Deep Retrofit Value Reports
Determining how these additional sources of value can be quantified—and how they enhance the business case—happens through the preparation of a well-reasoned and supported deep retrofit value (DRV) report. There are three steps to developing the DRV report, which can then be presented as part of a retrofit capital request:
1. Conduct a preliminary analysis to improve the efficiency and effectiveness of the following two steps. This analysis should build support for incorporating value considerations, identify and prioritize efficiency opportunities across the entire portfolio, determine financial and non-financial decision metrics, and include an assessment of the organizational context influencing retrofit decisions.
2. Assess the value elements of a deep retrofit, in addition to energy-cost savings. The five elements listed previously serve as a menu of the potential types of value that a deep-energy retrofit can create. Each element detailed in the report is accompanied by a thorough methodology on how to assign and calculate value.
For example, the process for the analysis and calculation of a sales price premium due to sustainability performance improvements in an office building is presented in four steps. Step one entails background research and analysis to provide support for the assumptions and analyses of sales price premiums. In steps two through four, marginal retrofit effects on net operating income and residual capitalization rates are estimated to enable direct calculation of the sales price premium.
It’s important to note that it is not necessary to evaluate and present all five value elements; only those applicable to a particular retrofit project or portfolio strategy are necessary.
3. Develop a DRV report based on an evaluation of selected value elements that enables a compelling presentation to decision-makers and other important stakeholders. A sample DRV report is included in the guide to provide an illustration of how the calculations and analyses completed for each of the five value elements come together in a document to support a specific deep-retrofit decision.
Download the practice guide for the sample DRV report that provides an illustration of how the calculations and analyses completed for each of the five value elements come together in a document to support a specific deep retrofit investment decision.
To arm investors and managers with the skills they need to spur investment in deep retrofits, RMI is working with the Chicago-based Institute of Real Estate Management (IREM), whose Certified
Property Managers manage more than 13 billion square feet of nonresidential real estate worth over $800 billion in asset value, to develop three deep-retrofit value online courses and an accompanying tool based on the new practice guide.
The courses will show portfolio managers, property managers, asset managers, project managers, and others in the investment real-estate industry how to analyze the financial impact of deep energy retrofits and make a compelling case to move projects forward with owners, investors and other stakeholders. They will also qualify for state-licensed continuing education and other mainstream accreditations. RMI and IREM are partnering with real-estate investor organizations to train staff to support the integration of RMI’s deep-retrofit value methodology into investment decisions as these courses are introduced in the coming months.
Moving forward, RMI hopes to highlight more real-world examples of leaders taking values beyond energy-cost savings into account during their retrofit decision-making. These examples further build confidence in the methodology and promote increased investment in energy efficiency.
Please contact Douglas Miller if you have already taken these values into account, are interested in piloting the methodology or would like to hear more about RMI–IREM courses.