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Sustainability Financing REIT Expanding into Commercial Sector

01/15/2014 | By Sarah Borchersen-Keto

Jody Clark, vice president of Hannon Armstrong Sustainable Infrastructure Capital, (NYSE: HASI), joined REIT.com for a video interview at NAREIT’s 2014 Leader in the Light Working Forum held in San Francisco, Calif.

Hannon Armstrong provides equity and debt financing for sustainable infrastructure projects. It went public as a REIT in April 2013.

Clark explained that the Internal Revenue Service (IRS) issued a ruling in 2013 confirming that Hannon Armstrong could elect REIT status. The company has a 32-year history in energy efficiency financing, she noted, but in the past has largely concentrated on the federal market.  Hannon Armstrong is now expanding into the municipal and hospital sectors, among others, as well as the commercial arena and universities and schools.

Asked to outline what Hannon Armstrong looks for in commercial real estate projects, Clark said the company is trying to partner with entities that don’t want to invest their own capital into retrofitting their portfolios.

“In much the same way that they’re looking to lever their building in the first place… we’re trying to do the exact same thing. We’re trying to provide that in the context of energy efficiency,” Clark said.

Clark also discussed how the company measures the impact of an investment in terms of return on investment (ROI) and a sustainability perspective.

“We largely let our customers – they’re either the building owner or sometimes the contractor – determine what they think is the right way to spend the money in their project. We’re really in essence the wind beneath their wings to get things going and to make those projects happen by financing them,” Clark said.

She emphasized that the company has a tight investment focus: “Anything we invest in must be an energy efficient opportunity. If it’s not, we just don’t invest in it.”

Meanwhile, Clark noted that the company has faced some challenges in commercial, multi-tenanted properties, where there is a “split incentive” with regard to sustainability. On the other hand, “when there’s a meter that someone’s responsible for and it falls 100 percent to the bottom line of that project, we’re seeing a lot of focus there,” Clark said.