TY - JOUR
T1 - Green Buildings in Commercial Mortgage-Backed Securities
T2 - The Effects of LEED and Energy Star Certification on Default Risk and Loan Terms
AU - An, Xudong
AU - Pivo, Gary
N1 - Funding Information:
We thank two anonymous referees, Avis Devine, Nils Kok, Shimeng Liu, Pat McAllister, Norm Miller, Paige Mueller, Joe Nichols, Doug Poutasse, Andrew Sanderford, Jim Shilling, Chaoyue Tian, Bob White and participants at the 2015 RERI Research Conference and the 2015 AREUEA National Conference for their helpful comments. Financial support from the Real Estate Research Institute (RERI) is gratefully acknowledged. We are also very grateful to Real Capital Analytics, Redfin, Trepp and U.S. Green Building Council for providing invaluable data. The views expressed in this article do not necessarily represent those of the Federal Reserve Bank of Philadelphia or the Board of Governors of the Federal Reserve System. Any errors and omissions are solely the authors? responsibility.
Publisher Copyright:
© 2017 American Real Estate and Urban Economics Association
PY - 2020/3/1
Y1 - 2020/3/1
N2 - We study the impact of green building on loans in the CMBS market. A hazard model shows green buildings carry 34% less default risk, all else equal. A matched-sample analysis gives similar results. We attribute the effect to a loan-to-value channel, where risk is lowered by a green price premium. The benefit comes at least partly from the level of green achievement, not only the label itself. Loans on buildings that were green at loan origination have slightly better terms than loans on nongreen buildings. That difference is growing over time, but the effect is economically small compared to default risk.
AB - We study the impact of green building on loans in the CMBS market. A hazard model shows green buildings carry 34% less default risk, all else equal. A matched-sample analysis gives similar results. We attribute the effect to a loan-to-value channel, where risk is lowered by a green price premium. The benefit comes at least partly from the level of green achievement, not only the label itself. Loans on buildings that were green at loan origination have slightly better terms than loans on nongreen buildings. That difference is growing over time, but the effect is economically small compared to default risk.
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U2 - 10.1111/1540-6229.12228
DO - 10.1111/1540-6229.12228
M3 - Article
AN - SCOPUS:85039979993
SN - 1080-8620
VL - 48
SP - 7
EP - 42
JO - Real Estate Economics
JF - Real Estate Economics
IS - 1
ER -