ESG
Financing Sustainable Real Estate Through Sale-leasebacks
Financing sustainable building upgrades can be a daunting and expensive endeavor for many businesses. The upfront costs associated with sustainable materials, energy-efficient systems and eco-friendly designs often deter companies from pursuing these environmentally beneficial projects, even when they know there are long-term cost savings. Sale-leasebacks offer an effective solution to this challenge. By selling their real estate to an investor and leasing it back, companies can unlock capital which they can invest in sustainability upgrades, improving the quality of their building and often lowering operating costs. Landlords, like W. P. Carey, are also typically supportive of sustainability-focused building upgrades as they increase the overall value of the building. Here are several ways companies can leverage sale-leaseback financing to make their buildings more sustainable. Solar panel installations and green roofs One of the most effective sustainable upgrades for commercial facilities is installing solar panels on a roof or carport. Solar panels provide a clean source of energy and can help companies save on power costs. They also reduce over-reliance on the grid during peak periods when electricity demand is high and clean up the grid, providing a renewable and cost-effective alternative to fossil fuels. Depending on the location, companies may also be able to receive Renewable Energy Credits (RECs) or Guarantees of Origin (GOs). Another sustainable upgrade that can provide both environmental and economic benefits is a green roof, also known as vegetated or living roof. These are roof systems covered with waterproofing membrane, soil and vegetation. Green roofs can significantly improve stormwater management, reduce urban heat island effect, boost biodiversity by providing a habitat for plants and animals, and improve building energy efficiency. Both solar panels and green roofs are a great way to make a building more sustainable and help reduce energy costs for the tenant, but they require significant investment. By utilizing sale-leaseback financing, companies can easily unlock the capital they need to invest in these improvements. Sustainable construction For companies who are looking for a brand-new building and want to prioritize sustainability, a build-to-suit, which uses the sale-leaseback structure, is a great solution. Through a build-to-suit, a company can secure a custom-built, sustainable facility without the upfront capital investment. An investor funds and manages the construction of the new facility to meet the specifications of the future tenant, and upon completion, the company enters into a long-term lease. During the build-to-suit planning, companies can specify that they want to utilize sustainable construction, which means using recyclable and renewable materials during the building process as well as minimizing energy consumption and waste production. In addition, the building can be designed to minimize its carbon footprint by incorporating elements and materials that have a continuous positive influence on the environment. These features can include electric-vehicle charging stations, drought-resistant landscaping, heat pumps, appropriate insulation to prevent heat loss and greywater recycling. Energy-efficiency upgrades Implementing sustainable features to improve energy efficiency significantly impacts a property's life-cycle emissions. These upgrades are often relatively easy to implement but can be costly to install. By unlocking capital through a sale-leaseback, companies can extract the cash they need to invest in these improvements, making their building more sustainable and saving on energy costs in the long run. One example of an energy-efficiency upgrade is installing Internet of Things (IoT) technology, including smart meters, which help companies manage building efficiency on a daily basis. IoT sensors can gather information on energy consumption, temperature, air quality and occupancy levels, enabling tenants to best optimize the efficiency of their buildings. Companies can also leverage the capital from a sale-leaseback for building systems upgrades. Upgrading an outdated heating, ventilation and air conditioning (HVAC) system can help decrease utility consumption and create maintenance cost savings for the tenant. W. P. Carey can help While the financial burden of sustainable building upgrades can be substantial, sale-leasebacks provide a viable and strategic solution. Embracing this approach allows companies to align their environmental goals with their economic objectives, paving the way for a greener and more prosperous future. W. P. Carey is one of the largest net lease real estate investors and has significant experience working with companies on sale-leasebacks and sustainability solutions. If you’re interested in learning more, contact us today!
