{"id":1004593526,"date":"2022-07-28T05:12:31","date_gmt":"2022-07-28T13:12:31","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004593526"},"modified":"2022-12-09T02:22:41","modified_gmt":"2022-12-09T10:22:41","slug":"fostering-inclusivity-with-aews-lily-kao-qa","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/fostering-inclusivity-with-aews-lily-kao-qa\/","title":{"rendered":"Fostering Inclusivity With AEW\u2019s Lily Kao: Q&A"},"content":{"rendered":"

As she approaches her quarter-century anniversary with AEW, firm managing director Lily Kao remains deeply committed to seeing the diversity goals of both her firm and her industry realized. A member of AEW\u2019s diversity & inclusion committee, as well as co-chair of its social committee, Kao is well positioned to help ensure AEW promotes equality and inclusivity among its workforce.<\/p>\n\n\n

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READ THE DIGEST<\/a><\/div>\n<\/div>\n\n\n

In this wide-ranging interview with Commercial Property Executive<\/em>, she discusses these initiatives and how her firm evaluates climate-related investment risks, among others.<\/p>\n

What achievements are you proudest of as a member of AEW\u2019s diversity and inclusion committee?<\/strong><\/p>\n

Lily Kao: <\/strong>One of the reasons that I have spent my 24-year career at AEW is our steadfast commitment to DE&I.\u00a0It\u2019s incredibly important to have defined goals and a team that is held accountable for making measurable progress.<\/p>\n

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READ ALSO:<\/strong> Making the Construction Business More Diverse<\/a><\/p>\n

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Long before formalizing a DE&I committee, AEW demonstrated to me that it is a place that values and prioritizes diversity of thought.\u00a0I\u2019m very proud that our investment committee, risk management committee, and senior leadership team, which comprise the senior-most investment professionals from both the private and public markets, are representative of the firm\u2019s population.<\/p>\n

\"\"<\/a>

Lily Kao<\/p><\/div>\n

Also, our open-end, core strategies are led by an all-women portfolio management team across the globe\u2014in the U.S., Asia Pacific and Europe\u2014with the U.S. strategy alone consisting of $10.8 billion in assets.<\/p>\n

Establishing diversity at every level of the organization, and especially at the highest levels, is still an actionable goal for us, and can be improved across the real estate industry overall.\u00a0At AEW, it\u2019s important that\u00a0the future leaders of the organization see themselves reflected at the very top. I\u2019m also incredibly proud of the Affinity Groups (AEW Pride, AEW Racial Alliance and AEW Women\u2019s Network) and their tireless initiatives, as well as all of the training and mentoring programs we have in place to foster an equal and inclusive workplace.<\/p>\n

How is climate change impacting your use of the “R” in ESG&R criteria?<\/strong><\/p>\n

Kao: <\/strong>Climate\u00a0impacts will affect almost all geographies globally to varying degrees. AEW evaluates climate-related risks using MSCI\u2019s\u00a0Climate\u00a0VaR software, which allows us to measure\u00a0climate-related physical and transition risks across our portfolios.\u00a0Since these impacts will affect different markets and different regions will experience idiosyncratic risks,\u00a0climate\u00a0risks are considered<\/a> during the portfolio construction process in a similar manner in which property type, economic\/industry and market\/geographic risk are considered.<\/p>\n

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READ ALSO:<\/strong> The ABC\u2019s of ESG<\/a><\/p>\n

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AEW\u2019s insurance risk management group monitors catastrophe exposure and works with engineers on resiliency. Capital improvements are evaluated during due diligence and as part of the ongoing annual property and portfolio level business plans.\u00a0We also continually review opportunities for renewable energy and battery storage for our investments to reduce GHGs and add long-term value to assets.<\/p>\n

How has your team deepened its ESG&R due diligence in evaluating potential investments?<\/strong><\/p>\n

Kao: <\/strong>AEW\u2019s process for monitoring and controlling risk is robust and disciplined. As part of the acquisition due diligence process, we created a physical risk scorecard to identify risk of floods, heat stress, hurricanes and typhoons, sea level rise, water stress and wildfires.<\/p>\n

