1. Sustainable performance
and value : Finding the links
how to work with the necessary complexity or several key performance
indicators throughout the different real estate professions.
Frank Hovorka
Head of real estate sustainable policy

2. Key figures of CDC group
■ Consolidated assets: €255.6 billion
■ Equity: €19.2 billion
■ Funds managed by Caisse des Dépôts: €224 billion
■ Rating: AAA/Aaa
Unique status:
Caisse des Depôts has a unique status enshrined in the founding law dating from 1816
whereby it was “placed, under the most special surveillance and guarantee of the
legislative authorities”.
The Chairman and Chief Executive Officer of Caisse des Dépôts is appointed by a
decree of the President of the French Republic and takes the following oath of office
before the Supervisory Committee:
“I swear… with all of my powers to uphold the inviolability of Caisse des Dépôts.”.
2 3 novembre 2011

3. Caisse des Dépôts Group
■ manages from public regulated savings accounts and invests these on a secure basis in
projects in the public interest, particularly social housing,
■ acts as public banker to the judicial and social security systems,
■ manages public and semi-public pension schemes,
■ invests in regional and local development alongside local authorities,
■ acts as a long-term investor in the French economy,
■ participates in national economic development via its subsidiaries.
Caisse des Dépôts comprises the public institution and a number of subsidiaries:
■ business and infrastructure financing: Strategic Investment Fund, CDC Entreprises
Qualium Investissement, CDC Infrastructure
■ personal insurance: CNP Assurances
■ real estate: SNI group, Icade
■ services: Transdev, Egis, Compagnie des Alpes and Belambra
■ Environment: CDC Climat, Société Forestière and CDC Biodiversité.
3 3 novembre 2011

4. Value through cities ranking
Attractivity:
■ Cultural
■ Connectivity
■ Density
■ People education
■…
Tomorrow: Green City Index ?
4 3 novembre 2011

5. Examples: Lyon
■ Rationale – to improve Lyon’s conurbation's
ranking and to improve social cohesiveness
■ Initiated by Raymond Barre (1997)
■ Bringing together 54 municipalities
■ A united, competitive conurbation: 21
priorities for the 21st century
■ A conurbation opened to other cultures
and the world at large
■ An attractive liveable conurbation
■ A conurbation encouraging the spirit of
enterprise
■ A conurbation encouraging life-long
learning
■ A conurbation putting participatory
democracy to work
5 3 novembre 2011

6. Examples: Lyon
■ The Plan of Action for Technopolitan Metropolis (three poles: a top
ranking scientific and academic pole; a sport and entertainment pole, a
leisure zone)
■ The Bienalle de la Danse
■ The Science and Society Museum
6 3 novembre 2011

7. Examples: Bilbao
■ Early 1990s – collapsed shipbuilding industry, 30% unemployment,
aggravated environmental problems
■ Mobilisation of local actors – new vision to be developed using
prospective methodology
■ Five aims:
■ Identification of opportunities in the new economic sectors
■ Taking account of long-term results
■ Connecting the economy to the civil society
■ Providing a collaborative leadership
■ Masterminding the regeneration process
7 3 novembre 2011

8. Examples: Bilbao
■ 50% of initiatives proposed were put in effect
■ Flagship projects serving as catalysts
The Guggenheim Museum
The new Waterfront
The Underground
The Euskalduna Conference
& Concert Hall
8 3 novembre 2011

9. Planning vs. Futures
‘Traditional’ Planning ‘Futures’ Planning
Perspective Partial, ‘everything else being Overall, ‘nothing else being equal’
equal’
Variables Quantitative Qualitative
Objective Subjective
Known Unknown
Relationships Statistical Dynamic
Stable Structures Emerging Structures
Explanation Past explains the present Future is the raison d’etre of the
present
Picture of the Future Simple & certain Multiple & uncertain
Method Deterministic and Qualitative, behavioural and
Quantitative models stochastic models
Attitude to the Future Passive or adaptive (the future Active and creative (the futures is
will be) shaped)
9 3 novembre 2011

10. How will you be working?
How will you live?
What will you stand for?
The professional challenge
10 3 novembre 2011for the 21st Century