Tenant Partnerships – The Road to a Sustainable Future
As Climate Week NYC approaches, the spotlight on sustainability is brighter than ever. For companies across industries, the annual event underscores the urgent need to address climate change. The real estate sector, estimated to be responsible for nearly 40% of global carbon emissions, plays a critical role in advancing this worldwide effort. At W. P. Carey, we recognize our potential to drive meaningful impact in the fight against climate change through our extensive portfolio of over 1,200 net lease properties. While the net lease model means our tenants have full operational control of their properties, we are committed to collaborating with them to achieve shared sustainability goals and enhance the quality of our properties. Here’s how: Gaining insights through data Collecting detailed energy data remains a core focus for us. Collaborating with our tenants to install IoT smart meter systems provides both us and our tenants access to high-quality utility data for their leased properties. This data can be utilized to assess energy usage for regulatory compliance as well as voluntary reporting. It also enables us to calculate the carbon footprint of our portfolio and identify opportunities to implement energy-saving measures at our properties. In 2023, we began a smart meter installation program with our European tenants, making the process more efficient for both W. P. Carey and our tenants while also reducing the risk of data errors. Renewable energy opportunities Renewable energy can reduce building operating costs and lower carbon emissions. One of the most accessible sources of renewable energy is solar power, which can be harnessed through the installation of solar panels. Particularly given the roof space that our industrial and warehouse assets provide, we believe we have a large addressable market for solar. Through W. P. Carey’s CareySolar® program, tenants have the opportunity to take advantage of rooftop and carport solar installations at their leased properties through a broad array of structures. These include: Landlord-operated Landlord-financed Tenant projects Rooftop leases W. P. Carey collaborates with each tenant to understand their current energy usage and determine the ideal solar solution for their unique property. In 2023, W. P. Carey extended the lease term with an existing tenant for their 265,000-square-foot industrial facility in Illinois. Simultaneously, we signed a 15-year power purchase agreement where we plan to build a 1,350-kilowatt roof mounted solar system that would offset 740 metric tons of CO2 annually. We will manage and fund the construction of the system and sell the power generated by the system to the tenant. Building energy retrofits Implementing sustainable features to improve energy efficiency has a huge impact on a property’s life-cycle emissions. W. P. Carey can do this through property-specific energy retrofits. An example of an energy retrofit is the installation of LED lighting. LED lights are 80% to 90% more energy efficient than other light bulbs and do not contain any environmentally hazardous materials. Additionally, LEDs last up to 25 times longer than traditional incandescent bulbs. In 2023, W. P. Carey completed a full LED retrofit at our 1.5 million-square-foot warehouse in University Park, Illinois. The LED project is expected to result in a 35% reduction in lighting electricity usage and 41% reduction in utility and maintenance bills at the property. Following the completion of the retrofit, we leased the property to Samsung for a term of 10.5 years. Green-building certifications Green-building certifications such as LEED and BREEAM can provide many benefits for both landlords and tenants. Achieving a green-building certification means that a property meets certain sustainability requirements across a variety of categories including energy, air quality and water usage. Certified buildings are typically more energy and cost efficient and create healthier work environments for employees. In addition to being more environmentally friendly, green-certified buildings can offer tax benefits. Many states offer tax incentives for green building projects, based on either energy savings or reaching a certain level of certification. Real estate studies have also shown that green buildings sell and lease faster than traditional buildings, and garner higher rents and lease rates. At W. P. Carey, we’re committed to achieving green-building certifications where we can, and our portfolio includes 6.6 million square feet of green-certified buildings as of June 30, 2024. In 2024, our state-of-the-art food research facility in the Netherlands received a BREEAM Outstanding certification, the highest level of BREEAM certification for buildings worldwide. Conclusion Reducing the carbon footprint of a net lease portfolio is an enormous challenge, but by bolstering tenant engagement and systematically identifying sustainability opportunities, progress is possible. Sustainable real estate is beneficial to the planet, attractive to tenants and improves the value of our broader portfolio, making it a win-win-win for all.
