Summer Specials…

by Ellen Sinreich on July 1, 2014

I am often asked: “How can we make money or save money by going green?”

Answers range from reducing operational costs to increasing overall productivity and top line revenues. This summer we welcome market confirmation of a meaningful opportunity for real estate owners to make money by greening their properties and a new regulatory imperative that will ultimately make not going green even more costly for them than it is now.

Market Edict: Carbon-Enhance Your Properties

The value creation opportunity is one we have been championing for years: green buildings are inherently more valuable than their more traditional peers. This was confirmed in the public debt market with the recent pricing of a so-called green bond offering by Regency Centers, a public shopping center developer. Regency’s $250M of green bonds sold at a significantly lower yield than a traditional offering that same day by a Real Estate Investment Trust (REIT) with a similar credit rating. Regency’s green bonds will fund the development of Regency shopping centers that achieve Leadership in Energy and Environmental Design (LEED) certification.

EPA Edict: Carbon-Proof Your Real Estate

The Regency green bonds were issued just before the Environmental Protection Agency, at the direction of President Obama, announced its Clean Power Plan proposal to cut carbon pollution from existing power plants. The Clean Power Plan will be implemented through state-federal partnerships under which each state will devise a path forward for cutting its emissions.

Strategies will no doubt include mandates for increased efficiencies, renewable energy and demand side management that will ultimately trickle down to individual property owners and tenants. Although this proposed scheme for reducing carbon emissions will likely be tied up in litigation knots for some time to come, there is no doubt that existing property will be impacted.

While property owners like Regency will be well-positioned to address these and other climate change regulatory trends (such as public disclosure of energy consumption), others leave themselves exposed to significant financial and environmental risks.

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