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Brookfield Turns to Blockchain for High-Tech ESG Tracking

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Brookfield Turns to Blockchain for High-Tech ESG Tracking pconnors@reit.com Nov. 28 2022

Michele Lerner

Michele Lerner is a freelance writer and regular contributor to REIT magazine.

Brookfield Turns to Blockchain for High-Tech ESG Tracking

Tech-enabled sustainability measures at Brookfield Properties’ One Manhattan West flagship office, which include the use of blockchain for data verification purposes, are taking the 67-story state-of-the-art office tower to a whole new level.

Manhattan West Plaza
Manhattan West Plaza. Photo courtesy of Brookfield Properties.

Tech-enabled sustainability measures at Brookfield Properties’ One Manhattan West flagship office, which include the use of blockchain for data verification purposes, are taking the 67-story state-of-the-art office tower to a whole new level.

The measures are seen as an important step toward meeting both the company’s broader goal of reaching net zero greenhouse gas emissions across its portfolio by 2050, as well as its tenants own carbon reduction targets.

“One Manhattan West is our most sustainably advanced building, and it will be the first in our New York portfolio to be powered 100% by renewable energy,” says Michael Daschle, senior vice president, operations at Brookfield Properties. The building will be a pilot project with Brookfield Properties directly purchasing power from Brookfield Renewable Partners’ (NYSE: BPE) hydropower plants in upstate New York. [Brookfield Properties and Brookfield Renewable Partners are both majority-owned by parent company Brookfield Asset Management (NYSE: BAM).]

While the purchase of renewable energy was an internal bilateral transaction, Brookfield Renewable is one of the largest producers of hydroelectric, wind, and solar power in the world and any company can contract with them, Daschle points out.

But buying renewable energy is just one part of Brookfield Properties’ forward-thinking sustainability actions. In order to monitor and record their energy use, Brookfield contracted with ClearTrace, an Austin, Texas- based startup that automates tracking energy and emission data in real time.

“There’s lots of hot air out there when it comes to ESG reporting,” says Lincoln Payton, CEO of ClearTrace. “The biggest thing that was missing was quality data to prove what companies were reporting.”

Sophisticated Monitoring

For Brookfield Properties, proving the source of its energy depends on accurate, transparent data.

“We collect data in a very pure, traceable format from all points of energy that a given entity is drawing energy from,” Payton says. In the case of One Manhattan West, he notes, that involves going to each meter, in each turbine, in each tributary of the Hudson River system. “We collect the data of what electricity is being generated in real time.”

ClearTrace also collects real- time data from every meter in One Manhattan West, floor- by-floor and tenant-by-tenant, Payton says, and all the data is digitized and tokenized. “We can track the time, location, and nature of the energy used at every meter,” Payton says.

The ability to monitor energy 24/7 is important, Payton says. “We’re moving from one phase of renewable energy monitoring to the next,” he says. “Lots of companies take energy from the grid that has different components at different times, then they average it on an annual basis. They buy renewable energy credits to offset their carbon emissions.”

While that’s not a bad thing, it’s not the way to move the needle towards carbon-free emissions, Payton says.

The renewable energy credit system is looked at as a form of greenwashing by some people because there isn’t proof that the energy being used is truly renewable, Payton says. He notes that auditable proof of the actual use of green energy is more important.

“We’re using the hydroelectricity by contractual right at the exact same time as it’s being generated, which is why we need the hour-by-hour data from ClearTrace that shows we’re consuming the energy at the exact same time that it’s being generated,” Daschle says.

Manhattan West
One and Two Manhattan West developed by Brookfield Properties. Photo courtesy of Brookfield Properties.

Technology used to track emissions will become even more important as regulations such as New York City’s Local Law 97, which sets increasingly higher limits on greenhouse gas emissions from buildings beginning in 2024, and proposed Securities and Exchange Commission guidelines are likely to require detailed reporting.