Going Green for Earth Day
Real estate is one of the biggest CO2 emitters, with buildings accounting for 30-34% of global energy consumption. This makes it a critical sector in the global effort to reduce carbon emissions and combat climate change. Fortunately, there are many solutions available to help reduce the carbon footprint of real estate, while also reducing energy costs, improving building safety and boosting operational efficiency. With Earth Day around the corner, this article discusses several of the most impactful changes companies can implement to make their buildings more sustainable. Install Solar Panels One of the most effective sustainable upgrades for commercial facilities is the installation of solar panels to a roof or carport. Solar panels provide a clean source of energy and can help companies save on their cost of power. Additionally, companies may be able to receive renewable energy credits for offsetting carbon emissions depending on their location of operation. Companies who install solar panels can minimize their carbon footprint and contribute to the wider goal of reducing greenhouse gas emissions. It can also help them achieve their corporate sustainability goals and align with the growing interest in ESG broadly among stakeholders, including investors, customers and employees. Upgrade to LED Lighting A simple step that companies can take to improve a building's sustainability is switching to light-emitting diode (LED) bulbs. LEDs produce light up to 90% more efficiently than other types of light bulbs, which can significantly reduce energy consumption. Additionally, LEDs do not need to be replaced as often as incandescent or fluorescent bulbs, lasting as long as 14 years in a building which uses lighting for approximately 10 hours each day. LED lightbulbs are a more sustainable option not only due to their efficiency and longevity, but also because they do not have the environmentally hazardous materials incandescent bulbs contain (including argon and xenon gases). LED lights also give off very little heat compared to other types of lighting, therefore helping reduce a building’s temperature and limiting the power load on its mechanical systems. The payback period for an LED retrofit is shorter than many other sustainable upgrades, making it a great starting point for companies looking to make their buildings more efficient. Invest in Water Recycling Climate change has caused water scarcity to become an increasing issue of concern. As a result, water recycling has emerged as a viable option to provide a sustainable source of water in commercial facilities. A leading option for reducing water waste and preserving this vital resource is to recycle greywater. Greywater refers to lightly used water from sources such as sinks, showers and washing machines. Instead of directing this water into the sewer system, facilities can instead treat it and repurpose it for non-potable uses such as toilet flushing and irrigation. Instead of wasting freshwater, recycled water can be used when potable water is not needed. By harnessing the latest technology, water recycling has the potential to revolutionize the way we manage water waste and conserve this precious resource. As water scarcity becomes an increasingly pressing issue, water recycling will be an important step companies can take to make their buildings more sustainable. Utilize IoT Sensors As businesses leverage technology to help them operate more sustainably, integrating Internet of Things (IoT) technology has proven valuable in helping companies manage building efficiency on a daily basis. In particular, IoT sensors can collect data and bridge the gap between the digital and the physical world, helping companies gather information on things like energy consumption, temperature, air quality and occupancy levels. For instance, IoT sensor data can help promote sustainability by helping companies monitor energy consumption and manage power usage. IoT sensors can also be vital in helping continuously monitor particulate matter (PM) concentrations and other chemicals, gasses and contaminants in the air, allowing companies to take measures to improve occupational safety and reduce greenhouse gas emissions. Lease Your Real Estate? Partner With Your Landlord! Implementing sustainability initiatives can make a huge difference in reducing a building’s carbon footprint. Companies that lease their real estate may think implementing these changes isn’t possible, but that may not be the case. Leveraging their landlord relationship is a great way to explore options for sustainable building improvements. W. P. Carey is a leading real estate investor with a portfolio of over 1,400 properties, and recently launched a suite of sustainability and efficiency offerings for its tenants. With no upfront costs, W. P. Carey can help tenants manage the implementation of sustainability projects such as solar, LED lighting and smart metering, which can save money, reduce carbon emissions and benefit the environment. Contact W. P. Carey today to learn more!
The Benefits of LED Lighting for Commercial Real Estate Tenants
As environmental concerns become prominent in today’s market and green initiatives drive corporate decisions for investors and consumers, businesses are focused on reducing their carbon footprint. Commercial real estate is one of the largest contributors of greenhouse gas emissions today due to the fuel-generated electricity each asset requires. A misconception about green initiatives is that completing sustainability projects is a complicated process which require extensive capital investment from tenants. However, there are many cost-efficient ways to significantly reduce the carbon footprint of commercial buildings. One solution that can make a substantial difference is the installation of efficient LED lighting systems. The simple upgrade from outdated lighting systems to LED can provide the tenant with operational savings, optimized lighting performance and reduction of its carbon footprint. What makes LED lighting more efficient than other lighting? LED lights use a process called electroluminescence to operate at a far greater efficiency than traditional lighting technologies. LEDs are 80% to 90% more energy-efficient, shine at a cooler temperature and do not contain the environmentally hazardous materials that incandescent lights do. Not to mention, LEDs last longer than any traditional commercial lighting solution. Incandescent lights create illumination by heating a small wire filament. They get extremely hot, losing most of their energy to heat. Halogen and fluorescent lights are more efficient than incandescent bulbs yet costly to obtain. Let's dive deeper into the many benefits of LED lighting, including their long lifespan, financial savings and reduced environmental impact. 