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Business and marketing strategies in responsible property investment


Ulrich Kriese
Schopfheim, Germany
Abstract
Purpose The purpose of this paper is to give an overview of business and marketing strategies pursued by responsible property developers, funds and investors in the USA and to draw conclusions for future activities in that sector from a transatlantic perspective. Design/methodology/approach Personal interviews are conducted with 42 developers, fund providers 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 an analysis of promotional documents. A cluster analysis is performed to classify the strategies of the participating companies and institutions and to explore any commonalities and differences. Findings Business and marketing strategies in responsible property investment (RPI) can be described and characterised within the three dimensions of location, building and people. RPI activities and investors in the USA usually transcend pure green building and aim to contribute signicantly to smart growth, to sustainable urban development and revitalization. Research limitations/implications The results in this study are not fully representative of the US RPI community, with the study focussing on the core network of developers, real estate funds and large investors. Furthermore, issues of corporate governance and nancial performance are omitted from this study. Interviews are conducted in autumn 2008, i.e. at a time when the major nancial crisis reached 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 many respects from US experiences. Originality/value The research approach, applied to RPI focussing on business and marketing strategies for the rst time, provides new insights for practitioners on both sides of the Atlantic. Above all, 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 America Paper type Research paper

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1. Introduction In 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 author is most grateful to the American Council on Germany, which generously supported this research through a McCloy Fellowship. Thanks also to Gary Pivo and several experts for their advice nding through the US RPI community, to all interview partners for their participation, and to Claire Roberts and two anonymous referees for their valuable comments on previous versions of this paper. After all, the author would like to thank Roland W. Scholz for what he has learned from him to conduct this research.

Journal of Property Investment & Finance Vol. 27 No. 5, 2009 pp. 447-469 q Emerald Group Publishing Limited 1463-578X DOI 10.1108/14635780910982331

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development and green buildings attract more attention both within the real estate industry and the socially responsible investment (SRI) community, particularly in the USA, Australia and Great Britain (Dixon et al., 2006; Flynn et al., 2007; Funders Network for Smart Growth and Livable Communities, 2004; Newell, 2008; Ritter, 2008; RREEF, 2008; WWF-UK, Housing Corporation, Insight Investment and Upstream Strategies, 2007). Professional real estate magazines have featured sustainability issues with unprecedented intensity and property valuation experts have become aware of the connection between the social, environmental and nancial performance of buildings (Lorenz and Lutzkendorf, 2008; RICS, 2005)[1]. Responsible property investment (RPI) as dened by Pivo and McNamara (2005) refers to the more general concepts of SRI and corporate social responsibility (Koellner et al., 2005; Rapson et al., 2007). It means:
[. . .] maximizing the positive effects and minimizing the negative effects of property ownership, management and development on society and the natural environment in a way that 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 social responsibility related to the buildings location, which may have been contaminated and may be transit oriented, inner-city or suburban, etc. Third, it refers to social responsibility related to people, i.e. the development in question may, e.g. include mixed income housing or provide jobs (Kriese and Scholz, 2009). In recent years, some developers, fund providers and investors in the USA, the UK and some other countries introduced RPI as a major component in their business strategy (Pivo and UNEP FI Property Working Group, 2008; RREEF, 2007). RPIs and investment 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. Hagerman et al. (2007), Lamore et al. (2006), Steiger et al. (2007) and Willis (2004) point to the crucial role of both nancial intermediaries, i.e. funds to link institutional investors to urban revitalization, and community intermediaries (e.g. community development corporations) to ensure the achievement of the social goals of investment. The fund and the institutional investor come together in a symbiotic relationship and provide each other with scale (Hagerman et al., 2007, p. 24). The fund, with the aid of the community partner, delivers urban development projects large enough to both make an impact on the community and produce nancial returns. The institutional investor delivers large amounts 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 for major reputation and brand growth (Mistra, 2008). In short, RPI has a strong business case. With regard to the current global nancial crisis caused by the property and nance industry itself, RPI appears to be a good part of the solution. As part of this potential, green buildings should now be able to extend their competitive advantage (RREEF, 2009). In many places in the USA, Leadership in Energy and Environmental Design (LEED) certication[2] has already become a precondition for granting a loan.

