Use these metrics to measure your portfolio’s triple bottom line performance

Get this new research on metrics that helps you measure property triple bottom line performance.

We are pleased to share a new report titled, Metrics for Responsible Property Investing: Developing and Maintaining a High-Performance Portfolio.

You can download the report here.

This research was co-authored by Jean Rogers of Arup, David Wood of the Responsible Property Investing Center and myself. This is a working draft for comment that was presented today (4 November 2009) to a joint session of ULI’s Responsible Property Investing and Sustainable Development Councils.

Why do we need metrics for triple bottom line investing?

Our survey of the industry indicated that the spread of triple bottom line investing was being hampered by the fact that most currently available real estate sustainability reporting came from investors who would green a couple of showcase buildings in their portfolios.  This lack of transparency leaves the broader real estate industry and capital markets with several pressing problems:

• They cannot determine if sustainability performance on the portfolio is improving over time.
• They do not know how the portfolio’s green performance compares with the portfolio’s of other investors.
• There is no way to judge sustainability risks hidden within any portfolio.

Drafting and road-testing proposed metrics with the Bay Area Council and TIAA-CREF

After developing a set of metrics that would represent the ten RPI principles in action, we worked with the Bay Area Council Family of Funds and TIAA-CREF to road test them, to obtain real world feedback from actual investor users.

Bay Area Council Family of Funds tested the metrics on recent acquisitions to see how the metrics might be useful during the property acquisition process.

TIAA-CREF tested the metrics on a portfolio of properties they own, to determine how the metrics could possibly assist them with asset management activities.

Both investors were also at today’s ULI session and provided in depth comments on the use of the metrics and their recommendations.

Key takeaways

Here are a few of our findings based upon investor feedback about their use of the metrics:

• RPI metrics do provide a tangible link to asset and portfolio value by pointing to possible decreases in operating expenses and/or increases in rental revenue.
• The use of RPI metrics can assist with opportunity finding: a key objective of due diligence during  acquisition.
• The use of RPI metrics can help drive social responsibility within the portfolio, instead of just monitoring it after the fact.

We need your help!

This report is currently a working draft for comment. It was submitted to members of the Sustainable Development and Responsible Property Investing Councils for their review and comment. We would also appreciate hearing the comments and questions of real estate investors and practitioners within the Green Journey community.

Let us know your thoughts about these proposed metrics. Also feel free to forward this report to anyone in your network whose practice might benefit from the information.

We look forward to hearing from you and will keep you updated on this effort as it evolves.

You can download the report here.

Related reading:

• We’ve covered the emergence of responsible property investing many times before.
• You can also view a short presentation on the basics of responsible property investing here.

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Essential Downloads & Reading for Triple Bottom Line Returns

Feeling behind on your green building finance and investment reading? Well, we thought that Friday is the perfect day to lick your fingers and start turning some pages!

Here are a few must reads we’ve enjoyed over the recent past here at Galley Eco Capital. We consider these to be the real deal –  taking you beyond the cocktail party level to making a positive difference on your next green and/or triple bottom line real estate transaction.

Green Building Through Integrated Design

I have been WAY overdue in mentioning this one — mainly because I’ve found myself picking it up repeatedly. Jerry Yudelson (a faithful Our Green Journey subscriber and commentor!) has been out with this latest book for a short while now, which shows that integrated design does not have to mean a cost premium. We especially liked his walking readers through the mechanics of payback and life cycle analysis step by step. This is a sustainable design book that is as good for business professionals as it is for the architects and engineers. Link to this book’s Amazon page here.

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Investment Returns from Responsible Property Investments: Energy Efficient, Transit-oriented and Urban Regeneration Office Properties in the US from 1998-2008

This one, from Gary Pivo and Jeffrey Fisher, is just out and very critical for those needing hard data to support triple bottom line investment strategies for real estate.  If you follow responsible property investing like we do,  then you know that its everlasting mission is to prove that the application of social responsibility to institutional real estate investing results in equal if not better returns.  In this working paper, the authors study how properties built near mass transit, those which undergo regeneration, and energy efficient projects deliver equal if not better returns over the previous ten year period. Download this working paper from the Responsible Property Investing Center here.

See related posts and resources:

Green Building Drives Triple Bottom Line Advantages

Pension Funds Green Agendas Continue - You Prepared?

John Knott & Andrew Nelson Show RPI in Action

Other Stuff We Recommend

Green Real Estate Investing 101 - Cashing in on water savings

One of our new favorite blogs, Multi-family Guide, just alerted us to a recent article in Greener Buildings about the top ways commercial building owners can save money through better water management. We think you should take a read and send it along to your property staff for a quick check up on water management at your properties.

It’s a pleasure to share around because it is great advice from industry pacesetter Melaver – a true pioneer in responsible property investing whom we admire just as much as the folks at Multi-family Guide. Also pay attention to the fact that many of the best practices that they discuss cost very little, and therefore, generate a sizable payback on the investment.  Who doesn’t love a little extra NOI?

We always advise clients starting with sustainability programs to focus on the low-hanging fruit. The tips in this article are just that.

Happy saving!

Responsible Property Investing & Green Building

While living in Hamburg, I made friends with some people who were refugees. They lived in a part of town most of my other friends avoided — Wilhelmsburg, with about 49,000 inhabitants. 25% of those were either unemployed or living on public assistance. Many were foreigners with little education. They had come to Germany to escape violence and economic desperation in other parts of the world. They told stories that were tragic and fascinating. And they lived in dreary apartment buildings like the one above. There are approximately 8,000 public housing units crammed into Wilhelmsburg. News reports about the area usually contained words like: crime, ethnic tensions, language barriers and undocumented workers. Sound familiar? Getting an informal education on the German public housing and social system helped me to see more clearly the connections between similar issues and the real estate industry here in the US.

The Responsible Property Investing Center represents institutional real estate investors who are applying triple bottom line principles to their activities within the many Wilhelmsburgs here in America. It takes on the challenge of creating value in investment real estate across ten dimensions, all of which either directly overlap or indirectly support green building. Here’s a few:

• Energy conservation
• Smart growth
• Urban revitalization and adaptability
• Environmental protection
• Voluntary certifications (like LEED)

With so much in common with green building, why does RPI matter?
I only showed you a few of RPI’s dimensions above. When you look at all of them together, you will see a heavy stress on how people are treated and corporate accountability. There is less emphasis on the technical construction requirements of the property. Green building fulfills many important RPI criteria, but green building is not the exclusive goal of RPI. Both however, strongly advance triple bottom line investing. They complement and strengthen each other. And that’s a good thing.

Upcoming RPI Convening in Boston
Here’s the link to the  Responsible Property Investing Center’s website. (Disclosure: my firm is involved as well). The growing support for the RPIC indicates that there is a belief within institutional real estate that triple bottom line investing is not a philanthropic move, but a credible investment strategy.

The RPIC is also having a meeting in March and investors with a triple bottom line focus are welcome. If you are an investor with activities within this field and want to meet your peers, I urge you to sign up and attend.

Hope to see you there!

Photo Credit: Flickr/Hochhaus Stadtteil - Hamburg Wilhelmsburg