1) Long Lifespan LEDs should last for almost 14 years in a building which uses lighting for approximately 10 hours each day. In contrast, the longest lasting fluorescent bulbs will last for about 4 years. This improved lifespan reduces the amount of maintenance work needed to maintain adequate light in a workspace. The average incandescent bulb lasts approximately 1,000 hours without power surges or manufacturing flaws, whereas commercial installations of halogen or fluorescent lighting may last between 2,000 hours to 15,000 hours. The average LED bulb is rated for 50,000 hours of use, multiplying the lifespan of the longest-lasting fluorescent bulbs. 2) Financial Savings LEDs are also the most energy-efficient of commercial lighting options. By switching to LEDs, tenants could see as much as 90% improvement in their overall energy savings, which translate directly into financial savings. Between the savings on monthly utility bills and reduction in maintenance costs, LED lights can bring impactful reductions to a tenant’s operating expenses. 3) Reduced Environmental Impact Due to their low energy consumption, LEDs contribute the least amount of carbon dioxide into the atmosphere of all lighting sources. For example, use of a simple incandescent bulb results in 4,500 pounds of CO2 annually, while LED bulbs contribute only 451 pounds of CO2 per year. LED lights also give off very little heat compared to other types of lighting. Therefore, switching to LEDs can help reduce a building’s temperature and limit the power load on its mechanical systems. LEDs are safe to handle and install which eliminates the risks of burns and potential bulb explosions. Start Enjoying the Benefits of LED Lighting with W. P. Carey Installing LED lighting is one of the best solutions for companies looking to improve the sustainability of their buildings. Those leasing commercial space may be able to leverage their relationship with the landlord to explore LED installations. W. P. Carey is a leading real estate investor with a portfolio of over 1,400 properties and recently launched a suite of sustainability offerings for tenants, including LED lighting installations. With no upfront cost to tenants, W. P. Carey will manage the design, development and implementation of LED upgrades at its portfolio properties. A more sustainable and energy-efficient commercial property is a win-win for both the tenant and the building owner. By embracing opportunities such as LED lighting installations, tenants can save money, reduce carbon emissions and fulfill their sustainability goals. Check out a recent case study featuring an LED lighting transformation or contact W. P. Carey today to learn more!
Here Comes the Sun!
Real estate, one of the largest contributors to carbon emissions, accounts for approximately 37% of the world's greenhouse gas emissions. This makes it a critical sector in the global effort to combat climate change. Fortunately, there are many solutions available to help reduce the carbon footprint of real estate, and one of the most impactful is solar power. This article discusses key benefits of installing solar panels for CRE occupiers. Save on the Cost of Power Solar panels allow buildings to generate their own electricity, reducing the amount of power tenants need to purchase from the grid. This is particularly beneficial for commercial real estate, where energy costs can be a significant expense for tenants. By installing solar panels, tenants can reduce energy bills, freeing up resources to reinvest in their businesses or operations. In addition, they can potentially earn revenue by selling excess power back to the grid through net metering programs. Hedge Against Utility Rate Increases The cost of energy varies and can rise unexpectedly due to factors like fuel costs or infrastructure maintenance. As a result, occupiers who rely solely on the traditional grid electricity for their power are subject to rate increases that can impact their operating costs. Based on data from the U.S. Energy Information Administration, electricity costs in the U.S. have increased by 2.28% on an annual basis from 2005-2020 and 7.08% since 2020. Through solar energy, companies can protect themselves against unplanned rate increases and stabilize their energy expenses. Solar panels can also reduce over-reliance on the grid during peak periods when the electricity demand is high compared to the supply. Moreover, solar panel systems have a long lifespan and require minimal maintenance. It means tenants can continue to benefit from the fixed cost of solar energy for many years, even as traditional grid electricity rates continue to rise. Reduce Carbon Emissions and Support Corporate Sustainability Goals Traditional energy sources, such as fossil fuels, produce greenhouse gas emissions that contribute to climate change. On the other hand, solar panels generate electricity using the sun, a renewable energy source that does not produce harmful emissions. Occupiers who install solar panels can minimize their carbon footprint and contribute to the wider goal of reducing greenhouse gas emissions. It can also help them achieve their corporate sustainability goals and align with the expectations of their stakeholders, including investors, customers and employees. Receive Renewable Energy Certificates (State Dependent) Tenants who install solar panels on their building can also receive Renewable Energy Certificates, or RECs, to offset carbon emissions. One REC is issued for every MWh of electricity generated and delivered to the grid by a renewable energy resource. The use of renewable energy, verified with RECs, ensures a company’s electricity is provided from renewable sources that produce low- or zero-emissions, thereby reducing the tenant’s market-based scope 2 emissions. Start Enjoying the Benefits of Solar with W. P. Carey Installing solar is one of the best things companies can do to shrink the carbon emissions of their buildings. If they lease their real estate, leveraging their landlord relationship is a great way to explore options for solar installation. W. P. Carey, a leading real estate investor with over 1,400 properties, recently launched its CareySolar program, a solution providing eligible tenants the opportunity to take advantage of rooftop and carport solar installations on their leased properties with no upfront investment. By embracing opportunities like this, companies can save money, reduce their carbon emissions and help the environment. Contact W. P. Carey today to learn more!
