Anyone here finance a multifamily project using either Freddie or Fannie's Green rewards program?
I have only read about it, but it seems that in exchange for a reduction in energy/water usage, the upshot is you can push higher leverage and lower interest rates.
Anyone have any firsthand experience? What exactly is required from the borrower's perspective, and what kind of underwriting benefits can borrower expect to receive?
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Have looked at this as well. From what our debt guy tells us you can save about 20-25 bps on spread to implement "Green Improvements." Freddie generates a report that estimates what you can save on utility expenses by installing low flow faucets, toilets, LED lighting etc. If you can get to a certain threshold of % savings your deal qualifies for the green underwriting. I believe there is a minimum dollar amount that you need to escrow up front. Seems like a good deal.
I underwrite green deals at my shop, and the main advantage is the discount on pricing. You have to get to a 20% water or energy savings to get the Fannie Mae approval for green pricing. Not sure about Freddie, but it's probably similar. During due diligence, the Engineer will do a High Performance Building Module (HPBM) as part of their Property Condition Assessment. They list what upgrades can be done to the property to save water or energy.
Almost 100% of the applications choose to add aerators to the sinks and replace toilets or shower heads with low flow stuff to get to 20% water savings. Unless you have an older property and are planning on upgrading windows or other building envelope materials, it's usually not worth the cost. Unless you are trying to get your rate locked in early during a rise in interest rates, it's usually a pretty good deal for the Borrower.
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