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2019 Alexander's SASB Disclosure Flipbook PDF
2019 Alexander's SASB Disclosure
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ALEXANDER’S, INC. SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB) REAL ESTATE DISCLOSURE For the year ending December 31, 2019
Management of Alexander’s, Inc. is responsible for the completeness, accuracy, and validity of the specified metrics included in Alexander’s, Inc. SASB Real Estate Disclosure (the “specified metrics”). Management is responsible for the collection, quantification, and presentation of the specified metrics and for the selection of the criteria, which management believes provide an objective basis for measuring and reporting on the specified metrics. Measurement of certain metrics includes estimates and assumptions that are subject to inherent measurement uncertainty resulting for example from precision of conversion and other factors, and assumptions used for the weather and occupancy normalization of energy data. The selection by management of different but acceptable measurement methods, input data, or assumptions may have resulted in materially different amounts or metrics being reported. Management asserts that the specified metrics included within this disclosure for the year ended December 31, 2019 are presented in accordance with the Sustainability Accounting Standards Board (SASB) Real Estate Sustainability Accounting Standard.
ENERGY MANAGEMENT CODE
ACCOUNTING METRICS
TOTAL
UNIT OF MEASURE
IF-RE-130a.1
Energy consumption data coverage as a percentage of floor area, by property subsector.
100%
Percentage (%) by floor area (SF)
IF-RE-130a.2
Total energy consumed by portfolio area with data coverage.
393,433
Gigajoules (GJ)
IF-RE-130a.2
Percentage of total energy that is grid electricity, by property subsector.
100%
Percentage (%)
IF-RE-130a.2
Percentage of total energy that is renewable, by property subsector.
0.0%
Percentage (%)
IF-RE-130a.3
Like-for-like change in energy consumption of portfolio area with data coverage, by property subsector (see note on normalization).
4.77%
Gigajoules (GJ), Percentage (%)
IF-RE-130a.4
Percentage of eligible portfolio that has obtained an energy rating.
100%
Percentage (%) by floor area (SF)
IF-RE-130a.4
Percentage of eligible portfolio that is certified to ENERGY STAR, by property subsector.
0.00%
Percentage (%) by floor area (SF)
IF-RE-130A.5 DESCRIPTION OF HOW BUILDING ENERGY MANAGEMENT CONSIDERATIONS ARE INTEGRATED INTO PROPERTY INVESTMENT ANALYSIS AND OPERATIONAL STRATEGY As a real estate company, Alexander’s Scope 1 and Scope 2 emissions come entirely from the operation of our buildings. Energy costs are often among the largest controllable expenses on a property’s balance sheet. For these reasons, we consider energy management to be an environmental and fiscal priority. We incorporate energy management into our acquisition due diligence process. We tour properties in person and review capital and operating budgets, as well as utility bills to determine opportunities to reduce energy consumption and demand. We assess energy performance through quantifiable methods of consumption and cost on a per square foot basis, and we consider energy labels and benchmark values provided through ENERGY STAR. We gain an understanding of the building’s energy inventory and current energy initiatives implemented at the property. Our building managers and operators are trained and supported by our centralized energy management team to employ sound and responsible energy management across the portfolio. Our engineers perform in-house technical assessments, akin to an ASHRAE Level I audit, as part of their ongoing preventative maintenance. We employ third party engineering firms to complete technical assessments such as ASHRAE Level II Energy Audits and Retrocommissioning at all NYC properties over 50,000 square feet. In our NYC market, the Audits and Retrocommissiong reports are part of Local Law 87 and are subject to City review to ensure that all landlord-controlled inventory is included in the scope, all low- and no-cost recommended repairs are included, and that the assessments were completed by licensed professionals. Such technical assessments are the basis for our energy efficiency capital work. While total savings from these assessments is difficult to quantify, Alexander’s completes or seriously considers all low- and no-cost repairs and recommended measures, as well as all energy conservation measures with a simple payback of up to 5 years. We uphold energy ratings, benchmarking, and certifications as an important recognition tool and performance indicator. We understand that our tenants prefer buildings that have earned green building certifications and demonstrate competitive energy ratings such as the ENERGY STAR score. We believe the benefits of such ratings and certifications outweigh the costs or resources associated with obtaining them. Because our core business is the maintenance and operation of existing assets, we believe that certifications based on ongoing performance are more relevant to us than those based on performance-modeled design objectives. Through Vornado, Alexander’s regularly evaluates opportunities to invest in renewable energy. We believe that onsite renewable energy is the most impactful in reducing carbon emissions, but we are limited in this opportunity by the lack of physical space and high construction costs that are typical for the dense urban markets where we are located. Off-site renewable energy can provide a virtual carbon offset to our scope 1 and scope 2 emissions. We believe off-site renewable energy investment should carry the qualities of additionality, so the investment results in the creation of new renewable power generation sources, and should be physically connected to the utility grids in the geographic regions where our properties are located. Through Vornado, we also will plan to purchase carbon offsets between 2020 and 2030 to reduce the effective balance of our Scope 1 emissions. This will be the balance of emissions that has not been reduced by energy efficiency, energy demand optimization, or renewable energy procurement. Carbon offsets, like renewable power, should bear localized benefit and align with those which are defined in the Climate Leadership and Community Protection Act (CLCPA) passed in New York State in 2019. We will re-account for the necessary balance of carbon offsets to maintain carbon neutrality on an annual basis.