11. Urban morphology and flows
People
Infrastructure, connectivity
mobility
Land use
Flows : people and
goods
Land property and
regulations impact
Build shape, energy impact
and waste management
11 3 novembre 2011 Source: S. Salat urban morphology lab

12. Example : a smartgrid for what?
12 3 novembre 2011 Source: IISBE Salat, Bourdic, Larson, Hovorka

13. Towards Synergy Grids
Optimization of supply and demand for neighborhood-scale
systems
■ Buildings with a deficit or surplus of :
■ thermal energy;
■ domestic hot water;
■ grey water;
■ DC power;
■ parking spaces;
■ Owners of private electric vehicles with a deficit or surplus of DC
power
13 3 novembre 2011

14. Towards Synergy Grids
14 3 novembre 2011 Source: IISBE Salat, Bourdic, Larson, Hovorka

15. Structuring and Sizing Grids
« Scale Free Complexity » concept
Each level of the grid has to display the same level of complexity,
no matter the scale considered
15 3 novembre 2011 Source: IISBE Salat, Bourdic, Larson, Hovorka

16. Structuring and Sizing Grids
Insights from hard-core thermodynamics:
Power laws
Energy
Scale free
complexity Efficiency
Hausmannian Paris
16 3 novembre 2011
Source: IISBE Salat, Bourdic, Larson, Hovorka

17. Structuring and Sizing Grids
Most of the natural networks display scale free
complexity, to optimise energy efficiency
Neuronal networks Trees Blood systems
17 3 novembre 2011 Source: IISBE Salat, Bourdic, Larson, Hovorka

18. Example: district of tomorrow in Netherlands
The Site/district: no fossil fuels allowed
Energy
All functions selfsupplying or from overall production unit ( winturbines etc)
Materials
Reduction and preference for renewable materials, regionally and locally produced
Water
All water going out as clean as it came in.
Land
net built upon land increase = 0. ( That is the equal surface has to become available for other functions ( stack
functions, energyroof, greenhousesroof etc)
Food:
Active search for combination that involve food production
Economy/regulations
Research will be started with market parties to find creative and constructive financial solutions for market
introduction and policy/regulation support
18 3 novembre 2011

19. Besides houses, many other
elements are developed,
Food and energy 0-energy or designed, constructed and
production plus houses researched
testing Urban Material-neutral
windturbines houses
4 Exergy concept
Service
centre 2
3 Renewable material
production
1
Mini-
0-water district hydropower
Electric transport Sustainable road
(retrofit car)
19 3 novembre 2011 PV loading station Public lighting as
service

20. For constructing the projects we created:
Tender “Sustainable shopping”
Buying materials and products for construction of
the 1st house in an open tender for innovative
offers by the market.
Some of the selection criteria :
- Material criteria
- Energy criteria
- Way of Delivery
- Proposed financial construction
- ‘Service’ offer in stead of product buy
- co-operational variants
20 3 novembre 2011

21. Value :
■ Location
■ Connectivity infrastructure
■ Local services and shops (density)
■ Security
■ Attractivity ( image…)
■ Quality
■ Indoor environemental quality
■ Energy performance
■ Lifespan
■ flexibility
21 3 novembre 2011

22. From past market mirror to valuation
22 3 novembre 2011
Source : D. Lorentz

23. Uncertainty
23 3 novembre 2011 Source: S Sayce

24. Risk management
24 3 novembre 2011

25. How sustainability impacts market value of
real estate
• Changes in tenants expectations • Lower costs for maintenance and servicing
(+) activities (-)
• Lower share of operating costs (+) • Lower investments to sustain building at
market level (-)
• Lower costs of fittings (+)
• Lower rent waivers (-)
Market net operating income (market rent – owner’s operating costs)
=
value Cap rate (risk free rate + risk premium – growth + depreciation)
• More cash flow (-) • Competitiveness (+) • Longer life span (-)
• Improved marketability (-) • Rising energy costs (+) • Longer compliance with
increasingly stringent
• Shorter vacancy periods (-) • Sustainability hype (+) legislation (-)
From Dr. David Lorenz, MRICS
25 3 novembre 2011
25

