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Basics of Commercial Real
Estate Transactions Tony Liou, Partner EnergyJohn Rockwell, Partner Energy
December 07, 2016
“PG&E” refers to the Pacific Gas and Electric Company, a subsidiary of PG&E Corporation. ©2010 Pacific Gas and Electric Company. All rights reserved.
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Course Agenda
• Basics of Commercial Real Estate
• Introduction to Valuations
• The Proforma Process
• Investor Confidence Project (ICP)
• MUP Measures and Affects
5
Course Agenda
• Basics of Commercial Real Estate
• Introduction to Valuations
• The Proforma Process
• Investor Confidence Project (ICP)
• MUP Measures and Affects
6
Investor Confidence Project (ICP)
Multifamily Upgrade Program Partner Orientation 8
♦ Managing energy efficiency projects can be
challenging
♦ Following the ICP protocols are a solution
♦ ICP delivers reliable results
• Increase opportunities for internal and external
investment
• Improve building operating performance
Investor Confidence Project (ICP)
Multifamily Upgrade Program Partner Orientation 9
♦ Breaking down barriers to EE finance
Investor Confidence Project (ICP)
Multifamily Upgrade Program Partner Orientation 10
♦ Short-Term: Increase Deal Flow
• Increase Confidence in Savings
• Reduce Transaction Costs
• Streamline Origination Process
♦ Long-Term: Market Transformation
• Standardized Performance Data
• Project Finance Underwriting
• Enable Portfolios and Securitization
MUP Energy Measures
♦ Windows
♦ Roof/attic insulation
♦ Wall insulation
♦ Floor Insulation
♦ Cool roofing or radiant barrier
♦ Pipe insulation
♦ Duct sealing and insulation (as applicable)
♦ Space heating equipment
♦ Space cooling equipment
♦ Water heating equipment (including solar pre-heat)
♦ Water heating recirculation controls
♦ Refrigerators and dishwashers
♦ Indoor and outdoor lighting attached to the building
Multifamily Upgrade Program Partner Orientation 15
MUP Energy Measures
♦ Windows
♦ Roof/attic insulation
♦ Wall insulation
♦ Floor Insulation
♦ Cool roofing or radiant barrier
♦ Pipe insulation
♦ Duct sealing and insulation (as applicable)
♦ Space heating equipment
♦ Space cooling equipment
♦ Water heating equipment (including solar pre-heat)
♦ Water heating recirculation controls
♦ Refrigerators and dishwashers
♦ Indoor and outdoor lighting attached to the building
Multifamily Upgrade Program Partner Orientation 16
Building Envelope
Improvements
MUP Energy Measures
♦ Windows
♦ Roof/attic insulation
♦ Wall insulation
♦ Floor Insulation
♦ Cool roofing or radiant barrier
♦ Pipe insulation
♦ Duct sealing and insulation (as applicable)
♦ Space heating equipment
♦ Space cooling equipment
♦ Water heating equipment (including solar pre-heat)
♦ Water heating recirculation controls
♦ Refrigerators and dishwashers
♦ Indoor and outdoor lighting attached to the building
Multifamily Upgrade Program Partner Orientation 17
HVAC
Improvements
MUP Energy Measures
♦ Windows
♦ Roof/attic insulation
♦ Wall insulation
♦ Floor Insulation
♦ Cool roofing or radiant barrier
♦ Pipe insulation
♦ Duct sealing and insulation (as applicable)
♦ Space heating equipment
♦ Space cooling equipment
♦ Water heating equipment (including solar pre-heat)
♦ Water heating recirculation controls
♦ Refrigerators and dishwashers
♦ Indoor and outdoor lighting attached to the building
Multifamily Upgrade Program Partner Orientation 18
Controls
MUP Energy Measures
♦ Windows
♦ Roof/attic insulation
♦ Wall insulation
♦ Floor Insulation
♦ Cool roofing or radiant barrier
♦ Pipe insulation
♦ Duct sealing and insulation (as applicable)
♦ Space heating equipment
♦ Space cooling equipment
♦ Water heating equipment (including solar pre-heat)
♦ Water heating recirculation controls
♦ Refrigerators and dishwashers
♦ Indoor and outdoor lighting attached to the building
Multifamily Upgrade Program Partner Orientation 19
Plug Loads
MUP Energy Measures
♦ Windows
♦ Roof/attic insulation
♦ Wall insulation
♦ Floor Insulation
♦ Cool roofing or radiant barrier
♦ Pipe insulation
♦ Duct sealing and insulation (as applicable)
♦ Space heating equipment
♦ Space cooling equipment