To date, general thoughts on business and marketing strategies in RPI have been outlined, 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 and gl acceptance have been investigated (Bu et al., 2009; Mistra, 2008; Pivo, 2008b; Sayce et al., 2007; Schafer et al., 2008). Browneld development, as a business approach, has emerged 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 inll and revitalization have all been realised by RPI market actors (Pivo, 2008a). In the authors view, both for European developers and investors considering any RPI activities and the European SRI community there is much to learn from US approaches and experiences with RPI. With more than e2,600 billion in SRI, Europe is the worlds largest SRI market (Eurosif, 2008). Yet with only 4 per cent SRI in property, it is obvious that European socially responsible investors in particular are very interested in 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 led both European investors to ask for respective products in the USA and US fund managers to introduce investment vehicles such as real estate investment trusts (REITs) in the USA in order to facilitate investment by foreign investors. Although the large market 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 still underserved 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 business partners? RQ4. What are the market niches developed so far and occupied by the industry? Here, connecting with Kriese and Scholz (2009), we particularly seek to explore how the building, its location and the people using and inhabiting the built environment are combined within business and marketing strategies: RQ5. Which conclusions can be drawn for future activities and businesses in that sector from a transatlantic perspective? 2. Data and method In an exploratory study, semi-structured personal interviews were conducted with developers, fund providers and managers, institutional, nonprot and major private investors throughout the USA. The companies and institutions represented more than US$220 billion in commercial and residential property assets under management

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(AUM), among them US$60 billion or on average 27.5 per cent responsible property AUM, according to their own estimates (Table I). 2.1 The sample Companies and institutions were sampled through extensive literature and internet research, e.g. via the Responsible Property Investing Center[3] and the Principles for Responsible Investment[4], partly complemented by a snowball procedure based on expert advice. The ve types of stakeholders have been chosen to cover key stakeholder groups in RPI along the development and investment chain. Out of a total of 61 companies and institutions engaged in RPI and approached by e-mail, referring to the McCloy Fellowship of the American Council on Germany, 42 (69 per cent) agreed to an interview. Reasons for non-participation were either a general lack of interest or, in a few cases, general company policy precluded interviews. The geographical distribution of the participating companies and institutions was as follows: 40 per cent were located in the north/northeast; 31 per cent in California; 17 per cent in the south/southeast including one in Denver, Colorado; 12 per cent in the northwest (Seattle and Portland). For the sectoral proportion see Table I. Most interviews were conducted with executive personnel, i.e. 23 interviews with CEOs and other board members, 11 interviews with head of departments, eight interviews with vice presidents and similar in the eld of RPI. 2.2 Interview process and topics Interviews were held between September and November 2008. Several days before the interview meeting, interview guidelines were sent to participants for their preparation. Five of the 42 interviews were conducted by phone. According to the exploratory nature of the research, the interview guidelines and the interview itself were mainly qualitatively complemented by some quantitative
Property AUM Total Thereof RPI Sum billion Mean SD Sum billion Mean SD Sum billion Mean SD Sum billion Mean SD Sum billion Mean SD Sum billion Mean SD US$ US$ US$ US$ US$ US$ 13.356 1.336 2.640 38.825 3.883 4.165 136.350 11.363 15.258 2.638 0.660 0.779 30.250 5.042 8.909 221.419 5.272 9.732 13.285 1.329 2.644 21.260 2.126 3.351 21.430 1.786 1.928 1.732 0.433 0.779 3.280 .547 .489 60.987 1.452 2.332

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Participants Developers Fund providers and managers Institutional investors Nonprot investors Major private investors Total Table I. Basic sample data