The hourly monitoring is an important component of the sustainability program at One Manhattan West because of the mix of energy in the New York grid at different times of the day.

“Sometimes the energy mix is cleaner than at other times,” Daschle says. “For instance, on a hot afternoon in the summer, the New York electrical grid might bring in other power sources such as natural gas, which is quicker than some other power sources, but also dirtier.”

Brookfield is an early leader in the use of emerging technology to shift its peak use times to a different time of day, Daschle says.

Immutable Data

Monitoring both the use and sources of energy relies on tech innovations. Blockchain provides an excellent technology for self-auditing and managing an extremely large volume of data, Payton says

“Using blockchain means that the data is immutable, and it can’t be replicated,” Paton says. “Each unit of data gets its own NFT (non-fungible token) with the time, location, and nature of energy being produced, bought, transported, and used.”

Layering in blockchain technology provides additional credibility and power to ClearTrace’s data, says Daschle. Blockchain allows anyone to see and audit the data and prevents anyone else from making the same claim to be using renewable energy from the same source at the same time, he explains. “Blockchain provides us with internal verification that we’re carrying out what we promised to do. We can show our tenants the reports so they can verify the data and use if for their own ESG reporting.”

The ability to monitor energy 24/7 is important. We’re moving from one phase of renewable energy monitoring to the next.

Lincoln Payton, CEO, ClearTrace

Currently, Brookfield and the tenants at One Manhattan West have direct access to the reports generated by ClearTrace. Eventually, as reporting requirements grow, Brookfield will be able to provide reporting organizations with access. “The key is that this is well-organized, granular data that can be reported in any format to anyone from the building owner to the tenant to a regulatory agency,” Payton says. “We can produce load matching reports, renewable energy credit reports, or even just a report on how much of a building’s energy is green.

Stakeholders and Energy Marketing

Tenants at One Manhattan West, which is 98% leased, benefit from Brookfield’s sustainability actions in two ways. The primary benefit is a direct reduction in their carbon emissions, Daschle says.

“Most of our tenants have sustainability goals and many have net zero goals of their own,” he says. “The reports from ClearTrace allow these companies to demonstrate their progress on green goals to their employees and investors. In addition, they’ll be ready for the upcoming SEC ESG reporting requirements.

Payton says more tenants ask their landlords about their carbon footprint today before signing a lease.

“Commercial real estate buildings account for 40% of greenhouse gas emissions around the globe. There’s no question that investors also factor in ESG into their investing decisions, especially in real estate,” Payton says.

Many investors have their own carbon emissions reporting requirements.

Blackstone, which owns 49% of One Manhattan West, is also a market leader in ESG, Daschle notes. “Blackstone has considerable exposure to emissions across their entire portfolio, so their investment at One Manhattan West allows them to zero out their emissions at this particular property.”

One thing Brookfield’s program at One Manhattan West doesn’t do is lower utility bills, however. “This is emerging technology, and it actually adds a premium to utility costs,” Daschle says. “But our tenants are willing to accept the cost because they want to achieve their ESG targets and to get the brand and reputation benefits.”

The cost of electricity and the cost of renewable energy credits has climbed in part because of the high demand for renewable products, Daschle says. He estimates that the dollar cost per megawatt on an hourly basis will be about one-third higher in the next properties in Brookfield’s pipeline compared to the cost at One Manhattan West.

“The cost varies by market and it’s hard to control for, but it’s a risk owners have to face,” Daschle says.

Many real estate companies are actively reducing their carbon footprint for multiple reasons, including their commitment to sustainability, as a sales aid for their buildings and to attract investors, Payton says. “This is where the world is going. We’ve been talking about buying some offsets and making some incremental changes. But now people want details.”

The sustainability program at One Manhattan West has been a draw for the office’s leasing capability, Daschle says. Brookfield plans to introduce the same program at Two Manhattan West and eventually across their entire portfolio. “We’ve purchased hydropower for properties in other markets such as Washington, D.C. and Northern Virginia,” Daschle says. “Our focus is on Brookfield’s net zero greenhouse gas emissions by 2050 commitment, and this is an important part of reaching that goal.

