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Paper for Presentation at 2009 ULI Fall Council Forum
Metrics for Responsible Property Investing:
Developing and Maintaining A High-Performance Portfolio
November 2009

2. Lisa Michelle Galley
Founder and Managing Director
Galley Eco Capital
Jean Rogers
Principal
Arup
David Wood
Director
Responsible Property Investing Center
Boston College
Acknowledgements
The authors are indebted to Scott Zengel of Bay Area Council and Nick Stolatis of TIAA-CREF for their
willingness to participate in the case study and to test the RPI metrics in the real world. Their insights were
invaluable. The authors would also like to thank Andrea Fernandez of Arup for her tremendous assistance
in researching indicators, interpretation of data, and editing.

3. Contents
1 Introduction 5
2 Institutional Real Estate’s Volatile Investment Environment 6
2.1 RPI in the Contemporary Real Estate Environment 7
2.2 Impacts of Sustainability on Institutional Real Estate 10
3 New Metrics for a New Era 12
3.1 Gaps in current reporting efforts 12
3.2 Proposed metrics for RPI evaluation 13
3.3 Use cases for RPI metrics 13
3.4 Discussions of proposed RPI metrics 15
3.5 Portfolio characterization 20
3.6 Case Study Results 21
4 Implication for Reporting and Management 23
4.1 Adapting for higher performance 23
4.2 High-Performance Portfolio Dashboard 25
5 Notable Benefits and Conclusion 26
Tables
Table 1: Sustainability Impacts on Real Estate 10
Table 2: Proposed RPI Metrics 14
Table 3: Portfolio Characterization 20
Figures
Figure 1: Institutional real estate’s performance, 6
as measured by the NCREIF Property Index as of 12/31/08
Figure 2: “Market standard” fund performance characteristics 9
Appendices
Appendix A: Metrics Case Study – Acquisitions 27
Appendix B: Metrics Case Study – Portfolio Management 35

5. 1 Introduction
Responsible Property Investment [RPI] is an These metrics must be rigorous enough
emerging investment strategy and discipline to allow for substantive analysis, but
concerned with integrating environmental, flexible enough for investors to tailor them
social, and governance [ESG] data into to their specific needs. They have to be
investment decision-making. Proponents comprehensive enough to capture real
point to increased regulatory risk, resource performance, but simple enough to be usable
constraints, changing consumer preferences in the context of investments in the real world.
and demographics – all as they relate to the These challenges will require collaboration,
increased importance of environmental and and a willingness to test ideal systems in the
social issues -- as drivers of change in the real day-to-day world of investing
estate investment industry. This paper is a preliminary effort to address
To date, however, the industry has yet to these challenges. After reviewing the state of
develop standards to evaluate ESG data real estate in the wake of the recent financial
that compare to its traditional evaluation of crisis, and the role of RPI in that context, we
portfolio performance. The emergence of offer a set of sample RPI metrics, along with
third-party standards offer investors some 2 case studies with actual investors (TIAA-
guidance especially on environmental issues, CREF and the Bay Area Fund of Funds). Our
but tend not to cover the range of RPI. In hope is to catalyze a discussion on how to
any case, there has yet to develop a fully make metrics that are rigorous and useful. We
5
elaborated set of issues, vocabulary, and want to raise the profile of this issue among
measurement that allow investors can use to industry professionals, and draw from their
evaluate whether their portfolios are achieving expertise and experience to develop a system
their environmental and social goals, or that that helps the industry face the imperatives of
enable investors to evaluate the relationship key environmental and social challenges, and
between ESG data and financial performance. capitalize on the opportunities that will come
One important step along these lines will with a transforming economy.
likely be the development of an industry- Real estate investment plays a fundamental
standard set of metrics to evaluate ESG role in determining how society uses
performance that allows investors to measure resources, how the built environment
performance across their own portfolios, to shapes social life, how economic activity
enhance their acquisition and disposition can be sustainable over time. As an asset
decisions, and to report their performance to class, real estate offers especially tangible
investment partners, regulators, civil society demonstrations of the importance of ESG
organizations, and other stakeholders. analysis in creating value for investors and
For ESG analysis to become industry best society alike. We believe that a robust
practice, some system of measurement will metrics system can help shape the market
need to establish rigorous standards that hold to better create sustainable outcomes for all
investors accountable for their claims, and stakeholders.
offer investors the capacity to favor higher
performing buildings and portfolios in practice.

6. 2 Institutional Real Estate’s Volatile Investment Environment
Institutional real estate is in the midst of a major downturn, as real estate performance has
both driven and followed the plunge in US and worldwide economic activity. At their peak,
annual real estate returns for tax-exempt property owners (governments, pension funds,
etc), ranged from 14%-20% from 2003-20071.
1
Data from the National
NCREIF Property Index Total Return Council of Real Estate
Income Return Investment Fiduciaries as
8%
Capital Return of 12/31/08 (www.ncreif.
6% org; accessed on 4/6/09).
4% The graph shows the
Quarterly Return
2% returns for the NCREIF
0% Property Index (NPI) for
-2% the nation, which includes
-4% over 4,200 properties at
-6%
a market value exceeding
$150 billion. The NPI
-8%
income graph shows
-10%
the return from the Net
-12%
Operating Income (NOI)
78 82 86 90 94 98 02 06
for the properties and the
Year NPI capital graph shows
the return from gain in
Figure 1: Institutional real estate’s performance, as measured by the NCREIF Property Index as of 12/31/08 value net of any. Returns
are calculated by NCREIF
2008 will be remembered as a year where Hidden Rise of Un-Sustainability quarterly based on
appraised values and are
6
property returns for institutional investors The current credit crisis has exacerbated shown on an unleveraged
basis as if properties were
ended at an estimated -6.46%, reflecting other problems within commercial real estate all purchased on an all
the impact of a national credit and housing –hidden during the boom years -- that have cash basis.
crisis, and speculative excess tied to real only recently come to light.
estate investment. It is unclear to what extent
During the real estate boom years of 2004
real estate investment will track economic
to 2007, low interest rates, easy liquidity and
recovery, given the size of the bubbles that
increased debt leverage had combined to
have popped.
help inflate real estate prices. Many investors
Most in the economy clearly recognize focused on these speculative returns at the
that credit and investment capital is highly expense of attention paid to the real rise in
constrained and an easy credit environment energy and water costs on their properties.
will not be back for a long time. Real estate During that period, rising (and fluctuating)
owners must become experts at economic energy costs, particularly within the past 36
sustainability; conserving and organically months, have been increasing consumer
growing cash flow though long-term cost of living and weakening the business
investment strategies, while becoming more sector through higher costs of operations.
efficient users of capital the next several years In addition, fuel costs for transportation
to come. have also played a key role in the real estate
crisis, impacting with greater force on those
properties in suburban areas or locations with
poor access to public transit.
The potential long-term risks of exposure to
climate-related regulation, changing consumer
sentiment, and even the simple operating
costs of buildings in their portfolios have
become more apparent in recent years. As the
short term orientation of real estate markets
has suffered, the long term implications of
sustainability have risen in importance.