26. Recent research results
Criteria Research name Parution impact
Miller & al. 2008 0 to 3%
Eichholtz, Kok & Quigley 2008 et 2009 3 to 6%
Rental value Fuerst & McAllister 2008 et 2009 4 to 6%
Pivo & Fisher 2009 5%
Leopoldsberger & al. 2010 0 to 6%
Wiley & al. 2010 7 to 17%
Salvi & al. 2008 3 to 7%
Miller & al. 2008 6 to 10%
Asset valuation
Eichholtz, Kok & Quigley 2009 16%
Fuerst & McAllister 2009 31 to 35%
Pivo & Fisher 2009 13%
Fuerst & McAllister 2010 3 to 8%
Occupancy rate
Wiley & al. 2010 10 to 18%
26 3 novembre 2011

27. Survey in Australia
27 3 novembre 2011

28. Additive versus Integrative Approach
28
28 3 novembre 2011
Source T. Lutzkendorf

29. “Longlist” of valuation-relevant property characteristics
& attributes (main structure)
Main criteria groups Sub-criteria groups
National market
Location Macro-location
Micro-location
Characteristics and configuration
Plot of land
Surroundings
Basic building description
Sustainability-aspects
aspects
Technical quality
Functional quality
Building Environmental qulity
Design / Aesthetic quality
Urban design quality
Cultural value
Health / comfort / satisfaction of inhabitants,
user and visitors
Market
Payments-in
Economic quality / Payments-out
cash flow Vacancy / Letting situation
Tenant and occupier situation
Building Image Brand value / Other
Planning quality
29
29 3 novembre 2011 Construction quality
Process quality
Management quality

30. Valuation sensitivity
30 3 novembre 2011
Source T. Lutzkendorf

31. Example of energy : NZEB during the
life cycle?
Embodied
energy
Building needs
(conventional Transport
calcul)
Specific Specific Embodied
Mobility use energy
use
electricity
Building Local
needs renewable
energy
Local renewable
production
3 3 novembre 2011 or
novembre 2011 Source: Franck Richard ADP
31
31 At construction In use per year
Département Etudes, Planification Stratégique et Développement Durable
refurbishment

32. Energy linked to a building: 4 main
blocks
Building energy Specific electricity
Actual new building:
130 to 250 kWhep/m²/an Housing :
10 à 50 kWhep/m²/an
NZEB :
40 to 65 kWhep/m²/an Office:
30 to 300 kWhep/m²/an
Embodied energy Transport
New building : French average daily distance:
≈ 1200 kWhep/m² 16km
« As usual »NZEB: 20 km :
≈ 1600 kWhep/m² by car : 6450 kWhep/an
bus: 630 kWhep/an
32 3 novembre 2011

33. Energy and Carbon
■ NZEB : Production ≥ use
0,25 m² PV/m²
P Embodied
V energt
50 kWhEP/m².a
Energy in use
-2,5 kgCO2/m².a 50 years ?
2,5 kgCO2/m² =renewable production
Zéro Carbon
2,1 m² PV /m² !!!
Energie Carbon emission
PV PV grise
bâtiment
throughout lifespan
50 kWhEP/m².a
2,5 kgCO2/m²
Consommation 50 ans
-23 kgCO2/m².y
25 years :lifespan
of PV cells Renewable production
33
33 3 novembre 2011

34. Transparency and follow up
Mandatory design construction In use
Simulation Metering Real consumption
- Construction - regular metering
-Calcul hypothesis
Mandatory quality - Tuning from hypothesis
input
calculation - Maintenance and
- needed metrology
modification
- Bioclimatism for checking and
tuning
Performance Performance
waranty at waranty in use
delivery
34
34 3 novembre 2011

35. COOPERATION – Data is valuable
Source: Lützkendorf and Lorenz, 2011
Manufacture /
Production
Planning / Disposal &
Design / Recycling
Engineering
Construction /
Facility
Commissioning /
Management
Modernisation
35 3 novembre 2011

36. Conclusion
■ Changing legislative environment
■ Changing market landscape
■ Changing occupier behaviour
■ Changing investor strategies
■ Changes to future value
36 3 novembre 2011