Appraising Green in Vancouver

Tristan Roberts

Efforts to include green building features in a project are often hampered by a lack of support from lenders, particularly due to a poor understanding of how to appraise those features. The Vancouver Valuation Accord, a memorandum signed in March 2007 at the Vancouver Valuation Summit in Vancouver, B.C., may bring change to green building by integrating environmental awareness into the standards governing real estate appraisal (called property valuation in the U.K. and Canada).

Real estate appraisal standards are governed in the U.S. by the Appraisal Foundation; worldwide, the U.K.’s Royal Institution of Chartered Surveyors (RICS) is the most prominent organization. Both organizations support the accord. “To the extent that sustainability is either legislated or used in the market or is part of everyday life, it gets captured” in existing standards governed by those groups, says Chris Corps, president of Asset Strategics, of Victoria, B.C., and past chair of RICS. The Vancouver initiative will look more thoroughly at more innovative green building practices, says Corps, where “translation to value is unclear.”

Discussing a green roof as an example, Corps says, “How valuable is it? There are extra costs up front but a longer life cycle. Better thermal properties, but it requires more maintenance.” Corps notes that while capital expenditures affect one set of accounts, maintenance and operations typically affect a different set of accounts. The green roof also affects the sell-ability and, hence, the value of a building. For example, some companies won’t insure buildings with green roofs, which presents a major obstacle to property transfer and value.

Kevin Hydes, P.E., former chair of the U.S. Green Building Council (USGBC) and a signatory to the accord as chair-elect of the World Green Building Council, says “this is about two similar buildings standing side by side. One’s green, one’s not, and right now those buildings are valued at the same price.” Hydes argues that “the owner-occupant can find ways to benefit from green investments” by making capital investments that reduce operating costs. But for investors to adopt green building strategies, there must be increased recognition of the value of those capital investments, so that they can sell and earn a return.

By establishing more complete standards, Corps says, “the banks, the investors, and the entrepreneurs are armed with the information they need. You are enabling sustainability to expand because the incentive is clearer.” However, the accord will take a neutral stance toward environmental responsibility. “This is not about an advocacy position—this is about a neutral and dispassionate review of sustainability and the linkage back to value,” Corps says. He adds, “I expect that by being neutral we’ll find that a lot of sustainability is actually extremely financially sensible.”

Supporters included British Columbia Premier Gordon Campbell; the Appraisal Institute, the most prominent U.S. membership organization of appraisers; the Globe Foundation of Canada; the Canada Green Building Council; and the USGBC. Representatives from 20 countries attended. Although the Vancouver Accord set the policy course for the group, “we’re now defining what its work program will be,” says Corps. Participating groups will likely undertake a variety of tasks, he added, including examining and publishing case studies, writing white papers, and building networks to spread knowledge. The signatories of the accord will work on the initial program through 2010, when a progress report is planned.

“Sustainability has grown partly because of altruism and partly because it’s effective,” Corps says. “This is moving it into possibly a new phase. Knowledge of the financial implications will arm people to actually do it.”

For more information:

Vancouver Valuation Summit
The Globe Foundation of Canada
Vancouver, British Columbia
604-775-7300, 800-274-6097
www.vancouveraccord.org

This article was produced by BuildingGreen, Inc.- www.buildinggreen.com

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