Disclosures and Disclaimers

© 2018 by 5 Stone Green Capital

PHILOSOPHY

Market Innovation

 

We use green technologies and design to reduce operating expenses; we incorporate sustainability protocols to improve risk management;  and we implement operating policies and procedures to enhance cash flows.

 

The U.S. is expected to add 150 million American citizens in the next 36 years to total 450 million people.  The world’s population is expected to increase by 2 billion to total 9 billion over that same period.

 

We believe that continued domestic U.S. and global population growth and improving economies will result in increased demand and therefore increased cost for energy, water and materials in the not too distant future.

 

Our green strategy, we believe, helps insulate our investments from the potential impact of sudden price increases due to energy, water and materials shortages.

 

We believe the key competitive advantages provided by a 100% green real estate portfolio are (i) higher distributable cashflows (ii) higher valuations and (iii) a better inflation hedge, versus a comparable standard construction portfolio.

 

We think a 100% green real estate portfolio will also provide better tenant lease up, better tenant retention, better health outcomes, and a hedge against physical, functional, and economic obsolescence as well as some protection against regulatory risk.

   

Additionally, we believe we serve our investors better by thinking and acting like operators, loan originators and asset managers.  While we don’t provide property management services, we are involved in as many steps of the real estate investment and management process as we can.  

 

Through our emphasis on sustainability, utilities efficiency, and asset management, we see opportunities where others don’t or can’t.

Our subject matter expertise helps to select, integrate, and optimize the power of green technology and sustainable design to reduce operating costs and enhance profitability with our partners. 

 

We target markets that have (i) improving demographics, (ii) high retail sales leakage (iii) high income density (iv) high utility rates and (v) are within a regulatory environment that is supportive of green real estate investment and/or development. 

 

Additionally, we focus on reviewing our investments through the lens of impact investing.  This allows us to better understand how we interact with local governments, communities and key stakeholders.

 

We regard impact investment criteria as well as the deployment of green technology as strong risk mitigants. We do not believe an iota of return is sacrificed by considering impact issues or by being green.  In our view, having a community have a positive stake in our investments’ success ( jobs, improved health outcomes and more) reduces risk.  Hence, we layer impact criteria throughout our investment and asset management process

 

 To aid diversification within the portfolio, our investment engine targets light industrial assets, multifamily housing (mixed use), and essential retail (pharmacies and groceries). 

 

Through a combination of experience and data driven analysis, we work to place the right green technologies in the right assets in the right locations to maximize the probabilities of success for our projects. 

 

How We Do It

 

Our goal is to reduce utilities’ consumption by 30% or more.

 

We are relentlessly focused on asset management as the best way to ensure that our investments enjoy the maximum benefit of the green technologies employed.

 

We believe that the combination of this approach with our rigorous market selection criteria, provides the framework for an investment discipline that enables us to find value where others don’t and maximize that value where others cannot.

 

Our view is that this approach will result in lower operating expenses and future capital expenditures, ultimately resulting in higher net operating income and higher valuations for our investments.

Thoughtful Leadership

 

8 Predictions for Green Commercial Real Estate in 2017

 

Our strategy is driven by the belief that, over time, corresponding to U.S. population increases, there will be increased regulation of carbon emissions and that capital markets will differentiate between the valuation of energy–efficient and conventional real estate assets.  As it stands today, U.S. Commercial Real Estate domestically consumes or emits

  • 72% of electric consumption

  • 39% of total energy use

  • 38% of greenhouse gas

  • 40% of raw materials

  • 30% of waste (136mm tons/yr.)

  • 14% of potable water

 

Over time, we expect, there will be increased regulation of carbon emissions and that capital markets will differentiate between the valuation of utilities efficient, super healthy, sustainably designed, high performance green real estate assets versus conventional real estate assets.

 

We think as pressure builds on natural resources, the regulatory environment will stiffen for real estate and that our country will (i) need new urban development /redevelopment to meet the demands of generations X, Y,Z and the Boomers and (ii) there will be corresponding price increases for  utilities and materials due to increased demand.

  • Early adopters, we predict, will benefit from investing in commercial real estate that incorporates smart technologies and is utilities and materials efficient.

  • Green real estate will be a likely winner in such an economy