9 August 2011 – John Bond, son of ’80s entrepeneur Alan Bond, and director of the $1.5 billion wholesale property syndicator Primewest, is just one satisfied client of Ian Knox’s HFM Asset Management. Bond’s entire crop of buildings nationally can now boast NABERS Energy ratings of between four and four and a half stars.
HFM Asset Management, a Perth based building efficiency consultancy, has noticed old C and D grade building can be inefficient for a very simple reason. It has nothing to do with the design, infrastructure or facilities. It can often be the meter or the way the place has been wired up. It’s as simple as that.
So if the owners want to make their buildings more efficient and improve their ratings, they should check the meter and the wiring. If they do that, they could improve their NABERS rating. And that’s before they even spend anything on facilities and upgrading.
HFM Asset Management knows what it’s talking about, it’s one of Australia’s biggest players in this space. It has done about 15 per cent of the mandatory disclosure work in Australia, assessing energy usage of buildings, hours of operation and getting their NABERS ratings.
With a staff of 25 – many of them ex-tradesmen turned consultants – and five contractors, the company also has offices in Sydney, Melbourne and Brisbane. The eastern states provide about 40 per cent of the company’s business.
HFM owner Ian Knox says his company has noticed the problem in every old building it tackles. Again, HFM has seen a lot of it – about 90 per cent of its work is with established buildings. There’s a good business reason for that: there are more of them with plenty of owners wanting to upgrade.
“What we have been finding is significant infrastructure issues with the accounting device, the meter, and with every single building we look at, the meter is invariably incorrect. We recommend to owners that we start by investigating their measurement tools, it’s our first port of call.’’ Knox says.
“We now say that 100 per cent of every building we investigate there is an issue with metering. It’s a significant problem that needs to be addressed in terms of metering.”
In some cases, the buildings aren’t even wired up properly. In states where building owners can buy electricity in bulk for the whole site and on-sell it – that means every state except for New South Wales and Victoria – some tenants have incorrectly wired their systems.
Normally buildings are broken up into tenant metering and common services, like lifts and lighting, for the base building. Tenants pay for the tenant metering, owners pay for the common services or base building. That’s in theory, but as Knox points out, it doesn’t always work that way.
He cites one example of a building in West Perth that had been incorrectly wired. “In a well performing building, we would expect the owner to be paying 40 per cent of the electricity for the base building and the tenant 60 per cent. What we found in this particular building was that it was 70 per cent base and 30 per cent tenant, which we thought was a bit bizarre.
“When we investigated, we found that one of the tenants, who happened to be an oil and gas client, had put in a complete computer suite for their Australian operations and it should have been off the tenant power supply and it was actually plugged into the common area power supply, and nobody knew about it. ”
The discovery was worth about $100,000 shaved off the yearly energy bills to the owner, Knox says.
“That energy being consumed by the owner makes the owner look extremely inefficient. We find that is a common problem.”
He says that after this was fixed, that particular building increased its NABERS rating by one to one-and-a-half stars. “We haven’t even invested any money in efficiency at the moment. We simply sorted out the metering.”
When there’s bad wiring or faulty meters, it’s double jeopardy for the building owners. They not only have to pay more for electricity but it means a lower NABERS rating which in turn lowers the rental yield and makes the building less attractive to prospective tenants. And for a building owner, the biggest risk is an empty building.
Knox say that a similar problem exists in other states, where owners are not allowed to on sell electricity. “In New South Wales, for example, we will find buildings where the metering is incorrect. It’s either not working, or it’s an old meter. That affects the rating.”
He says rising electricity prices are driving a lot of the firm’s business. More building owners want to make their buildings more efficient to cut costs and attract tenants. “Demand is huge because [energy consumption] disclosure is mandatory now,’’ he says. “We’re not having to do a lot of marketing to get business because we have key clients across the country and as they become more aware of the rules and regulations, they will ring us and say, ‘what are we supposed to do?’”
He says a lot of building owners still “don’t get it”. But that’s starting to change. “They’re starting to understand the merits of improving performance with evidence coming out now that good performing buildings tend to yield better rents, have lower CAPEX and lower operating costs,’’ he says.
He believes the carbon tax with its impact on electricity costs will make him even busier. “We will see a greater awareness as the price of energy rises. Building owners will have no choice,’’ he says. “I presume there will be more inquiries.” Whether it’s in Perth or anywhere else, he says, building owners are making the same choices.
One of his clients, John Bond – son of 80s entrepreneur Alan Bond and director of national wholesale property syndicator and developer Primewest which has a portfolio of about $1.5 billion – also believes the carbon tax might drive a lot of business. Most of the properties in the Primewest portfolio are four to four and a half stars.
Bond says the carbon tax could give his company a competitive advantage. “It will hopefully,’’ Bond says. “With NABERS ratings, it’s all about reducing energy consumption and so all of the steps we have taken will give us a growing benefit going forward as electricity prices rise. “
Bond is nothing like his famous father, one of the loudest and most raucous people you could meet. His son is shy, even self-effacing. Still, he is into property development so the apple doesn’t fall far from the tree. And when he speaks of property, particularly sustainability, he becomes quite fluid. For John Bond, sustainability is about better business and bigger long term profits.
“We are an investment manager for syndicates so we buy property and manage them on behalf of syndicates of wholesale investors,’’ Bond says. “We tend to take a reasonably medium to long-term view about our properties and we like to make sure that we upgrade them and manage them to the best of our ability.
“We were lucky to be a little bit ahead of the game compared to most of our competitors in terms of addressing the issues. We got all of our office properties rated and then worked out a program as to how we could work them up to get them to four to four and a half stars well before it really became a big issue.”
It’s not about better rental yields, he says. It’s about risk management and ensuring there are no vacancies.
“For us, the building has to be competitive in the marketplace and for bigger tenants, certainly government tenants, they expect it, so it’s become a norm for the bigger tenants and it will become a norm for the smaller tenants.
“And with corporates, it’s about having things like bigger bike racks and shower facilities for their staff to be able to ride to work or go to work by public transport and exercise at lunch time.’’ he says. “It’s more that we stay competitive and have a product that people want to lease than saying we want to get X return out of it.
“Probably more than rental yields, it probably gives you a less vacancy factor. If tenants have two buildings to choose from that are the same rent and one has those facilities and the other doesn’t, it’s a very big advantage.”
Read an article on John Bond that appeared recently in Perth Now.