Sustainable performance Sustainable performance and value : Finding the links
how to work with the necessary complexity or several key performance indicators throughout the different real estate professions.
Frank Hovorka
Head of real estate sustainable policy
Key figures of CDC group
■ Consolidated assets: €255.6 billion■ Equity: €19.2 billion■ Funds managed by Caisse des Dépôts: €224 billion■ Rating: AAA/Aaa
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Unique status:
Caisse des Depôts has a unique status enshrined in the founding law dating from 1816whereby it was “placed, under the most special surveillance and guarantee of thelegislative authorities”.The Chairman and Chief Executive Officer of Caisse des Dépôts is appointed by adecree of the President of the French Republic and takes the following oath of officebefore the Supervisory Committee:“I swear… with all of my powers to uphold the inviolability of Caisse des Dépôts.”.
Caisse des Dépôts Group
■ manages from public regulated savings accounts and invests these on a secure basis in projects in the public interest, particularly social housing,
■ acts as public banker to the judicial and social security systems,■ manages public and semi-public pension schemes,■ invests in regional and local development alongside local authorities,■ acts as a long-term investor in the French economy,■ participates in national economic development via its subsidiaries.
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■ participates in national economic development via its subsidiaries.
Caisse des Dépôts comprises the public institution and a number of subsidiaries:■ business and infrastructure financing: Strategic Investment Fund, CDC EntreprisesQualium Investissement, CDC Infrastructure■ personal insurance: CNP Assurances■ real estate: SNI group, Icade■ services: Transdev, Egis, Compagnie des Alpes and Belambra■ Environment: CDC Climat, Société Forestière and CDC Biodiversité.
Value through cities ranking
Attractivity:■ Cultural■ Connectivity■ Density■ People education
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■ People education■ …
Tomorrow: Green City Index ?
Examples: Lyon
■ Rationale – to improve Lyon’s conurbation's ranking and to improve social cohesiveness
■ Initiated by Raymond Barre (1997)■ Bringing together 54 municipalities■ A united, competitive conurbation: 21
priorities for the 21st century■ A conurbation opened to other cultures
and the world at large
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and the world at large■ An attractive liveable conurbation■ A conurbation encouraging the spirit of
enterprise■ A conurbation encouraging life-long
learning■ A conurbation putting participatory
democracy to work
■ The Plan of Action for Technopolitan Metropolis (three poles: a top ranking scientific and academic pole; a sport and entertainment pole, a leisure zone)
■ The Bienalle de la Danse■ The Science and Society Museum
Examples: Lyon
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Examples: Bilbao
■ Early 1990s – collapsed shipbuilding industry, 30% unemployment, aggravated environmental problems
■ Mobilisation of local actors – new vision to be developed using prospective methodology
■ Five aims:
■ Identification of opportunities in the new economic sectors■ Taking account of long-term results
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■ Taking account of long-term results■ Connecting the economy to the civil society■ Providing a collaborative leadership■ Masterminding the regeneration process
■ 50% of initiatives proposed were put in effect■ Flagship projects serving as catalysts
Examples: Bilbao
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The Guggenheim MuseumThe new WaterfrontThe UndergroundThe Euskalduna Conference & Concert Hall
Planning vs. Futures
‘Traditional’ Planning ‘Futures’ Planning
Perspective Partial, ‘everything else being equal’
Overall, ‘nothing else being equal’
Variables QuantitativeObjectiveKnown
QualitativeSubjectiveUnknown
Relationships Statistical Dynamic
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Relationships StatisticalStable Structures
DynamicEmerging Structures
Explanation Past explains the present Future is the raison d’etre of the present
Picture of the Future Simple & certain Multiple & uncertain
Method Deterministic and Quantitative models
Qualitative, behavioural and stochastic models
Attitude to the Future Passive or adaptive (the future will be)
Active and creative (the futures is shaped)
How will you be working?How will you be working?How will you live?How will you live?
What will you stand for?What will you stand for?
