{"type":"rich","version":"1.0","provider_name":"Transistor","provider_url":"https://transistor.fm","author_name":"Climate-Ready Real Estate Investing","title":"Capital Stack Design for Climate-Exposed Deals","html":"","width":"100%","height":180,"duration":614,"description":"EPISODE DESCRIPTION A climate-exposed deal is not an uninvestable deal. It is a deal that requires a different capital stack than a climate-resilient one. The climate-adjusted stack must accomplish four things that a standard stack does not: reserve for insurance trajectory over the hold period (not just at origination); reserve for certification capex as a ring-fenced tranche (not a deferrable contingency); build in financing optionality for green mortgage rates and EPC-conditioned refinancing; and stress-test the exit financing assumption for a buyer facing the same or tighter climate-exposed market at the end of the hold.This Strategy & Underwriting brief builds the climate-adjusted capital stack around a specific deal: an 85,000 square foot light industrial and logistics warehouse in a Hertfordshire logistics park, EPC rating D at acquisition, purchased at £14.5 million at a 6.25 percent cap rate. The thesis: reposition to EPC B and access green financing at the Year-3 refinancing window. The conventional stack versus the climate-adjusted stack comparison shows how ring-fencing £850,000 in green capex reserve at a lower LTV (60% vs. 65%) produces a Year-1 DSCR of 1.81x versus 1.67x, a Year-5 DSCR of 1.60x versus 1.48x, and a Year-3 refinancing event that returns approximately £1.8 million of equity to the investor while reducing the ongoing interest cost by 50 basis points.The seven-year return comparison makes the case: conventional stack unlevered IRR approximately 6.5 percent; climate-adjusted stack unlevered IRR approximately 7.0 to 7.5 percent. The 50 to 100 basis point advantage comes from three compounding sources — interest cost reduction on the Year-3 refinanced loan, a wider exit buyer pool compressing the exit cap rate by 50 basis points, and DSCR headroom from lower initial leverage. The word “ESG” is never required at an investment committee meeting.Episode SummaryEpisode 23 is the Strategy & Underwriting brief that bridges Episode 22’s debt...","thumbnail_url":"https://img.transistorcdn.com/edaVSiW7TDXFb72yvtrmHy0LDmwIgx2BDQFH-qalgqw/rs:fill:0:0:1/w:400/h:400/q:60/mb:500000/aHR0cHM6Ly9pbWct/dXBsb2FkLXByb2R1/Y3Rpb24udHJhbnNp/c3Rvci5mbS9hNmVk/NWUyYzI0MzJhN2Uz/YmQ4MTIxNmRlY2Yz/MzA2ZC5wbmc.webp","thumbnail_width":300,"thumbnail_height":300}