ALEXANDER’S, INC. 2019 SASB | 1
SASB DISCLOSURE (CONTINUED 1)
WATER MANAGEMENT CODE
ACCOUNTING METRICS
TOTAL
UNIT OF MEASURE
IF-RE-140a.1
Water withdrawal data coverage as a percentage of total floor area, by property subsector.
100%
Percentage (%) by floor area (SF)
IF-RE-140a.1
Percentage of floor area in regions with High or Extremely High Baseline Water Stress, each by property subsector.
56.10%
Percentage (%) by floor area (SF)
IF-RE-140a.2
Total water withdrawn in 2019, (1) by portfolio area with data coverage and (2) percentage in regions with High or Extremely High Baseline Water Stress, each by property subsector.
IF-RE-140a.3
Like-for-like change in water withdrawn for portfolio area with data coverage, by property subsector.
(1) 379,333 -2.27%
(2) 66.15%
Thousand cubic meters (m^3); Percentage (%)
Thousand cubic meters (m^3); Percentage (%)
IF-RE-140A.4. DESCRIPTION OF WATER MANAGEMENT RISKS AND DISCUSSION OF STRATEGIES AND PRACTICES TO MITIGATE THOSE RISKS Alexander’s portfolio is concentrated in the dense urban core of New York City. As such, the primary water consumption includes potable water consumption for drinking across our portfolio; plumbing use; water used for specific business purposes, such as food service or showers in exercise facilities; and water use attributed to Heating, Ventilation, and Air-Conditioning (HVAC). We do not consider water consumption used for landscaping or agricultural purposes to be significant and therefore do not include this consumption in our reporting boundary. Our sources for water are exclusively municipal water systems, and our discharge destinations are exclusively municipal sewer systems. We face water-related environmental constraints and risks that are characteristic of urban places, and use publicly available maps, resources, and tools to gain insights into the risks inherent to our properties. Approximately 56% of our total properties operate in some regions with high or extremely high baseline water stress. As referenced in the 2018 SASB codified standards, the World Resource Institute categorizes high and extremely high stress based on the level of available water withdrawn annually to support agricultural, domestic, and industrial users. Because our properties are located in New York, they experience medium to high levels of interannual variability. We also face water-related regulatory constraints. Our water costs increase regularly to pay for developing and maintaining the infrastructure that supports our municipal water and sewer systems. We incur sewer costs to pay for the treatment of water that is discharged from our buildings. We incur additional costs to control the temperature of the water we discharge. We may incur additional costs to comply with future stormwater management regulation in our regions. We expect costs for water to continue to rise into the foreseeable future, which will increase our operating costs. Our primary means of water risk mitigation is to reduce our water withdrawals and consumption. We work in different capacities to reduce water consumption based on property type and controls. We have considerable influence over our office property through our relationship with our office tenant. We installed efficient water fixtures during construction of The Alexander apartment tower, located above Rego Park II shopping center. We rely on advancements in plumbing code to further the water efficiency of the fixtures installed in our retail tenant spaces. Our primary risk of achieving our water consumption reduction target is our lack of control over end users. Our tenants are the main drivers of water consumption. Increases in occupancy, operating hours, or densification of existing spaces will cause consumption to increase. Diversity of water use – such as retail uses in food service or health and exercise facilities — could also cause an increase in consumption, despite our efforts to reduce water consumption. We collaborate with our water and sewer authorities, city governments, and community boards when issues arise in water management or water and sewer infrastructure concerns. We observe that our water conservation efforts have achieved coincidental reductions in energy reduction, but have not yet quantified these coincidental reductions. We continue to consider these benefits and evaluate additional lifecycle impacts and tradeoffs, such as impacts to GHG emissions, as potential future opportunities to be realized.