7. 2.1 RPI in the Contemporary Real Estate Environment
The very widespread problem of energy, More comprehensively, the built environment 2
Mansley, definition of
Responsible Investing
water, and fuel supply and price risk helped shapes fundamental decisions about where
to propel environmental concerns to the and how to live, social inequity in the provision
national agenda and even partially shaped the of housing, and access to public and private
outcome of the 2008 American presidential services.
election. Stakeholders from regulatory Responsible Property Investing (RPI) is a
agencies to consumers have become more response to increasing public concerns
aware of the negative impact of buildings on about the environmental and social
the use of natural resources and the related impacts of buildings, in conjunction with
effects building siting and operations have on a growing awareness among investors
communities. that environmental and social analysis can
Widely cited statistics note that 40 percent enhance their ability to assess building and
of primary energy use, 72 percent of U.S. portfolio performance over the long term.
electricity consumption, 29 percent of RPI facilitates a more comprehensive
carbon dioxide emissions, and 13.6 percent engagement between investors, their
of potable water consumption are due to properties, and tenants by “taking into
buildings. account social, ethical and environmental 7
Against this backdrop, buildings constructed factors in the selection, retention and
using green building principles are present a realization of investment, and the responsible
compelling alternative: use of rights (….) that are attached to such
• Energy use in green building is 29 to 50 investments2. Responsible property investing
percent less than non-green counterparts. has emerged in response to the need for
investors to adopt responsible investing
• Green buildings use an estimated 40
principles, which are more tailored for property
percent less water.
investments.
• Carbon dioxide emissions in green
buildings are reduced by 33 to 39
RPI takes into account the social,
percent.
• Solid waste attributable to green buildings
ethical and environmental factors in the
is reduced by 70 percent. selection, retention and realization of
investment, and the responsible use of
rights attached to such investments

8. The United Nations Environment Programme These principles highlight the range of RPI
Finance Initiative Property Working Group issues, and also create a framework for
has defined RPI in terms of social and applying ESG analysis to the real estate
environmental dimensions of real estate asset class. In practice, these issues have
investment, including: been treated as vital by many investors – RPI
• Smart Growth (e.g., transit-oriented offers a means to bring them together into a
development, walkable communities, coherent framework.
mixed-use development
Industry Practice Today
• Social Equity and Community
The application of responsible property
Development (e.g., affordable housing,
investing principles to institutional real
community outreach, fair labor practices,
estate portfolios can best be framed by
workforce development)
understanding the current context for property
• Urban Revitalization (e.g., goods and investment and investment metrics here in the
services provided to underserved United States.
communities, infill development, flexible
The Real Estate Roundtable estimates the
interiors, brownfield redevelopment)
size of the US commercial real estate market
• Energy Conservation (e.g., energy efficient at $5 trillion, with approximately $2.5 trillion
buildings, conservation retrofitting, green in assets owned by institutional investors.
8
power generation and purchasing) The balance is owned by corporations.
• Environmental Protection (e.g., water Institutional investors can be public funds,
conservation, recycling, habitat protection) union/multi-employers, foundations,
endowments, healthcare, insurance
• Worker Well-Being (e.g., plazas, indoor
companies, high net worth individuals or
air quality, childcare on premises,
mutual funds.
handicapped access)
Those investors utilize a diverse array of
• Health and Safety (e.g., property security,
financial structures to achieve their investment
avoiding hazards, first aid readiness)
objectives, such as equity, fixed income,
• Local Citizenship (e.g., aesthetics, non-US equity or fixed income, balanced
minimum neighborhood impacts, real estate or alternative investments. Each
considerate construction, stakeholder of these financial structures have distinct risk
engagement, historical preservation) and return profiles.
• Corporate Citizenship (e.g., regulatory
compliance, sustainability disclosure,
independent directors, and adopting
of independent voluntary codes such
as LEED, Energy Star, Green Seal, UN
Principles for Responsible Investment, and
Global Reporting Initiative)

9. Fund Life Cycle Performance
Diversification Diversification Summary
Professional real estate investment operates Property type Existing buildings Year
through the contract between the institutional Geographic Redevelopment Quarter
investor and the asset manager, also Property size Development Income
called the real estate manager. The goal of Land Appreciation
the management contract is to establish Gross total return
relationship guidelines, performance goals, Net total return
and regulate investment discretion. The Dividend paid out
typical selection criteria that institutional
investors use to select real estate managers Figure 2: “Market standard” fund performance characteristics
are:
• Experience and stability managing real In other words, contemporary institutional real
estate estate investing happens through a diverse
array of financial vehicles, managed by real
• Competitiveness of fund performance
estate managers. These arrangements are
• Competitiveness of fees considered ‘market standard’ because they
• Appropriate fund diversification and use of are thought to encompass nearly all of the
leverage most relevant criteria and processes needed
to obtain market or above market rates of
The classic measures of success, which
return on an investment of institutional capital
ultimately determine whether the institutional 9
within real estate.
investor is receiving satisfactory performance,
appear in portfolio characteristics below
RPI Metrics as Enhanced Investment
and in Figure 2, which are the most direct
Analysis
measures of fund performance:
The endgame of using metrics is to
Portfolio Characteristics provide real estate market participants with
transparency, benchmarking, risk assessment,
1. Fund strategy: core, value-added,
performance evaluation, and an unbiased
opportunistic, etc.
way to compare asset managers’ investment
2. Legal structure and fund type: closed-end, efforts.
open-end, private REIT, etc.
The likelihood or reaching that endgame,
3. Number of properties however, relies on one fundamental, largely
4. Use of leverage unspoken, assumption, which drives many
of the explicit agreements and assessment
parameters – that the current set of
information used by institutional real estate
investors is complete, and delivers predictable
forecasts of future performance. In other
words, the key assumption within the system
of performance criteria and measurement
outlined above is that there are no new issues
or factors beyond that highlighted above,
which would affect the business system of
real estate including the results (returns) of the
investment process.
In the next section, we examine why that is no
longer the case.

