Commercial Investment Real Estate January/February 2017

FINANCING FOCUS Mining Gold Improvements in energy performance boost the bottom line. by Iain Campbell D 14 January | February 2017 geting REITs. They can reduce scrutiny from investors following the addition of real estate to the S&P on Aug. 31, 2016. Simply put, REIT fund managers who implement building energy retrofits across their portfolios will be positioned for greater stability and value. Those who overlook this opportunity will increase the likelihood of underperformance. Investors should strongly encourage managers to prioritize energy retrofit investments to improve portfolio performance. According to a 2015 University of Cambridge study, REITs with higher Global Real Estate Sustainability Benchmark scores outperform their peers on their returns in investment. Improving Performance In good times and bad, REIT fund managers function as risk managers. As REIT managers assess risk mitigation strategies, energy retrofits should rise to the top of the list because they deliver reliable and compelling returns. Energy retrofits provide COMMERCIAL INVESTMENT REAL ESTATE uring the 140.6-mile Ironman event, competitors can either follow or ignore guidance about the importance of nutrition to maximize their performance. Those who follow this advice have a performance advantage throughout the competition. Similarly, research from the likes of BDO and NAREIT finds that Real Estate Investment Trusts are facing performance risks, potential market volatility, and heightened attention from investors after outpacing the Standard & Poor’s 500 during most of 2016. REIT fund managers can either follow or ignore guidance on the financial opportunity that commercial building energy retrofits offer to maximize earnings and sustain a competitive advantage. Ignoring guidance presents major performance risks. Consider, for example, how managers who prioritize invest- ments in energy retrofits in the near-term can strengthen their position against potential challenges from activist investors tar-

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