ALEXANDER’S, INC. 2019 SASB | 2
SASB DISCLOSURE (CONTINUED 2)
CLIMATE CHANGE ADAPTATION CODE
ACCOUNTING METRICS
TOTAL
UNIT OF MEASURE
IF-RE-450a.1
Area of properties located in FEMA Special Flood Hazard Areas or foreign equivalent, by property subsector.
0
SF
IF-RE-450A.2 DESCRIPTION OF CLIMATE CHANGE RISK EXPOSURE ANALYSIS, DEGREE OF SYSTEMATIC PORTFOLIO EXPOSURE, AND STRATEGIES FOR MITIGATING RISKS We identify and assess our exposure to climate change risk based on the 1.5° and business-as-usual scenarios discussed in the October 2018 Special Report by the Intergovernmental Panel on Climate Change (IPCC). We find these scenarios to be relevant to our properties for two reasons. The first is that they provide narratives and underlying assumptions on the physical risks each scenario presents between the present time and the year 2100. The second is that they provide a shorter term view of transitional risks related to climate-related policy change that our properties could encounter. Our principal market of New York has executed or pending legislation that would limit carbon emissions to align with a 1.5° scenario. We consider the costs for compliance with such legislation to be a financial impact attributable to the transition to a lower-carbon environment. Our buildings are located in regions that have had recent history of extreme weather events, including but not limited to hurricanes and superstorms, nor’easters and ice storms, temperature extremes, and heavy precipitation events. A global warming scenario could bring an increase in the frequency and severity of these events between now and 2100. Such events may impact our buildings individually, depending on a building’s specific use, design, and location characteristics, or regionally, depending on the magnitude of the event. We are also aware that while none of our properties are in areas designated as flood zones by FEMA, our coastal locations are susceptible to sea level rise (SLR) or localized flooding. Various global warming scenarios could bring about differing amounts of SLR between now and the year 2100. Financial impacts under various warming scenarios include, but are not limited to: increases in capital and operating costs; increases in insurance premiums; increases in energy costs; and increases in overall utility costs. Our properties are located in urban areas, which means the vitality of our properties is reliant on sound transportation and utility infrastructure. If that infrastructure is compromised in any way by an extreme weather event, such a compromise could have an adverse impact on our local economies and populations, as well as on our tenants’ ability to do business in our buildings. This risk is not unique to Alexander’s, but is endemic to our regions. Our strategies for mitigating physical risks require a combination of adaptive and preventative measures with a proactive reduction of carbon emissions. Adaptive and preventative measures are executed at both the property level and regional level. We train our operators in disaster risk management and emergency operating procedures. At the regional level, New York City and Consolidated Edison, the City’s utility, adapt by creating programs that improve resilience against climate-related impacts. Examples of such programs include New York City’s OneNYC plan and Consolidated Edison’s Storm Hardening Protection Plan. Like adaptive and preventative measures, proactive reduction of carbon emissions requires property-specific and regional efforts. Our carbon reduction strategy prioritizes energy efficiency, while evaluating opportunities to incorporate renewable power into our energy sourcing as a secondary measure. New York City has municipally-driven carbon emissions reduction programs in place. These programs combine strategies of absolute energy reduction, through efficiency mandates, with fossil fuel intensity reduction of utility-delivered energy. We discuss the intent and requirements of these programs with our property managers and engineers, as well as our tenants. They provide important framework to the GHG reduction goals we set with our properties. All carbon emission reduction strategies, whether property-specific or regional, present different risks and opportunities. Risks include unsuccessful investment in new technologies; costs to transition to lower emissions technology; increased pricing on GHG emissions; and uncertainty in market signals such as utility costs or carbon taxes. Financial impacts of such risks which could include increased capital and operating costs, and increased or unexpected shifts in energy costs. Opportunities, on the other hand, include reduction of energy and resource consumption; use of public-sector incentives, such as utility rebates; diversification of energy resources; and adaptation of new technologies. Financial impacts of such opportunities include reduction of energy and/or operating costs; increased value of fixed assets; reduced exposure to fossil fuel price increases; reduction of utility costs for our tenants; and various benefits to workforce management and planning. Additional opportunities also include the reduction or elimination of burden from emerging carbon pricing or carbon tax mechanisms, as well as the reduction or avoidance of carbon emissions-related penalties. New York City has emissions-reporting obligations, which require us to publicly disclose our properties’ carbon emissions via ENERGY STAR Portfolio Manager. We consider this requirement as an opportunity to measure the carbon emissions from our properties, and manage the reduction of those emissions on an ongoing basis.
