The missing link: Transforming deep retrofits into financial assets

Scott Muldavin, Roy Torbert and Michael Bendewald

Corporate Real Estate Journal, 2014, vol. 3, issue 3, 244-259

Abstract: Deep retrofits — those saving 50 per cent or more energy and achieving superior sustainability performance — are valuable yet largely untapped financial assets. This paper describes how to calculate all the value created by deep retrofits, radically changing the value proposition of deep retrofits, enabling such investments to take their proper role as a central driver of company performance. Many corporations have steadily improved the energy and sustainability performance of their buildings, primarily to minimise operating costs and keep pace with changing codes and standards. Many also have been searching for financially viable approaches to expand sustainability efforts to meet growing customer, employee and investor demand, but have struggled to link deeper energy/sustainability retrofits to attractive financial performance. This paper presents the ‘missing link’: how to calculate and present the value created by deep retrofits of corporate real estate. The deep retrofit value model for corporations consists of nine ‘value elements’ organised around a traditional business valuation framework that starts with an evaluation of retrofit property costs and risks, and then details how a deep retrofit affects business costs, revenues and risks. If implemented broadly, corporations will enhance their competitive position and financial performance while helping to transform global energy use to create a clean, prosperous and secure future.

Keywords: corporate real estate; energy management; sustainability; decision making; capital budgeting; facilities management (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:aza:crej00:y:2014:v:3:i:3:p:244-259

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