Business and marketing strategies in responsible property investment
| Pages | 447-469 |
| Published date | 07 August 2009 |
| DOI | https://doi.org/10.1108/14635780910982331 |
| Date | 07 August 2009 |
| Author | Ulrich Kriese |
| Subject Matter | Property management & built environment |
Business and marketing
strategies in responsible
property investment
Ulrich Kriese
Schopfheim, Germany
Abstract
Purpose – The purpose of this paper is to give an overview of business and marketing strategies
pursued by responsible property developers, funds and investors in the USA and to draw conclusions
for future activities in that sector from a transatlantic perspective.
Design/methodology/approach – Personal interviews are conducted with 42 developers, fund
providers and managers, institutional, nonprofit and major private investors representing more than
US$60 billion of responsible property assets under management. The data are complemented by an
analysis of promotional documents. A cluster analysis is performed to classify the strategies of the
participating companies and institutions and to explore any commonalities and differences.
Findings – Business and marketing strategies in responsible property investment (RPI) can be
described and characterised within the three dimensions of location, building and people. RPI activities
and investors in the USA usually transcend pure green building and aim to contribute significantly to
smart growth, to sustainable urban development and revitalization.
Research limitations/implications – The results in this study are not fully representative of the
US RPI community, with the study focussing on the core network of developers, real estate funds and
large investors. Furthermore, issues of corporate governance and financial performance are omitted
from this study. Interviews are conducted in autumn 2008, i.e. at a time when the major financial crisis
reached a global scale, potentially influencing participants’ perspectives and subsequent responses.
Practical implications – The findings may help RPI practitioners reflect on business and
marketing strategies. European developers, real estate funds and investors can benefit in many
respects from US experiences.
Originality/value – The research approach, applied to RPI focussing on business and marketing
strategies for the first time, provides new insights for practitioners on both sides of the Atlantic. Above
all, the findings may initiate further research to deepen the understanding of the RPI business.
Keywords Social responsibility, Sustainable development, Regional development, Real estate,
Corporate strategy,United States of America
Paper type Research paper
1. Introduction
In recent years, public awareness and government activity has increasingly focussed
on the connection between buildings, urban form and sustainability. Transit oriented,
walkable, mixed use and mixed income communities, brownfield and high-density
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The author is most grateful to the American Council on Germany, which generously supported
this research through a McCloy Fellowship. Thanks also to Gary Pivo and several experts for
their advice finding through the US RPI community, to all interview partners for their
participation, and to Claire Roberts and two anonymous referees for their valuable comments on
previous versions of this paper. After all, the author would like to thank Roland W. Scholz for
what he has learned from him to conduct this research.
Business and
marketing
strategies
447
Journal of Property Investment &
Finance
Vol. 27 No. 5, 2009
pp. 447-469
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780910982331
development and green buildings attract more attention both within the real estate
industry and the socially responsible investment (SRI) community, particularly in the
USA, Australia and Great Britain (Dixon et al., 2006; Flynn et al., 2007; Funder’s
Network for Smart Growth and Livable Communities, 2004; Newell, 2008; Ritter, 2008;
RREEF, 2008; WWF-UK, Housing Corporation, Insight Investment and Upstream
Strategies, 2007). Professional real estate magazines have featured sustainability
issues with unprecedented intensity and property valuation experts have become
aware of the connection between the social, environmental and financial performance
of buildings (Lorenz and Lu
¨tzkendorf, 2008; RICS, 2005)[1].
Responsible property investment (RPI) as defined by Pivo and McNamara (2005)
refers to the more general concepts of SRI and corporate social responsibility (Koellner
et al., 2005; Rapson et al., 2007). It means:
[...] maximizing the positive effects and minimizing the negative effects of property
ownership, management and development on society and the natural environment in a way
that is consistent with investor goals and fiduciary responsibilities (Pivo and McNamara,
2005, p. 129).
First, this definition covers social responsibility directly connected with the building,
which may be “green”, mixed use, high density, etc. Second, it includes social
responsibility related to the building’s location, which may have been contaminated
and may be transit oriented, inner-city or suburban, etc. Third, it refers to social
responsibility related to people, i.e. the development in question may, e.g. include
mixed income housing or provide jobs (Kriese and Scholz, 2009).
In recent years, some developers, fund providers and investors in the USA, the UK
and some other countries introduced RPI as a major component in their business
strategy (Pivo and UNEP FI Property Working Group, 2008; RREEF, 2007). RPIs and
investment vehicles are either of a fixed income (debt based) or equity real estate type;
they can be used to generally de-risk a portfolio or add value and generate an alpha, if
the investor is able to identify and tap widespread market inefficiencies. Hagerman
et al. (2007), Lamore et al. (2006), Steiger et al. (2007) and Willis (2004) point to the
crucial role of both financial intermediaries, i.e. funds to link institutional investors to
urban revitalization, and community intermediaries (e.g. community development
corporations) to ensure the achievement of the social goals of investment. The fund and
the institutional investor come together “in a symbiotic relationship” and “provide each
other with scale” (Hagerman et al., 2007, p. 24). The fund, with the aid of the community
partner, delivers urban development projects large enough to both make an impact on
the community and produce financial returns. The institutional investor delivers large
amounts of capital that allow the fund to scale-up its investments.
Besides, both direct and indirect financial benefits of sustainable real estate
(Eichholtz et al., 2009; Ellison et al., 2007; Fuerst and McAllister, 2008; Lorenz et al.,
2007; Pivo and Fisher, 2009; Roper and Beard, 2006), RPI possesses the potential for
major reputation and brand growth (Mistra, 2008). In short, RPI has a strong business
case. With regard to the current global financial crisis caused by the property and
finance industry itself, RPI appears to be a good part of the solution. As part of this
potential, green buildings should now be able to extend their competitive advantage
(RREEF, 2009). In many places in the USA, Leadership in Energy and Environmental
Design (LEED) certification[2] has already become a precondition for granting a loan.
JPIF
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