ALEXANDER’S, INC. 2019 SASB | 3
SASB DISCLOSURE (CONTINUED 3)
MANAGEMENT OF TENANT SUSTAINABILITY IMPACTS CODE
ACCOUNTING METRICS
TOTAL
UNIT OF MEASURE
IF-RE-410a.1
Percentage of all leases that contain a cost recovery clause for resource efficiencyrelated capital improvements and associated leased floor area, by property subsector.
43.05%
Percentage (%) by floor area (SF)
IF-RE-410a.2
Percentage of tenants that are separately metered or submetered for grid electricity consumption, by property subsector.
99.86%
Percentage (%) by floor area (SF)
IF-RE-410a.2
Percentage of tenants that are separately metered or submetered for water withdrawals, by property subsector.
44.73%
Percentage (%) by floor area (SF)
IF-RE-410A.3. DISCUSSION OF APPROACH TO MEASURING, INCENTIVIZING, AND IMPROVING SUSTAINABILITY IMPACTS OF TENANTS At Alexander’s, we understand that much of the electricity consumed in our properties is from our tenants, as is evidenced by the submetered electricity we record throughout our portfolio. Because so much of our energy consumption is under tenant control, it is essential to engage with our tenants as a partner in reducing our carbon footprint. We have a responsibility to communicate to our tenants their energy and water consumption, when known, and to encourage their participation in best practices in resource conservation. While Alexander’s does not explicitly endorse third-party initiatives concerning green leases, our office agreement and many of our retail and residential lease agreements include several components that encourage tenant energy conservation. We promote or require submetered or separately metered electricity consumption for all residential tenants and all office and retail tenants over 5,000 square feet. We also require submetered or separately metered water consumption for all tenants whose predicted use is expected to exceed normal business practice. The submetered arrangement enables Alexander’s to share energy and water consumption with our tenants on a monthly basis through the generation of the submeter bill. Tenants are billed transparently and based on their actual and exclusive consumption as recorded on the submeter. In our office lease, we include a clause to recover capital costs that reduce operating expenses — whether utility costs or another cost reduction benefit – and we may amortize that recovery over the useful life of the project. Beyond the lease, we distinguish ourselves with in-person engagement with our tenants on sustainability. Through Vornado, we host an annual tenant sustainability roundtable for tenants, where we share best practices on energy, water, and waste reduction, and discuss corporate ESG trends and regulatory updates. We collect information from our tenants that contribute to mandatory energy rating schemes, such as ENERGY STAR Portfolio Manager profiles. We meet with tenants onsite to survey opportunities to save energy and water. We train our tenants on recycling programs. We host energy reduction competitions with tenants to promote awareness and foster their participation. We hold ourselves accountable and measure the success of our engagement. Success is measured in the observed reduction of energy from submetered tenant spaces, or from the square footage of space that our team reaches through our engagement program. Normalization Note: 2018 and 2019 Like-for-Like energy consumption data has been normalized to adjust for fluctuations in weather and occupancy. Weather normalization uses inputs of total degree days (TDD), a fixed portion of energy consumption, known as a Base Load, and a variable portion of energy consumption, known as a Seasonal Load. Occupancy is normalized based on the following assumptions: 1.) 50% of the Weather Normalized Energy’s Baseload is adjusted for Occupancy based on field research that demonstrates that roughly half of the baseload is occupancy dependent. 2.) 33% of the Weather Normalized Energy’s Seasonal Load is adjusted for Occupancy based on field research that demonstrates that a third of the seasonal load is occupancy dependent. 3.) Quarterly occupancy rates are averaged for the year to calculate the current year and prior year annual occupancy rates. Q4 Estimation: Q4 2019 energy and water data has been estimated using the following calculation: Electricity and water were estimated using Q4 2018 data and adjusted for occupancy. Natural gas, steam and oil were estimated using Q4 2018 data and adjusted for occupancy and weather.
