Galvanize Expands Its Strategy of Greening Commercial Real Estate

Article content

(Bloomberg) — Galvanize, the alternative investment manager co-founded by billionaire Tom Steyer, is expanding its commercial real estate portfolio as a war-fueled spike in oil and gas prices supports its strategy of flipping properties after making them more energy efficient.

Article content

Joseph Sumberg, a former Goldman Sachs Group Inc. manager who now heads Galvanize Real Estate, says he’s seen electricity bills rise between 15% and 40% in some of the markets he and his team are looking at. That’s forcing tenants to be laser focused on ways to cut energy costs, he says. 

Article content

Article content

Article content

“Everyone is hyper aware of the scarcity of energy and the benefit of energy resilience,” Sumberg said in an interview. “And so that has become a much bigger focus.”

Article content

Article content

Galvanize’s latest deal, for which financial details weren’t disclosed, is for three properties in Green Oaks, an industrial hub north of Chicago. Created in 2023, the firm’s real estate arm now holds 18 buildings spread across 12 US cities.

Article content

The asset manager plans to install more energy efficient roofs, update aging mechanical systems, and set up on-site solar generation. Those measures are expected to cut carbon emissions by as much as 207%, Sumberg said.

Article content

The deal offers “an attractive and differentiated opportunity for us to build on our existing Chicagoland presence,” Nadine Anderson, managing director for acquisitions at Galvanize Real Estate, said in a statement. 

Article content

Galvanize said in March it had closed its Real Estate Fund I after hitting a $1 billion milestone. Of that, some $370 million came from investors while most of the rest was in the form of leverage. Investors are pension funds, foundations, family offices and the Maryland State Retirement and Pension System, it said at the time.

Article content

Article content

The money manager had hoped to raise more from investors, but is now navigating a market in which potential allocators have been reluctant to sell out of existing positions to free up capital, amid concerns they’d have to do so at a discount, Sumberg said.

Article content

“So they had limited amounts to allocate based on the fact that they weren’t getting their money back” from property investments elsewhere, he said. Some investors who did allocate funds to Galvanize “had to do very creative things” in order to find the money, he said.

Article content

At the same time, the current policy environment in the US remains challenging, Sumberg said.

Article content

While the growth in investor demand for clean energy “has been, frankly, a surprise,” the lack of consistent policy support in the US “has not been helpful,” he said.

Article content

More predictability “would allow foreign investors to be able to make the case to invest in America.”

Article content