2D — January 25 - February 7, 2019 — 2019 Forecast — M id A tlantic
Real Estate Journal
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F inancial S ervices
By Matthew Hodson & Debra Goldstein, M&T Realty Capital Corporation It’s Not (as) Easy Being Green in 2019
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significant changes to the green programs for 2019. First, the projected mini-
sumption reduction threshold ensures that the benefits from green renovations are passed through to the tenants, while the added data requirement allows FHFA to assess the ef- ficacy of the Enterprises’ green improvements programs on an ongoing basis.” ii To determine eligibility for green loan programs, an en- ergy and water audit report is obtained during the due diligence process. The audit report provides a list of vari- ous improvements, as well as the expected costs and the projected energy and/or water
savings associated with each item. The borrower then has the option to choose which items they wish to implement, provided the minimum sav- ings required by the program is achieved. Understandably, most bor- rowers choose the minimum and/or least expensive items needed to qualify. Historically, these items have been related to water savings, but—as the audit report identifies multi- ple items that will provide the required energy savings—it is anticipated that many bor- rowers will be able to meet the
he Federal Housing Fi- nance Agency (FHFA) recently announced that
higher savings requirements by implementing these addi- tional items. Some upgrades, such as replacing water heaters, can provide both energy and water savings. The key will be to find the optimal mix of upgrades that provides the mandatory savings while minimizing up- front costs. It is also impor- tant to note that unit-level upgrades do not have to be completed at every unit, but at enough units to obtain the necessary savings. In the past, borrowers were required to self-report ongo- ing energy and water costs on an annual basis for a certain period of time after the loan was closed. In 2019, both of the Agencies will now require a third-party service provider be responsible for the collection and ongoing reporting of ener- gy and water costs throughout the life of the loan. While this will result in an additional cost to the property owner, the col- lection and reporting burden will no longer fall on property managers. In conclusion, the bar may be raised, but it is still achiev- able. While the 2019 program changes will require increased investment for many bor- rowers, the lower interest rate available on these loans should offset the additional in- vestment. In addition, proper- ties that offer energy-efficient features may have an advan- tage over their competition, as tenants desire to spend less on energy as a percentage of their overall housing costs. The views and opinions expressed in this article are those of the authors, and do not necessarily represent those of M&T Realty Capital Cor- poration. This article is for informational purposes only. It is not intended to provide professional advice of any kind, as such advice always requires consideration of indi- vidual circumstances. Please consult with the professionals of your choice to discuss your situation. Matthew Hodson and Debra Goldstein are Man- aging Directors for M&T Realty Capital Corporation in the Southeast. i FHFA. 2018. “FHFA Announces 2019 Multifamily Lending Caps for Fannie Mae and Freddie Mac.” Last modified November 6. https://www.fhfa.gov/Media/PublicAf- fairs/Pages/FHFA-Announces-2019-Multi- family-Lending-Caps-for-Fannie-Mae-and- Freddie-Mac.aspx ii Ibid.
mum savings for both en- ergy and wa- ter has been increased to at least 30%, wi th mini - mum energy s av i ng s o f at least 15%.
the Agencies’ 2019 lending caps will re- main at the same levels as 2018, with $35 b i l l i on allocated to each lender i . There are cer-
Matthew Hodson Debra Goldstein
Second, ongoing energy and water cost reporting must now be completed through specified third-party service providers. According to FHFA, “[t]he con-
tain loan types the Agencies can originate that do not count against their caps, and green loans remain one of those exclu- sions. However, there are two
Delivering the deal.
Understandingwhat’s important.
At M&T Realty Capital Corporation, we understand that speed and certainty of closing complicated transactions is important for commercial real estate clients. We have more than 160 years of experience building relationships, providing seamless execution, and tailoring financing solutions to meet your unique needs. With $4.9 billion in commercial and multifamily loans closed in 2018 alone, M&T Realty Capital Corporation offers the know-how and experience you need to close deals with confidence. To find out how we can deliver for you, call 1-800-737-2344 or visit learnmore.mandtrcc.com.
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