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VICI Properties: A Case Study in Good Governance

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VICI Properties: A Case Study in Good Governance pconnors@reit.com Nov. 28 2022

Sarah Borchersen-Keto

Portrait of Sarah Borchersen-Keto

Sarah Borchersen-Keto is Nareit’s editorial director and writes extensively for Nareit’s website and award-winning magazine, REIT: Real Estate Investment Today, and Nareit's website.

VICI Properties: A Case Study in Good Governance

Starting with a blank slate on corporate governance is a unique position for any company to be in, and for one REIT, VICI Properties Inc., that very situation in 2017 proved essential in creating trust in a new company and accelerating the institutionalization of a nascent gaming real estate asset class.

 

 

Caesers Palace
Caesars Palace, Las Vegas. Photo courtesy of VICI Properties Inc.

Starting with a blank slate on corporate governance is a unique position for any company to be in, and for one REIT, VICI Properties Inc. (NYSE: VICI), that very situation in 2017 proved essential in creating trust in a new company and accelerating the institutionalization of a nascent gaming real estate asset class.

VICI, which held its IPO in early 2018, is the subject of a recent case study published by the Corporate Governance Research Initiative at the Stanford University Graduate School of Business.

VICI was formed out of the bankruptcy of an entity of Caesar’s Entertainment. The hedge funds that controlled the Caesar assets post-bankruptcy “recognized that the only way to monetize that investment was to combine the assets into a vehicle and then ultimately take that vehicle public as a REIT,” says Bill Ferguson, chairman of global talent management firm Ferguson Partners, and a co-author of the study. Ferguson Partners recruited the entire VICI leadership and board ahead of its IPO.

“It was incredibly important to the hedge funds to have both a board and a leadership team that the investors would respect, and that ultimately could build and manage a high quality REIT,” Ferguson says. In assembling the board, Ferguson recalls, “we wanted diversity, for sure. We also wanted sought a mix of active and retired executives. We wanted board experience where we could find it too.

VICI CEO Ed Pitoniak was initially considered as chairman of the board, “but everybody was so impressed with him we ultimately asked him to be CEO,” Ferguson says. Among his strengths, Pitoniak had a background serving as a chairman, lead director, as well as a CEO of public REITs in the hospitality space, he notes.

Raising the Game

From the very beginning, Pitoniak says, creditors and shareholders made sure that there was a high degree of alignment in terms of governance principles and practices.

“They handed the beginnings of this governance platform over to us as a new board and a new management team. It did take an awful lot of work coming really from square one, but it was a wonderful opportunity to set us on the path toward institutionalization,” he says.

According to Pitoniak, VICI was in the position to propel investor acceptance of a new asset class. But to achieve that, VICI had to be “institutional in all its key qualities, and that obviously starts with institutional quality governance.”

Pitoniak says VICI is an example to other REITs of “how quickly you can raise your game to an institutional level of quality governance...it’s all part and parcel of taking a very deliberate approach and constantly asking ‘what do our stakeholders need from us, what do they expect from us, and how do we deliver on those promises?’”

When a company can establish trust with its stakeholders, whether its equity owners, the owners of credit, partners, or the communities in which it operates, “it tends to de-stress the daily experience of running the business,” Pitoniak says. He adds that, when stakeholders “understand that you’re going to take care in everything you do and be very mindful of their expectations and needs, it gives you the confidence and ability to do what’s right for the business, even in the greatest time of turmoil.”

Impact on Performance

Ferguson notes that for REITs today, board quality and composition are “incredibly important. When you see activists out there in our space, or any space or to be frank, the first thing they look at is the quality of the board.

If the board is long-tenured, if the executives are primarily retired, if they don’t have prior public company experience, or if they happen to be closely affiliated with the CEO, “none of that augurs well as it relates to good governance,” he says.