ALEXANDER’S, INC. 2019 SASB | 4
Deloitte & Touche LLP 695 E. Main St Stamford, CT 06901-2141 USA Tel: +1 203 708 4000 Fax: +1 203 705 5455 www.deloitte.com
INDEPENDENT ACCOUNTANTS’ REPORT Board of Trustees Alexander’s, Inc New York, NY We have examined management of Alexander’s, Inc’s assertion that the following specified metrics included in the accompanying Alexander’s, Inc (the “Company” or “Alexander’s”) Sustainability Accounting Standards Board (SASB) Real Estate Disclosure (the “specified metrics”) for the year ended December 31, 2019 are presented in accordance with the Sustainability Accounting Standards Board (SASB) Real Estate Sustainability Accounting Standard: Energy management: • IF-RE-130a.1: Energy consumption data coverage as a percentage of floor area, by property subsector • IF-RE-130a.2: (1) Total energy consumed by portfolio area with data coverage, (2) percentage of total energy that is grid electricity, by property subsector, and (3) percentage of total energy that is renewable, by property subsector • IF-RE-130a.3: Like-for-like change in energy consumption of portfolio area with data coverage, by property subsector • IF-RE-130a.4: Percentage of eligible portfolio that (1) has an energy rating and (2) is certified to ENERGY STAR, by property subsector • IF-RE-130a.5: Description of how building energy management considerations are integrated into property investment analysis and operational strategy Water management: • IF-RE-140a.1: Water withdrawal data coverage as a percentage of (1) total floor area and, by property subsector, (2) percentage of floor area in regions with High or Extremely High Baseline Water Stress, each by property subsector • IF-RE-140a.2: Total water withdrawn in 2019 (1) by portfolio area with data coverage and (2) percentage in regions with High or Extremely High Baseline Water Stress, each by property subsector • IF-RE-140a.3: Like-for-like percentage change in water withdrawn for portfolio area with data coverage, by property subsector • IF-RE-140a.4: Description of water management risks and discussion of strategies and practices to mitigate those risks Climate change adaptation: • IF-RE-450a.1: Area of properties located in FEMA Special Flood Hazard Areas or foreign equivalent, by property subsector • IF-RE-450a.2: Description of climate change risk exposure analysis, degree of systematic portfolio exposure, and strategies for mitigating risks. Management of Tenant Sustainability Impacts: • IF-RE-410a.1: Percentage of new leases that contain a cost recovery clause for resource efficiency related capital improvements and associated leased floor area, by property subsector • IF-RE-410a.2: Percentage of tenants that are separately metered or sub metered for grid electricity consumption and water withdrawals, by property subsector • IF-RE-410a.3: Discussion of approach of measuring, incentivizing, and improving sustainability impacts of tenants The Company’s management is responsible for its assertion. Our responsibility is to express an opinion on management’s assertion based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA) in AT-C section 105, Concepts Common to All Attestation Engagements, and AT-C section 205, Examination Engagements. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether management’s assertion is fairly stated, in all material respects. An examination involves performing procedures to obtain evidence about management’s assertion. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material misstatement of management’s assertion, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.
ALEXANDER’S, INC. 2019 SASB | 5
In performing our examination, we have complied with the independence and other ethical requirements of the Code of Professional Conduct issued by the AICPA. We applied the Statements on Quality Control Standards established by the AICPA and, accordingly, maintain a comprehensive system of quality control. The preparation of the specified metrics in the SASB Real Estate Disclosure requires management to interpret the criteria, make determinations as to the relevancy of information to be included, and make estimates and assumptions that affect reported information. Measurement of certain metrics includes estimates and assumptions that are subject to inherent measurement uncertainty resulting for example from precision of greenhouse gas emission conversion factors, and assumptions used for the weather and occupancy normalization of energy data. Obtaining sufficient, appropriate evidence to support our opinion does not reduce the inherent uncertainty in the metrics. The selection by management of different but acceptable measurement methods, input data, or assumptions may have resulted in materially different amounts or metrics being reported. Our examination was limited to those SASB Real Estate Sustainability Accounting Standard metrics specified by management in the SASB Real Estate Disclosure for the year ended December 31, 2019. All other information presented within the SASB Real Estate Disclosure was not examined by us and, accordingly, we do not express an opinion on such information. In our opinion, management’s assertion that the specified metrics included in the accompanying SASB Real Estate Disclosure for the year ended December 31, 2019 are presented in accordance with SASB Real Estate Sustainability Accounting Standard is fairly stated, in all material respects.
April 3, 2020
ALEXANDER’S, INC. 2019 SASB | 6