Triple Bottom Line Investing
Impact investing is a concept that has been around for years, though recently it has received renewed attention. Whether on the cover of Barron’s or in the New York Times, the concept is that impact investing enables one to achieve a theoretical “double bottom line”. There is the return on one’s investment and there is a social justice return. A triple bottom line goes one step further. It not only factors in the social justice component in connection with an investment but it also includes a positive environmental impact. The theory revolves around the understanding that by placing investment dollars behind an investment that investor can either encourage or discourage a company’s positive impact on our environment.
We have always believed that to create value, we must fundamentally reposition an asset. We have never been of the opinion that hoping the leasing market will come our way is a good strategy. I wish we could say our prior investment strategy was directly tied to our firm’s belief in achieving a triple bottom line. However, that really isn’t the case. Rather, in the past, we never really connected the dots. While this triple bottom line concept has been apart of our DNA (without being conscious of it), it only recently really started to dawn on us that in our attempts to produce quality returns for our investors, our business plans were very reflective of a triple bottom line strategy. Whether it has been our signature project, PacMutual, 87 N Raymond, or many of our other projects – we implement major environmental, technological and social changes in order to drive a positive investment return.
As our senior management team met at our quarter and year end meetings, we recognized that our signature changes really reflect a larger, and quite frankly, more important, company strategy. In fact, the strategy has become the very fabric of how we approach real estate investment. So, in the spirit of New Year’s resolutions, it is our commitment to always have a triple bottom line strategy. The Rising Impact Strategy is to always seek to have a positive financial return, with a triple bottom line approach.
Going forward, our triple bottom line strategy will demand that we always reposition a property by focusing on three fundamental pillars in a real estate investment:
Whether it’s in the way we run our construction practices, the amount of electricity we run at our properties, or the up-keep of landscaping, we invest in three important effects and certifications as it relates to the environmental impacts of our properties.
First, it is our goal that each asset be Zero Net Energy (“ZNE”). This means that the total amount of energy used by the building on an annual basis is roughly equal to the amount of renewable energy created on the site. In 2014, California revised Title 24 to include that all residential buildings must be Zero Net Energy by 2020, and all commercial buildings must follow suit by 2030. By investing in this requirement now, we are able to have a positive impact on the environment immediately and lower our operating expenses which, in turn, increases the value of the asset upon sale.
The second area we focus on is attaining a LEED (Leadership in Energy & Environmental Design) certification. From the materials we use in construction to the water flow in the building, we strive to get the highest possible LEED certification to ensure we maintain a healthy environment for our tenants and guests, save money and resources, and promote our renewable, and clean energy practices.
The third area we focus on is achieving the best Energy Star rating which sets the standard for energy efficiency. By implementing most efficient products and practices, we’re able to decrease negative environmental impacts, and increase cost savings.
The hallmark of our social philosophy is to create a hotel-like experience in an office or mixed-use environment, “The Rising Experience”. Whether it’s our concierge-level of service to provide a convenient and comfortable lifestyle, planned events to promote community engagement, or attracting a unique tapestry of tenants to enhance the social element of an asset, Rising aims at creating a curated experience. Our innovative and entrepreneurial culture inspires us to try new strategies in the office building environment that have never been tried before, resulting in a more dynamic experience. From millennials to baby boomers, our company has no shortage of perspectives. Further, we are committed to a mix of tenants, including locally owned and small business. Such smaller business must be given the opportunity to compete with larger, national chains. We believe this mix drives a positive tenant experience.
The last, and very important, aspect of our impact strategy is technology. With 5×5 Telecom, Rising’s own ISP, we focus on delivering only the highest quality of connectivity to tenants and guest – all at a fraction of the cost by other providers. In every asset, we build out the fastest and most secure project-wide wi-fi giving tenants and guests the option to work indoor or outdoors. Our philosophy is that no one should feel like they can *only* work from inside their cubicle. We live, work and play in the 21st century and in order to innovate and create in every industry, one must work wherever they feel most creative and alive. Giving tenants the ability to work in a nearby pocket park, the lobby, or at a downstairs restaurant makes a world of a difference by improving their performance at work. People often ask us why we offer this service for half the price and the answer is simple – if we lower the cost of internet to a tenant, usually one of the most highest priced operating expense, we are able to benefit with a higher rental rate. Higher rental rates = more amenities and the highest level of service.
Some people may ask, “how will you measure success?” With each asset we reposition, we will have defined metrics and goals that will determine the success of our investments. For example, these may include: X offsets of carbon emissions through renewable energy sources, X gallons of water preserved through new technologies, and X level increases in connectivity speeds. We will also take into account the overall success of the brands we create and our philanthropic and community activities. All of these metrics and goals will be set prior to beginning the repositioning process.
We’ve proven with PacMutual that by focusing on these strategy components, we’re able to create meaningful value to the community, have minimal or no impact on the environment, and maximize returns for our investors.
We are committed to finding investors who share this vision and who will hold us accountable for meeting these objectives. We are also equally passionate in finding partners who will help us create and implement metrics of accountability and to help us educate real estate developers and investors across the country and the world.
We are passionate about the Rising Impact Strategy and we believe this the best approach to achieving the best possible economic returns for our investors. We are excited to see what 2016 brings and believe we are well positioned to execute.