Green Property Investment:
A Triple Bottom Line Role?
        TBLI Europe
        Paris, France
      November 15, 2007
  ...
Why Invest in Real Estate?
• Diversification: low
  correlation with equities
  and debt

• Stable long-term yields:
  Cur...
What about SRI alternatives?
• Real estate largely
  overlooked
• Unfilled market niche
  $2.3 trillion: U.S.
  €1.0 trill...
Who’s Leading the Charge?
Institute for Responsible
Investment:
  --Broad outreach to SRI
  & real estate industries
  --P...
What is RPI? Many aspects
 •   Walkable Urbanity (transit-oriented, walkable, mixed-use development)
 •   Urban Revitaliza...
Early Consensus Emerging
         Around Key Variables
•   Highest scoring variables, Pivo
    2006 expert survey:
    Ene...
Green Real Estate:
The Best Immediate SRI Fit?
What is Green Real Estate?
•   New constellation of development
    practices: addresses RPI energy,
    environment and u...
Rapidly Growing Market
• 5% U.S. market, 2006

• $11 billion built, U.S., 2006 (2%
  non-residential construction)

• Rapi...
Growing Global Experience
• Widely accepted
  standards
• LEED, Energy Star,
  Green Globes (U.S.,
  Canada)
• BREEAM (UK)...
Strong Green Value Proposition
• Green first costs: becoming
  competitive (1.5%- 2%
  premium, on average)
• Green: salab...
Emerging Trends in Green
• Institutional
  investor interest
• Greening existing
  portfolios
• Green funds
  emerging
• O...
Challenge: Most Vehicles are
           Private Equity
• Most of the action is in
  private equity
• Green private equity:...
Challenge: Few Public Vehicles
• Public vehicles are few.
• Investa Property Group:
  $6.2 BB under
  management, Australi...
Challenges: Social Equity,
              Leverage
• Social equity goals: risky,
  hard to implement,
  challenging locatio...
What Can SRI Investors Do To
         Drive Market?
• Standard definitions: LEED, BREEAM, HQE, etc. :
  link with other SR...
Take-aways
• Real estate is a smart investment
• Green real estate may be even smarter
• Unfilled SRI niche: ample room fo...
GREEN PROPERTY
      INVESTMENT:
AN EMERGING SRI MARKET
         Leanne Tobias
         Malachite LLC
        +1-301-229-1...
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Green Real Estate Investing: What Triple Bottom Line Investors Need to Know.

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Leanne Tobias, Principle - Malachite LLC - USA

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Transcript of "Green Real Estate Investing: What Triple Bottom Line Investors Need to Know."

