Why One Prominent CEO Invests in Sustainability
Many in the apartment industry are skeptical that residents will pay more for green features. That hasn’t stopped one company from fully committing to sustainability.
Greg Mutz, Chairman and CEO, cares about sustainability. And, even if it doesn’t full pay off right now, Mutz believes it will in the near future.
“Market demand for sustainable living and being environmentally responsible will shift,” Mutz says. “And when it shifts, we think it will shift rapidly. We are making that bet. We think that the attention given the climate and environment will continue to increase and that residents are going to choose to live in cleaner, more environmentally responsible dwellings.”
Part of Mutz’s confidence is backed by consumer preferences among primarily younger residents as well as among AMLI’s growing older resident demographic. AMLI continually checks in with residents to monitor their energy usage and their perceptions about the importance of sustainability. Last fall, AMLI surveyed residents living at its properties in major markets across the country and found that 84 percent of respondents said living in a sustainable or eco-friendly building is very important or moderately important to them.
“A lot of our residents are interested in sustainability for various reasons—some have indicated they enjoy the health and wellness benefits that come from sustainability,” Erin Hatcher, Vice President of Sustainability at AMLI, told Multifamily Executive’s Lauren Shanesy. “Others like the idea of being part of a larger movement toward a more environmentally responsible lifestyle that’s reducing their carbon footprint. And some, frankly, just love to save on their utilities.”
Sustainability is not new for AMLI. In the depths of the recession in 2008, as everyone else was retrenching and cutting costs, Mutz and his management team decided to invest in a program that trained its key development and management team and make its properties more energy-efficient.
Ten years later, Mutz is happy with AMLI’s progress.
“Across the gamut, we have invested a lot in environmental sustainability,” Mutz says. “AMLI will have more energy certifications than anybody as far as being LEED certified as a percentage of our portfolio.”
AMLI currently has developed 31 LEED-certified apartment communities and an additional 20 new developments that are LEED-registered, targeting Silver, Gold or Platinum.
“We will not develop a property that is not LEED-certified,” Mutz says. “In fact, we have not developed one that is not LEED-certified in the past eight years.”
In Dallas and Houston, 100 percent of shared spaces’ energy consumed in all AMLI communities is powered by renewable energy.
“All our energy is generated either by wind or solar,” Mutz says, “and not by coal, gas or oil.”
Mutz is proud that AMLI is committing to sustainability without federal government mandate or regulation.
“Nobody in Washington, D.C., is telling AMLI to do this,” Mutz says. “However, unquestionably, the state, city and local governmental entities are increasingly requiring green features and sustainable building requirements in new projects.”
Pressure to build sustainable properties is also coming from other places. Overall there is a trend from Environmental, Social and Governance (ESG) investment firms to screen publicly traded companies for their focus on sustainability, according to BUILDER Magazine.
Assets connected to an ESG screen now account for more than $22.89 trillion, or 26 percent, of assets under management globally. ESG investments are growing at a 17 percent annual clip, according to McKinsey & Co.
While the company is no longer public, AMLI’s private investors do care, and care significantly, about sustainability, Mutz says.
“We have many large pension plans as investors,” Mutz says. “And these investors tell us that sustainability is important. They want to invest in real estate funds that place sustainability as a high priority.”
As more international money funnels into apartments, sustainability promises to become even more of a focus and an important factor in valuations. European investors lead the world in ESG allocation with 52 percent.
“If we have a Dutch or German investor, sustainability is much more than simply a check-a-box question,” Mutz says. “European investors, for the most part, engage in genuine and knowledgeable questioning and due diligence about sustainability as part of a prospective investment decision.”
Does the investment community’s interest in sustainable properties raise they value of those properties that are LEED-certified? Mutz thinks so.
“My instincts are sustainability increasingly is driving value creation and is a plus for buyers,” Mutz says. “It is not yet a huge plus, but it’s a growing plus.” There’s little doubt that in coming years it will become an even bigger plus.