10. 2.2 Impacts of Sustainability on Institutional Real Estate
Many experts have written extensively about social awareness about sustainability in
global sustainability challenges and the general has sharply impacted institutional real
impacts are now being observed in many estate in several interrelated ways, as shown
kinds of systems. The increased global and in the table below.
Sustainability-related Drivers Impacts on Institutional Real Estate
Opportunities Challenges
Global natural resource depletion in particular “Green” or resource-efficient buildings Potential obsolescence of non-green buildings
fossil fuels and water.
Sustainable mixed use developments Unreliable energy supply and pricing
Commissioning and retrofitting green Unreliable water supply and pricing
Increased building construction and costs
Increased regulation
Increased global atmospheric carbon levels Zero-carbon eco districts. Meeting zero carbon targets at building scale
Financing renewable on-site energy generation
Negative impacts of suburban land development TOD, urban-infill properties Land use restrictions
patterns
Adaptive reuse
10
Dearth of clean, economical public transportation Increased value of TOD sites Cost of public transit
Demographic trends toward urban environments TOD, urban-infill properties Increased competition for prime urban locations
Growth constraints due to municipal utilities Self sufficiency:getting off the grid for power Increased operating costs for power and water
and water
Increased risk of business interruption due to
New financing tools through ESCOs power failures
Limitations on development OR requirement to
fund adequate water and power supply facing
limits on supply
Financing investment in sustainable water and
energy infrastructure
Building energy labeling requirements Competitive positioning for owners of Energy Heightened legal compliance associated with
Star rated buildings disclosure
Market leasing and sales risk, if disclosures are
unfavorable
Impending carbon legislation Monetization of carbon reductions from energy Carbon tax on properties in the near to mid-term
efficiency measures
Utilities facing renewable portfolio standards On-site generation can be win-win Contract risks
(33% in California)
Space requirements for on-site generation
Insurers overexposed to climate chvange risks Green building policies offered through some Higher insurance costs for a host of business
insurers (Fireman’s Fund, Traveler’s) Increased liability issues
attention on indoor environmental health
Withdrawal of insurers from some real estate
Lower insurance premiums for implementing markets
green and/or energy efficient approaches
Some green building techniques perceived as
“risky”
Increased attention on indoor environmental Green buildings with healthy materials, Decrease in tenant satisfaction
health and good access to daylight and views
Legal risks of poor indoor air quality
Table 1: Sustainability Impacts on Real Estate

11. The above are sustainability-related forces The presence of these new forces within the
which constitute risks and opportunities real estate universe means that institutional
for institutional real estate investors. At the investors and their managers will have to
portfolio level, these risks and opportunities expand their measurement and definition of
will express themselves in the following performance to include an assessment of
property performance features: these sustainability-related factors. By doing
• Increased or reduced revenue and overall so, they gain an understanding of portfolio
cash flow performance which reflects important new
trends and comes closer to what they always
• Rent growth, occupancy rates and
strive for: transparency, objectivity, and
ongoing investment cost management
credibility within the new context of investing.
• Asset operating expense efficiency and
In order to create measurements that are 11
cost escalation management
meaningful across regions, sectors, and
• Depreciation and obsolescence investors, there is a need for a relatively
• Risk profile of target properties uniform set of additional metrics which are
better suited for the new issues facing real
• Discount and cap rates applied to
estate investing.
properties
To the extent that a real estate portfolio
may benefit due to the presence of these In 2008, the Global Reporting Initiative undertook a review of major
impacts, they constitute portfolio performance sustainability reporting efforts in the construction and real estate
opportunities. Nonetheless, most of today’s sector. It aimed to understand the relative frequency of which key
“market standard” portfolio performance sustainability indicators were measured and reported by leaders
metrics do not directly account for any of in the field. Among those already producing detailed sustainability
these forces, meaning that sustainability- reports, the review shows that portfolio-level performance is under-
related opportunities and risks that may be reported and that no standard exists for metrics at this level. The
present within these portfolios currently lie reporting frequency of identified indicators varies widely across
outside the real estate business system, the sample of investors, making valuable cross-industry analysis
unmeasured. impossible. Even many of the leaders in the industry report much
more on CSR and philanthropic issues than those of portfolio
performance. We hope that the GRI Sector Supplement for
construction and real estate, now in development in coordination
with a quorum of participating industry leaders, will address these
concerns before its anticipated release in 2011.

12. 3 New Metrics for a New Era
3.1 Gaps in current reporting efforts
A number of initiatives, both industry-wide and Showcasing exemplary projects can be
investor-specific, have attempted to quantify helpful to outside parties and a great method
and report on sustainability metrics outside of generating positive feedback, but should
the traditional scope of portfolio analysis. not be done without providing relative
These include the Global Reporting Initiative performance with respect to both the rest
and Principles for Responsible Investing at the of the portfolio and the industry as a whole
industry scale, and, for instance, the Investa (where possible). For example, two pages
Sustainability Indicators and CBRE Standards of discussion in a report of a single LEED-
of Sustainability at the individual company Certified building may mask the fact that the
scale. majority of the portfolio consists of business-
To varying degrees, these efforts track (or as-usual properties. A unified system of
aid in tracking) data on natural resource use, RPI metrics to measure performance at
building performance, environmental and the portfolio level would prevent these
community impact, and other key indicators. discontinuities and help establish standards
Many of them focus on (or are derived from) and best practices for high-performance
an understanding of building performance, portfolios sector-wide.
12 conducting analysis at an asset level rather
than a portfolio level. In the meantime,
In 2004, Paul Hawken studied the makeup of socially responsible
gaps at the portfolio level are present to the
investment (SRI) funds against traditional funds and determined
extent that sustainability data may be both
that an SRI portfolio had almost identical characteristics and
inconsistent and misrepresented, keeping
holdings as non-SRI investments. Furthermore, he found that
this valuable information from reaching its
there were no standards, definitions, or formal codes of practice
full potential for investors, asset managers,
for SRI. To continue to remain relevant, portfolios aiming for RPI
stakeholders, and industry analysts alike.
achievement should have a markedly different, more sustainable
The field of RPI lacks a powerful, standardized mix of assets than non-RPI portfolios. This difference should be
set of portfolio-level metrics which is quantitatively demonstrable, an aim which this system of metrics
recognized and used by investors and can help to achieve.
managers across the real estate industry,
thereby defining and giving credibility to the
practice of RPI. Such a system would not RPI metrics, therefore, must use
only create improvements in building and
vocabulary that is flexible enough to
portfolio performance, but would also allow
for benchmarking and development of a allow for a variety of financial, social and
database of “comps”. Currently, reporters environmental advantages, and still be
are selective about which metrics to include
or exclude, and data is not comprehensive
able to differentiate responsible property
or comparable from one portfolio to investing from more conventional real
another. Even those firms leading the field
of responsible investing and sustainable
estate projects
asset management may report only one-off
examples of buildings or initiatives which
cannot be extrapolated to obtain a view of
portfolio level performance.

