Why Multifamily Developers Are Investing in Sustainable Development

It’s difficult to calculate the ROI of green development, but it can be rewarding in the long run.

Jessica Fiur, Editor-in-Chief

Jessica Fiur, Editor-in-Chief

It’s important to be sustainable.

We all know this.

To misquote Gordon Gekko in 1987’s Wall Street: Green, for lack of a better word, is good.

Multifamily developers want to build more eco-conscious communities. And renters want to live in them. According to a recent AMLI Residential survey, 43 percent of respondents consider green features when they are looking at apartments.

But does it financially make sense to build green multifamily properties? (Not that we all have to agree with Gekko’s actual quote about “greed” being good, but we do all need to stay solvent.)

It’s hard to calculate a sustainable apartment’s ROI. As Ganesan Visvabharathy of Hawthorne Development Corp. told Robyn Friedman in “Reckoning ROI for Green Multifamily Development,” factors include the capital stack, the cost of debt and equity and the period of holding.

However, while new builds might not see favorable returns right away, you might be able to see lots of savings down the line. Plus, tax credits can help cover some of the original burden.

“It’s quite a big incentive,” Michael Zaransky of MX Capital Partners told Friedman of the tax credits. “With that and the energy savings over time, the return on investment is actually pretty good.”

Doing good things for the environment and getting a positive ROI? Seems like multifamily developers can gain a lot by going green.

“It’s not brain surgery,” Zaransky said.

Find out more about how to determine the ROI of green development in our issue. I’d also love to hear your thoughts on this! Email [email protected].

Read the October Digest.

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