LL97 Fines in CRE Underwriting
How LL97 fines impact CRE deal economics, with a real example
I stood on the rooftop of a 312K RSF Class B office building in Midtown East, going over the LL97 compliance plan with the building engineer. The actual 2023 emissions were 5,180 tCO2e, exceeding the LL97 emissions limit of 4,250 tCO2e by 930 tCO2e. At $268/tCO2e, the fine for 2024 would be $249K.
LL97 Fine Calculator
The LL97 fine calculator is a crucial tool for CRE underwriting, as it helps estimate the potential fines and their impact on deal economics. According to NYC Local Law 97 Article 320, buildings with emissions exceeding the limit will be subject to a fine of $268/tCO2e. In our example, the total fine would be $249K, which would increase carrying costs by $100K.
LL97 fines can increase carrying costs by $100K, with a 0.5% cap rate impact and 2% NOI haircut, as seen in a real example of a 312K RSF Class B office building with a $249K fine.
CRE Underwriting and ESG
ESG considerations, including climate risk and energy efficiency, are becoming increasingly important in CRE underwriting. As seen in our example, LL97 fines can have a significant impact on deal economics, with a 0.5% cap rate impact and 2% NOI haircut. Climate risk and CRE underwriting require careful consideration of these factors.
ESG considerations, including climate risk and energy efficiency, are crucial in CRE underwriting, with LL97 fines having a significant impact on deal economics.
Frequently Asked Questions
How much is an LL97 fine?
$268/tCO2e
Does LL97 apply to my building?
Check NYC Local Law 97 Article 320
When do LL97 period-2 limits start?
2030