13. 3.2 Proposed metrics for RPI evaluation
The scope of RPI is broad. It includes, for Building off of the ten elements of social and
example, “deep green” projects that focus environmental impact and opportunity in real
on poor communities or environmentally estate as defined by the UNEP FI Property
fragile areas, energy efficient buildings that Working Group, we have developed a set
offer clear financial advantages through of 26 quantitative metrics that can help
reduced operating costs, affordable housing investors to find, create and articulate value
projects that draw upon local tax credits, through improving the economic, social, and
and now carbon reduction projects that environmental profile of their investments. We
hedge risk and result in renewable energy recognize, of course, that individual investors
certificates. RPI metrics, therefore, must use will tailor their adoption and use according to
vocabulary that is flexible enough to allow for their specific investment strategies. These
a variety of financial, social and environmental metrics were selected for their ability to allow
advantages, and still be able to differentiate real estate professionals to better address
responsible property investing from more risks and identify opportunities for long-term
conventional real estate projects. value creation. The metrics take two forms
to support different use cases: acquisition and
portfolio management, as described below.
13
3.3 Use cases for RPI metrics
We envision three primary uses for RPI Reporting can happen in both instances:
metrics in practice: informing acquisition characterizing the nature of an RPI
decisions, enhancing portfolio management, opportunity, or demonstrating for stakeholders
and reporting performance. Metrics can be how investment values have been put into
used to guide investors across the life cycle practice in an RPI portfolio, and how a
of responsible property investment, from particular investment strategy can create value
existing buildings to new development, from over time.
acquisition to disposition. Our case studies (see Appendices A and
Because of their different purposes -- at the B) test the validity of these use cases, and
acquisition stage (evaluation of one property) establish links to value, where possible.
or at the level of portfolio management
(evaluation of the portfolio of assets in its
entirety), RPI metrics take different forms
depending upon the use case.

14. RPI Metric Acquisition Portfolio Management
Energy Conservation and Carbon Management
Energy Use Intensity For property, BTU/sf Average across portfolio, BTU/sf
Total Annual Energy Use For property, BTU/yr Total across portfolio, BTU/yr
Renewable Energy On-site generation at property location, % of total On-site generation across portfolio, % total
demand demand
CO2 Emissions Intensity From energy use, for property, pounds/sf/yr Average across portfolio, pounds/sf/year
Energy Star Rating Energy Star Score for Property Average Energy Star Score across Portfolio
Retrocommissioning Performed last 24 months, yes/no Properties on regular commissioning schedule,
across portfolio, %
Environmental Protection
Water Use Intensity For property, gal/occupant/day Averaged across portfolio properties, gal/
occupant/day
Total Annual Water Use For property, MG/yr Total for portfolio, MG/year
Recycled Water Use On property, % of total water use Average across portfolio, %
Water Management Fees For property, combined water and wastewater Total for portfolio, $/yr
charges, $/yr
Solid Waste Generation For property, tons/yr Total for portfolio, Million tons/year
Diversion Rate For property, % diverted from landfills through Average across portfolio, %
recycling programs
14 Green Leases In place on property, yes or no Properties in portfolio operating under green lease
structures, %
Urban Revitalization and Adaptability
Brownfield Yes or no % brownfield properties in portfolio
Infill Yes or no % properties in CBD in portfolio
Smart Growth and Transit Oriented Development
Walkscore Rating Rating for property Average rating across portfolio
Health and Safety
Risk Management Plans Prepared for property, yes or no % properties in portfolio with risk management
plans in place
Vulnerable Location Yes or no % properties in coastal areas and/or earthquake
zones
Worker and Tenant Well Being
Tenant Satisfaction Survey Score on Kingsley survey Average score across portfolio on Kingsley Survey
Social Equity and Community Development
Benefits to CRA area Property located in a CRA census tract, yes or no % of properties in census tracts designated by the
Community Reinvestment Act (CRA)
Essential services Project brings essential services to an underserved % of properties in the portfolio bringing essential
area, yes or no services to underserved areas
Local Citizenship
Community Engagement Community Engagement Plan in place for property, % properties in portfolio with community
yes or no engagement plans in place
Public space Amount of public space maintained by the project, Amount of public space maintained, as % of total
sq ft area in the portfolio.
Voluntary Certification
Third Party Certification Property is certified under USGBC LEED, Energy % of properties in the portfolio with third party
Star, or other green building rating system, yes certification underway or in place
or no
Governance
Reporting Performance Performance of the property is reported against Is the performance of the portfolio reported against
triple bottom line metrics, yes or no triple bottom line metrics?
Alignment of Incentives Property manager is evaluated on triple bottom % of property managers evaluated and
line performance, and it is tied to compensation, compensated on the basis of triple bottom line
yes or no performance
Table 2: Proposed RPI Metrics

15. 3.4 Discussions of proposed RPI metrics
3.4.1 Energy Conservation and Carbon
Management
Metrics relating to energy conservation An Energy Star rating of 75 is needed to get
and renewable energy generation have an Energy Star certification and for LEED-
the advantage of being tied directly to EB. 85+ is good, and 90+ is very good. The
reduced operating costs. Therefore, it is no score is essentially the percentile compared to
coincidence that the metrics surrounding the rest of the EPA database, so 95% would
building energy use and associated mean only 5% of buildings perform better.
greenhouse gas emissions have been the For an office building (based on Commercial
focus of many green building initiatives Building Energy Consumption Survey, or CBECS
to date. However, these are generally data) typical energy use (energy and gas) is in
communicated as gross totals across the range of 90 kBtu/sf/year (electricity use of
investments rather than in normalized or 17 kWh/sf/yr = 59 kBtu/sf/yr plus gas use of
percentage terms which allow comparisons 32 kBtu/sf/yr). Of course, energy use is climate
between properties and between portfolios. specific, but a well designed low energy office
When evaluating a portfolio, it is most useful building might achieve 30 to 50 kBtu/sf/yr total.
to set targets and interpret performance by A net zero energy building might beat code 15
building types and climate zone. Recently baseline by 60% and then make up the rest with
enacted EPA GHG reporting requirements renewable and offsets. While energy intensity
and legislative initiatives promoting net zero is a metric that can identify underperforming
buildings (California Energy Commission) will buildings, total energy use for the portfolio is
drive adoption of metrics such as these for also important. This indicates the magnitude of
portfolio management. the value opportunity for even small increases in
energy performance.
RPI metrics take different forms
depending upon the use case:
acquisition or portfolio management