Frequency 10 10 12 4 6 42

% 23.8 23.8 28.6 9.5 14.3 100.0

components. After the rst ten interviews, three sub-questions that appeared to be relevant for the research were added and one qualitative component was transformed into a quantitative one. The research sought to cover the following topics: . individual RPI funds or developments, denition and basic understanding of responsible property investment, three most common RPI characteristics; . business strategies and market niches, core competence, key business partners, perceived market potential and market risks; . market segments: investor and residential target groups; and . marketing strategies with respect to people, location and building, environmental and social issues, personal and public nancial and non-nancial benets; emotional strategies, branding and storyline. Regarding the main quantitative component, participants were asked to mark the appropriate spot on arbitrary scales designed to show their business foci (e.g. far left, if solely society focused, or centred, if society and environment are equally relevant): . strategic focus: society vs environment; . location: inner-city vs greeneld; contaminated sites vs non-contaminated sites; . property type: existing buildings vs new buildings; non-housing vs housing; higher income vs low income; and . property diversity: mixed use vs single use; mixed income housing vs one income housing. Attribution of green building standard policy (no LEED or similar requirement vs maximum standard) is based both on interview responses and content analysis (see below). 2.3 Data analysis The marks on the arbitrary scales have been measured as a value between 0 (one end of the scale) and 100 (the other end of the scale). Cluster analysis, a statistical procedure to assign similar objects, in this case, RPI strategies, with various characteristics into groups, was performed with the data. The quantitative analysis was complemented with qualitative interview data introduced above and by an elementary content analysis of promotional documents (internet, presentations, print material), both provided by interview partners and via the internet before and after the interview. On average, three documents per case were analysed as well as each company web site. This analysis was reective of the interview topics described above (market segments, marketing strategies and green building standard policy) and was undertaken by searching for both written and illustrative key texts. 3. Findings Referring to our RQ1, we found that interviewees, as a main idea and principle, articulated a strong belief in, if not explicit commitment to cities and inward development. It was stated that the most important supporting trend for RPI is the trend back to the city. One fund manager put it simply: urban equates to core. Transit oriented, higher density development appeared to be the common denominator

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or minimum requirement for any kind of RPI. Transit oriented combined with mixed use and mixed income development was estimated by many to be the most promising RPI business strategy. Another main principle was that RPI was usually undertaken in major metropolitan areas. In such regions investments reach a certain scale, which was said to be a prerequisite for acceptable or even superior market returns. However, several companies and institutions pursue a business and investment strategy aside from those areas, although they almost invariably focus on larger cities or regional centres. As repeatedly raised by respondents, the emergent market logic, applied to urban property investment, appeared to be a shared RPI philosophy in the USA. Many investments are undertaken in edge neighborhoods, transition zones, fringe areas, i.e. areas typically avoided by conventionally thinking developers and investors. In many RPI strategies location is in fact the leading concern. The large majority of companies and institutions in this study aim to signicantly contribute to smart growth[5], to sustainable urban development or even revitalization. Greeneld development is usually excluded either explicitly or because it is just not part of an inward development strategy. The building, green or not, becomes a means to an end. In answering the RQ2, who asks for this kind of property and investment? According to respondents, for certain investments (see below) high net worth individuals (HNWI) and professional private investors play an important role. Among institutional investors, public pension plans and individual labor union funds, due to their patient capital, clearly led the way, followed by insurance companies, again followed by corporate pension plans. Banks play a special role due to Community Reinvestment Act (CRA) requirements[6]. Main residential target groups for predominantly urban developments, as consistently stated by respondents, are low and moderate income households on the one hand and middle to higher income young people (singles, couples without children), empty nesters and suburbanites moving back into the city on the other. Families, as a target group, were also mentioned, though much less often. Respondents almost unanimously argued with the perception that school quality in cities impedes the expansion of urban family living. Third, interview partners across the board highlighted community development organizations (CDCs) and other community intermediaries as key business partners. Without their local knowledge, relationships and on the ground experience, many investments, particularly in the larger metropolitan areas, would have been impossible. They bring deals to the table, and their involvement usually leads to quicker and cheaper entitlement, less opposition and easier upzoning. Some respondents also include (e.g. through planning charettes) the public and local interest groups in the planning process to better account for local needs. Public authorities were mentioned as another important partner, because they are major property owners, provide both planning and nancial incentives towards sustainable urban development and, as it is increasingly the case in major metropolitan areas, they require certain standards, e.g. a minimum LEED certication. Our RQ4 sought to identify market niches so far developed and occupied by the US RPI industry. After a rst round of cluster analyses four cases were excluded because of their individual character with respect to the sample. This concerns:

(1) a fund specializing in the redevelopment of contaminated sites or brownelds; (2) an institutional investor aiming to rehabilitate and green its multi-family housing stock; (3) a greeneld traditional neighborhood (new urbanism) development with LEED certied buildings (in this case the social responsibility appears to be debatable); and (4) quasi meta level RPI, a REIT conducting environmental and social analyses of potential investments, assuming strong links between environmental and social performance on the one hand and management quality on the other. We believe that these cases actually represent additional typical business approaches in RPI. Having performed cluster analyses with the remaining 38 cases, the seven cluster solution using Wards method (i.e. a clustering method seeking maximum homogeneity within groups) describes best the RPI business spectrum (Figure 1). Other methods led to very similar solutions with no less than 5 per cent of variation, i.e. only one or two cases were allocated differently. For statistics see the Appendix. It should be noted that some overlap exists between the clusters in such a way that, although the statistical procedure allocated each case to a certain cluster, some companies and institutions actually pursue more than one RPI strategy described below. It also happens that the developer and the investor of a certain project are allocated in different albeit related clusters. Therefore, the cluster analysis only provides a rough and simplied idea of US RPI strategies. In the following, the quantitative results are only used to facilitate full understanding and interpretation, which are just as much based on the qualitative ndings. Urban affordable housing (Cluster 1) This cluster is dominated by nonprot and institutional investors. In fact, all four nonprot investors in the sample are allocated here. Investors of this kind of RPI mainly invest in and provide loans to low and moderate income housing (i.e. household incomes ranging between 25 and 80 per cent of area medium income) both for rent and for sale. The inclusion of middle income households (with 80-120 per cent of area medium income) is not an unusual (supplementary) strategy. One respondent occupied a market niche by providing market rate affordable housing. Typical target groups mentioned include the working poor and workforce households. Other target groups are single parents, elderly or people with disabilities. A long-term ground lease that allows leveraging of assets for further investments that can be transferred to subsequent occupiers plays an important role in the nonprots business approach. Another approach consists of grants to buyers of existing homes (to avoid social housing construction with all its disadvantages), tied to a purchase option for the benet of the nonprot once the owner wants to resell. Such measures aim to ensure permanent affordability[7]. The tendency to avoid contaminated sites is certainly interesting from an environmental justice point of view. Although one nonprot within this cluster has developed green criteria and propagates their widespread use[8], most companies and institutions in this cluster do not apply LEED or other green building standards. Where green building is an issue, marketing concentrates on healthy living and cost-reducing appliances. Marketing usually highlights social arguments, i.e. affordability as such, improvement of housing standard and of quality of life,

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***HIERARCHICAL CLUSTER ANALYSIS*** Dendrogram using Ward Method Rescaled distance cluster combine CASE 0 5 10 15 20 Label NP INST NP INST INST 1 NP INST FUND NP INST INST FUND PRIV 2 DEV INST INST PRIV FUND 3 DEV INST DEV DEV DEV 4 DEV FUND INST DEV FUND INST 5 PRIV DEV FUND FUND DEV 6 PRIV INST PRIV FUND INST INST 7 INST PRIV Notes: DEV Developer; FUND Fund supplier/manager; INST Institutional investor; NP INV Nonprofit investor; PRIV Major private investor

25

454

Figure 1. Clusters in RPI

provisions of community and social infrastructure, accessibility to public transit, jobs and schools. Regarding investor types addressed for investment most successfully by respondents, institutional investors among them in particular are banks with CRA requirements and nonprot investors, e.g. foundations, were regularly mentioned. HNWI and professional private investors are only important in some respondents opinions.

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Revitalizing commercial property development (Cluster 2) Investors and developers in this cluster aim to foster the local economy and to contribute to urban revitalization. They typically invest in an underserved area at the fringe between inner-city and suburb or at a high density suburban location. In such areas, population and income density can be substantial. Consequently, commercial developments aim to satisfy real, aggregate demand and to skim the respective buying power. Where housing is included, it is usually of a mixed income type. Though investments of this strategy can be rather opportunistic, they are not pioneering. As one interview partner put it: community development organizations go into very bad areas, failing communities, and start development. After that we come in. LEED or other green building standards are not necessarily applied. Marketing focuses on social issues, such as job creation and diversity; however, some companies go well beyond that, towards comprehensive social responsibility. In conjunction with social responsibility, location and smart growth, particularly transit orientation, are treated as more important than building related issues. One company attracts investors with the slogan We saw urban center when others saw inner city. For a company advertisement see Plate 1. Regarding investor types successfully addressed, institutional investors again banks with CRA requirements, but also public pension plans and insurance companies are considered most relevant.

Urban living (Cluster 3) This RPI business consists of creating centrally located, new, ambitious housing projects. One company slogan states: innovative urban living, revitalizing urban neighborhoods, creating special places and meaningful relationships. Other than residential uses, particularly retail, are included, but they must not conict with the residential use and may be required by zoning. Affordable housing units may be included. Some investors also target families for the urban living experience[9]. Contaminated sites tend to be avoided. Location as well as societal and personal aspects and benets, e.g. urban diversity and health, are prominent in marketing (Plate 2). Any kind of convenience, service or amenity by reason of the central location also provided by third parties are particularly emphasised. Promotion often refers to the urban lifestyle and the cultural creatives. Green building aspects are relevant, but the development is not always required to comply with a particular (high) standard. For further characteristics, see Cluster 4.

