Jun
23

Banks Cultivate Green Loans

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June 2, 2008

By Matt Hudgins – National Real Estate Investor

In San Francisco, Houston and across the country, a handful of community banks and even some of the nation’s largest lenders are discovering a growth area in construction loans and mortgages for sustainable commercial real estate. Green-building loan programs vary, but all offer borrowers the opportunity to seek funding from loan officers who understand both the challenges and financial benefits attainable through environmentally responsible design.

“There’s absolutely an interest nationwide in green-building oriented lending,” says Marc Heisterkamp, manager of corporate investment real estate at the U.S. Green Building Council. “About a year ago, the investment community really started to embrace green building, both new and existing operations. With that came increased demand on insurance, finance, and appraisers to understand the unique nature of these projects and to see if they do have a financial benefit.”

Most institutions that offer standard loan terms favoring green building are community banks, Heisterkamp says. San Francisco-based New Resource Bank, for example, offers qualifying green projects a generous loan-to-value ratio of perhaps 80% and a slightly better interest rate than it offers for conventional projects. “We provide projects that meet green leadership levels with lower interest rates and fees,” says Peter Liu, president of New Resource Bank. “This truly makes a difference to developers who build green.”

Larger institutions, on the other hand, are more likely to treat green projects the same as conventional loan applications while taking into consideration any boost to net income connected with energy savings or other green features, Heisterkamp says. “They aren’t necessarily following a separate financing track,” he explains, “but if green building enhances the financial viability of the project, their models can and should capture that benefit and possibly result in better financial terms for the borrower.”

Wells Fargo is clearly on the large-institution end of green finance, having loaned more than $1.7 billion for about 35 LEED projects, including construction loans and some permanent financing. The bank’s green lending program stems from a growing interest in sustainability on the part of its long-standing customers, according to Paul Brumbaum, senior vice president in environmental finance at Wells Fargo’s San Francisco office. “In some markets it has become almost de rigueur that you’re building to green standards if you’re doing a Class-A product,” he says.

ARTICLE SHORTENED DUE TO LENGTH….

LINK TO ARTICLE HERE:
http://nreionline.com/brokernews/greenbuildingnews/banks_cultivate_green_loans_0602/

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