16. 3.4.2 Environmental Protection
The management of other resources used In San Francisco, commercial rates for potable 4
http://www.buildings.
com/ArticleDetails/
or generated by properties, namely water water and wastewater are escalating, with rates tabid/3321/ArticleID/6461/
and waste, is also a key issue for investors to proposed at approximately $10.00 per ccf Default.aspx
consider for their portfolio. These parameters (hundred cubic feet = 748 gals)6 for provision of 5
http://www.seco.
cpa.state.tx.us/
have direct links to value, with reduced water water and wastewater services by 2012. So, waterconservation.pdf
potable use, reduced wastewater and solid a 30 storey office building with a floor plate of 6
SFPUC 2009-2013
waste volumes resulting in reduced operating 30,000 sf could save over $50,000 per month proposed water and
wastewater rate package
costs. by investing in conservation and efficiency
7
California Integrated
According to the DOE, commercial buildings measures. Waste Management
Board, Estimated Solid
consume 88% of the potable water in the US4. Solid waste generation can be 0.08 lb/sf/day Waste Generation
A typical office building can use up to 60 gals/ or 1.24 lb/ employee/day7 for a typical office Rates for Commercial
Establishments,
sf/year, or 70 gals/person/day for indoor use, building. However, diversion rates of 75 % or http://www.ciwmb.
cooling, and irrigation5. This is compared to more can be achieved for an office building ca.gov/WasteChar/
WasteGenRates/
a highly water efficient building, which can with robust sorting, recycling, and composting Commercial.htm
achieve up to 10 to 15 gals/sf/year or gals/ programs in place. With solid waste collection
16 and disposal rates approaching $150/ton, the
person/day through water efficient fixtures,
xeriscaping, and use of recycled water. While magnitude of the value opportunity for even
potable water savings represent significant cost 50% diversion significant (for our hypothetical
savings, wastewater charges can be double 30 storey office building it could be over
to quadruple water charges in some areas $1M per year). Green lease arrangements tie
with limited capacity and aging infrastructure, tenant efforts to conserve resources directly
or communities with new wastewater plants to the savings realized by such efforts, so that
that must be amortized. Therefore, reducing investors, managers, and tenants alike each
wastewater volumes is even more important to have motivation to maximize reductions.
the bottom line that reducing potable water use.
3.4.3 Urban Revitalization and
Adaptability
Focusing investments on sites and properties of space as opposed to conventional sprawl.
which return brownfield sites to productive Some real estate funds invest exclusively
use or which take advantage of under- in brownfield properties (e.g. Cherokee).
utilized urban space reduces the need for However, most funds do not report the scale
greenfield development and encourages land of these types of investments at the portfolio
conservation. Additionally, government and level either as a percentage of properties or a
market incentives are increasingly directed total square feet in the portfolio.
toward investments which make efficient use

17. 3.4.4 Smart Growth and Transit
Oriented Development
Compact, walkable communities are the Similar to the manner in which some portfolio 8
http://www.u.arizona.
edu/~gpivo/
solution to some of our biggest shared managers aggregate EnergyStar ratings and Walkability%20Paper%20
challenges, from childhood obesity to social establish a portfolio wide target, walkscore 8_4%20draft.pdf
isolation, from crash deaths to disappearing ratings can also be aggregated across a
farmland, from the high price of gas and GHG portfolio, providing a useful view into the
emissions, to the architectural blight of strip character of the properties in the portfolio.
malls. The effect of walkability on property value
Investing in areas with existing density and was the subject of a study by Dr. Gary Pivo,
access to essential services and public transit professor of planning and natural resources
is one of the principal ways that RPI can and senior fellow at the University of Arizona,
support smart growth. Walkscore ratings can and Dr. Jeffrey Fisher, professor of real estate
serve as a proxy measure for smart growth and director of the Benecki Center for Real
and transit orientation, since with density Estate Studies at Indiana University8.
comes public services and “walkability”. Dr. Pivo and Dr. Fisher pulled real estate
Measuring the walkscore for a property is data going back a decade from the Nation
17
a simple as putting in the address into the Council of Real Estate Investment Fiduciaries
walkscore calculator (www.walkscore.com). (NCREIF) and obtained walkability ratings for
The property walkscore is a number between nearly 11,000 buildings using a Walk Score.
0 and 100. General guidelines for interpreting For each of the property types analyzed –
the score are as follows: office, retail, multi-family and industrial – higher
• 90-100 = Walkers’ Paradise: Most errands walkability scores equated to higher overall
can be accomplished on foot and many property values and net operating incomes.
people get by without owning a car Comparing properties with a Walk Score of
• 70-89 = Very Walkable: It’s possible to get 80, defined as “very walkable,” to properties
by without owning a car with a score of 20 (“car-dependent”), the
study found that the walkable properties were
• 50-69 = Somewhat Walkable: Some
29 percent to 49 percent more valuable and
stores and amenities are within walking
generated 34 percent to 71 percent more NOI
distance, but many everyday trips still
per square foot.
require a bike, public transportation, or car
The positive correlation between walkability
• 25-49 = Car-Dependent: Only a few
and property value and NOI was expected,
destinations are within easy walking
Dr. Pivo and Dr. Fisher said in the study.
range. For most errands, driving or public
According to Dr. Pivo, the premiums suggest
transportation is a must
higher rents, occupancy and general market
• 0-24 = Car-Dependent (Driving Only): demand for walkable properties.
Virtually no neighborhood destinations
within walking range. You can walk from
your house to your car!

18. 3.4.5 Resiliency
Properties that endure are inherently satisfied. Numerous studies have found
sustainable. Properties can be vulnerable benefits in monitoring and improving occupant
to all kinds of disasters which in turn could comfort, particularly in productivity gains.
jeopardize the sustainability of the occupants Providing services such as childcare and
and/or community. Additionally, rebuilding wellness programs on-site are another way
damaged properties has an enormous to improve worker well-being, and aiming to
environmental impact. Looking at the age institute these types of programs across a
of buildings in a portfolio is revealing, as portfolio is a valuable RPI commitment.
building codes have become more stringent We have chosen the property score on the
over time. However, dDesigning to code Kingsley survey as a metric that can establish
protects life safety, but does not protect the occupant satisfaction across a broad range
asset. Therefore, a portfolio manager should of factors, and be aggregated across the
assess the resiliency of the portfolio to risks portfolio. The Kingsley Index is the largest
associated with climate change, earthquakes, and most comprehensive performance-
other natural disasters, and security. Rather benchmarking database in the industry.
18 than establishing metrics for performance Compiled from over 20 years of analyzing the
of the asset against specific risks, having performance of real estate industry leaders,
a risk management plan in place serves the proprietary Index represents the standard
as a proxy for performance. As investors for measuring tenant, resident, employee and
become more sophisticated, they can begin client satisfaction, as well as broker relations
to look into specific risk parameters with the and operational effectiveness. Many portfolio
potential to affect health and safety such as managers, such as TIAA-CREF, routinely
location: climate, floodplain, or earthquake conduct Kingsley surveys for their properties.
zones, structural stability, life safety systems, Scoring high on occupant satisfaction has a
façade integrity, or business continuity plans. direct link to value, as tenant turnover will be
Adequate knowledge and mitigation of risks lower.
increases disaster resiliency and overall
sustainability by improving the durability and 3.4.7 Social Equity and Community
longevity of properties. With certain risk Development
mitigation measures in place, appraised value
Three pressing and interconnected issues
can be higher and insurance premiums can
have caused increasing amounts of concern
be lowered, thereby establishing a direct link
for real estate development as urban land
to value.
has become scarcer: gentrification, housing
affordability, and exclusionary policies and
3.4.6 Worker and Tenant Well-being
practices. In low income areas, sustainability
Taking an interest in the personal health and equates to jobs as a first priority. Underserved
wellbeing of tenants not only demonstrates areas typically need not only buildings, jobs,
a dedication to RPI, but can bring benefits transportation and green space, but access
in the form of increased property values to essential services, including local markets
and occupancy rates. Occupancy surveys for food and sundries, health care, places of
provide valuable feedback on the occupant worship, community centers, and day care
experience in a building and can lead to a services. Investment practices can help to
better understand of what makes occupants bring essential services to underserved areas,

