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New Resource Bank Targets Green Development With Construction Loan Discounts

San Francisco-based New Resource Bank, founded in 2005 as the country’s first bank specifically created for green business, has launched a loan program which will provide developers with financial incentives for green building projects. The bank’s founding members include green building experts Greg Kats, Jonathan Rose, and Malcolm Lewis of CTG Energetics, and the new program will offer lower interest rates and higher loan-to-value ratios in order to both encourage green development and assist developers and investors turn a higher profit on green projects.

NRB will offer a 1/8th percent discount on loans to commercial or multi-unit residential LEED projects (though details regarding how NRB will determine whether a particular LEED project qualifies for the discount were not disclosed either by BD+C or on the NRB web site, as far as I can tell). An eighth of a percent doesn’t sound like much, but for a five million dollar loan, it provides a developer with over sixty thousand dollars in savings over the course of ten years.

In terms of funding green projects, the bank will provide construction loans up to eighty percent of a qualifying project’s value as opposed to the standard seventy-five percent. So, for a ten million dollar project, the bank will fund an eight million dollar loan, leaving an extra $500,000 in the developer’s pocket that it will, presumably, use towards securing various green design elements that it might not otherwise have incorporated into the structure. NRB will also extend the higher loan-to-value ratio to green real estate refinancing and acquisitions that qualify as well.

Perhaps most interestingly, NRB plans on tracking how, and if, the returns on the green buildings it funds justify the increased leverage that the bank is offering (though I was unable to ascertain any details on these efforts). NRB is also “open to alternative approaches to demonstrat[ing] green design excellence” when evaluating green projects for financing under the program; should it ultimately qualify projects under other rating systems besides LEED, this may say something about LEED’s effectiveness at accurately quantifying the performance level of green buildings.

Either way, NRB’s new program is definitely one to keep an eye on as more details are revealed and the bank begins to disperse these green loans during the course of 2007.

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