Benefits of Green Leasing for Net Lease REITs
The real estate industry continues to face increased scrutiny regarding climate-related disclosures from many different stakeholders, including investors and regulatory agencies. As the SEC finalizes its proposed rules around these disclosures, the net lease industry is grappling with how to collect and report on climate-related data given the majority of a net lease REIT’s carbon emissions are Scope 3, or indirect. Without any direct control over the operations of their properties, net lease REITs have the added challenge of establishing access to their tenants’ utility data in order to understand the power consumption and potential sustainability opportunities at their properties. One effective approach to improving sustainability and disclosure quality for net lease REITs is through green leasing, in which green clauses are incorporated into leases that encourage landlords and tenants to collaborate on energy efficient and sustainable practices by aligning financial incentives and sustainability goals. Here are three of the most significant benefits of green leasing for net lease REITs: Increases data transparency to help identify a greater number of sustainability opportunities Collecting sustainability-related data has historically been difficult for net lease REITs due to the triple-net lease structure whereby tenants are responsible for the day-to-day operations of the property. However, by implementing a green clause in their leases, landlords can require tenants to disclose electricity, water consumption, waste management and other energy usage data at their properties. This enables net lease REITs to easily collect data and benchmark the energy usage of their portfolio to better identify inefficient buildings and target attractive sustainability opportunities within their portfolio. Incentivizes landlords to invest in green building upgrades There are a number of ways green leasing can support the implementation of projects that reduce a property’s carbon footprint. For example, green leases can include a clause that give landlords the ability to install on-site renewable energy such as solar panels at their properties so long as they can sell power back to the tenant at the same retail electricity rates as the tenant pays a utility company. Furthermore, green leases often include cost-recovery clauses for energy efficiency upgrades which helps solve the “split-incentive problem” – where landlords pay 100% of the capital expense for energy upgrades while only tenants receive the monetary benefits attributed to the decrease in energy consumption. Through a cost-recovery clause, landlords can amortize and recover capital costs for energy efficiency improvements, increasing incentives to pursue these types of projects while still benefiting the tenant through cost savings. Fosters greater tenant-landlord sustainability partnerships Perhaps the biggest benefit of green leasing is the improvement in tenant engagement. Green leases are designed to benefit both tenants and landlords, providing incentive for both parties to partner on sustainability projects including renewable energy opportunities, building energy retrofits and green building certifications. In order to implement a green lease, landlords and tenants must engage in an ongoing dialogue and align on sustainability goals, objectives and opportunities, ultimately strengthening the relationship, enabling tenants to achieve their own sustainability goals and improving the likelihood of tenant renewals. Conclusion Green leasing is a great tool to enable both landlords and tenants to reduce the adverse effect that real estate has on climate change. Particularly for the net lease industry, green leasing can help improve energy data collection, enhance the environmental performance of leased properties and align financial incentives so all parties benefit. It’s a win-win-win for everyone involved – landlords, tenants and most importantly, the environment.