19. either through direct investment in retail, food 3.4.9 Voluntary Certification
markets, or urban agriculture, or through LEED has established itself as the
inclusion of space for essential services as predominant green building certification for
part of a development program. By tracking new development in the United States and
the ability of properties to create jobs and several other parts of the world, with its
provide services for underserved areas, marketability and value being realized by many
investors can lower risks associated with investors and managers across the country.
regulation and community opposition as well Still, many green building initiatives and LEED
as setting an example of social sustainability. certification achievements are reported as
For existing assets, the two metrics we single-property accomplishments and the
selected to represent this element of RPI true sustainability impacts of the portfolio
include investment in a CRA area (Community remain hidden . Because of the time,
Reinvestment Act), and the amount of space complexity and cost of LEED certification,
allocated to essential services provided to many portfolio managers have indicated an
an underserved area as part of the project. unwillingness to make LEED certification a
These metrics are easily tracked across a portfolio-wide policy. Energy Star is emerging 19
portfolio but are currently under-reported, as the premier portfolio wide approach for
even for funds that have a stated goal of certification of energy performance, due to
targeting low to moderate income census low cost of certification, ease of use of the
tracts or benefitting CRA areas. Energy Star Portfolio Manager software, and
focus on value drivers. Portfolio manager can
3.4.8 Local Citizenship manage energy and water consumption for
Buildings – even green buildings – often lack all buildings, help set investment priorities,
a close connection to their surrounding area identify underperforming assets, verify
and community. Developing Community efficiency improvements, and receive EPA
Engagement plans on a site-by-site basis recognition for superior energy performance.
allows projects to be sensitive to the needs TIAA-CREF, for example, has set a goal of
of the citizens and areas in which they are Energy Star labeling for 100% of their office
constructed. Understanding issues such as buildings. Setting a goal of certifying most
site context, cultural resources and concerns, or all of a portfolio’s properties and tracking
and potential for shared use agreements progress toward this goal makes a profound
ensures that negative impacts and public statement of a company’s true commitment
opposition to projects will be minimized. to sustainability, reaching much beyond the
These plans should also include provisions demonstration of the system’s benefits in a
for the public use of private space, which has single building.
well-documented success in San Francisco
and other cities. Across a portfolio, investing
in projects that positively contribute to the
community in which they are anchored
creates a positive image, minimizes, risk, and
improves social sustainability.

20. 3.4.10 Governance of individual assets, with the capabilities to
This category represents the degree to which aggregate and view performance across the
metrics have been adopted and institutionalized portfolio. Finally, incentives must be aligned
within the portfolio management process. with goals, if a commitment to RPI is to be
Reporting performance on RPI metrics is diffused throughout the portfolio. This means
a shared responsibility between property that property managers must be not only
managers and portfolio managers. Systems evaluated, but compensated, on the basis of
must be put in place to track performance triple bottom line performance.
3.5 Portfolio characterization
In order to make sense of the performance of a and opportunities, certain measures need to
portfolio with respect to RPI metrics, portfolios be understood at the outset and tracked along
20 must be characterized according to their with the performance metrics. We have called
asset composition, geography, strategy, and these attributes “characterization” indicators.
other factors. This can help in benchmarking, They are quite useful for normalization and
review of progress against goals and in comparison of performance data. They take a
identifying trends over time. In order to have slightly different form for acquisition vs. portfolio
a complete picture of performance, progress, management, and they are shown below.
Characterization Acquisition (Asset) Portfolio
Asset type Property sf and type (office, Asset type in portfolio by sf
industrial, retail, apartment)
Size Gross sf of property Total gross sf held in portfolio
Climate Zone CBECS zone % property held in each CBECS climate
zone
NCREIF region NCREIF region for property % property held in each NCREIF region
Occupancy rate Most recent quarter Most recent quarter occupancy rate
occupancy rate (average across portfolio)
Age of Buildings Age of building Average age of buildings in portfolio
Ownership structure For building Within portfolio (direct or commingled)
Property Manager (s) For building Number of property managers working
with portfolio
# of Distinct Properties In investment opportunity In portfolio
Strategy Core, value-added or % of portfolio invested in core, value-
opportunistic added, opportunistic
Return on Investment Targeted for deal Targeted for portfolio
Table 3: Portfolio Characterization

21. 3.6 Case Study Results
The development of the RPI metrics for For many of the issues covered within the
acquisition and portfolio management was realm of RPI, the acquisition decision is the
undertaken by piloting an original, longer most critical stage in defining performance
set of draft metrics with two real estate achievement, as improvement may depend
funds—TIAA-CREF and Bay Area Fund of on outside factors (such as CRA location
Funds. Individual case studies are presented or walkability) or quite simply, the metric is
in the Appendix. The pilot testing sought to static (such as brownfield site or vulnerable
determine if the metrics are valid, reasonable, location). It is essential then that performance
informative, linked to value, and relevant for results for these metrics be at an acceptable
decision-making. The metrics presented in level at the acquisition stage.
this document reflect the findings of this pilot Several categories contain RPI metrics
testing. which investment managers could directly
tie to value either through their indication of
Use of Metrics to Screen Potential
decreased operating expenses or indirectly
Assets during Acquisition
aid in obtaining higher rents, lower vacancy or
Successful property acquisition rests on selling the property at a higher price. Other
equal parts judgment and execution. While categories do not link directly to asset value, 21
investment managers have to make sure rather allow the investor to property determine
that their due diligence is accurate, the the correct ESG measures which must be
most successful develop a reputation for in place in order to achieve maximum RPI
closing in a timely and reliable fashion. Unlike benefits.
portfolio management which is an on-going
The key to obtaining the biggest benefits
monitoring function, acquisition evaluation is a
from RPI metrics during acquisition is to
collection of one-off evaluations that must be
conduct the review of the right metrics at
accomplished within a very limited timeframe.
the right stage of the acquisition process.
So the use of responsible property investing
Some metrics are more easily obtained
metrics has to fit the timing of real estate
during the pre-LOI stage, others require more
acquisition.
investigation and so can only be obtained
Our work indicates that an investor can during formal due diligence. A few might not
develop decisions and execute on a potential be available until post-closing.
investment utilizing many of the proposed
No matter when performance is measured, it
metrics. Moreover, the inclusion of RPI
is clear that the RPI metrics lend themselves
metrics within the acquisition process may
to the classic investment process and can
strengthen a key objective: identifying the
supply valuable information for both ‘classic’
areas of potential value enhancement within
and triple bottom line acquisition decision
the investment.
making.
The inclusion of RPI metrics within the
acquisition process may strengthen a key
objective: identifying areas for potential
value enhancement

