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C+CT

Landlords give sustainability high billing in annual reports

July 16, 2018

Sustainability seems to have moved into the fiscal prime time. Now, alongside such staples as balance sheets and development-pipeline reports, sustainability is assuming an increasingly weighty role in corporate annual reports, as public retail companies respond to investor demand for critical operations data.

“Investors are realizing that sustainable investing can mitigate risks, reduce operating costs and create ‘alpha’ in their portfolios,” said Chris Wedding, founder and managing partner of Chapel Hill, N.C.–based IronOak Energy Capital, a clean-energy investment-banking and advisory firm.

Among the companies highlighting greenness in their latest annual reports are GGP, Kimco Realty, Macerich and Simon, all of which issued separate sustainability or corporate-responsibility reports with more-detailed accomplishments.

Kimco’s report highlights that the firm has been named to the Dow Jones Sustainability North America index for the third time, and Kimco boasts that it is the only retail REIT on the index. The company posted a perfect score under the inaugural Global Real Estate Sustainability Benchmark (or GRESB). “If there’s one thing we learned in our five years of compiling and distributing comprehensive corporate responsibility reports, it’s that adaptation to change is one of the most important contributing factors to sustainability,” said Will Teichman, Kimco’s senior director of strategic operations, in a company blog.

GGP placed seventh among U.S. companies for installed solar capacity on the Solar Energy Industries Association’s ranking, for the second straight year. GGP also won a Green Star rating from GRESB, for the fourth consecutive year. “This honor recognizes our efforts to make ecological, economic and social initiatives an integral part of our business,” said Sandeep Mathrani, chief executive officer of GGP.

GGP’s upgrade of two former Sears spaces, at Staten Island (N.Y.) Mall and at The Mall in Columbia (Md.), required some green ingenuity. At Columbia Mall, where an 80,000-square-foot former Sears was recast for three tenants, GGP insulated ductwork with aluminum to minimize heat gain and loss, installed a reflective roof and added a RhinoBond system, nearly doubling the heat-resistance strength, from 16.5 to 31.4. At Staten Island Mall, where a 23,000-square-foot former Sears was converted to a Container Store, GGP put in seven high-efficiency rooftop air-handling units and a white “cool roof” containing recycled material. Systemwide, the new cooling units save some 67.2 million kilowatt-hours of power annually.

Hamburg-based ECE Projektmanagement leads the way in Germany, with some 70 sustainable certifications. All retail centers seeking certification have earned at least Silver awards from the German Association for Sustainable Building standards, considered to be among the world’s most demanding, according to ECE.

Mall at Columbia GGP insulated ductwork to minimize heat gain and loss, installed a reflective roof and added a RhinoBond system, nearly doubling the heat-resistance strength, from 16.5 to 31.4

Hamburg-based ECE Projektmanagement leads the way in Germany, with some 70 sustainable certifications. All retail centers seeking certification have earned at least Silver awards from the German Association for Sustainable Building standards, considered to be among the world’s most demanding, according to ECE. The developer’s sustainability advisory board, which includes specialists from the science, business and political spheres, is the first of its kind in the business.

ECE has used renewable energy sources since 2005, reducing annual carbon-dioxide emissions by some 149,000 tons. ECE is rolling out something the company calls an “intelligent mobility concept,” with charging stations for electric vehicles and hybrid pedal-electric bicycles. ECE also created Europe’s first electric-car-sharing street, at its Potsdamer Platz Arkaden mixed-use complex, in Berlin, to facilitate car pickup and drop-off for drivers using the Car2Go electric-car rental app.

All new Sephora stores in the Unibail-Rodamco-Westfield portfolio in Continental Europe will feature 100 percent LED-lighting installations, in line with Unibail’s strategy to reduce worldwide energy consumption. Further, Astrid Panosyan, Unibail’s chief resources officer, said the firm’s sustainability strategy “requires reducing our carbon footprint, water consumption and waste, making our business greener and more cost-efficient, creating a positive social and economic impact.” Westfield scored an A– in the U.K.-based Carbon Disclosure Project, a vast improvement over its grade of C the previous year and tying the firm with two peer companies for the top score.

Meanwhile, Sephora’s Forum des Halles store, in Paris, won a BREEAM rating of “excellent” — a first for any retailer in France, according to Sephora CEO Chris de Lapuente.

Retailers are doing their part All new Sephora stores in the Unibail-Rodamco-Westfield portfolio in Continental Europe will feature 100 percent LED-lighting installations, in line with Unibail’s strategy to reduce worldwide energy consumption

With growing consumer awareness of fashion sourcing, retailers are expanding their sustainable/ethical collections. In April H&M introduced its Conscious Exclusive line, which includes garments made from Tencel (a cellulose fiber derived from wood pulp) and Econyl (made from discarded nylon). The retailer also uses recycled polyester and organic linen for garments, as well as recycled silver for accessories manufacturing. Competitor Zara has a similar line, called Join Life. Zara parent Inditex recycles packing supplies for use toward fulfilling its “zero landfill waste” goal by 2020.

