NorthBridge Partners, a Boston-based industrial fund manager, has formed a strategic partnership with Green Bridge Energy to implement sustainable energy initiatives across much of its existing and future industrial and logistics portfolio.
The venture will implement these initiatives under the banner NetZero Logistics Company. The plan will be to invest in rooftop solar panels, electric vehicle charging docks, solar and EV parking canopies and battery storage for any industrial properties that NorthBridge currently owns, managing partners Greg Lauze and Dean Atkins told PERE exclusively.
The solar energy investments will involve assets in NorthBridge’s third fund, NorthBridge Partners Fund III, which closed in April 2021. The initiatives will also extend to properties purchased by the firm’s current fund, Fund IV, which is currently in the market and targeting $800 million, according to a source close to the matter. NorthBridge will use capital from Funds III and IV to pay for the green energy initiatives. However, future capital raising dedicated to renewable energy is in the early stages of discussion, Lauze said.
“We think the opportunity for co-investment and maybe a broader set of capital is very much possible,” Lauze said.
The firm has already delivered around 10 megawatts of solar projects, with another 25 megawatts under construction. The firm also has 40-50 megawatts of battery storage under development, Atkins said. These renewable energy improvements have yet to be reflected in higher rent growth or higher values for these assets, Lauze added, although he expects this to change in the future. He noted that these initiatives also help to reduce potential obsolescence risk for these assets.
NorthBridge and Green Bridge had partnered on solar panel installations on the former’s industrial assets on an ad hoc basis over the last 18 months. NorthBridge decided a programmatic partnership was required after many of its tenant clients requested more renewable energy features at the properties they occupy as part of the net-zero carbon emission targets they have set for their businesses, Atkins said.
Another driver for forming the partnership was the need to own and control the underlying assets and their green energy potential. In the past, NorthBridge had leased roof space to third parties that then either sold the energy back to the grid or to the tenants. Under the partnership, the firm can now generate the green energy itself and capture additional revenue from the renewable energy production to drive returns.
“We can get a solid return on it without having to make the bet that it’s going to lead to a lot stronger rent growth or a lower cap rate [in the future],” Lauze said.
As the technology becomes more sophisticated and can generate excess power in some instances, Lauze mentioned the potential of selling self-generated solar energy back to local and regional power grids. Hong Kong-based firm ESR announced a similar initiative in Japan in July.
Meanwhile, the US government has earmarked $7.5 billion to supply over 500,000 charging stations across the country. Major logistics companies including Amazon and FedEx have pledged to be net-zero by 2040, with the first electric commercial fleets expected to be operational by the end of this year.
Both factors are set to significantly increase demand for EV charging onsite and battery storage. Lauze viewed the oncoming demand as an opportunity for the partnership to be an early adopter of both renewable energy technologies.
Although primarily large real estate managers have invested in renewable energy to date, NorthBridge sees its size as an advantage when it comes to green energy adoption. For larger industrial owners, like Prologis and Blackstone, the implementation of such initiatives has a smaller impact on overall returns than it does on smaller landlords like NorthBridge.
“Our focus is on driving returns for our investors, and we believe that these projects can have a meaningful impact at our size and scale,” Lauze said.