What Makes a Great Place to Work
Company culture is the backbone of any successful organization. According to a recent survey, 83% of respondents rated company culture as important when deciding where to work. When cultivated well, a positive company culture will unite people through a shared set of values, goals, attitudes and practices, and can create a real sense of community and belonging for employees, boosting productivity and decreasing turnover. W. P. Carey was recently certified as a Great Place to Work in 2022 thanks to the positive culture fostered by our team. In fact, 96% of survey participants said it's a great place to work – 39 points higher than the average U.S. company. What are the qualities that make a great company culture and ultimately a Great Place to Work? Learn W. P. Carey’s keys for success below. Cultivate a values-driven workplace In a values-driven workplace, employees find alignment between their personal values and the organization’s values, creating a unified and motivated workforce. At W. P. Carey, our four core values have formed the foundation of our culture: we invest for the long run, our people are critical to our success, we believe in Doing Good While Doing Well®and we value doing what is right. Our culture is nurtured by continually putting those values into action, from everyday business, to volunteer programs, to treating each other with dignity and respect. Management plays a critical role in maintaining a values-driven workplace, as they “walk the walk” and uphold our four core values through their leadership. Develop a collaborative and friendly environment W. P. Carey creates an environment where employees operate as a team. No job is too big or small and all voices matter. To that effect, W. P. Carey maintains an open-door policy – dialogue and discussion is not only welcome but encouraged. Collegial debate is critical to the success of the business. When making decisions, we will always move forward with the best idea, regardless of who brings it to the table. W. P. Carey maintains a relatively flat and lean organizational structure. The company is not focused on hierarchy and employees get to know everyone at every level. This creates a unique opportunity for employees to directly work with and learn from more tenured executives, which enables them to hone their skillset and grow in their role. Prioritize respect A respectful workplace prioritizes fairness, equality and inclusion for all employees. At W. P. Carey, employees understand the impact of their behavior on others and act accordingly, remaining mindful of personal differences and ensuring all opinions are heard. This creates an environment where employees feel valued and are comfortable actively expressing their ideas. W. P. Carey encourages employees to “bring your whole self to work” – meaning the company wants to get to know who you are outside of the office. Employees share their passions, talk about their hobbies and most importantly bring a sense of humor into the workplace. This builds real relationships and creates a supportive and uplifting environment where respectful collaboration is natural. Conclusion Building a strong corporate culture is not a passive activity. Unless you continue to cultivate it, culture won’t grow. It is also dynamic and should change over time to reflect the evolving beliefs and values of the company. Ultimately, investing the time and energy into building a positive culture is well worth the effort. Positive workplace culture boosts motivation and productivity, increases employee satisfaction, attracts new talent and reduces turnover. Perhaps most importantly, it turns a good place to work into a great one.
The Return to Cannes: Takeaways from MIPIM 2022
Following a pandemic-induced hiatus, MIPIM, Europe’s largest real estate event of the year, finally returned to the idyllic city of Cannes. More than 20,000 attendees eagerly came out to meet in-person and discuss the most prevalent topics and issues impacting the real estate sector. During my experience at the four-day event, the following major themes unsurprisingly dominated most of the conversations: rising interest rates and inflation, the conflict in Ukraine and ESG. Here’s my take on how those may impact our business and the broader European real estate market. Interest Rates and Inflation Similar to the U.S., inflation in Europe is reaching highs not seen in several decades with euro area inflation hitting 5.8% in February, driven primarily by rising energy prices and supply chain challenges. As a result of fast-rising inflation, central banks worldwide will likely pursue an increasingly hawkish strategy, bringing forward interest rate increases. All-equity buyers like W. P. Carey may be better positioned to execute on deals in this environment since they are not reliant on third-party debt financing. From a seller’s perspective, the timing to pursue a sale-leaseback may have never been better – locking in a long-term rental rate now while cap rates remain low, and before interest rates begin to rise significantly. War in Ukraine We are incredibly saddened by the events unfolding in Ukraine and are committed to doing our part to support those in need. As of now, it’s difficult to say how exactly the war will impact the real estate market but it will likely continue to stoke the flame of rising inflation globally due to economic disruptions which could further impact interest rates and borrowing costs. It’s also possible that some companies may take a “wait and see” approach to investing in neighboring countries to Ukraine and Russia until there’s more clarity on when the conflict will end. Focus on ESG ESG remained a prominent topic, particularly as regulatory and disclosure requirements continue to increase, forcing companies to define concrete, measurable goals. With the main theme of MIPIM being “driving urban change,” there was certainly a lot of discussion surrounding how the real estate industry can tackle climate change and net zero emissions as well as ensuring sustainability of new developments. At W. P. Carey, we are intensely focused on ESG. In 2021, we invested in several green buildings, including the acquisition of a 1.1-million-square-foot, BREEAM-certified logistics facility in the U.K., net leased to Jaguar Land Rover. We also issued our first green bond offering last year with $350 million of proceeds earmarked for green projects. From an asset management perspective, we take a proactive approach to communicating with our tenants on sustainability projects that can reduce their environmental impact and reduce operating costs, such as solar panels and building efficiency retrofits. For example, we worked with our tenant Sonae MC in Portugal on the installation of a solar roof which was completed last year. We also worked with our tenant Nippon Express on the installation of a one-million-square-foot solar roof, which is now one of the largest solar rooftops in Europe. While we still have much progress to make, we are focused on reducing the carbon footprint of our portfolio and believe that green buildings are not only beneficial for the environment but can also have a significant business impact for W. P. Carey, including increasing property values, driving higher rents and attracting high-caliber tenants.