Apparel and home-decor seller La Maison Simons has opened its first zero-net energy store — one generating as much energy on-site as it consumes — in Québec City, in a former Target, powered by solar energy and cooled and heated by a geothermal system.

Walmart’s Project Gigaton, aimed at reducing 1 billion metric tons of greenhouse-gas emissions through the retailer’s value chain by 2030, reduced some 20 million metric tons of emissions in its first 12 months of use (through last April). The program has been expanded to the company’s stores in China, the U.K. and 30 other countries.

Federal Realty, which has invested some $1.2 billion since 2012 in green-certified construction projects, earned a “walkability” score of 85 from Seattle-based Walk Score (which rates real estate walkability) —the high end of the “very good” category — for its walking routes to transit and center amenities, according to. Moreover, since 2010 Federal Realty has plowed roughly $35 million into 22 solar photovoltaic systems and earmarked $12 million for an additional 10. The firm, which converted a 7,000-square-foot roof at Bethesda (Md.) Row into an urban farm yielding some 10,000 pounds of produce annually, is bringing out a second such roof: a 17,000-square-foot space atop the mixed-use Pike & Rose property, in North Bethesda. Individual subscribers and restaurant tenants will receive regular deliveries of harvests. Both roof sites involve partnership with Washington, D.C.–based Up Top Acres.

Rooftop farming Federal Realty created an urban farm on a 7,000-square-foot roof at Bethesda (Md.) Row

While the GRI (Global Reporting Initiative) and LEED (Leadership in Energy and Environmental Design) certifications remain the leading standards for sustainability and green buildings, the biggest emerging investor-reporting standard for sustainable risk and opportunities is the GRESB (Global Real Estate Sustainability Benchmark), Wedding says. Some 850 property companies and funds, representing nearly $4 trillion in assets managed, used the GRESB, he says.

This year NAREIT made Macerich a REIT Sustainability All-Star, lauding the firm for a water-conservation program that saved about 58 million gallons. Smart-irrigation systems, drought-tolerant plants, low-flow fixtures and automatic shut-offs in common areas are among the Macerich conservation tools. The firm also earned GRESB’s top North American retail sector ranking for environmental and social performance. Macerich says it is working toward carbon neutrality and zero impact on water waste and landfills by 2030 on the outside. The firm produced about 39 million kwh of clean energy from a dozen on-site solar projects and half as many on-site fuel-cell systems last year, more than doubling its 2016 performance.

Simon has reduced systemwide electric consumption by about 33 percent since 2003, using energy-storage batteries and solar installations, according to its 2017 report. “We were able to achieve the majority of our sustainability objectives and exceed our ambitious energy and greenhouse-gas emission-reduction goals,” said Chairman and CEO David Simon. Smart-irrigation technology at Fashion Valley Mall, in San Diego, has saved nearly 3.2 million gallons of water.

This year Simon is engaging its tenants through energy audits and other measures for improving sustainability. Simon, which has 446 electric-vehicle-charging systems across roughly 100 properties, won top awards from GRESB and the Carbon Disclosure Project for climate-change disclosures and corporate governance policies.

“At its core, sustainability is about building a business that will stand the test of time”

Weingarten Realty has teamed up with energy provider Summer Energy to purchase clean-energy-supporting “green tags” — also called renewable-energy certificates. These serve as tradable energy commodities and proof that at least 1 mwh of electricity was generated from renewable energy resources before being fed into the grid.

Forest City Realty Trust has been named an Energy Star Partner of the Year, the EPA’s highest honor for an energy-efficient organization. Forest City became only the second U.S. REIT to establish a greenhouse-gas-reduction goal approved by the Science Based Targets initiative. The firm is aiming to reduce emissions across its portfolio by about 27.5 percent and emissions from tenant spaces and construction by 33 percent by 2025.

Kimco is responding to transparency demands by supplying investors with verified performance data from its GRI-aligned report, says Teichman. Kimco invested $11.4 million last year in 238 sustainable-improvement projects it controls, achieved a 4.12 percent reduction in same-site greenhouse-gas emissions and diverted a quarter of operational waste (55,491 metric tons) away from incinerators or landfills.

Regency Centers, the first U.S. REIT to issue green bonds, has completed at least 17 LEED-certified developments since 2009 and says it aims to reduce greenhouse-gas emissions and same-store energy consumption by a cumulative 20 percent each, by 2021. DDR Corp. conserves water in dry climates using drought-tolerant native foliage, xeriscaping (landscaping that requires little or no irrigation) and drip-delivery irrigation controls to reduce usage by as much as 40 percent.

In contrast to the perception that sustainability sacrifices financial returns, some of the world’s biggest investors, including Bank of America, Goldman Sachs and Morgan Stanley, are finding that companies that pursue these environmental goals show stronger fiscal results, according to IronOak Energy executive Wedding, who is also an executive-in-residence at Duke University’s Nicholas School of the Environment and a professor at University of North Carolina at Chapel Hill. Over 80 percent of S&P 500 companies now produce annual sustainability reports, up from just 20 percent in 2011, he says.

“At its core,” said Kimco’s Teichman, “sustainability is about building a business that will stand the test of time.”

By Steve McLinden

Contributor, Commerce + Communities Today