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Plate 1. Advertisement for an urban revitalization property fund

Source: Reprint with kind permission of New Boston Fund Inc., Boston, MA

Revitalizing mixed use development (Cluster 4) Cluster members are unied by the idea of revitalizing urban centres through mixed use developments, where mixed in this cluster is understood as more than two uses. Typical company slogans are Developing urban space in style and Creating sustainable and inspiring places to work, learn and live. By all means, the development of contaminated sites is an option. The usually ground-up projects regularly contain housing of a mixed income type with the larger part of apartments and/or condominiums in the middle to higher income range (Plate 3 and [10]). Green building aspects are a relevant, sometimes a prominent[11], issue, but most cluster

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Source: Available at: www.alcyoneapartments.com, accessed 6 April 2009, reprint with kind permission of Harbor Properties and Vulcan Inc., both Seattle, WA

Plate 2. Urban living

Source: Available at: www.sosevenfortworth.com, accessed 6 April 2009, reprint with kind permission of Hughes Development LP, Dallas, TX

Plate 3. Revitalizing mixed use development

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members do not regularly strive for particularly high standards. Marketing resembles Cluster 3. Regarding investor types successfully addressed for this sort of RPI (including Cluster 3), in the view of respondents, HNWI and professional private investors are equally relevant to institutional investors. Green buildings in urban setting (Cluster 5) This type of RPI strategy leans towards new buildings and appears to be somewhat less ambitious with respect to mixed use and mixed income, if compared with clusters 3, 4 and 6. On the other hand, contaminated sites are less eschewed; in some cases the redevelopment of a contaminated site is only taken as the starting point for developing its surroundings. Cluster members seek to achieve high green building standards, and in marketing while focussing on the building and environmental aspects they more or less raise all relevant issues and point to a holistic approach (Plate 4 and [12]). Often, green building standards are prominently used in marketing even by institutional investors. Interestingly, from a marketing view, some companies establish the manifest connection between inward development and landscape preservation[13]. As for investor types successfully addressed HNWI and professional private investors appear to be at least equally relevant to respondents as institutional investors. Green, diverse and stock-oriented development (Cluster 6) Representatives of this type of RPI strategy seek high standards with respect to location, green building and the buildings usage and/or tenancy diversity. Companies in this cluster favour rehabilitation over new developments and seek locations in (or close to) the inner-city. One cluster member occupies a market niche in urban waterfront (re)development. Marketing can be very comprehensive, prominently covering location and building, as well as societal and environmental aspects (Plate 5). Transforming Americas cities, neighborhood by neighborhood, Diversity, environmental responsibility, livelihood, interdependence, impermanence and, Enveloping the community in a fabric of innovative, sustainable, inspiring practices are cluster members rather programmatic statements. Companies in this cluster want to create distinctive neighbourhoods and a sense of community among users and occupants, promoting the right place to be. For this kind of RPI, private investors were particularly emphasised. Green and highly efcient ofce buildings (Cluster 7) This cluster represents a very particular RPI strategy. It almost exclusively focuses on ofce buildings, which are not necessarily inner-city located (greeneld developments are not explicitly excluded). Contaminated sites and multiple uses are avoided. Green building standards (LEED and Energy Star) are utilised. Respondents are convinced that ofce buildings are best suited for any green measures, because compared to hotels, retail or residential buildings in terms of green technologies, ofce buildings are rather easy to control and to manage. In marketing, the building, its green features, maintenance efciency, productivity gains, energy and cost savings are most prominent. No relationship is established with urban revitalization. A typical product slogan is High performance green. Institutional investors were always mentioned for this type of investment. Nonprot investors were not mentioned at all and private investors are of minor relevance in the view of respondents.

