Improving Returns With Sustainability

ESG

ESG certified buildings have been shown to improve the project in numerous ways. Not only is ESG becoming a important metric, it is becoming a desired attribute of a building akin to building design and amenities. In a competitive environment, an ESG certified building, such as LEED certification, are more desirable.

Improve Ability to Finance

ESG certification is now an important metric that investors, (and end users) especially institutional investors, take into account in their investment decisions. Globally, asset managers with ESG criteria are expected to have $34 Trillion under management by the year 2026. That is a significant increase over the $18 Trillion of ESG investment funds in the year 2021. Many investors will only consider buildings that meet sustainability standards. This is not just an ideological viewpoint, it is good business. There is also additional risk in buildings that do not take into account climate and sustainability.

Sustainability Investing

Improve Returns

LEED and other similar rating systems in international jurisdictions, have been shown to improve commercial real estate returns in numerous ways. This has been shown in both office and multifamily residential.

In order to achieve these standards, additional energy efficient and other measures are implemented in the building. There typically is an increased cost to meet these higher standards. As we invest in high quality, A-type developments and buildings, ESG is an important part to achieve these results. With the financial improvements, these costs can often be offset by the project profitability improvement. The ESG related financial uplift for LEED or other certifications has shown it is well worth the additional financial cost. The improved cash flow and asset value can more than offset the additional cost. Our proprietary investment model and technology, improves returns even further.

The consumers of today increasingly are looking to live in highly rated ESG buildings...or go to work in offices that meet these standards. This provides us a competitive advantage. If you do not achieve these, this actually makes non-ESG certified buildings less desirable and put these projects at a competitive disadvantage compared to ESG certified buildings.

IMK goes a step further. By focusing on the renewable energy generating glass facade as a major part of the upgrade, we can easily help the building achieve LEED platinum, if not better. With the IMK proprietary investment model and "subsidy", there typically will be no premium cost compared to standard, non-energy generating glass facades. The financial improvement that the project receives are multiple:

Typical ESG financial improvement.
Additional project financial improvement from both the energy savings and the energy generation, increased value of premium glass facade without increasing CapEx, and better financing options.
IMK equity investment in the development project.

Proprietary Dual Investment Model

At IMK Development Group, we improve investment returns by utilizing technology and investment strategies to create energy efficient buildings and vertical solar cities. This includes the patents and technology that we have rights to for renewable energy generating glass facades.

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This is part of our proprietary dual investment model that improves financial returns.

This is in addition to typical ESG related financial improvements for offices and multifamily residential projects.

More information can be provided.

Typical ESG Financial Improvement in Offices

Increase in Price PSF

There is a capital value premium of 20.6% in BREEAM certified offices, according to a JLL report on 600 Central London Offices in its report "Sustainability and Value - Capital Markets:Central London Offices". Cushman & Wakefield in its "Green is Good" similarly found a 21.4% higher average sales price per sq ft. in buildings in the U.S.

Rent Increase

Increase in Price PSF

Cushman & Wakefield "Research Spotlight" report has found since 2015, LEED certified office buildings have averaged $4.13 psf, or 11.1%, higher rent than non-LEED certified buildings.

Lower Cap Rates

Increase in Price PSF

Lower Cap Rates

Cushman & Wakefield also compared the cap rates in office buildings. LEED certified buildings averaged cap rates 58 bps lower than non-LEED certified buildings. The delta ranges from 40-80 bps.

Clear Financial Outperformance

RevPAF Outperforms

According to Cushman & Wakefield, RevPAF for LEED certified and non-LEED certified buildings have consistently outperformed. RevPAF is a helpful metric as it combines the effects of occupancy and rents into a single metric. The 2018 RevPAF

growth, which has a hold period extending into 2021, had the highest percentage point difference (61.4%). Cushman & Wakefield notes that LEED certified assets out perform non LEED assets particularly during recessionary periods. This has been demonstrated during the great financial crisis and the Covid pandemic.

ESG Related Uplift of Multifamily Residential

Multifamily Residential Increased Rent

Cushman & Wakefield study analyzing multifamily residential reports an average increase in rent of 3.1% for LEED certified buildings compared to non-LEED certified buildings.

Multifamily Residential Sales Premium

Multifamily Residential Increased Rent

The Cushman & Wakefield report further reports that there is a sales premium for LEED certified multifamily residential of 9.4% compared to non-LEED certified multifamily buildings.

NOI Improvement and Improved Cap Rates

Even a modest energy savings can be meaningful to the overall project value. The energy aspect of esg typically calculates the energy savings. Any reduction in energy cost improves the NOI. This in turn improves the project value when calculating the Cap Rate.

The energy generating glass facades both reduces the energy cost just like with other more energy efficient glass, but also generates additional energy. This additional energy is not just cost savings, but additional revenue. Energy cost is often the largest part of the overall OpEx. This improves the asset value significantly. This goes straight to the bottom line and improves the NOI.

Example: Just a $40,000 energy savings/energy generation, based on a 5 cap, increases the property value by $800,000.

Energy & Emissions

Improving Returns With Sustainability

ESG

Improve Ability to Finance

Improve Returns

Proprietary Dual Investment Model

Typical ESG Financial Improvement in Offices

Increase in Price PSF

Increase in Price PSF

Increase in Price PSF

Rent Increase

Increase in Price PSF

Increase in Price PSF

Lower Cap Rates

Increase in Price PSF

Lower Cap Rates

Clear Financial Outperformance

RevPAF Outperforms

ESG Related Uplift of Multifamily Residential

Multifamily Residential Increased Rent

Multifamily Residential Increased Rent

Multifamily Residential Increased Rent

Multifamily Residential Sales Premium

Multifamily Residential Increased Rent

Multifamily Residential Increased Rent

10% Decrease in Energy Use = 1.5% Increase in NOI

NOI Improvement and Improved Cap Rates

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