13 Mar 2017

Achieving Financial And Environmental Success

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PROPERTY PERFORMANCE: TANGIBLE RESULTS

A key component of the Pillars of Responsible Property Investing (PRPI) is the pursuit of Property Performance, which we define through financial and environmental success. The Principal Real Estate Investors team diligently tracks the progress of its near- and long-term investments. Since the start of the PRPI initiative and previous sustainability efforts in 2009, Principal Real Estate Investors has realized over $32 million in cumulative avoided energy costs.1 The portfolio is saving over $7 million annually in energy costs, which equates to $117.0 million in incremental asset value.2

Measurement is the first step to sustainable operations. Principal Real Estate Investors has benchmarked and continuously monitored the utility costs and consumption at more than 197 buildings, covering 35 million square feet of gross floor area. This group includes all eligible buildings in the office, retail, and multi-family portfolios.

ENERGY STAR EXCELLENCE

The U.S. Environmental Protection Agency (EPA) uses the 0 to 100 ENERGY STAR score to compare building energy efficiency across the country while accounting for occupancy and weather. A score of 50 represents median energy performance, while a score of 75 or better indicates that a building is a top performer and may be eligible for ENERGY STAR certification.3

At an average score of 82, the Principal Real Estate Investors office portfolio ranks among the top 16% of all U.S. buildings for energy efficiency.

Principal Real Estate Investors has been repeatedly recognized for continued high performance in the ENERGY STAR program.

Recently, Principal Real Estate Investors achieved three important milestones:

Awarded the EPA’s ENERGY STAR Partner of the Year Award in 2016 and 2017.4

64 of our buildings had achieved ENERGY STAR certification, totaling more than 14 million square feet.

Awarded one of the first ENERGY STAR certifications for a multi-family property nationwide.5

Received recognition as an Executive Member of EPA’s Certification Nation, in honor of the significant number of properties certified to the ENERGY STAR Standard in 2014.6

LEED CERTIFIED PERFORMANCE

Awarded by the U.S Green Building Council, LEED, or Leadership in Energy & Environmental Design, is a green building certification program that recognizes best-in-class building strategies and practices. Approximately 68% of the office portfolio is LEED certified, with 60% certified to the Gold or Platinum level. The 197 buildings in the PRPI Initiative include 64 LEED certified buildings.

 

REDUCING GREENHOUSE GAS EMISSIONS

The PRPI initiative has achieved significant reductions in energy and greenhouse gas emissions. Since 2009, greenhouse gas emissions have been reduced by 122,319 metric tons, the equivalent of taking more than 25,830 cars off the road, zeroing out the energy from 12,910 homes, avoiding the consumption of 13.7 million gallons of gasoline, or planting 3.1 million tree saplings.7

THESE GREENHOUSE GAS REDUCTIONS STEM FROM COST-EFFECTIVE OPERATIONAL IMPROVEMENTS IN ENERGY EFFICIENCY, LEADING TO A CYCLE OF FINANCIAL AND ENVIRONMENTAL RETURNS.

MARKET RECOGNITION AND SUCCESS

BUILDING MOMENTUM, LOOKING FORWARD

OUR PILLARS OF RESPONSIBLE PROPERTY INVESTING INITIATIVE PROVIDES AN IMPORTANT FIDUCIARY FOUNDATION, ENABLING GREATER MARKET RESPONSIVENESS AND FINANCIAL OPPORTUNITY. WE ANTICIPATE CONTINUED EVOLUTION AND EXPANSION OF THIS INITIATIVE AS PART OF THE SERVICE WE PROVIDE TO OUR CLIENTS.

WE ARE PROUD TO HAVE ACHIEVED THE FOLLOWING MILESTONES AND AWARDS FOR WORK WE HAVE DONE TO DATE:

  • Recognized as a Green Lease Leader by the Institute for Market Transformation and the U.S. Department of Energy's Better Building's Alliance (2017)8
  • Received a performance band score of "A" by earning 47 out of 51 points in the UNPRI 2016 Assessment (2016)9
  • Named as a World’s Most Ethical Company by the Ethisphere Institute (2016)
  • Selected as an award winner for the Lighting Energy Efficiency in Parking (LEEP) Campaign (2015, 2016)  
  • Named to the CDP Climate Performance Leadership Index and Climate Disclosure Index which highlights S&P 500 companies committed to improving their impact on the environment (2014-2016)10
  • Cited by Commercial Property Executive as being among the greenest U.S. real estate companies (2011 – 2015)11
  • Achieved a perfect score in the management category from the GRESB Survey (2014-2016)12
  • Received the Green Star designation from the Global Real Estate Sustainability Benchmark survey (2014-2016)12
  • Our core property fund ranked in the top six among U.S. diversified property funds by the Global Real Estate Sustainability Benchmark (2014-2016)13
  • Our core-plus commingled real estate strategy ranked in the top six among U.S. diversified property funds by the Global Real Estate Sustainability Benchmark (2010-2016)14
  • Our value-add commingled strategy ranked in the top two among U.S. private property funds by the Global Real Estate Sustainability Benchmark (2013, 2014)15
  • Received honorable mention for Sustainability Executive of the Year by Commercial Property Executive magazine (2013)
  • Named Green Giant of the Year by Real Estate Finance & Investment (2008)

MEMBERSHIPS AND PROGRAM MILESTONES

  • Launched a dedicated closed-end Green strategy for Private Real Estate Equity, one of the first institutional commercial real estate funds to adopt a holistic approach to integrating environmental, social, and governance principles (2009)
  • Became an ENERGY STAR partner (2009)
  • Became a signatory to the UN PRI (2010)
  • Recognized as one of the BOMA STARS — an initiative of the Building Owners and Managers Association (BOMA) focused on voluntary efforts to address energy efficiency (2011)
  • Expanded and formalized our Pillars of Responsible Property Investing initiative (2013)
  • Launched a property assessment program to validate performance targets and identify future sustainability strategies (2013)
  • Joined the Department of Energy’s Better Buildings Alliance (2014)
  • Became a Global Real Estate Sustainability Benchmark (GRESB) member (2014)
  • Launched a second dedicated closed-end Green strategy for Private Real Estate Equity (2014)
  • Recognized as an Executive Member of EPA’s Certification Nation, in honor of the significant number of properties certified to the ENERGY STAR standard (2014)16

 

 

NEW INITIATIVES

Seeking to continue building on past successes, Principal Real Estate Investors recently implemented several new programs targeting its environmental, social, and governance efforts. A Stakeholder Engagement Toolkit was issued to all property management teams, providing guidance and resources to better partner with tenants, residents, brokers, and service providers on sustainability issues. Additionally, the newly launched Property Performance Guidelines detail supplemental policies and practices for operational best practices. Together, these and other programs administered by Principal Real Estate Investors continue to strengthen the foundation of the PRPI initiative, leading to greater value for its real estate investments.

Disclosure

NOTES

1 The information provided in this report is based on data input by individual property teams as of May 2017 into ENERGY STAR Portfolio Manager, with select review and validation. The office portfolio includes whole-building energy consumption and costs, while the residential and retail portfolios primarily include common area consumption and costs. Office property performance is normalized by ENERGY STAR Portfolio Manager for weather and operating characteristics, residential performance is normalized for weather alone, and retail performance is not normalized. Performance results may undergo some moderate variability as property teams continue to update utility, space use, and occupancy data.

Baseline is generally viewed as December of 2008, the year before Principal Real Estate Investors joined ENERGY STAR, launched the first Green Fund, and accelerated sustainability efforts. Many properties have individual baselines set according to unique circumstances, with office building baselines dating as far back as December 2008. Retail and multifamily baselines are generally set in December of 2012 when they were brought into the PRPI initiative.

Avoided costs are generally calculated as the difference in normalized energy consumption between the time a building entered the PRPI initiative and the current time period, multiplied by the local energy rate.

The investments described in this section are not comprehensive and do not include all investments made by Principal or all investments within Principal Real Estate Investor’s "responsible property investing" initiatives. In particular, this Portfolio excludes industrial and land investments and excludes certain office, retail and multifamily investments. The energy savings performance figures are being provided for illustrative purposes. Such figures are estimates with respect to the Portfolio and have been calculated in good faith and are based on original sources and data, as applicable, including information derived from sources other than Principal or its affiliates that is believed to be reliable;

2 Estimated incremental increase in asset value is calculated with a 6.5% capitalization rate applied to the estimated rate of annual costs avoided. Avoided costs are generally calculated as the difference in normalized energy consumption between the time a building entered the PRPI initiative and the current time period, multiplied by the local energy rate, as described in note 1

3 EPA, ENERGY STAR Certification Guidelines. http://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/earn-recognition/energy-star-certification/how-app-1

4 Each year, the EPA honors organizations that have made outstanding contributions to protecting the environment through energy efficiency. 16 April 2017, U.S. Environmental Protection Agency.