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The professional challenge The professional challenge for the for the 2121stst CenturyCentury
Urban morphology and flows
People
Infrastructure, connectivity mobility
Land use
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Land use
Flows : people and goods
Land property and regulations impact
Build shape, energy impact and waste management
Source: S. Salat urban morphology lab
Example : a smartgrid for what?
3 novembre 201112 Source: IISBE Salat, Bourdic, Larson, Hovorka
Towards Synergy Grids
Optimization of supply and demand for neighborhood-scale systems
■ Buildings with a deficit or surplus of :■ thermal energy; ■ domestic hot water; ■ grey water;
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■ grey water; ■ DC power; ■ parking spaces;
■ Owners of private electric vehicles with a deficit or surplus of DC power
Towards Synergy Grids
3 novembre 201114 Source: IISBE Salat, Bourdic, Larson, Hovorka
Structuring and Sizing Grids
« Scale Free Complexity » concept
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Each level of the grid has to display the same level of complexity, no matter the scale considered
Source: IISBE Salat, Bourdic, Larson, Hovorka
Insights from hard-core thermodynamics:
Structuring and Sizing Grids
Power lawsScale free complexity
EnergyEfficiency
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Hausmannian Paris
complexity Efficiency
Source: IISBE Salat, Bourdic, Larson, Hovorka
Most of the natural networks display scale free complexity, to optimise energy efficiency
Structuring and Sizing Grids
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TreesNeuronal networks Blood systems
Source: IISBE Salat, Bourdic, Larson, Hovorka
The Site/district: no fossil fuels allowed
Energy
All functions selfsupplying or from overall production unit ( winturbines etc)
Materials
Reduction and preference for renewable materials, regionally and locally produced
Water
Example: district of tomorrow in Netherlands
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Water
All water going out as clean as it came in.
Land
net built upon land increase = 0. ( That is the equal surface has to become available for other functions ( stack
functions, energyroof, greenhousesroof etc)
Food:
Active search for combination that involve food production
Economy/regulations
Research will be started with market parties to find creative and constructive financial solutions for market
introduction and policy/regulation support
0-energy or plus houses
Material-neutral houses
Food and energy production
testing Urban windturbines
Besides houses, many other elements are developed, designed, constructed and researched
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Service centre
Electric transport(retrofit car)PV loading station
Renewable material production
0-water district
Exergy concept
Mini-hydropower
1
23
4
Sustainable road
Public lighting as service
For constructing the projects we created:
Tender “Sustainable shopping”
Buying materials and products for construction of
the 1st house in an open tender for innovative
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the 1st house in an open tender for innovative
offers by the market.
Some of the selection criteria :
- Material criteria
- Energy criteria
- Way of Delivery
- Proposed financial construction
- ‘Service’ offer in stead of product buy
- co-operational variants
Value :
■Location■ Connectivity infrastructure■ Local services and shops (density)■ Security■ Attractivity ( image…)
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■ Attractivity ( image…)
■Quality ■ Indoor environemental quality■ Energy performance■ Lifespan■ flexibility
From past market mirror to valuation
3 novembre 201122Source : D. Lorentz
Uncertainty
3 novembre 201123 Source: S Sayce
Risk management
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• Changes in tenants expectations (+)
• Lower share of operating costs (+)
• Lower costs of fittings (+)
• Lower costs for maintenance and servicing activities (-)
• Lower investments to sustain building at market level (-)
• Lower rent waivers (-)
net operating income (market rent – owner’s operating costs)Market=
How sustainability impacts market value of How sustainability impacts market value of real estatereal estate
