Reflections on…

SustainAbility

Martin Brühl FRICS

Chief Investment Officer

Union Investment Real Estate

Hamburg, 16 February 2017

Source: Drees & Sommer

"The concept of global warming was created by and for the Chinese in order to make U.S.

manufacturing non-competitive."

"It's really cold outside, they are calling it a major freeze, weeks ahead of normal. Man, we

could use a big fat dose of global warming!"

Donald J. Trump45th President of the

Divided States of America

How (not) to make friends with “The Donald” …

3

For my sins…

4

Source: Drees & Sommer

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It's all about the money, stupid!

Future = the time

dimension: sustainable

income over an extended

economic life

The value of a real estate

asset is the sum of its

discounted expected

future returns.

Return = maximised net

operating income, therefore

minimised irrecoverables

Discount/Cap Rate = risk-free rate

less growth plus risk premium

(incl. functional obsolescence!)

Sustainability is an integral component of a modern asset manager’s real estate value-added chain…

screening of

certification options

green leases

service providers are

contractually bound to adhere

to Union Investment‘s

sustainability standards

identification of

optimisation potential

continuous

monitoring of

sustainability

aspects

sustainable increase

in asset value

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MAGoal: A

sustainable

increase of the

assets‘ net

income

asset management

investment

asset strategy

letting

monitoring

service providers

sustainable investment

check

disinvestment

management and

supervision of

sustainability measures

…and is concurrently affected by a variety of its internal and external stakeholders

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portfolio

asset

technical

installations

According to German Property Federation: Guideline to the implementation of sustainability measurement for the real estate portfolio

fund strategy

decision on optimising

installations

asset strategy

determines

determines

data

monitoring

portfolio

sustainability

management

fund

manager

property

manager / (facility

manager)

asset

manager / (property

manager)

retail/institutional investors sales forces/distribution channelsproduct /distribution

strategy

A Sustainable Investment Check is the starting point in both acquisition and ongoing asset management

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measurement of

qualitative attri-

butes is based on

six different criteria:

● energy

● resources

● economy

● user comfort

● operation

● location

content*

SI-check

„Measuring the quality of

sustainability“

cost-effective tool for

identifying optimisation

potential of the assets

the aim is to raise the

overall asset quality

execution of SI-check goal

for existing assets:

• annual execution of SI-

check questionnaire

• contains input to current

and targeted qualities of

each asset

property manager

for investments:

• execution of the SI-

check as part of the

due diligence process

• if threshold levels aren‘t

reached, the correspon-

ding costs are budgeted

in the purchase price

investment manager

* content of SI-check is based on the specifications of international certification schemes (LEED, BREEAM, DGNB)

Green Due

Diligence (GDD)

Operation of

property

Usage of property Balanced Score-

card KPI: SustAbil

Assess building

potential: SI-Check

The sustainability toolbox available to today's responsible institutional asset managers

Feedback to fund and asset

managers through target-

group-specific reporting

Data collection &

sustainability

reportingEvaluation of potential with

rough costs and recommen-

dations from property

management

Assess sustainability

criteria,

indicating potential savings

and ROI

Ensure sustainable building

operation via property

manager / facility manager

Sustainable use of

properties

(e.g. ensured by green

leases)

A sustainability KPI has

been embedded in the

Balanced Scorecard as an

additional element

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Reports at property and fund level to improve transparency and sustainability management

Fund reports:

• Results presented at fund level plus

property comparison overview

• Strategic recommendations for action

by fund management

Property reports:

• Detailed information on KPIs, SI score,

green leases, property certification

• Results presented over the course of

the year and compared with peer group

• Property-specific recommendations with

regard to KPIs and SI Check for asset

management and property management

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Including tenants in sustainable use of buildings, e.g. by way of green leases – an ongoing challenge

Optimizing building use through shared objectives and

joint action

Sharing building data to establish transparency

around consumption

Preventative measures to aid health through rules on

ecological building materials to be used during fit-out

Raising tenant awareness of sustainability issues and

cost savings

Simplified certification using existing documents

Positive impact on fund ratings

2012

2015

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Sustainability is an integral component of the organisation‘s entire real estate value-added chain…

screening of

certification options

green leases

service providers are

contractually bound to adhere

to Union Investment‘s

sustainability standards

identification of

optimisation potential

continuous

monitoring of

sustainability

aspects

sustainable increase

in asset value

13

MAGoal: A

sustainable

increase of the

assets‘ net

income

asset management

investment

asset strategy

letting

monitoring

service providers

sustainable investment

check

disinvestment

management and

supervision of

sustainability measures

Source: Drees & Sommer

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Microsoft Deutschland, Quelle: Bilder Spiegel Online: http://www.spiegel.de/fotostrecke/neue-microsoft-zentrale-smarter-worken-

in-schwabing-fotostrecke-141722-10.html

“Robotics change task-orientation into agile knowledge-oriented millennium-friendly workspace experiences”

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Philips Deutschland, Hamburg, Source: http://www.officelovin.com/2016/01/29/a-tour-of-philips-new-hamburg-headquarters/

What‘s true: Net utilisation of office space will increase, affecting demand for office space – how do we cope?

So, is this yet another workspace revolution?Or rather a gradual workspace evolution…

A 1990s hype revisited - How paperless and wireless are we today?

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What does this mean for other unstoppable life-transforming mega-trends?

Let’s not hold all truths to be self-evident.

“Spatial” revolutions take time!

It’s all about the money, stupid!

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So what’s gonna sustain Mother Earth?

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E D U C A T I O N

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E D U C A T I O N

Reflections on…

SustainAbility

Thank you

for your patience!Source: Drees & Sommer