1. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL Arch. Antonella Mazzeo, MBA, Luiss Business School Prof. Giacomo Morri, Director Master in Real Estate - SDA Bocconi APPRAISERS

2. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL A few questions in a today market How to incorporate green issues into value in the mid term? Does the conventional evaluating model fit the Green Property ? How can we improve the conventional evaluating model in the mid term? How to incorporate green issues into value in the mid term? Does the conventional evaluating model fit the Green Property ? How can we improve the conventional evaluating model in the mid term?

3. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi AGENDA  Green Issues and Value  An evaluating model in the mid term  A Case Study in Rome, Italy  Future Scenario  Green Issues and Value  An evaluating model in the mid term  A Case Study in Rome, Italy  Future Scenario A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL

4. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi  Sustainable Sites and Community Connectivity  Water and Energy Efficiency  Atmosphere  Materials & Resources  Indoor Environmental Quality  Innovation & Design Process GREEN ISSUES AND VALUE * Categories by main sustainable certification processes A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL REVENUES (RENT) EXPENSES RISK

5. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi  Saving money  Risk Mitigation  Energy Saving  Water Saving  Space Saving  Productivity Increasing (?)  Insurance Saving (?)  Process Performance Optimization  Feature Performance Increasing  Building Performance Increasing  Market Performance Increasing  Financial Performance Increasing GREEN ISSUES AND VALUE A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL

6. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi How many comparables in Italy? Energy Efficiency Green Buildings Number of Buildings Sustainable Buildings Sustainable Buildings EFFICIENCY EFFICACY ECONOMY GREEN ISSUES AND VALUE A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL

7. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi Does the traditional evaluating model match the Green Property ? How to link Rental Grow Depreciation Risk Premium Cash flow To GREEN ? A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL AN EVALUATING MODEL IN THE MID TERM CASH FLOW ANALYSIS 12 … …n-1n + Base Rental Revenue - Base Rent Abatements BASE RENTAL INCOME - Vacancy & Collection Loss EFFECTIVE GROSS INCOME - Operating Expenses - Insurance costs - Maintenance costs - Real Estate Taxes NET OPERATING INCOME PV= CF / (1+r) t

8. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL PV= CF / (1+r) t Past / Present Mid term Value = Income / Capitalization rate Rent Vacancy Expenses Rent Vacancy Expenses Views Finishes Flexibility Views Finishes Flexibility Illiquidity Investment Urbanistic Illiquidity Investment Urbanistic Use Location Maintenance Quality Tenant Lease structure Last of lease contract Use Location Maintenance Quality Tenant Lease structure Last of lease contract Location Amenities Design Ability to attract tenant Location Amenities Design Ability to attract tenant Process performance Feature performance Building performance Market performance Financial performance Process performance Feature performance Building performance Market performance Financial performance Operating Electricity, heating, cooling, utilities Maintenance HVAC and finishes Cap Ex Construction costs Operating Electricity, heating, cooling, utilities Maintenance HVAC and finishes Cap Ex Construction costs Add in= Other Risk Rent Vacancy Expenses Rent Vacancy Expenses Health space planning Operating saving Productivity Health space planning Operating saving Productivity Reflecting brand & image Operating & space saving Reflecting brand & image Operating & space saving Maintenance saving AN EVALUATING MODEL IN THE MID TERM

9. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL CONVENTIONAL BUILDINGS Green Building issues Levers of value P.V. Revenues Finishes Energy saving Water saving Less absenteism Higher productivity Finishes Energy saving Water saving Less absenteism Higher productivity Healt space planning (core and shell dimension, windows sizes, mechanical ventilation rate) Healt space planning (core and shell dimension, windows sizes, mechanical ventilation rate) Process performance Feature performance Building performance Market performance Financial performance Process performance Feature performance Building performance Market performance Financial performance Lower vacancy Better tenant Lower vacancy Better tenant Maintenance saving Insurance saving Maintenance saving Insurance saving ExpensesRisks + Rent per Area Rentable Area Risk Stability of Rent Maintenance & Insurance costs Maintenance & Insurance costs + Rent - Discounted Rate- Expenses CAP RATENET OPERATING INCOME PRICEPRICEVALUEVALUE AN EVALUATING MODEL IN THE MID TERM

10. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL AN EVALUATING MODEL IN THE MID TERM BUILDING CASH FLOW ANALYSIS12 … …n-1 n + Base Rental Revenue + Space saving - Base Rent Abatements BASE RENTAL INCOME ADD: + Energy Saving + Water Saving + Health and Worker Saving Costs (Productivity) + Energy Producing + Government Incentives (+ Green Certification sell) + Turnover Vacancy - Capital expenditures POTENTIAL GROSS INCOME - Vacancy & Collection Loss EFFECTIVE GROSS INCOME - Operating Expenses - Real Estate Taxes (+ Green Design & Construction) (+ Contracts ) - Insurance cost - Maintenance Costs NET OPERATING INCOME RENEWABLE ENERGY CASH FLOW ANALYSIS +

11. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi Building Features  6900 square meters office  1 story underground  4 stories Building Features  6900 square meters office  1 story underground  4 stories Building Performance  energy efficiency 45%  water efficiency 50%  70 more workers Building Performance  energy efficiency 45%  water efficiency 50%  70 more workers DCF Assumptions for the Initiative REVENUES (first year)  + traditional rent revenues :  +10% office vacancy rate ( first year)  + space efficiency saving  1% office vacancy rate (over years)  + energy efficiency saving  + water efficiency saving  + productivity/ + absenteeism reduction (10%)  + government incentives (for 5 years) (building energy, retrofitting, solar panel, HVAC)COSTS maintenance insurance DCF Assumptions for the Initiative REVENUES (first year)  + traditional rent revenues :  +10% office vacancy rate ( first year)  + space efficiency saving  1% office vacancy rate (over years)  + energy efficiency saving  + water efficiency saving  + productivity/ + absenteeism reduction (10%)  + government incentives (for 5 years) (building energy, retrofitting, solar panel, HVAC)COSTS maintenance insurance about € 1.900.000 about € 230.000 about € 30.000 about € 8.000 about € 15.000 about € 190.000 about € 2.300.000 about € 2.100.000 About € 45.000 -10% - we consider - REVENUES from green A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL A CASE STUDY IN ROME, ITALY REVENUES from renewable technology (incentives from GSE + direct sell + energy not paid to electricity deliverer)

12. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL Health space planning Operating saving Health space planning Operating saving AN EVALUATING MODEL IN THE MID TERM Add in

13. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL Productivity Indoor Environmental Quality Productivity Indoor Environmental Quality AN EVALUATING MODEL IN THE MID TERM Add in

14. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL A CASE STUDY IN ROME, ITALY Evaluating a building with the “add in” evaluating model gives an extra MARKET VALUE of 20%.

15. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi FUTURE SCENARIO A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL Green Buildings > Conventional Buildings Green Buildings < Conventional Buildings Long term.............................. ≥ 10 years EVALUATION MODELING RENT UTILITIES RENT UTILITIES

16. ERES 2010 MILANO Arch. Antonella Mazzeo, MBA ; Prof. Giacomo Morri, SDA Bocconi FINE A “MEDIUM TERM” ADD IN PROPOSAL FOR GREEN PROPERTY APPRAISAL THANK YOU FOR YOUR ATTENTION