Friday, February 17, 2017 at 12:00pm to 1:30pm
Lewis Hall (RGL), 308
650 Childs Way, Los Angeles, CA 90089
Sustainable Development and Commercial Real Estate Financing
Federal Reserve Bank of Philadelphia
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Using a novel dataset that matches commercial mortgage and green building information, we study the impact of green development on the default risk, interest rate and loan terms of commercial mortgage-backed securities (CMBS) loans. We find the default risk of office CMBS loans is reduced by 30 percent after the property becomes Energy Star labelled or LEED certified, ceteris paribus. The impact at least partially comes from enhanced property operating efficiency, instead of solely from the green label. Green property loans also enjoy better loan terms than non-green property loans: they have lower interest rate but significantly longer interest-only periods.