GreenPoint on energy transition: A new asset class in the making

Energy transition might be the buzzword driving an emerging asset class combining real estate, technology and sustainability, says GreenPoint Partners’ Chris Green and Eric Boothe.

This article is sponsored by GreenPoint Partners

GreenPoint Partners, a New York-based alternatives firm, is betting there is a new real estate asset class that will marry logistics property to technology and decarbonization as the use of electric vehicles grows in ways that most property owners have not yet considered: logistics EV real estate.

Chris Green, chief executive of GreenPoint Partners, and Eric Boothe, a partner at GreenPoint and head of its value platform, note that real estate operators, especially those in trucking and mobility electrification, will need to be more innovative, efficient and tech-driven as the sector continues to grow.

What exactly is logistics EV real estate?

Chris Green

Chris Green: Logistics real estate is something that is in vogue but is also spawning new types of investment. Logistics used to be thought of as just warehouses, but now data centers, cold storage and adjacent sectors are growing in popularity. The broader logistics supply chain is evolving, which is driving increased interest in emerging sectors such as industrial outdoor storage, fleet parking and storage, truck terminals, port facilities, container storage and airport cargo assets.

There is a long history of emerging sectors rapidly becoming large and well established; we have seen this movie before. Today, the US REIT sector is dominated by asset classes that didn’t really exist 15-20 years ago, driven by technology change: industrial, logistics and e-commerce at $168 billion; cell towers at $174 billion; data centers and cloud computing and $119 billion; and cold storage and the necessary modernization of supply chains. We believe that logistics EV real estate will follow a similar trajectory.

As warehouses have proliferated and industrial site coverage ratios have increased, availability for parking and storing trucks, trailers and containers remains scarce. And while demand for parking and storage has increased, supply has not. Much of this existing supply is owned by non-institutional capital and is not well-suited to serve the needs of fleets or enterprise freight clients.

The spaces we are looking at are for fleet vehicles, for delivery vans, larger service vehicles and trucks. It includes the van that goes from the warehouse to your house, plus the trucks that are doing either full loads or less-than-full loads from port to warehouse or between warehouses.

These are adjacent sites that need to be a five- to 10-minute drive from the warehouse itself. And then it has to have a place where we can park and store trucks, trailers, shipping containers, delivery vans and the like, to become an easy transit to pick-up and drop-off points.

How can the ongoing energy transition around transport vehicles add value to real estate assets?

CG: The industry is growing quickly. Technological advances in clean energy, batteries and vehicle manufacturing, along with significant public and private sector decarbonization commitments, have created significant demand for assets that can support growing EV demand. Existing logistics assets may not be suited to park, charge and store these new vehicles. Some sites may not have enough power to support chargers, others may not be built to support the weight of heavier EVs.

This supply-demand imbalance is creating a need for real estate with access to the power and charging infrastructure needed to support electrification across vehicle types. That means an immediate need for improvements to existing assets or the construction of new properties that meet these needs. Over time, we expect that managing energy and charging capabilities on-site can be a meaningful net operating income, or NOI, value lever for real estate owners.

Where does the EV part come in?

CG: As an organization, we are aiming to invest at the intersection of real assets, technology and sustainability – not in a segregated way across those different disciplines, but in a very integrated way, bringing the learnings and insights from the different components of the business across everything that we do.

This approach means we tend to think about things thematically, and one theme is how the transition to electric vehicles is going to impact real estate. We believe this transition is going to deliver some new and emerging business models, and what opportunities are out there.

We are doing a lot in terms of energy transition of transport and shipping, and we are spending a lot of our time looking at that in the context of fleet vehicles. We have a partnership in Europe and one in the US aimed at creating purpose-built spaces for last-mile delivery vans, trucks and vehicle fleets that want to go from diesel fuel to electric. We are building out the electrification infrastructure and putting in the chargers in these specific locations. Our expectation is that in a three- to 10-year timeframe, logistics EV real estate will be a well-accepted asset class. Today, it is simply not something that is widely understood.

Outside of energy transition, what are other areas where technology is adding value to logistics real estate?

Eric Boothe

Eric Boothe: You do not need to be particularly tech savvy to own a truck parking and storage lot, but as you build out a nationwide portfolio of truck storage and logistics management properties, technology becomes very relevant and very important.

We are identifying emerging assets, like truck parking, where we have the ingredients to actually pursue the strategy of integrating and transforming individual, non-institutional assets into a national logistics network that can serve not only small owner-operators, but also large national carriers.

We use technology at an operational level at these sites in an effort to make the assets more profitable. Managing a single logistics asset is very different from managing a distributed portfolio of properties.

Technology can provide key solutions, such as booking, access control, space availability, payments, security, etc, in a uniform and connected way across a network of assets. We believe that creating these connected networks will create long-term value for the network owner.

What are some specific examples of how technology is driving better operations and helping capture more customers?

EB: GreenPoint is partnering with sector specialist Outpost, a semi-truck parking and storage operator in the US, to develop out a targeted $500 million asset network. Outpost primarily has truck parking lots for heavy-duty vehicles, primarily 18-wheelers. Their sites range from 10 to 25 acres, and each acre can typically fit 40 to 50 trucks and trailers.

What is interesting about the US trucking industry is that 96 percent of carriers operate 10 or fewer trucks. These small business operators together have 11 million pieces of equipment on the roads. Increasingly, these drivers try to get same-day routes to be able to return home at night, though some may be driving their cab for multiple nights. Outpost often is leasing their sites by parking space, which means we spend a lot of time thinking about individual customers, in addition to large enterprises.

“Creating these connected networks will create long-term value for the network owner”

Eric Boothe

Historically, truck parking and storage has been very fragmented and manual. A driver or operator would have to call in to a site and ask if there was space available for their truck and trailer. This method is inefficient for drivers seeking to find safe, easy parking, and is inefficient for parking operators looking to capture parking demand.

Instead, we have worked with Outpost to design an e-commerce-like experience very similar to what you do when you sign up for a subscription or buy something on Amazon. Now, drivers can book space with Outpost online in three or four clicks from getting information about the space to reserving it and having access to it.

Designing this new system required us to take physical real estate across the portfolio and abstract it into a digital experience, which means identifying how many spaces are available, where they are located, how they are priced; it all becomes just like inventory in an Amazon warehouse. That becomes inventory on the Outpost website that people can explore, add to their shopping cart and check out.

What about the other customers, the large networks of enterprise fleets that need access to hundreds of trucks across multiple locations?

EB: These national carriers typically have thousands of pieces of equipment. The biggest one is Fedex, which has 180,000 pieces of equipment in its fleet. They need the ability to access space across a network of assets or locations and have it all consolidated up to a single enterprise relationship, not calling 10 different guys who own yards throughout the US.

With a uniform interface like what Outpost is creating, an enterprise customer can log in and allocate guaranteed space for 50 trucks for a fleet in Chicago and another 30 spaces in Dallas, for example. And now they have a guaranteed solution to where they are going to store these $500,000 vehicles overnight without each driver having to worry about it day-to-day.

It is the same kind of technology we were building for the consumer side. But we extended to be able to service these larger enterprise customers who have very expensive loads, very expensive fleets, very expensive equipment, and lots of different drivers and locations that need service.

We are creating a network of logistics properties, storage yards with vehicle services that can be matched to the large carriers around the world and be a flexible infrastructure provider to them, creating additional value across the real estate portfolio.