  1. 1. Green Property Investment: A Triple Bottom Line Role? TBLI Europe Paris, France November 15, 2007 Leanne Tobias Malachite LLC +1-301-229-1558 www.malachitellc.com leanne.tobias@malachitellc.com Copyright April 2007
  2. 2. Why Invest in Real Estate? • Diversification: low correlation with equities and debt • Stable long-term yields: Current income with appreciation potential Greenpeace USA Washington, DC • Excellent inflation hedge
  3. 3. What about SRI alternatives? • Real estate largely overlooked • Unfilled market niche $2.3 trillion: U.S. €1.0 trillion: EU Minimal real estate option • Since 2005: new effort to make property investing socially responsible • SRI niche is being Artists for Humanity EpiCenter defined: Responsible Boston, USA property investing (RPI)
  4. 4. Who’s Leading the Charge? Institute for Responsible Investment: --Broad outreach to SRI & real estate industries --Permanent institute proposed: Center for Responsible Property Investment UNEP: International meetings, research, proposing global incentives for green real estate linked to Kyoto Round Hill Hotel & Villas, Jamaica Protocol IPCC: Real estate = climate change opportunity
  5. 5. What is RPI? Many aspects • Walkable Urbanity (transit-oriented, walkable, mixed-use development) • Urban Revitalization (e.g. infill development, brownfields) • Energy Conservation (e.g. conservation retrofitting, green power generation and purchasing, energy efficient buildings) • Environmental Protection (e.g., water conservation, recycling, habitat protection) • Social Equity and Community Development (e.g., affordable housing, community outreach, hiring and training, fair labor practices) • Worker Well-Being (e.g., plazas, indoor air quality, childcare on premises, handicapped access) • Health and Safety (e.g., property security, avoiding hazards, first aid readiness). • Local Citizenship (e.g. aesthetics, minimum neighborhood impacts, considerate construction, stakeholder engagement, historical preservation) • Corporate Citizenship (e.g., regulatory compliance, sustainability disclosure, independent directors, and adoption of independent voluntary codes such as LEED, Energy Star, Green Seal, UN Principles for Responsible Investment, and Global Reporting Initiative.) Source: Institute for Responsible Investment
  6. 6. Early Consensus Emerging Around Key Variables • Highest scoring variables, Pivo 2006 expert survey: Energy efficiency/ conservation Public transit/ transit oriented Central location/ livable- walkable Mixed use, high density Water conservation, recycling Daylight/natural ventilation Brewery Block II • Consensus dimensions: Portland, Oregon Energy/environment Pro-urban siting
  7. 7. Green Real Estate: The Best Immediate SRI Fit?
  8. 8. What is Green Real Estate? • New constellation of development practices: addresses RPI energy, environment and urban siting concerns • Environmentally sensitive siting: favors urban infill, transit-oriented • Energy and water savings (typically 30%-40% in U.S.)—slows climate change • Better indoor air quality (IAQ) • More comfortable temperatures • More natural light • Healthier finishes: minimizes off- gassing of toxins • Being applied to affordable housing, market rate and luxury projects
  9. 9. Rapidly Growing Market • 5% U.S. market, 2006 • $11 billion built, U.S., 2006 (2% non-residential construction) • Rapid growth projected: $29- $57 billion/year • 10% of U.S. real estate by 2010 111 South Wacker Drive • UN and others calling for Chicago, Illinois international incentives Sources: McGraw Hill Construction, CNNMoney.com
  10. 10. Growing Global Experience • Widely accepted standards • LEED, Energy Star, Green Globes (U.S., Canada) • BREEAM (UK) • HQE (France) • CASBEE (Japan) • Green Star (AU, NZ) • World Green Maison de Tourisme Building Council: 10 nations active; 16 Ales, France nations developing standards
  11. 11. Strong Green Value Proposition • Green first costs: becoming competitive (1.5%- 2% premium, on average) • Green: salable consumer amenity • Green: faster lease-up, top tier rents, operating cost reductions • Green: higher, more 4 Times Square predictable cash flows New York City • Green: superior investment potential
  12. 12. Emerging Trends in Green • Institutional investor interest • Greening existing portfolios • Green funds emerging • On the horizon Dockside Green Green CMBS Victoria, British Columbia, Canada Carbon trading (monetizes green energy savings)
  13. 13. Challenge: Most Vehicles are Private Equity • Most of the action is in private equity • Green private equity: Hines/CalPERS, Rose Smart Growth Fund, others planned (Thomas Properties, AIG, JP Morgan, Bond Companies) • Urban private equity, adding green: Ecourban Mixed Use Project Urban Strategy America Barcelona, Spain (USA) Fund; McFarlane Group; Canyon Johnson Urban Fund
  14. 14. Challenge: Few Public Vehicles • Public vehicles are few. • Investa Property Group: $6.2 BB under management, Australia, publicly traded; sustainable focus. • Fund of fund alternatives: Forward Progressive Real Estate Fund Investa: 31 Market Street Sydney, Australia • Conventional REITs adding green: Liberty Property Trust, ProLogis. Green spinoffs in future?
  15. 15. Challenges: Social Equity, Leverage • Social equity goals: risky, hard to implement, challenging locations, public subsidy requirements • Affordable housing: suitable primarily for taxable investors (tax credit driven returns) • SRI Models: TIAA/CREF, Enterprise Community? 1400 Fifth Avenue • Leverage: it improves Harlem, NY return; is it appropriate to be concerned with the lender’s SRI record?
  16. 16. What Can SRI Investors Do To Drive Market? • Standard definitions: LEED, BREEAM, HQE, etc. : link with other SRI screens • Develop real estate expertise and engage the real estate investment community • Get creative: Consider emerging managers, REIT investment in private equity and project-specific focuses • Revise fixed income strategies: Green or urban CMBS/RMBS. Wall Street will form pools if demand shown • Consider energy retrofit programs for consumers, small business
  17. 17. Take-aways • Real estate is a smart investment • Green real estate may be even smarter • Unfilled SRI niche: ample room for growth • Apply SRI market muscle: market will respond to investor demand • Add capacity: hire internal real estate experts and external consultants • Be creative: explore new structures and managers– many are eager to work with you.
  18. 18. GREEN PROPERTY INVESTMENT: AN EMERGING SRI MARKET Leanne Tobias Malachite LLC +1-301-229-1558 www.malachitellc.com leanne.tobias@malachitellc.com

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