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Source: Reprint with kind permission of Vulcan Inc., Seattle, WA

Plate 4. Green buildings in urban setting

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Plate 5. Green, diverse and stock-oriented development

Source: www.clippermill.net, accessed 6 April 2009, reprint with kind permission of Struever Bros. Eccles & Rouse, Baltimore, MD

4. Summary of ndings and discussion The results provide an initial overview of the US RPI business, focussing on the core US RPI network of developers, real estate funds and large investors, their degree of relationship and their investment activities related to building, location and people. First, as for main ideas and principles we retain developers, funds and investors strong belief in cities and in higher density, inward development, and even in urban revitalization, connecting with respective place marketing ndings and initiatives (Lang et al., 1997; Ward, 1998). Most RPI business is done by pronounced market makers (MORI, URBED & School of Policy Studies at the University of Bristol, 1999) or niche developers and investors (Ley, 1996; Psilander, 2004), applying the emergent market logic to areas typically avoided by conventionally thinking market participants. Consequently, besides nancial performance, location and exerting an inuence on it towards a sustainable urban development is the leading concern. Second, there is some evidence, that, besides developers, HNWI and professional private investors play an important role in exploiting RPI potential and in occupying new market niches. Though usually not the driving force (Pivo, 2008a), some institutional investors, among them pension funds and life insurance companies in particular (patient capital), have clearly recognised the various possibilities and more or less have committed themselves to RPI. Depending on the companies and institutions strategy, low and moderate income households, middle to higher income young people and/or empty nesters and suburbanites moving back into the city are main residential target groups. For some part of RPI, gentrication should be a legitimate issue of concern (Fraser and Kick, 2007; Lees, 2008). Although some developers and investors also target families, it becomes clear that a noteworthy expansion of urban family living would need drastic

improvement of school quality and/or its corresponding perception. It may seem surprising that not even one respondent explicitly conned target groups to the environmentally aware spectrum. Respondents could in fact have received the impression that the adoption curve for sustainable properties has surpassed its rst phase led by innovators and early adopters and is by now supported by the (early) majority (Rogers, 2003). Moreover, according to the authors estimate, Richard Floridas The Rise of the Creative Class (Florida, 2002) has probably much inuenced the US RPI community. Third, for implementing their business strategies, respondents highlighted the importance of good relationships and partnerships with public authorities, CDCs and other community intermediaries. This conrms previous research and experience (Hagerman et al., 2007; Steiger et al., 2007; Willis, 2004). Beyond that kind of cooperation, though several regional and national environmental non-governmental organizations in the USA are engaged in green building and/or smart growth, not many strategic partnerships have been established with them. One exception seems to be the partnership between the Natural Resources Defense Council (NRDC) and the Enterprise Community Partners (both nonprot) in elaborating the Green Communities criteria (Enterprise Community Partners, 2008). Another one is the partnership between US Green Building Council, NRDC and the Congress for New Urbanism in establishing LEED ND, i.e. for neighborhood development. For funds and institutional investors on the one hand and the environmental movement as an independent voice on the other, there still seems to be some gainful but untapped potential for cooperation with regard to credibility, reputation and branding. Fourth, we outlined the comprehensiveness and diversity, and the varying profoundness and broadness of business and marketing strategies, connecting with the ndings of Pivo (2008a). Specialised developers and funds have occupied several market niches, meeting respective demands of all kinds of investors. In most RPI strategies in the USA, at least two of the three dimensions of building, location and people play a signicant role (Figure 2). When developing their business and marketing strategy, the following strategic questions connected with the building, its location and the people using and inhabiting the built environment seem to lead responsible property developers, funds and investors in the USA and may inform future decision making in the business and its marketing: . How much do we focus on design and performance of the building compared to its location? Is the building a means to an end or the main object? . To what extent is the location of the building an essential issue in our RPI strategy, and do we aim to make a signicant contribution to smart growth, to sustainable urban development or revitalization? . What spectrum of people using and inhabiting the built environment do we consider in our RPI strategy and activities? Having answered those main strategic questions, the following secondary questions remain to be answered: . Referring to the building, do we focus on particular single uses (ofce, retail, residential, etc.) or is our business in mixed use? Do we specialise in rehabilitation

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Urban revitalization Smart growth Community image Urban diversity Revitalizing commercial property development

LOCATION
Landscape preservation through inward development Brownfield redevelopment Green buildings in urban setting Urban amenities, lifestyle & diversity Sustainable lifestyle at central location Healthy environment Green building standard Green & highly efficient office buildings Energy savings, resource use & green features Productivity & other economic gains

462

Transit orientation Job creation Community & social infrastructure Accessibility

LE OP PE

Quality of life improvements Affordability

Urban affordable housing

Green, diverse & stock-oriented development // Revitalizing mixed use development // Urban living

BU ILD ING

Multi family housing green rehabilitation

Figure 2. Business and marketing strategies in RPI

Healthy living Cost savings Cost savings Housing standard improvements

Maintenance efficiency

and adaptive re-use, are we mainly engaged in new construction, or do we seek a strategic combination? Do we focus on energy efciency or do we cover all aspects of green building? With regard to location, do we focus on inner-city and on areas adjacent to it or do we specialise in (sub)urban environments beyond the centre? Is the development of contaminated sites an option to us, or even a main part of our strategy? Regarding both building and location, do we handle green building standards and ratings as one criterion among others or do they lead our strategy? Do we particularly strive for high standards/ratings? In terms of people, do we provide one income or mixed income developments? Do we particularly try to improve the living and working conditions for and in low and moderate income households and neighbourhoods? Do we actually seek investments in such communities or do we try to bypass them? To what extent do we consider the needs of special groups such as children/families, elderly or disabled?

