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The Green Column: Investment groups helping fund eco-friendly projects


Published:   |   Updated: July 19, 2013 at 04:50 PM

Investment groups are taking up the slack left by slow-moving private lenders, finance groups, equity companies and banks when it comes to capital for green projects and renovations.

Meridian Capital Group is New York City's largest commercial mortgage brokerage firm, but managing director Jonathan Stern says the company doesn't do that type of lending because "the market just isn't quite there yet," according to an article by Jennifer V. Hughes in the National Real Estate Investor online magazine.

Some smaller banks, lenders and equity companies, however, are tapping into what is becoming a growing marketplace.

Chicago-based Green Choice has less than $100 million and its loans come in at $1 million and under. "This is a market that has been completely overlooked by major financial institutions, but it's also an area that has the biggest impact on the community," says Levey.

For example, Green Choice might loan 65 to 75 percent of the cost of a sustainable project, with an interest rate between 6 and 7 percent, a payback period of 15 to 25 years and a term on the loan of three to five years, Hughes explained.

Douglas Lawrence, managing principal of 5 Stone Green Capital LLC, calls his firm "the only game in town." Launched in January, the New York- and Washington, D.C.-based equity firm is raising capital and has seven deals in the works. One is a mixed-use new construction development in Baltimore.

"We've put in $2 million with the option for more capital," says Lawrence. "We expect to get very strong returns, in the high mid-teens."

Lawrence, Hughes writes, believes it's about lowering the bottom line.

"Real estate is a 40-year asset class and most of the cost is from year two through year 40," Lawrence explained. "If we can materially reduce operating expenses, we are going to have a great impact on the bottom line. I'd rather take 39 years of reducing operating expenses by using green technology to enhance my annual cash flow than worry about a 1 percent premium in the cost of building green."

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