Southern California-based Shangri-La Industries and Thompson National Properties are forming a $100 million fund to make buildings more environmentally friendly and energy efficient – a big chunk of money for the growing green building industry.
The companies' $100 million Green Building Fund will be aimed at "value-add commercial and industrial assets that can be retrofitted, repositioned or redeveloped as energy efficient and environmentally sustainable," according to the companies' news release.
While the companies didn't respond to requests for further comment, it would appear that their fund is aimed at retrofitting industrial and commercial buildings to meet criteria of the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) program.
Given that buildings consume about two-fifths of the electricity used in the United States, finding ways to make them more energy efficient has been getting a good amount of investor attention of late.
LEED-certified buildings account for a growing portion of revenue for commercial builders. These buildings also command higher property valuations, rents and occupancy rates, industry observers said at a conference in May (see Green Buildings: No Subsidies Needed?).
Webcor, the largest builder in California, earned more revenue from LEED buildings than traditional buildings in its most recent quarter. Last month it became a limited partner in Navitas Capital, an investment firm specializing in green building (see California's Biggest Builder Dips Into VC Investing).
Navitas has put money into Los Altos, Calif.-based Integrity Block, which makes building blocks from rammed earth instead of cement, and is seeking other investments (see Green Building VC Mystery Solved).
There's more to green building than just the rising interest in cutting down on energy costs, and thus reducing carbon emissions from coal-fired and other greenhouse-gas emitting electricity generation sources, said James Pettit, a managing partner of Navitas.
There's also the fact that green building materials and processes are getting to the point where they don't cost much more than going with traditional materials and methods, he said.
"We're seeing a lot of quality substitutes that are getting the cost down," he said. "That's the main difference between today and three years ago."
That view is backed up by a study sponsored by investment firm Good Energies that found existing green building projects cost only around 2 percent more than traditional buildings and yielded a 33 percent savings on energy use. For about half the 150 buildings studied, energy and water savings allowed a five-year payback on the extra costs of going green.
Green building companies can include those finding ways of making building materials in a more sustainable way. Cal-Star Cement makes cement that requires less fossil fuel in manufacturing, and Serious Materials offers less fossil-fuel intensive drywall.
Or it can come through making more energy-efficient buildings and the appliances that go into them, the goal of homebuilders Michelle Kaufmann Design and Zeta Communities and water-heater maker American Hometec.
The action isn't limited to North America. Hycrete, an India-based company which makes waterproof concrete, in July landed $15 million in a Series C investment round led by Mohr Davidow Ventures and including RockPort Capital Partners and NGEN Partners, according to Private Equity HUB. (See Next Cleantech Hub: India?).
But given that the economic downturn has slowed new construction, retrofitting buildings to be more green – as it appears Shangri-La and Thompson intend to do with their $100 million fund – makes sense, Pettit said.
"For every new building that could go up that is more efficient, there are a hundred that can be retrofitted to be more efficient," he said.
Shangri-La Industries was founded by Steve Bing, a Los Angeles-based real estate developer, film producer and donor to environmental causes. Its Shangri-La Construction subsidiary unveiled a LEED-certified airplane hanger at Bob Hope Airport in Burbank, Calif. this week.
Thompson National Properties was formed earlier this year by Tony Thompson. Thompson founded Triple Net Properties in 1998 and was board chairman of NNN Realty Advisors, Inc., which merged with real estate titan Grubb & Ellis last year.