A corporate governance structure that includes board members that are independent, yet work as strong partners with the executive team, has clear long-term benefits for REIT performance, Ferguson adds.

A corporate governance structure that includes board members that are independent, yet work as strong partners with the executive team, has clear long-term benefits for REIT performance.

Bill Ferguson, chairman of global talent management firm Ferguson Partners

“It’s a fine balance...the board is there to be a fiduciary and represent the shareholders’ interests, but the bottom line is that they also need to be a good partner to the leadership team to make sure that the strategy and the execution of the business plan make sense and happen flawlessly,” he says.

Meanwhile, among the many benefits of taking a deliber - ate approach to governance, Pitoniak cites “the comfort of knowing you’re doing the right things for all of your key stakeholders.” It also sends a strong message to existing and potential investors “that you’re a REIT that can be counted on when it comes to governance quality and stakeholder alignment.” It can also be very positive in attracting new talent, he adds.

Among its accomplishments in 2022, VICI gained investment grade credit status and was elevated to the S&P 500. Pitoniak says that makes VICI the fastest REIT in history to go from IPO to S&P 500 inclusion.

We believe that the world of experiential real estate still has great promise attached to it...it’s an exciting time for us,” Pitoniak says.

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What are Essential Ways to Attract and Retain Valued Employees in Today’s Marketplace?

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What are Essential Ways to Attract and Retain Valued Employees in Today’s Marketplace? pconnors@reit.com Nov. 22 2022
What are Essential Ways to Attract and Retain Valued Employees in Today’s Marketplace?
Final Word Banner


Shelby Pyatt
Vice President, Human Resources & IT
Rayonier Inc.

Culture and employee experience play a critical role in enabling us to attract and retain the right talent. A positive experience translates to engaged employees and a strong organizational brand. While there are many aspects of employee experience that are important, some of the most impactful include: empowering employees to take ownership and make a meaningful contribution; ensuring employees feel recognized and valued for their contributions; prioritizing and supporting employee development; and treating employees with trust and respect, such as offering flexible work options.

While none of these aspects would appear surprising, it can be easy for people leaders to lose sight of them in the day-today grind of managing business priorities and challenges. Finding ways to keep these critical elements of the employee experience at the forefront for leaders can have a significant impact on attracting and retaining talent.”

Jennifer Ragsdale
Chief Administrative Officer
Uniti Group Inc.

In the 1950s, American psychologist Frederick Herzberg introduced the Motivator-Hygiene theory, categorizing factors in the workplace as dissatisfiers and satisfiers. For decades, many organizations have felt as though their ability to positively impact the dissatisfiers (salary, working conditions, polices) was their primary responsibility. In today’s marketplace, organizations are realizing that their responsibility to focus on the satisfiers (recognition, personal growth, the work itself) is what can set them apart from other employers.

While the basic conditions of a workplace should be met, organizations successful at attracting and retaining top talent are focusing on meeting the needs of employees in the areas of hybrid work arrangements, DEI efforts, truly rewarding loyalty and performance (we’re not talking about pizza parties, managers), and promoting interpersonal relationships. Employees want to know that their employer isn’t just depositing a paycheck, but is committed to their advancement and nurturing them as high performers.”

Sean Vanderelzen
Chief Human Resources Officer
Lineage Logistics

It’s an employee market right now, so it’s imperative to nail down the right pay and benefits—but we also have to offer a place where people want to work with career opportunities beyond the job we’re hiring for. We offer numerous resources for employees to develop professionally and grow personally during their time at Lineage. Some examples include our management training programs, employee resource groups,and continuous improvement roadmaps.

Lineage Foundation for Good, our charitable entity, includes an Employee Hardship Fund. It’s a huge element of engagement in our workforce. Most of Lineage’s charitable work aligns with food, and we partner with Feeding America on a regular basis.

