Case Study

PRUPIM Improver Portfolio – Realising Value in Sustainability

Overview

The idea of the PRUPIM Improver Portfolio was conceived during 2006 as a way to improve the environmental performance of a group of ‘typical’ properties currently owned and managed by PRUPIM. We hope to draw on the lessons learned to help reduce the environmental impact of our wider portfolio of more than 700 properties.

What we did and what we will do

In March 2006, Paul McNamara, Director of Research at PRUPIM, gave a presentation to senior property management professionals within PRUPIM. The presentation rehearsed the increasing government and industry interventions over the past three years which have raised the importance of the environmental agenda. He also put forward the idea for an ‘Improver Portfolio’, suggesting that such a Portfolio could be developed to improve the environmental performance of  “ordinary” properties and in doing so contribute to the enhanced and protected value of those properties. The seeds were sown for the idea of an Improver Portfolio.

The presentation sparked a debate on how such a Portfolio could be set up, looking at the property asset types, location, physical condition, lease expiry dates and refurbishment opportunities, and the types of actions that could be implemented to improve the environmental footprint of those properties. A business case was presented to the Fund Managers who wholeheartedly supported the establishment of the Improver Portfolio.

The Portfolio gradually began to take shape. Twenty-five managed properties were identified, covering all property types, with a total value of £530 million. During 2007, baseline environmental audits will be undertaken and strategic advice will be sought on the ongoing monitoring of performance in order to demonstrate improvement over time. Once completed, low/no cost measures will be identified and action plans for each property will then be drawn up with measurable objectives and targets for implementing the various low/no cost measures. A regular reporting structure from the Portfolio is being established, and regular briefings to PRUPIM Management Surveyors will enable good practice to be applied to other properties in the wider PRUPIM Portfolio.

The benefit

The Improver Portfolio remains a ‘work in progress’ and as such, there is little to report on in terms of immediate benefit. We are confident, however, that investors and tenants are becoming increasingly selective about what they will invest in or lease. We are also seeing increasingly stringent regulations raising the standards by which properties need to be managed. This gives us reason to believe that properties that have been made more environmentally sustainable will prove more lettable and saleable and, as a result, could perform better than non-sustainable buildings.

We will continue to report on the Improver Portfolio experience and expect to learn much. Ultimately, PRUPIM hopes to show that astute environmental management will lead to protected and even enhanced investment returns.