Financing a Green Certified Building
New financing programs are available for property owners of green certified buildings who participate in value add transactions and have made their properties more energy and/or water efficient. Through the new Fannie Made Green Certification and Green Rewards Programs, commercial real estate property owners can experience better pricing and proceeds. Since the green loan is disclosed as a “green MBS,” these programs facilitate access to a broader MBS investor market.
Fannie Mae Green Financing
Fannie Mae lenders are providing meaningful incentives to those who own a building or who are seeking a commercial real estate loans for a new purchase. Green properties are eligible regardless of rent levels. Benefits for owners include increased operating cash flow generated from reduced energy and water usage in addition to a lower interest rate on their commercial real estate mortgage. The loans are financed through a newly created Fannie Mae Green MBS, which is designed to attract socially responsible securities investors to the multifamily industry.
Eligibility for the Green certification pricing discount is limited to properties that are certified by one of the seven nationally recognized entities below:
Enterprise Green Communities
Leadership in Energy and Environmental Design (LEED) National Green Building Standard (NGBS)
Property owners also must demonstrate a capital plan to reduce energy or water usage by at least 20%. Projects that qualify include: improvements to the heating system, domestic hot water system, cooling system, appliances, ventilation and motors, lighting, water or renewable energy, and onsite generation. Specific examples include installing more efficient lighting or a solar panel system for heating. Replacing the refrigerators in each housing unit with ENERGY STAR® rated appliances also would qualify a property for green financing that equates to significant loan savings.
Green financing applies to affordable and conventional properties throughout the United States and can be used for acquisition, refinance, or supplemental loans.
Green Financing Programs
The new Fannie Mae program offers a choice of green financing option: Green Rewards, Green Building Certification Pricing Break, Green Preservation Plus, and Standard DUS. Each of the programs, with the exception of Standard DUS, is associated with a preferential pricing incentive for commercial real estate loans.
Green Rewards is available for conventional housing, affordable housing, and senior co-op properties and is suited for properties that are prepared for improvements and repairs after loan closing. This program can be used for commercial real estate refinance, acquisition, supplemental, and second supplemental loans.
Green Building Certification Pricing Break is available to properties including conventional, affordable housing, and senior housing. It is the best fit for properties that are awarded a green building certification prior to rate lock and can be used for refinance, acquisition, or supplemental loans.
Green Preservation Plus is designed for affordable housing properties that are more than 10 years old and can be used for refinance or acquisition. Properties that qualify for this program should be prepared to make improvements and repairs after close.
Standard DUS is available to standard properties nationwide and can be used for refinance, acquisition, or supplemental loans.
Discuss the options with your commercial real estate mortgage lender to identify the best fit for your green property.
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