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

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

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)

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

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

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

Green Real Estate:
The Best Immediate SRI Fit?

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

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

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

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

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)

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

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?

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?

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

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.

GREEN PROPERTY
INVESTMENT:
AN EMERGING SRI MARKET
Leanne Tobias
Malachite LLC
+1-301-229-1558
www.malachitellc.com
leanne.tobias@malachitellc.com