"It's not that easy bein' green." -- Kermit the Frog
A recent article featured on REIT.com highlighted three companies that think globally and back that up with award-winning energy efficiency and recycling initiatives. Each company was recently recognized by the London based Carbon Disclosure Project. The CDP works with 722 institutional investors with assets of $87 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce those effects.
What they have in common
These companies operate large portfolios of facilities where there are opportunities to reduce energy consumption, water usage, and greenhouse emissions.
HCP (NYSE: HCP ) owns and operates health care related facilities leased to tenants such as Amgen, Genentech, HCA, and HCR ManorCare. Mall landlord Simon Property Group (NYSE: SPG ) is the largest U.S. real estate investment trust, with a market cap of more than $49 billion. Host Hotels & Resorts (NYSE: HST ) is best known by the luxury hotel brands it operates, including the Four Seasons, Marriott, Westin, Hyatt, and Ritz-Carlton.
What about that other kind of green?
Something else they share in common is that they are all REITs, which must pay out at least 90% of taxable earnings to shareholders in the form of dividends.
Each of these companies pays quarterly dividends, which is the kind of green most investors like to see in their brokerage statements. HCP has increased its dividend for 28 consecutive years, and it's currently yielding almost 5%.
Nothing to sneeze at
HCP is focused on five types of health-care facilities: senior housing, nursing homes, life science, medical offices, and hospitals. As of June 30, 2013, HCP had $21 billion of assets under management with a market cap of $19.5 billion. Stockholders can give themselves another pat on the back for investing in a sector vital to our society.
An April 25, 2013, presentation to stockholders highlighted these achievements in sustainability for 2012:
- NAREIT's Healthcare Leader in the Light Award.
- The Global Real Estate Sustainability Benchmark, or GRESB, overall leader in the health care and hotels sector.
- 35 Energy Star labels.
- 2 LEED certifications.
- $1.3 million in energy cost savings for MOB portfolio.
Executive Vice President for medical office properties Tom Klaritch, discussing sources of capital, said "investors are looking more at these surveys and reports, and making decisions as to what companies to invest in based on that." Top institutional holders of HCP shares include Vanguard, BlackRock, and Fidelity.
Please don't leave the light on
Host Hotels & Resorts as of June 30, 2013, owned 103 properties in the U.S. and 15 international properties totaling approximately 62,700 rooms. "We consider all aspects of sustainability including initial investment and maintenance costs and the return on the investment in addition to the environmental and social impact a project may have," according to CEO W. Edward Walter.
Host's ongoing investments in environmental projects include:
- Currently operating four cogeneration plants.
- Upgrading to energy-efficient lighting and controls in more than 100 hotels.
- Routinely installing EPA WaterSense qualified plumbing fixtures.
- Installing and currently specifying elevator upgrades that reduce energy consumption an estimated 15%.
- Performing systematic energy audits at older hotels.
Host Hotels is one of only 36 S&P 500 companies included in the CDP's Climate Performance Leadership Index, out of 334 respondents.
Think globally, act locally
Mall landlord Simon Property Group is ranked No. 50 in the Fortune 100. It's the largest retail real estate company in the world, operating 326 properties totaling 241 million square feet in the U.S. and Asia. Simon recently purchased a 29% stake in a publicly traded French real estate company with assets in 13 European countries.
In a recent press release, CEO David Simon stated, "We believe a transparent approach to measuring and reducing climate impact is critical to our business strategy ... and aligns with our commitment to responsible citizenship."
- The company has been named to the S&P 500 Climate Disclosure Leadership Index five times.
- The GRESB ranked Simon No. 1 among 15 retail real estate peers.
- Recycling is available at 100% of its properties.
- Initiatives are in place to measure and reduce the consumption of energy, water, and greenhouse gas emissions.
- U.S. customers are encouraged to use electric vehicle charging stations at 100 locations.
The GRESB report is based upon sustainability data gathered from 543 property companies and funds, providing information on 49,000 properties across the globe.
Why should you care?
Some businesses are focused on water conservation and energy efficiency because it's good for the bottom line. That is certainly a win for shareholders and the environment.
However, there are other businesses that take a more holistic approach, managing for the benefit of all stakeholders: employees, shareholders, financiers, suppliers, customers, communities -- and when it comes to greenhouse gas emissions -- the planet and future generations. This way of thinking is often referred to as "conscious capitalism."
In the age of social media, investors can influence corporate behavior. During the next few weeks, I'll be looking at how these three REITs stack up to their sector peers as investments. Stay tuned!
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