Marketing activities mirror business strategies as they are highly differentiated, too. Depending on the business model and respective target group(s), marketing either focuses on or combines issues related to people, location and/or building (Figure 2). User benets related to location and/or building are regularly specied. LEED proved to be the most widely used label for green building. With regard to RPI contributing to urban development, it is frequently described as smart growth. Some market actors even argue with landscape preservation through inward development.

5. Conclusion As for conclusions that can be drawn for future activities and businesses in RPI, the ndings and questions presented here can be useful in designing and developing responsible property funds, business and marketing strategies, and they may guide respective acquisitions, investments and envisaged cooperation between developers, investors, nancial intermediaries and other stakeholders. The RPI approach in the USA is in several respects instructive from a transatlantic perspective in particular[14]. The results presented here provide a strong case against European property funds and investors shying away from making a contribution to sustainable urban development at more challenging sites or from collaboration with other stakeholders, including nonprots and public authorities. Though a certain standard in high density, mixed use and mixed income developments is set in Europe, there is still a strong movement out of the city towards land consuming single use developments and one income neighbourhoods. A large portion of the standing stock conforms to users demands less and less, not to speak of necessities with respect to climate and demographic change. Only in recent years has Europe rediscovered the strengths and advantages of the European city model (European Member States, 2007). However, in Europe, RPI is still in its beginnings (Montezuma, 2006; Rapson et al., 2007), and it needs denition and strategy (Bugl et al., 2009; Kriese, 2008; Kriese and Scholz, 2009). Some small and middle size companies have recognised the business case in RPI[15]. However, only a few RPI funds exist, such as the Igloo Regeneration Partnership in the UK, the sustainable real estate fund of Rabo Real Estate Group in cooperation with Triodos Bank in The Netherlands, and the Real Estate Fund Green Property announced in early 2009 by Credit Suisse Switzerland. Even in the UK, a country with a noteworthy number of rms engaged in RPI, independent maverick developers seem to lead the way in generating creative solutions for the development of challenging sites (Guy et al., 2002; Dixon, 2007; MORI, URBED & School of Policy Studies at the University of Bristol, 1999). UK and Swiss investors views related to social responsibility usually concentrate on the building, much less on location or people (Bugl et al., 2009; Kriese and Scholz, 2009; Rapson et al., 2007). In the rst version of the German sustainable building label, instead of giving credit for investment in a neighbourhood with a bad image, the opposite is the case; location is even excluded from the nal rating (DGNB, 2009). Yet, simplifying RPI to (green) building would certainly attract only part of the SRI community (Pivo, 2008b). Property funds and developers that are able to sell a broader concept of sustainability, including smart growth, cultural diversity, social justice and the promotion of sustainable lifestyles, should be particularly evidentiary for socially responsible investors. In Germany, one of the largest (and doubling every two years) European SRI markets, demand for a responsible property fund has been articulated (Schafer et al., 2008). In addition to institutional SRI investors, a noteworthy SRI retail market exists in Germany; private individuals and investors of all kinds are insecure with respect to future-proof property investment; large portions of multifamily housing change hands; the building stock needs enormous rehabilitation to adapt it to environmental and demographic challenges; social segregation in urban space continues, and many cities show edge neighbourhoods and transition zones; urban regeneration, inward development and quality of life improvements are important concerns. At the same

