CORPORATE RESPONSIBILITY

Environmental Stewardship

We recognize that our commercial real estate assets can have a substantial impact on the environment and on the health and safety of building occupants. We believe that being aware of and addressing these issues are important aspects of maintaining a successful and sustainable business. Our commitment to environmental stewardship starts at our corporate headquarters, in Princeton, New Jersey, and extends to our portfolio of income producing properties, our investment and leasing practices, and to our tenants. We are committed to expanding and enhancing our efforts to incorporate sustainability matters in our corporate governance and applicable business processes, including underwriting our investments, our asset management activities, and our disclosure and reporting practices.

The Nominating and Corporate Governance Committee of the Board, which is chaired by an independent director, oversees our efforts to promote environmental stewardship; our responsibilities relating to social issues, including our goals associated with the diversity, equity and inclusiveness of our organization; and our strong corporate governance. Our Nominating and Corporate Governance Committee meets at least quarterly and included in its regular agenda is an evaluation of our objectives associated with ESG matters and our progress in achieving those objectives. In addition, our Board includes a review and discussion of our progress on our ESG initiatives at least quarterly.  

As a net-lease REIT, we do not control the operations and activities at our properties and, prior to December 2021, we did not have a contractual right to implement sustainability measures at our properties. However, in December 2021, we modified our standard lease form, which we typically use in our sale-leaseback transactions, to provide us with the contractual right to implement sustainability measures at our properties that are subject to our new “Green Lease” form. Additionally, we are seeking to provide various operating solutions for tenants seeking to deploy sustainability measures, such as our sustainability loan program, that may be used to finance sustainability initiatives at certain of our properties. We believe that supporting our tenants’ efforts to implement sustainability initiatives enhances their operations and prospects for success and therefore our own. In 2021, our sustainability efforts included:

  • Modifying our standard lease form, which we typically use in our sale-leaseback transactions, to provide us with the contractual right to make Sustainability Improvements to our properties subject to our new lease form, including, but not limited to, installation of energy efficient lighting and lighting control systems, HVAC controls, insulation, water efficiency systems, solar energy systems and electric vehicle charging stations, and the ability to monitor the tenant’s energy consumption. In addition, the lease modification included a provision whereby our tenants are required to provide us with their energy consumption information at least annually, including but not limited to, electric, water, wastewater, gas.
  • Launching the EPRT Sustainability Loan Program, through which we offer certain tenants the opportunity to receive loans from us, with loan proceeds used to implement Sustainability Improvements.

Our Headquarters. In addition to assisting our tenants with their sustainability initiatives, we recognize that our Company has a carbon footprint that we are committed to reducing. We emphasize sustainability at our corporate headquarters through several measures, including our own office operations and the operation of the building in which we rent space. The sustainability practices in our office seek to minimize our environmental impact and reduce our carbon footprint and include the following:

  • We use energy efficient lighting and lighting control systems that automate the activation and termination of lighting in our individual offices, conference rooms and common areas;
  • We deploy minimized HVAC and heating run times—our HVAC systems go into a night set back daily and there is no run time on the weekends;
  • We have an active single-stream recycling program for paper, plastic and cans;
  • We purchase Energy Star certified computers, monitors and printers;
  • We use Energy Star power management settings on our computers and monitors;
  • We dispose of all ink cartridges utilizing the manufacturer’s recycling program; and
  • We have installed water machines and have eliminated the use of plastic or Styrofoam cups and plastic water bottles.

Our headquarters building is certified under the EPA’s Energy Star certification program, indicating that it uses 35% less energy and generates 35% fewer greenhouse gas emissions. In order to receive this designation, the following components must be met:

  • Use of energy efficient LED lighting.
  • Use of environmentally friendly cleaning products. The products must meet the Green Seal certification standards.
  • Variable frequency drives and more energy efficient motors are purchased and installed in all cooling tower units.
  • Mandatory shut down of all lighting and HVAC systems daily.
  • The building utilizes a lamp recycling company for compliant disposal of all spent tubes and electronic ballasts.
  • To minimize generation of waste and release of pollutants, the building requires all paint to be low VOC.
  • Storm water retention is managed through water runoff from roofs and paved areas and are routed to various underground drainage basins. All water runoff is naturally filtered and returned to the aquifer.
  • Green-friendly native and drought-tolerant plants are used in landscaping to minimize watering needs.

Investing in Our Properties. The properties in our portfolio are generally leased to our tenants under long-term triple net leases which give our tenants exclusive control over and the ability to institute energy conservation and environmental management programs at our properties. However, in December 2021, we modified our standard lease form, which we typically use in our sale-leaseback transactions, to provide us with the contractual right to make Sustainability Improvements to our properties subject to our new lease form. Generally, our leases also require the tenants to fully comply with all applicable environmental laws, rules and regulations, including any remediation requirements. Our asset management department actively monitors any environmental conditions on our properties to make sure that the tenants are meeting their obligations to remediate or remedy any open environmental matters. On all properties that we acquire we obtain an environmental assessment from a licensed environmental consultant to understand any environmental risks and liabilities associated with a property and to ensure that the tenant will address any environmental issues on our properties.

As of June 30, 2022, approximately 78% of the 146 properties we acquired in 2022 were subject to our new Green Lease.

78% Green Leases

The Essential Sustainability Loan Program. Since the second quarter of 2021 we have been developing our Essential Sustainability Loan Program, the initial sustainability program for our income property portfolio. Through this program we will offer our tenants the ability to obtain a Sustainability Loan from us to support a tenant’s implementation of sustainability initiatives at the property or properties it leases from us. Our initial commitment to this program is $[50] million. The primary objective of the Essential Sustainability Loan Program is for us to provide financing to our tenants to achieve their sustainability goals, which we believe will provide our tenants with strategic opportunities, including reducing their carbon footprints, rationalizing certain operating costs, and deploying sustainable features that may promote increased brand identity and customer adoption or loyalty. A tenant’s use of the loan proceeds must be for products, equipment and services that serve specific sustainability initiatives. Examples include lighting and lighting control systems, HVAC equipment and related insulation, water efficiency systems, electric vehicle charging stations, and solar energy solutions. The Company is currently engaged in identifying sustainability partners for the program that will assist participating tenants in evaluating the costs and benefits of their targeted sustainability solution, acquiring the necessary products and services, and implementing/installing the solution. The sustainability partners will also assist the tenant in identifying, applying for and obtaining any related grants, credits or similar financial incentives or payments that may be available from utility companies, governmental authorities or other parties. We expect that any grants, credits, financial incentives or other related payments received by the tenant will be required to be used to pay down the principal of the sustainability loan upon receipt. We are currently evaluating new sustainability programs to present to our tenants in addition to the Essential Sustainability Loan Program, whereby we will be able to deploy sustainability measures at our properties while also providing our tenants with the same opportunities for reducing their carbon footprint and improving their profitability and/or brand identity.

Essential Properties Realty Trust

info@essentialproperties.com
609.436.0619
47 Hulfish Street, Suite 210
Princeton, NJ 08542