We also have a lively recognition program that’s a great representation of our culture. We recognize people who display our values with “values cards.” We recognize those who go above and beyond with the X-Factor Award, and they receive cold warehouse jackets with a special patch. Our annual CEO Award goes to 12-15 of our 25,000 employees. It’s a trip of the winner’s choice, so it’s a pretty incredible experience for winners!”

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Names to Note

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Names to Note pconnors@reit.com Nov. 22 2022
Names to Note

People making news in the REIT and publicly traded real estate industry.

Essex Property Trust, Inc. (NYSE:ESS) announced the planned retirement of Michael Schall, the company’s president and CEO since 2011, effective March 31, 2023. Thereafter, Schall will continue to serve on the company’s board of directors and will remain on as a part-time employee. Angela Kleiman, the company’s senior executive vice president and COO, has been named to succeed Schall as president and CEO.

Healthpeak Properties, Inc. (NYSE: PEAK) appointed Scott Brinker, the company’s president and chief investment officer, as president and CEO. He succeeds Tom Herzog, who mutually agreed to step down as CEO and from the board to pursue other endeavors.

Hersha Hospitality Trust (NYSE: HT) announced that its founder, Hasu Shah, intends to retire as chairman of the board of trustees on Dec. 31, after 38 years with the company. As part of the planned succession, the board has selected CEO Jay Shah to become executive chairman, and President and COO Neil Shah to become president and CEO and join the board of trustees, both appointments effective as of Jan. 1, 2023. Hersha will be eliminating the role of COO.

Anya Coverman was named president and CEO of the Institute for Portfolio Alternatives. Over the past five years, Coverman has served as the IPA’s SVP of government affairs and general counsel. Prior to joining the IPA in 2017, she was the deputy director of policy and associate general counsel at the North American Securities Administrators Association (NASAA).

Prologis, Inc. (NYSE: PLD) said Global Head of Deployment Dan Letter will assume the role of president and Chief Investment Officer Gene Reilly will become vice chairman of the global real estate firm, effective Jan. 1, 2023. Letter, who has been with Prologis since 2004, will be responsible for the company’s global real estate operations and capital deployment activities. Reilly, who has been with Prologis since 2003, will remain on Prologis’ executive committee and serve as a senior advisor to Prologis CEO and co-founder Hamid Moghadam.

John McLaren resigned from his positions as president and COO of Sun Communities, Inc. (NYSE: SUI) effective Dec. 31. McLaren will remain with Sun as its EVP of entitlement and integration for MH Development, where he will focus on entitling and integrating new manufactured housing developments. Gary Shiffman, the company’s current CEO, will assume the additional role of president. Sun also appointed Bruce Thelen as its COO and EVP, effective Dec. 31. Thelen joined the company in January 2018 and currently serves as EVP, operations and sales.

Tanger Factory Outlet Centers, Inc. (NYSE: SKT) announced the appointment of Michael Bilerman as EVP, CFO, and chief investment officer. He is expected to join the company in the fourth quarter of 2022. Bilerman most recently served as managing director at Citi, leading the firm’s global real estate investment research franchise, while also managing the U.S. real estate and lodging team.

UMH Properties, Inc. (NYSE: UMH) said Eugene Landy, founder and chairman of the board, was inducted into the RV/MH Hall of Fame.

Ventas, Inc. (NYSE: VTR) said Chairman and CEO Debra Cafaro was awarded the Women Corporate Directors (WCD) 2022 Visionary Award for Strategic Leadership, celebrating individuals who exhibit an exceptional commitment to diversity, inclusion, and women’s authority in the boardroom.

Ventas also said that Sumit Roy, president and CEO of Realty Income Corporation (NYSE: O) has been appointed as an independent member of the Ventas board of directors, and will serve on the investment committee.

Meanwhile, Molly McEvily has joined Ventas as vice president, corporate communications. McEvily joins Ventas from Citadel, a leading global alternative investment firm with more than $50 billion in investment capital. She most recently held the title of COO, global affairs and served in a number of other key roles over more than ten years at Citadel.

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