♦ Water heating equipment (including solar pre-heat)
♦ Water heating recirculation controls
♦ Refrigerators and dishwashers
♦ Indoor and outdoor lighting attached to the building
Multifamily Upgrade Program Partner Orientation 20
Lighting
MUP Energy Measures
♦ Windows
♦ Roof/attic insulation
♦ Wall insulation
♦ Floor Insulation
♦ Cool roofing or radiant barrier
♦ Pipe insulation
♦ Duct sealing and insulation (as applicable)
♦ Space heating equipment
♦ Space cooling equipment
♦ Water heating equipment (including solar pre-heat)
♦ Water heating recirculation controls
♦ Refrigerators and dishwashers
♦ Indoor and outdoor lighting attached to the building
Multifamily Upgrade Program Partner Orientation 21
LightingPlug Loads
Controls
HVAC
Improvements
Building Envelope
Improvements
MUP - Pro Forma Effects
Multifamily Upgrade Program Partner Orientation 22
♦ Cosmetic Improvements
• Windows
• Refrigerators and dishwashers
• Indoor and outdoor lighting
♦ Underwriting Modifications:
• Increased average rent
• Increased lease renewals
• Decreased absorption period
Revenue
Multifamily Upgrade Program Partner Orientation 23
Standard Subject Comp 1 Comp 2 Comp 3
Adjustment Property
Vista Springs
Apartment
Homes The Arbors
Highland
Meadows
Apartments
Square Footage Adjustment: $0.40
Location/Age/Appearance Enter $ amount adjustments for all Comps relative to Subject:
Location Adjustment $0 $0 $0
Appearance Adjustment $15 $15 $15
Age Adjustment $0 $0 $0
Interior Condition Adjustment $15 $15 $15
Standard
Project Amenities Adjustment Enter "Y" for all that apply for Subject & Comps. If not applicable, leave blank:
Balcony / Patio $15.00 Y Y Y Y
Carports/Podium Parking $20.00 Y Y Y Y
Parking Garage $50.00
Laundry Rooms $5.00 Y Y Y Y
Swimming Pool $10.00 Y Y Y Y
Sauna / Spa $5.00 Y Y Y Y
Fitness Center $10.00 Y Y Y Y
Secured Building $10.00
Community Room $10.00 Y Y
Tennis Court/Vollyball Court $5.00 Y
Hardwood Floors $10.00
Gated Community $20.00 Y Y Y Y
24-Hour Doorman/Security $20.00
On-Site Retail $5.00
BBQ Area $5.00 Y Y Y Y
Standard
Unit Amenities Adjustment
W/D Connections $10.00 Y Y Y Y
W /D Included In-Unit $40.00 Y
Central HVAC $20.00 Y Y Y Y
Microwave $5.00 Y
Dishwasher $20.00 Y Y Y Y
Disposal $3.00 Y Y Y Y
Refrigerator $25.00 Y Y
Cable TV Available $0.00 Y Y Y Y
MUP - Pro Forma Effects
Multifamily Upgrade Program Partner Orientation 24
♦ EUL or CapEx Improvements• Roof/attic insulation
• Cool roofing or radiant barrier
• Space heating equipment
• Space cooling equipment
• Water heating equipment (including solar pre-heat)
♦ Underwriting Modifications:• Lower utility expense
• Lower O&M expense
• Poor payback periods Expenses
MUP - Pro Forma Effects
Multifamily Upgrade Program Partner Orientation 25
♦ OpEx or Green Certification Improvements• Wall insulation
• Floor Insulation
• Pipe insulation
• Duct sealing and insulation (as applicable)
• Water heating recirculation controls
♦ Underwriting Modifications:• Difficult to underwrite
• Lower utility expense
• Lower O&M expenseExpenses
MUP Energy Measures
♦ Windows
♦ Refrigerators and dishwashers
♦ Indoor and outdoor lighting attached to the building
♦ Roof/attic insulation
♦ Cool roofing or radiant barrier
♦ Space heating equipment
♦ Space cooling equipment
♦ Water heating equipment (including solar pre-heat)
♦ Wall insulation
♦ Floor Insulation
♦ Pipe insulation
♦ Duct sealing and insulation (as applicable)
♦ Water heating recirculation controls
Multifamily Upgrade Program Partner Orientation 26
OpEx,
Green Certs
EUL,
CapEx
Cosmetic
Asset Manager priority #1 is
dollars invested in the property
Multifamily Upgrade Program – Basics of CRE (Day 4) 29
Pro Forma
is
the tool to communicate
financial understanding of the
investment
Multifamily Upgrade Program – Basics of CRE (Day 4) 31
All ECMs effect utility expense,
focus on the next level of
property interaction
Multifamily Upgrade Program – Basics of CRE (Day 4) 32
MUP Administration Team
♦ Program Administrators: TRC
• Program Manager: Mike Maroney
• Technical Manager: Stephanie Berkland
• Marketing Manager: Melissa Buckley
• Website: www.multifamilyupgrade.com
• Phone: 866-352-7457
• Email: [email protected]
34