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time, e.g. demand for urban living increases (Beckmann et al., 2008). Consequently, urban and green, mixed income and mixed use development, urban family living, green urban revitalization and rehabilitation, i.e. sustainable alternatives for the unsustainable but still prevalent patterns, would all be promising and necessary extensions of investment activities not yet practiced on a larger scale. 6. Limitations These results must be treated carefully with respect to the small sample size. Owing to convenience sampling, the results are not fully representative. The family home building industry could only be touched upon. With regard to the broad concept of RPI, neither corporate governance issues, such as transparency, fair contracting, labor union work, community hiring, community investment, etc. nor RPI beyond the built environment, i.e. for landscape conservation reasons, nor questions related to nancial performance were researched in this study. Moreover, interviews were conducted in autumn 2008, i.e. at a time when the major nancial crisis just reached a global scale, potentially inuencing participants perspectives and subsequent responses. Finally, real behaviour may be different from interview responses and/or promotional communication.
Notes 1. Available at: www.greenbuildingfc.com (accessed 6 April 2009). 2. LEED stands for Leadership in Energy and Environmental Design, the green building rating system of the US Green Building Council (www.usgbc.org (accessed 6 April 2009)). 3. Available at: www.responsibleproperty.net (accessed 6 April 2009). 4. Available at: www.unpri.org (accessed 6 April 2009). 5. Smart growth means inward, mixed use, compact, walkable, transit oriented urban development as an alternative to urban sprawl. For an introduction see Beneld et al. (2001). 6. The CRA, a US federal law, requires nancial supervisory agencies to encourage banks to meet the credit needs of the local communities in which they operate, which includes lowand moderate-income neighbourhoods. Banks adhere to the law by supporting households and the local economy, e.g. through job creation, community investment and investment in property serving peoples needs. For more details see Immergluck (2008). 7. Available at: www.champlainhousingtrust.org (accessed 6 April 2009). 8. Available at: www.greencommunitiesonline.org (accessed 6 April 2009). 9. As an example see www.livingonthepark.com (accessed 6 April 2009). 10. As an example see www.kalahari-harlem.com (accessed 6 April 2009). 11. As an example see http://southwaterfront.com (accessed 6 April 2009). 12. As an example see www.alley24.com (accessed 6 April 2009). 13. As examples see www.cyanpdx.com/ and www.cherokeefund.com (accessed 6 April 2009). 14. Of course, factual needs and challenges in property and in urban development and, general conditions in terms of nancing, taxes and subsidies in the USA are different from European countries. The scope of this paper does not allow to recess these aspects here. 15. As examples see www.rhombergbau.at and www.interboden.de (accessed 6 April 2009).

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Appendix

Society focus Inner-city Contaminated (0) vs (0) vs (0) vs nonenvironment greeneld contaminated focus (100) (100) sites (100) 79.6b 19.051 57.7 17.997 28.7 18.148 19.8c 13.423 42.0 17.413 63.2 14.167 20.0
a

Existing buildings (0) Mixed vs new use (0) vs buildings single use (100) (100) 47.3 18.759 35.3 23.634 39.3 29.263 18.8c 18.126 54.7 15.253 29.8 11.432 80.0b
a

Nonhousing (0) vs housing (100) 91.0b 7.916 35.0 18.903 90.3 11.719 55.5 20.926 52.5 15.437 50.0 14.124 3.5c 4.435 54.3 30.048 46.2 28.691 36.0 23.998 9.4 16.102 8.3c 14.338 16.7 14.434 16.7 20.412 51.2 17.034 55.0b 20.917 43.8 12.500 27.1 24.975

Higher income (0) vs low income (100)

Mixed income (0) vs one income (100)

No LEED or similar requirement (0) vs max. standard (100)

Cluster 1 n7 Cluster 2 n7 Cluster 3 n3 Cluster 4 n6 Cluster 5 n6 Cluster 6 n5 Cluster 7 n4 Total n 38 67.4 14.965 60.9 24.471 89.3 11.015 57.0 10.564 54.3c 20.954 69.2 19.215 96.8b 1.258 67.6 20.984 51.9 14.554 46.3 17.651 97.0b 3.606 83.2 16.964 61.5 13.531 39.8c 20.017 45.3 39.978 58.6 25.401 60.9 10.605 57.9 14.124 50.0 0.000 17.8 10.944 53.8 16.315 16.2c 19.550 78.0b 14.697 47.5 24.460

Mean SD Mean SD Mean SD Mean SD Mean SD Mean SD Mean SD Mean SD

29.3 14.829 17.9c 15.646 24.7 11.015 44.7 20.685 60.5b 17.132 50.2 9.550 58.0 16.000 40.0 21.548

18.6 15.372 37.6b 16.390 4.0c 1.732 9.2 8.998 18.3 6.653 13.8 11.606 33.5 15.588 20.3 16.033

Notes: an 1; bhighest value in column; clowest value in column

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Table AI. Cluster means of RPI activities

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