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8/6/2019 Marketing Strategies Real Estate
Business and marketingstrategies in responsible
property investmentUlrich Kriese
AbstractPurpose The purpose of this paper is to give an overview of business and marketing strategiespursued by responsible property developers, funds and investors in the USA and to draw conclusionsfor future activities in that sector from a transatlantic perspective.Design/methodology/approach Personal interviews are conducted with 42 developers, fundproviders and managers, institutional, nonprot and major private investors representing more than
US$60 billion of responsible property assets under management. The data are complemented by ananalysis of promotional documents. A cluster analysis is performed to classify the strategies of theparticipating companies and institutions and to explore any commonalities and differences.Findings Business and marketing strategies in responsible property investment (RPI) can bedescribed and characterised within the three dimensions of location, building and people. RPI activitiesand investors in the USA usually transcend pure green building and aim to contribute signicantly tosmart growth, to sustainable urban development and revitalization.Research limitations/implications The results in this study are not fully representative of theUS RPI community, with the study focussing on the core network of developers, real estate funds andlarge investors. Furthermore, issues of corporate governance and nancial performance are omittedfrom this study. Interviews are conducted in autumn 2008, i.e. at a time when the major nancial crisisreached a global scale, potentially inuencing participants perspectives and subsequent responses.Practical implications The ndings may help RPI practitioners reect on business and
marketing strategies. European developers, real estate funds and investors can benet in manyrespects from US experiences.Originality/value The research approach, applied to RPI focussing on business and marketingstrategies for the rst time, provides new insights for practitioners on both sides of the Atlantic. Aboveall, the ndings 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 AmericaPaper type Research paper
1. IntroductionIn 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, browneld and high-density
The current issue and full text archive of this journal is available atwww.emeraldinsight.com/1463-578X.htm
The author is most grateful to the American Council on Germany, which generously supportedthis research through a McCloy Fellowship. Thanks also to Gary Pivo and several experts fortheir advice nding through the US RPI community, to all interview partners for theirparticipation, and to Claire Roberts and two anonymous referees for their valuable comments onprevious versions of this paper. After all, the author would like to thank Roland W. Scholz forwhat he has learned from him to conduct this research.
Journal of Property InvestmentFinan
Vol. 27 No. 5, 2pp. 447-4
q Emerald Group Publishing Limite1463-57
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development and green buildings attract more attention both within the real estateindustry and the socially responsible investment (SRI) community, particularly in theUSA, Australia and Great Britain (Dixon et al., 2006; Flynn et al., 2007; FundersNetwork for Smart Growth and Livable Communities, 2004; Newell, 2008; Ritter, 2008;RREEF, 2008; WWF-UK, Housing Corporation, Insight Investment and UpstreamStrategies, 2007). Professional real estate magazines have featured sustainabilityissues with unprecedented intensity and property valuation experts have becomeaware of the connection between the social, environmental and nancial performanceof buildings (Lorenz and Lu tzkendorf, 2008; RICS, 2005).
Responsible property investment (RPI) as dened by Pivo and McNamara (2005)refers to the more general concepts of SRI and corporate social responsibility (Koellneret al., 2005; Rapson et al., 2007). It means:
[. . .] maximizing the positive effects and minimizing the negative effects of propertyownership, management and development on society and the natural environment in a waythat is consistent with investor goals and duciary responsibilities (Pivo and McNamara,
2005, p. 129).First, this denition covers social responsibility directly connected with the building,which may be green, mixed use, high density, etc. Second, it includes socialresponsibility related to the buildings location, which may have been contaminatedand may be transit oriented, inner-city or suburban, etc. Third, it refers to socialresponsibility related to people, i.e. the development in question may, e.g. includemixed income housing or provide jobs (Kriese and Scholz, 2009).
In recent years, some developers, fund providers and investors in the USA, the UKand some other countries introduced RPI as a major component in their businessstrategy (Pivo and UNEP FI Property Working Group, 2008; RREEF, 2007). RPIs andinvestment vehicles are either of a xed 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 inefciencies. Hagermanet al. (2007), Lamore et al. (2006), Steiger et al. (2007) and Willis (2004) point to thecrucial role of both nancial intermediaries, i.e. funds to link institutional investors tourban revitalization, and community intermediaries (e.g. community developmentcorporations) to ensure the achievement of the social goals of investment. The fund andthe institutional investor come together in a symbiotic relationship and provide eachother with scale (Hagerman et al., 2007, p. 24). The fund, with the aid of the communitypartner, delivers urban development projects large enough to both make an impact onthe community and produce nancial returns. The institutional investor delivers largeamounts of capital that allow the fund to scale-up its investments.
Besides, both direct and indirect nancial benets 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 formajor reputation and brand growth (Mistra, 2008). In short, RPI has a strong businesscase. With regard to the current global nancial crisis caused by the property andnance industry itself, RPI appears to be a good part of the solution. As part of thispotential, green buildings should now be able to extend their competitive advantage(RREEF, 2009). In many places in the USA, Leadership in Energy and EnvironmentalDesign (LEED) certication has already become a precondition for granting a loan.
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To date, general thoughts on business and marketing strategies in RPI have beenoutlined, however, without providing empirical ndings on them (Hermes Real Estate,2006; Institute for Responsible Investment, 2007; Kriese, 2008; RCLCO, 2008; RREEF,2007). Financial stakeholders views regarding RPI criteria, market perspectives andacceptance have been investigated (Bu gl et al., 2009; Mistra, 2008; Pivo, 2008b; Sayceet al., 2007; Schafer et al., 2008). Browneld development, as a business approach, hasemerged and has been described in the literature (Dair and Williams, 2006; Dixon, 2006,2007; Tiesdell and Adams, 2004). The same applies to the new urbanism business(Gyourko and Rybczynski, 2000), to urban housing (Lang et al., 1997; MORI, URBED &School of Policy Studies at the University of Bristol, 1999), to mixed income housing(Fraser and Kick, 2007) and to urban revitalization (MacFarlane, 2007). In the USA,browneld development, green building, transit-oriented development, and urban inlland revitalization have all been realised by RPI market actors (Pivo, 2008a).
In the authors view, both for European developers and investors considering anyRPI activities and the European SRI community there is much to learn from USapproaches and experiences with RPI. With more than e 2,600 billion in SRI, Europe isthe worlds largest SRI market (Eurosif, 2008). Yet with only 4 per cent SRI in property, itis obvious that European socially responsible investors in particular are very interestedin the real estate asset class for the purpose of diversication of their portfolios (Eurosif,2008). However, up to now, this demand could not even nearly be satised, which ledboth European investors to ask for respective products in the USA and US fundmanagers to introduce investment vehicles such as real estate investment trusts (REITs)in the USA in order to facilitate investment by foreign investors. Although the largemarket potential for RPI has started to be recognised by the European nance industry,a link to SRI is not always seen (Credit Suisse, 2009). In the authors view there are stillunderserved market niches for responsible property funds in most European countries.In Germany, no responsible property fund yet exists, although both closed-end and
open-end real estate funds are well established in this country.In the next section, the following ve research questions will be explored:
RQ1. What are the main ideas and principles in US RPI strategies?
RQ2. Who asks for this kind of property and investment?
RQ3. Who are key b