Well, I am back in the great Salt Lake valley...and as I write this, the skies are blue and clear (I brought it back with me from California) but it is still really cold. I have to keep an eye on the weather because next Saturday...I am getting married! My fiance is a little nervous that it will snow so we are going to be meteorologists for the next week. Keep your fingers crossed. A couple weeks ago, I wrote an article about socially responsible investing and I mentioned that REITs could see some strong gains as they invest in green properties. After that article, I kept thinking about REITs and their business strategy. They have to be investing in JVs or purchasing green properties during the course of business. Right? I mean, why wouldn't they. So, if they are, then why don't they tout themselves as "Green REITs?" Well, I have done some research and I think I have a few ideas.
Follow this...as energy prices continue to rise, energy efficient buildings will save money (over the life of the building). This is attractive to tenants who may have to bear the operating cost burden. So, if REITs go out and invest in or purchase green buildings for their tenants, why don't they kill two birds with one stone and publicize the green strategy to investors as well? From what I can gather, REIT investors tend to be a little more conservative. Publicizing a REIT as a "Green REIT" may scare off investors...so REIT fund managers have been hesitant to promote the green angle. Case in point, Equity Office Properties (NYSE:EOP) has been a U.S. Environmental Protection Agency Energy Star partner and award winner for five years. EOP has also committed to installing cogeneration systems across its property portfolio--over 124 million square feet of office space in the US. Of the fifteen total installations that are completed, 10 are in California...resulting in an estimated average savings of $2 million per year. See article regarding details of EOP's cogeneration systems. The company is happy to promote and share its energy efforts with other energy innovators, trade magazines and even the EPA's website but you would be hard pressed to find any mention of their "green" committment on their website or in their annual audited financial statements (2006 10-K: Go to Edit:Find and do a search for energy, efficiency, green, or sustainable). For some reason, EOP doesn't want to self-sell itself as "green" to the REIT investor...but it's cool if others do it. Like KLD, who recently added Equity Office Properties to its Domini 400 Social Equity Index Fund (Go here and then click on prospectus on the left).
Although EOP has been hesitant to market its green involvement to potential investors, I think this trend is beginning to change. Tomorrow, I will have more examples of other REITs that are going green. By the way, look at EOP's stock price over the last year. Pretty interesting.