Why Tenant-Landlord Relationships Matter
Since our founding in 1973, W. P. Carey has been a long-term partner to our tenants. This means that when we invest in a property, we are also committed to advancing the tenant’s business and look to support their evolving real estate and capital needs throughout the duration of their lease and beyond. A Long-term Partner: Building Beyond the Original Transaction W. P. Carey partnered with Sonae MC, a leading Portuguese food retailer, in 2018 when it acquired its mission-critical warehouse facility in the Azambuja logistics park, Portugal’s prime logistics hub outside of Lisbon. Since its founding in 1985, Sonae MC has steadily grown its market share. Today, the company has more than 1,300 stores throughout Portugal and Spain, 35,000 employees and a broad range of products and services. At the time of the acquisition, Sonae MC was experiencing rapid growth, particularly through its city-center convenience stores and e-commerce operations. In order to meet rising demand and continue executing on its strategic plans, the company needed additional food distribution warehouse space. “In recent years, Sonae MC has been expanding its store portfolio, mostly with small, convenience stores; in the last decade, 750 new stores were opened. This growth will continue for the next few years to solidify even more of our dominant market share. This means our company’s logistics operation has to continue growing its warehouse footprint to be able to receive, prepare and ship an ever-growing number of merchandise," explained Rui Braz, Head of Area – Logistics Development at Sonae MC. To support Sonae MC’s growing business, W. P. Carey partnered with the company and agreed to fund a $28 million expansion of the Azambuja facility. Completed in 2020, the 300,000-square-foot expansion was custom built to Sonae MC’s specifications and totaled over 840,000 square feet, making it the largest refrigerated warehouse in Portugal. With the additional space, Sonae MC was able to increase its capacity and speed of supply to Mainland stores in the central and southern regions of Portugal. “The Azambuja expansion was part of a plan to strengthen our logistic capability, which makes it a fundamental piece to the company’s strategy,” said Braz. A Shared Vision: Committing to a Greener Future Our ability to support our tenants’ real estate needs goes beyond just expansions. We can also partner with our tenants on projects to help reduce their carbon footprint and meet their sustainability goals. W. P. Carey and Sonae MC are both committed to creating a greener future, which meant the expansion of the Azambuja warehouse was built with sustainability in mind. In 2021, a solar roof generating an estimated 4,000 MWh/year was successfully installed on the newly expanded facility, earning a LEED Gold certification for the property. This makes the facility Portugal’s first LEED Gold certified warehouse, an exciting milestone for W. P. Carey, Sonae MC and the country as a whole. “Receiving a LEED Gold certification for our new building in Azambuja, being the first in Portugal and, on top of that, the first for a refrigerated warehouse, is an important acknowledgement of our focus on sustainability. The thought that was put into multiple aspects like the isolation of the building, rainwater utilization system, and the investment in the photovoltaic solar plant–that reduces 30% of our electrical power grid needs for the entire facility–clearly portrays our intention in diminishing the operation’s environmental footprint,” Braz added. The new building is also equipped with innovative cooling and insulation systems that are more energy efficient and environmentally friendly. The joint delivery of fresh produce allows 20% fewer deliveries to shops, a reduction of 1.4 million km traveled per year and the equivalent of 1,100 tons of CO2 saved per year. A Win-Win: Long-term Benefits for Both Tenant and Landlord W. P. Carey prides itself on serving as a long-term, flexible partner to its tenants. By building strong relationships we are able to not only understand the business objectives of each tenant, but also their unique corporate values. In the case of Sonae MC, we were thrilled to have the opportunity to support them and their business needs, while also advancing our goal of reducing the carbon footprint of our overall portfolio. “W. P. Carey has had a fundamental role in the development of this project, proving to be the right partner along the entire process of building this warehouse and its sustainability and efficiency features, which we’re all proud of,” Braz concluded.