09 Mar Sustainability at Mitiska REIM
In this Q&A, our Managing Partners, Axel Despriet and Sylvie Geuten-Carpentier, outline the importance of sustainability at Mitiska REIM…
What impact has ESG had on the real estate sector?
Axel: ESG has had a huge impact and sustainability is now the new currency in real estate. There has been a seismic shift in the market’s perspective on sustainability, moving from a ‘nice to have’ to a key requirement, with green credentials now seen as a premium for commercial property.
This is a trend that will continue to gather momentum, fuelled by the demands of institutional investors and the desire of companies to become greener, and government initiatives to combat climate change. The adoption of metrics such as GRESB performance, BREEAM ratings and CRREM alignment, and the inclusion of solar panels, EV charging stations and LED lighting into designs and refurbishment plans have taken off in recent years as part of a larger Net Zero Carbon roadmap.
What progress has Mitiska REIM made recently in terms of ESG?
Sylvie: We have made very good progress over the past year and look forward to detailing these achievements in our annual Sustainability Report, which is due for publication in May.
In terms of BREEAM, highlights include the entire Romanian portfolio of 24 retail parks receiving “Very Good” BREEAM certifications for Asset Performance. In Poland, we recently announced that 5 convenience real estate assets had been awarded either “Excellent” or “Very Good” BREEAM awards. These latest BREEAM certifications are part of an ongoing program to actively future-proof our convenience real estate investments across Europe, through initiatives such as renewable energy, LED lighting, increasing green areas and biodiversity, and green leases.
We have also made good progress in terms of GRESB, with the First Retail International 2 fund (FRI 2) being awarded a total of 3 green stars for the standing investment and development categories.
To read our 2022 Sustainability Report, please click this link.
How important is working with tenants on ESG initiatives?
Axel: When it comes to sustainability, cooperation between landlords and tenants is key and a partnership approach is certainly the most effective. By working in partnership, we have been very successful at transitioning to green leases with our tenants.
Often the focus of tenants’ sustainability efforts is on the supply chain, where the large majority of the brand’s carbon footprint comes from, rather than on the retail side. This differing focus can lead to a big gap between the priorities of landlords and tenants when it comes to sustainability, and a wariness amongst tenants to landlord initiatives that have the potential to increase fit-out and operational costs.
Without tenant cooperation, it is less likely that asset owners can reach their ESG and reduction in carbon footprint goals. Across the industry, there is still a long way to go to resolve the differing priorities of landlords and tenants but, for those working in partnership, it is certainly moving in the right direction.
Are the increasing ESG requirements creating advantages for Mitiska REIM?
Sylvie: Yes, our strong focus on ESG is creating advantages. Firstly, for existing assets in our portfolio, buyers are now paying a premium for sustainable properties which are future-proofed.
We are also seeing advantages in terms of acquisitions. There are many historic assets, such as large hypermarkets and cash & carry locations, which no longer meet current consumer or tenant demand, or future sustainability requirements. These assets have effectively become ‘stranded’ due to their poor ESG credentials, however we see an opportunity to create significant value by transforming these assets into modern and sustainable convenience real estate projects.
A great example of this is the refitting and repurposing of an old Tesco hypermarket in Pulawy, Poland, which we completed in April last year, transforming it into a modern food-anchored retail park which is designed to achieve a “Very Good” score on the BREEAM scale.
Do you see green loans as an opportunity?
Sylvie: Yes, we see green loans as a growing opportunity over time. Green loans differ from conventional loans by including climate risk elements in the financing frameworks, linking to factors such as minimum BREEAM scores, CRREM decarbonization pathways, restriction to build in high-flood risk areas and reporting of energy consumption data. Structures can also include things like margin pricing in relation to BREEAM scores obtained, therefore creating a financial incentive to maximize BREEAM ratings.
Axel: In May last year, we announced that Mitiska REIM had secured €110 million in green loan financing agreements with KBC Bank. Securing these green loans was an important milestone in our ESG programme and a clear sign of the opportunity that Mitiska REIM now has to access green loan financing across our convenience real estate investments.
At present, a quarter of our debt portfolio is in the form of green loans and our aim is to establish a broader green financing framework in which to increase the number of green loans across the 10 European markets in which we operate.