Third-party engineering consultants are often engaged to provide options to physically mitigate risk through the implementation of such items as flood gates, earth berms, white roofs, etc. This analysis allows us to assess potential\u00a0climate\u00a0risks and underwrite and budget for costs to enhance the resiliency of an asset if needed.<\/p>\n

In addition to physical risk, we seek to assess transition risk throughout the lifecycle of an investment. This includes policy and technology risks as markets around the world transition to a low carbon economy.<\/p>\n

When you push facilities to improve efficiencies prior to investing in them, do the managers respond more favorably than they once did<\/strong>?<\/strong><\/p>\n

Kao: <\/strong>I\u2019ve seen a real shift in the understanding, acceptance, and prioritization of ESG&R initiatives within our industry.\u00a0Our investors and third-party service providers are sophisticated and respond favorably when we can demonstrate the return on cost of improvements that reduce expenses such as LED lights, low-flow toilets and solar, or the ability to increase revenue or leasing prospects.<\/p>\n

Many of our tenants are equally sophisticated with their ESG&R efforts and are appreciative that we, as their landlord, are being proactive and committed to a vision of prudent property stewardship with the goal to develop or enhance the environmental, social, governance and resiliency measures of our property investments.<\/p>\n

What sectors of commercial real estate currently show the greatest investment potential?<\/strong><\/p>\n

Kao: <\/strong>This is an interesting time of price discovery as the Federal Reserve has raised the benchmark interest rate swiftly and aggressively, which has driven borrowing costs up while real estate cap rates are at historic lows.\u00a0Negative leverage is occurring, giving low or no leverage buyers an advantage.\u00a0AEW has a strong track record of investing through all cycles and maintaining disciplined underwriting and I believe there will be investment opportunities across all the major property sectors.<\/p>\n

Specifically, the fundamentals continue to be strong for logistics<\/a> and housing where supply is range bound and record low vacancy continues to drive rent and NOI growth, providing a hedge against any potential yield expansion. As medical costs continue to rise nationally and the delivery of medical care is shifting toward outpatient facilities, we also see potential in health-care investments with need-based demand that provide durable income.<\/p>\n

Which sectors pose the greatest potential investment risk?<\/strong><\/p>\n

Kao: <\/strong>Today, the most uncertainty surrounds the office sector<\/a>.\u00a0Tenant demand is still muted after two-plus years of many people working from home. As a result, in-office occupancy has not recovered, driving many companies to reevaluate their longer-term space needs.<\/p>\n

Equally challenging are the costs for tenant improvements as well as the capital required to maintain or upgrade the building which are significant and continue to increase.\u00a0These headwinds are resulting in tighter lender underwriting, and capital market liquidity is less today than it was a year ago.<\/p>\n

Read the August 2022 issue of CPE.<\/em><\/a><\/p>","protected":false},"excerpt":{"rendered":"

The managing director continues firm\u2019s tradition of encouraging diversity of thought.<\/p>\n","protected":false},"author":450,"featured_media":1004593780,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1521,44033,51037],"tags":[],"class_list":["post-1004593526","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-digital","category-executive-profiles","category-trends"],"acf":[],"yoast_head":"\nFostering Inclusivity With AEW\u2019s Lily Kao: Q&A - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/fostering-inclusivity-with-aews-lily-kao-qa\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fostering Inclusivity With AEW\u2019s Lily Kao: Q&A\" \/>\n<meta property=\"og:description\" content=\"The managing director continues firm\u2019s tradition of encouraging diversity of thought.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/fostering-inclusivity-with-aews-lily-kao-qa\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2022-07-28T13:12:31+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-09T10:22:41+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/CPE-QA-August-iStock-498891350-IMage-by-elenabs.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Jeffrey Steele\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/fostering-inclusivity-with-aews-lily-kao-qa\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/fostering-inclusivity-with-aews-lily-kao-qa\/\",\"name\":\"Fostering Inclusivity With AEW\u2019s Lily Kao: Q&A - 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