22. Use of Metrics for Portfolio
Characterization and Management
Managing a real estate portfolio requires Prudent portfolio managers will look to
measuring and monitoring a variety of financial enter into portfolio wide contracts for
fundamentals, including asset value, operating commissioning, efficiency, renewables, and
income, occupancy rates, and others. Use of other measures to improve performance,
ESG metrics can provide insight into risks and and use RPI metrics to track the value of
opportunities across the portfolio, however, improvements portfolio wide.
the burden of additional data collection The ability to benchmark ESG metrics
requirements must be balanced with the portfolio wide provides deep insight. While
potential insight to be obtained. Metrics external benchmarks are helpful, the ability to
must point to potential actions to take, or evaluate progress over time and characterize
indicate the results of those actions, or they the changing nature of the portfolio is viewed
are not worth the additional cost and time. as even more beneficial.
Our work indicates that RPI metrics can be
incorporated into standard procedures for Once RPI metrics are in place, portfolio
22 portfolio management, even where multiple
managers take a “horizontal” rather than
property managers exist. The performance
results help to drive strategies for improving a “vertical” approach to greening the
performance across the portfolio—beginning portfolio—implementing strategies in
with low hanging fruit, such as no cost
and low cost measures to improve energy
tranches across the portfolio
efficiency, to measures that may involve more Environmental metrics are perceived as having
significant capital cost but deliver greater more direct links to value, however social
payback. metrics are seen as helpful in characterizing
A view into ESG performance across the progress on advancing the social agenda of
portfolio helps to prioritize investments that the fund, while maintaining financial returns.
can be implemented portfolio wide. Our Environmental metrics are more malleable
research indicates that once ESG metrics than social metrics—in other words, most
are in place portfolio wide—managers take a environmental metrics can be improved over
“horizontal” rather than a “vertical” approach time across the portfolio, whereas social
to greening the portfolio—in other words, metrics are often determined at the point of
rather than greening one building at a time, acquisition, and remain static (walkability, CBD
strategies are enacted in tranches across the properties, etc.) Over time, both environmental
portfolio. Moving to a “horizontal” portfolio and social metrics may help drive investment
management approach is one of the best strategy and portfolio management, by setting
ways to achieve value—value creation from targets for certain parameters.
the initial measures can help to make the In summary, tracking RPI metrics in addition
business case for subsequent measures. to standard financial metrics can provide
Additionally, leveraging the size of the added insight into risks and opportunities
portfolio can mean economies of scale for (useful for all investors), and can provide
implementation. tangible evidence of a socially responsible
investment agenda.

23. 4 Implications for Reporting and Management
4.1 Adapting for higher performance
Implementing a system which tracks all of the 2 Implement a system for tracking
key performance indicators recommended and updating the listed metrics
for RPI will take some investment and require To ensure ease of collection and interpretation 9
Responsible Property
changes to current reporting and management Investing: What the
of the additional data, systems should be put leaders are doing, UNEP-
processes. However, implementing these into place to ensure the metrics are tracked Finance Initiative, 2008I
changes will contribute positively to long- at each property and easily aggregated to the
term portfolio performance and help foster portfolio level. This should generally align well
better relationships between investors and with current information-gathering practices,
asset managers around RPI and sustainability though may require improved relationships
objectives. Additionally, reporting across RPI with managers to be fully effective (discussed
metrics will help to develop a new literacy below). Furthermore, having an individual
of investment criteria and performance. or team dedicated to RPI and sustainability-
Portfolio managers, property managers, related analysis and management would help
and stakeholders will be able to engage in the metrics reach their full potential as portfolio
a dialogue regarding value created across improvement tools.
the triple bottom line through responsible
investment practices.
23
In 2007, Lend Lease released a
Adapting portfolio reporting processes to
framework for tracking and assessing its
include RPI metrics involves:
progress in reaching key sustainability
targets. Among these was a
1 Establishing a commitment to
commitment to ensuring that energy,
obtaining, managing and reporting
water, and waste data are measured and
on the metrics
monitored in a comparable way across
A concrete commitment to tracking a new all assets under management. This
set of metrics at the investor level is an commitment is an essential first step
important first step toward realizing benefits toward using the metrics to improve
for the portfolio, as well as toward gaining performance.
acceptance for the metrics industry-wide. An
investment of time and resources should be
put toward understanding existing available Reporting across RPI metrics will help
data, establishing a baseline, benchmarking, to develop a new literacy of investment
and performing a gap analysis to target key
improvement areas. Examples of this type of
criteria and performance
action are available from industry leaders who
have proven that this approach has benefits for
reporting and performance9.

