GOVERNMENT INCENTIVES HIGHER PRODUCTIVITY FOR HIGHER INNER AIR QUALITY HIGHER ATTRACTION OF SKILLED WORKERS IMPROVED MARKET VALUE OPERATIONS AND MAINTENANCE COSTS SAVING HIGHER EFFICIENCY AND MANAGEMENT CONTROL SAVING CONSUMPTION LESS CO2 EMISSIONS WHO SHOULD INVEST IN GREEN BUILDINGS AND WHY? NEW MARKET ENTERING PARTNERSHIP EUROPEAN FUNDINGS GOVERNMENT INCENTIVES & BENEFITS SUPPORT TO COMPANIES  PARTNERSHIP  EUROPEAN FUNDINGS  SUSTAINABLE CERTIFICATION LABELS  GREEN BUILDINGS: INSTRUCTIONS FOR USE 15