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Belgian REIT Follows French Legislation By Incorporating Environmental Appendix Into Parisian Net Lease


An EHPAD facility in Paris, designed by Lazo & Mure. There are 5000 EHPADs in France.

The Brussels-listed real estate investment trust Cofinimmo S.A. (Euronext: COFB) recently announced the acquisition of an EHPAD nursing home facility in Paris for just under 21 million Euros. At closing, it simultaneously signed at 12-year triple-net lease with the French healthcare provider Orpea. But more importantly the parties included as an appendix to the lease a set of green lease obligations in accordance with France’s Grenelle de l’Environnement legislation, an aggressive legislative initiative that includes a number of laws aimed at curbing energy use within the built environment.

The Grenelle de l’Environment was launched in 2007 as a working group with representatives from both private and public sector players in France to develop policy initiatives aimed at adressing climate change. Grenelle I and II refer to the sequence in which those initiatives are to be adopted by France’s National Assembly and Senate.

Grenelle II requires that an environmental appendix must be included with leases entered into for office or retail purposes larger than 2000 square meters. The requirement took effect as of January 1, 2012 for leases signed or renewed as of that date, and will trigger on July 14, 2013 for existing leases (which is why many entities – like Cofinimmo – are proactively adding appendices before the legislation takes effect).

The environmental appendix must include information on actual water and energy consumption, waste treatment, heating, cooling, ventilation, and lighting equipment in the building. In the appendix, the landlord and tenant must also establish a mechanism for continuously monitoring the energy performance of the premises in order to reduce consumption.

By way of additional background, Grenelle I imposes the following requirements:

  • On existing buildings: decrease energy consumption by 38 percent by 2020 and establish a primary energy consumption threshold of 150 kilowatt hours per square meter per year. By 2050, average energy consumption of primary energy for existing buildings should not exceed 50 kWh per square meter per year.
  • On newly constructed buildings: recommendation for low energy consumption buildings (less than 50 kWh per square meter per year beginning January 1, 2013.
  • For all buildings: by 2021, all buildings should be positive-energy (i.e. generate more energy than they consume).

In addition to the environmental lease appendix, Grenelle II will also impose the following requirements:

  • Beginning January 1, 2017, all buildings must perform an energy performance diagnosis (if they have heating or cooling installations, not a given in France).
  • “Carry out works” for increasing the the energy efficiency of buildings by January 1, 2020.

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