24. 3 Institute education programs 4 Educating appraisers and
with managers to increase seeking support for increased
awareness of needed changes at appraisal values where
the property level appropriate
Many key improvements at the portfolio level Investments which improve performance
rely heavily on improvements occurring at the across key RPI metrics, particularly in areas
property level – through design and siting as such as energy performance, GHG emissions,
well as operations. Creating a standardized resource management, and connection to
education program tailored specifically toward transit and essential services, may bring an
managers, promoting awareness of new added value compared to standard assets
metrics and their implications should provide without such considerations. As energy
for participation and consistency across prices fluctuate and government regulations
the portfolio. Effective relationships with become increasingly stringent, these benefits
educated managers will greatly improve the will bring risk reduction, reduced operating
accountability associated with many of the costs, and other benefits which are generally
operational issues in particular, and improve not accounted for in the current standard
24 performance in the long-term . appraisal process. Though these may be
Use of new KPIs to characterize portfolios difficult to quantify directly in the short term,
is akin to creating a new language- a way to making a case for their incorporation into the
articulate value beyond financial performance, appraised value of assets in some form is one
using standardized metrics and benchmarks. of the most important ways for investors to
Over time, property managers and portfolio realize their value across a portfolio .
managers alike will become fluent in this new The chicken and egg situation should be
language of RPI. avoided—some portfolio managers want to
see clear links to value before committing
the additional time and energy to reporting,
In 2008, CB Richard Ellis established
while reporting on these metrics over time
its “Standards of Sustainability” which
is the only way to demonstrate clear links
create a minimum set of sustainability-
to value. A common complaint of investors
related actions to be completed for all
who are committed in principle to RPI is that
of its office buildings. These include
appraisers are slow to recognize value beyond
seeking ENERGY STAR certification for
BAU. Appraisers are often unclear how to
any eligible buildings, providing relevant
value specific sustainability techniques for
training at each building, and reporting
atypical assets. Appraisers notoriously default
internally on sustainability performance
to “comps” to assess property, and the only
each month to ownership. These
way to create a comparable database of
standards align well with RPI goals,
sustainable properties is to begin reporting on
and could be very powerful if applied
those metrics that matter, beyond traditional
successfully at the portfolio level.
financial metrics for real estate valuation. This
situation may improve with the emergence of
the new National Green Building Underwriting
Standards, a tool that can be used to assign a
green value score to a property.

25. 4.2 High-Performance Portfolio Dashboard
Ideally, a unified approach could also be taken Finally, in the mid- to long-term there is
to visualizing, analyzing, and managing the potential for real-time information monitoring,
data obtained for individual metrics, building benchmarking, and analysis across a portfolio.
upon the action items mentioned above Sensors exist which are capable of monitoring
to create a dashboard for monitoring and building resource use and transmitting this
improving portfolio performance in the context data for analysis and visualization for every
of RPI and investor and stakeholder interests. minute of the day. This technology, combined
In the short-term this would take the form with regular manager reports and occupant
of a standardized aggregation of data from surveys, can give an incredibly a timely and
properties across the portfolio (gathered accurate picture of performance across a
quarterly or monthly) which could be analyzed portfolio, and lead to new realizations and
for specific trends. This data should be fairly improvements.
easily accessed, particularly once relationships There are many useful software tools on the
with managers are streamlined. This would market- from EnergyStar Portfolio Manager
allow quick identification of the “winners” and (mentioned previously) to proprietary systems
“losers” in a portfolio with respect to the RPI such as Tririga (www.tririga.com). Tririga
metrics. From this analysis, best practices combines portfolio management tools with 25
from the “winners” could be applied to portal views for property managers, and
underperforming properties to maximize the facilities management functionality. This
performance of the portfolio as a whole. helps to integrate goals and establish
common metrics from asset to asset, which
roll up to a portfolio wide view of costs,
benefits, and performance.

26. 5 Notable Benefits and Conclusion
The benefits of committing to RPI are Through adoption of these KPIs, investors
potentially significant, but a lack of uniform can become literate in responsible property
metrics which can be adopted industry- investing. RPI literacy is powerful—it
wide has hindered the potential impact of enables us to finally begin to articulate the
RPI on the real estate sector. By adopting connection between the values of mission
the metrics listed above and following the driven investing, the actions that are taken
suggested implementation program, individual by investors to shape a sustainable portfolio,
investors can realize substantial gains which and the resulting performance of the portfolio.
could be quantified and managed without And literacy enables us to communicate
significant additional reporting burden. The our shared values in a shared language—
most notable of these gains are: managers with investors; investors with
• Long-term value creation through shareholders. In a changing and volatile
increases in assessed value of property investment environment, there is a unique
and urgent need to better understand
• Greatly reduced operating costs by driving
the benefits of making a commitment to
environmental metrics
responsible property investing. The potential
• Minimization of risk in several key areas for improvements at the portfolio level is
26
during acquisition great, with benefits accruing to investors,
• Improved public image and investor the industry, and society as a whole, and the
confidence potential for these considerations to improve
the industry as a whole is even greater. There
• Improved relationship between investors
is no better time for their adoption than now.
and asset managers
• Increased visibility and transparency
RPI literacy is powerful—it enables
• Demonstration of values in practice
us to finally begin to articulate the
connection between the values of
mission driven investing, the actions
that are taken by investors to shape a
sustainable portfolio, and the resulting
performance of the portfolio

27. APPENDIX A
Metrics Case Study:
Acquisitions

28. Using Metrics in Property Acquisitions:
Bay Area Council Family of Funds Case Study
Objectives Portfolio Strategy
The objective of this case study was to trial The three properties studied are part of FOF’s Per FOF, the expected
combined “target” size
the draft metrics for assessing a property Smart Growth Portfolio of Funds, which are of the funds will be $191
acquisition according to the principles two private real estate equity funds, with a million.
of Responsible Property Investing. The combined size of approximately $191 million.
draft metrics were developed through a The Funds have a 10-year term. They are
collaborative research effort between the comprised of 17 assets, totaling 1,971,172
Responsible Property Investing Center, Arup square feet commercial space and 1,066 for-
and Galley EcoCapital. The findings from the sale homes and 514 rental units.
trial were used to refine, streamline and evolve The Smart Growth Portfolio of Funds’
the metrics into a final set that best reflected objectives are two-fold:
the RPI principles and a triple bottom line
• First bottom line returns: to seek market
approach to investing.
returns from office, industrial, retail and
The Bay Area Council Family of Funds (FOF) multifamily properties in low-to-moderate
offered to participate in the trial by testing the income submarkets, generally located
metrics on three recently acquired properties. along transportation corridors. The Fund
28 The study considered: believes that these assets are typically
• Which RPI metrics can provide the best under-managed and that insufficient
indicators of value during the acquisition organized competition plus enjoys
process? the support of local government and
• Which RPI metrics can be most easily community groups for investment in these
applied by investment acquisitions staff areas.
during the acquisitions process? • Second bottom line return: to benefit the
• Would the use of RPI metrics materially communities the investments are made
change the investment acquisitions in, by focusing on improving jobs, housing
process? and environmental impact.
The Smart Growth Portfolio of Fund’s
About the Bay Area Council Family of investment parameters are to focus on LMI
Funds census tracts within the nine county Bay Area
The Bay Area Council Family of Funds is a region, provide equity to real estate projects
regional effort developed by the Bay Area and invest mainly in value-add opportunities,
Council to attract private capital into low-to- with a no more than 20% of fund capital being
moderate income (LMI) neighborhoods of the made available for new development.
San Francisco Bay Area. FOF acts as a Fund
Sponsor and Special Member for several
commercial real estate investment funds.
It works with Kennedy Wilson, the Fund
Manager, who manages the investments on
a day-to-day basis.