5 Epicenter Apartments, Awarded November 13, 2014.

6 EPA.Certification Nation. http://www.energystar.gov/buildings/about_us/how_can_we_help_you/recognition/earn_recognition_ your_building_or_plant/certification_nation-1

7 US EPA, Greenhouse Gas Equivalency Calculator, http://www.epa.gov/cleanenergy/energy-resources/calculator.html

8 The Green Lease Leaders designation exhibits a strong commitment to increased performance and sustainability in buildings. May 15, 2017, Institute for Market Transformation (IMT) and the U.S. Department of Energy’s (DOE) Better Buildings Alliance.

9 Released July 2016. For further details please refer to the PRI Assessment Methodology, Principal Global Investors full Assessment Report and Transparency Report, all of which is available upon request.

10 Principal Financial Group is 1 of 27 S&P 500 companies named to the 2015 CDP Climate Performance Leadership Index and the Climate Disclosure Index. (CDP S&P 500 Climate Change Report 2015, November 2015). Principal Global Investors is the institutional asset management arm of the Principal Financial Group® (The Principal®).

11 Commercial Property Executive" rankings - Ranked #4 (2015), #3 (2014), #2 (2012, 2013)

12 2016 Global Real Estate Sustainability Benchmark (GRESB) survey, GRESB Foundation, data as of December 31, 2015.

13 Principal Global Investors’ core property fund ranked 6th among U.S. diversified property funds. Rankings out of 33 U.S. diversified property funds. (2015 Global Real Estate Sustainability Benchmark (GRESB) survey, GRESB Foundation, data as of December 31, 2015)

14 Principal Real Estate Investors’ core plus commingled fund ranked 6th among U.S. diversified property funds. Rankings out of 33 U.S. diversified property funds. (2015 Global Real Estate Sustainability Benchmark (GRESB) survey, GRESB Foundation, data as of December 31, 2015).

15 Principal Real Estate Investors’ closed-end value-added commingled fund ranked 2nd among U.S. diversified - office/residential funds. Rankings out of 8 U.S. diversified - office/residential funds. (2014 Global Real Estate Sustainability Benchmark (GRESB) survey, GRESB Foundation, data as of December 31, 2013).

16 Based on data in the ENERGY STAR certified building registry www.energystar.gov. As of 31 December 2014

 

Unless otherwise noted, the information in this document has been derived from sources believed to be accurate as of May 2017. Information derived from sources other than Principal Global Investors or its affiliates is believed to be reliable; however, we do not independently verify or guarantee its accuracy or validity. Past performance is not necessarily indicative or a guarantee of future performance and should not be relied upon to make an investment decision.

The information in this document contains general information only on investment matters. It does not take account of any investor’s investment objectives, particular needs or financial situation and should not be construed as specific investment advice, an opinion or recommendation or be relied on in any way as a guarantee, promise, forecast or prediction of future events regarding a particular investment or the markets in general. All expressions of opinion and predictions in this document are subject to change without notice. Any reference to a specific investment or security does not constitute a recommendation to buy, sell, or hold such investment or security, nor an indication that Principal Global Investors or its affiliates has recommended a specific security for any client account.

Principal Financial Group, Inc., Its affiliates, and its officers, directors, employees, agents, disclaim any express or implied warranty of reliability or accuracy (including by reason of negligence) arising out of any for error or omission in this document or in the information or data provided in this document.

Any representations, example, or data not specifically attributed to a third party herein, has been calculated by, and can be attributed to Principal Global Investors. Principal Global Investors disclaims any and all express or implied warranties of reliability or accuracy arising out of any for error or omission attributable to any third party representation, example, or data provided herein.

Investments in real estate are subject to various risks including liquidity risk and other risks inherent in real estate such as those associated with general local economic conditions. Payment of principal and earnings may be delayed.

Investment guidelines are subject to change. Properties shown are to illustrate examples of real estate property types invested in by Principal Real Estate Investors.

All figures shown in this document are in U.S. dollars unless otherwise noted.

This document is issued in The United States by Principal Real Estate Investors, LLC, which is regulated by the U.S. Securities and Exchange Commission.

Principal Real Estate Investors is the dedicated real estate group of Principal Global Investors, a diversified asset management organization and a member of the Principal Financial Group®.

"The Principal Financial Group" and "The Principal" are registered trademarks of Principal Financial Services, Inc., a member of the Principal Financial Group.

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