Real Estate Investment Trusts
Energy, Facilities and Sustainability Solutions for Real Estate Investment Trust
The market performance of real estate investment trusts (REITs) is impacted by a wide array of operational market forces and factors, including those outside the capital markets. Largely, the revenue predictability and growth of these organizations is dependent on their ability to mitigate as much risk as possible from any one of these factors. Net operating income, when adjusted for depreciation and capital improvements, is a critical performance metric for REITs but is heavily influenced by the ground-level operational realities of the facilities under management.
Investors gravitate toward predictability and long-term viability. Targeted (or cross-portfolio) sustainability investments can offset and insulate the REIT from some of the market precarities that impact bottom-line returns for the trust and its investors. In fact, within the capital markets like those for which REITs compete for investment, sustainability initiatives, and reporting have become less of a differentiator than an investor expectation.
Core Challenges
These are the unique challenges that face the Real Estate Investment Trust industry.
Market Volatility
Real estate tends to be a stable investment but is not without exposure to market forces. Economic uncertainty can impact property valuations, income streams, and investor confidence. Strategic sustainability investments can limit some of the revenue impact of market forces the trust is exposed to.
Property Valuations
Investors demand a predictable level of growth on their property investments even despite property valuations being subject to forces outside their initial assessments. Foreshadowing the long-term valuation of properties is difficult but there are known green investments to facilities, energy infrastructure, and water management that will stabilize and improve the valuation over the long term.
Liquidity Challenges
Access to capital instills investor confidence and allows for the sought-after predictable pattern of growth in the market. Optimizing facilities and sustainability budgets across the portfolio will serve the REIT by improving facility performance, limiting operational overhead, and ensuring a healthy cash flow.
Financing Costs
Borrowing costs will be, in part, dictated by the amount of risk the lender is assuming. In addition to having the backing of a healthy balance sheet, refinancing and rate-savings opportunities should be more readily available to trusts with a more sustainable and viable portfolio.
Regulatory Changes and Compliance
The exact course of regulatory outlook may not always be clear, but the long-term pattern points towards enforcing greener, more sustainable properties. Planning for and implementing these initiatives from the early stages of property development through ongoing property ownership can avoid costly refits and having depreciated assets within the portfolio.
Infrastructure Reliability
A property’s value is directly impacted by the extent it is reliant upon existing/ancillary energy grid or transportation infrastructure. Investing in alternative sources of energy generation and green transportation infrastructure can insulate the property’s valuation from disruptions to outside infrastructure.
Critical Considerations
These are the questions facing decision-makers in the Real Estate Investment Trust industry, we are here to help answer them.
What opportunities does my property portfolio have to diversify energy sources or decrease reliance on outside suppliers? How can we better verticalize our energy costs?
How can we maximize facility performance to reduce total cost of ownership of our facility assets and ensure maximum useful life for our roofs, pavements, and HVAC equipment?
How can we better forecast the revenue impact of sustainability investments to our cash flow and profitability? How can we attract ESG-sensitive investment?
How can we develop and execute a sustainability plan that will improve tenant retention and market appeal?
How Mantis Helps
Mantis has been partnering with commercial realtors and their funding partners since our inception. We understand the full cycle of facilities management, green building, energy optimization, and other factors impacting the valuation of your property portfolios.
From feasibility assessments, profitability forecasting, and project roadmapping, to ground-level implementation of sustainability solutions, we provide the full cycle of partnership your organization needs to understand, protect, and enhance the value of your property portfolio.
Key Advantages
- Cost Savings
- Enhanced Property Valuations
- Risk Mitigation
- Access to Capital
- Lower Tenant Turnover
- Regulatory Compliance
- Reputation Enhancement
Case Studies
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