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net operating income (market rent – owner’s operating costs)
Cap rate (risk free rate + risk premium – growth + depreciation)
Market
value=
• More cash flow (-)
• Improved marketability (-)
• Shorter vacancy periods (-)
• Competitiveness (+)
• Rising energy costs (+)
• Sustainability hype (+)
• Longer life span (-)
• Longer compliance with increasingly stringent legislation (-)
From Dr. David Lorenz, MRICS
Recent research results
Criteria Research name Parution impact
Rental value
Miller & al. 2008 0 to 3%
Eichholtz, Kok & Quigley 2008 et 2009 3 to 6%
Fuerst & McAllister 2008 et 2009 4 to 6%
Pivo & Fisher 2009 5%
Leopoldsberger & al. 2010 0 to 6%
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Leopoldsberger & al. 2010 0 to 6%
Wiley & al. 2010 7 to 17%
Asset valuation
Salvi & al. 2008 3 to 7%
Miller & al. 2008 6 to 10%
Eichholtz, Kok & Quigley 2009 16%
Fuerst & McAllister 2009 31 to 35%
Pivo & Fisher 2009 13%
Occupancy rateFuerst & McAllister 2010 3 to 8%
Wiley & al. 2010 10 to 18%
Survey in Australia
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Additive versus Integrative Approach
3 novembre 20112828Source T. Lutzkendorf
“Longlist” of valuation-relevant property characteristics & attributes (main structure)
Main criteria groups Sub-criteria groups
Location
National market
Macro-location
Micro-location
Plot of landCharacteristics and configuration
Surroundings
Basic building description
Technical quality
aspe
cts
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Building
Functional quality
Environmental qulity
Design / Aesthetic quality
Urban design quality
Cultural value
Health / comfort / satisfaction of inhabitants, user and visitors
Economic quality / cash flow
Market
Payments-in
Payments-out
Vacancy / Letting situation
Tenant and occupier situation
Building Image Brand value / Other
Process quality
Planning quality
Construction quality
Management quality
Sus
tain
abili
ty-
aspe
cts
Valuation sensitivity
3 novembre 201130Source T. Lutzkendorf
Example of energy : NZEB during the life cycle?
Building needs (conventional
calcul )Transport
Embodied
energy
3 novembre 201131 3 novembre 2011Département Etudes, Planification Stratégique et Développement Durable31 In use per yearAt construction or
refurbishment
calcul )
Specific use
Local renewable
energy
Embodied energy Mobility
Local renewable
production
Specific use
electricity
Building needs
Source: Franck Richard ADP
Energy linked to a building: 4 main blocks
Building energyBuilding energy
Actual new building: 130 to 250 kWh ep/m²/an
NZEB :40 to 65 kWh ep/m²/an
Specific electricitySpecific electricity
Housing : 10 à 50 kWhep/m²/an
Office: 30 to 300 kWh /m²/an
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Embodied energyEmbodied energy
New building : ≈ 1200 kWhep/m²
« As usual »NZEB: ≈ 1600 kWhep/m²
Transport
French average daily distance:16km
20 km :by car : 6450 kWh ep/anbus: 630 kWh ep/an
30 to 300 kWh ep/m²/an
Energy in use=renewable production
Embodied
energt
PV
50 kWhEP/m².a
■ NZEB : Production ≥ use
0,25 m² PV/m²
-2,5 kgCO2/m².a
Energy and Carbon
50 years ?
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=renewable production2,5 kgCO2/m²
� Zéro Carbon
Consommation
Renewable production
Energie grise
bâtiment
-23 kgCO2/m².y
2,1 m² PV /m² !!!
PVPV
50 kWhEP/m².a2,5 kgCO2/m²
-2,5 kgCO2/m².a
50 ans
25 years :lifespan
of PV cells33
50 years ?
Carbon emission throughout lifespan
Transparency and follow up
Simulation
-Calcul hypothesis
Metering
- Construction
Real consumption
- regular metering
Mandatory design construction In use
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Mandatory calculation
-Calcul hypothesis input
- Bioclimatism
- Construction quality
- needed metrology for checking and tuning
- regular metering
- Tuning from hypothesis
- Maintenance and modification
Performance waranty at
delivery
Performance waranty in use
COOPERATION – Data is valuable
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Manufacture / Production
Planning / Design /
Engineering Construction / Commissioning /
Modernisation
Facility Management
Disposal & Recycling
Conclusion
■ Changing legislative environment
■ Changing market landscape
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■ Changing occupier behaviour
■ Changing investor strategies
■ Changes to future value