By Tina Perinotto
7 July 2011  –
Brisbane investor Harvest Denison Opportunity Fund has leapfrogged the competition and signed Australia’s deal energy efficiency upgrade and finance deal with Low Carbon Australia.

Up to six more agreements are expected to be announced in the following weeks in regional NSW Sydney and Melbourne.

The moves signal the first of an anticipated string of funding agreements for energy efficient retrofits for the property sector by the federal government agency.

The are two key planks to the activities of Low Carbon Australia. One in the energy efficiency program of $87.6 million that can match dollar for dollar any approved efficiency work in building.

The other is an environmental upgrade agreement program that will allow property owners to achieve the holy grail of allocating the cost of energy efficiency upgrades to tenants, who reap the major rewards of lower energy outgoings through the work.  Typically owners struggle with investing in upgrades since they bear the cost for benefits that accrue to tenants, so called “split incentives.”

Key to the environmental upgrades is that repayments for the loans become part of council rates, so that the financier’s investment is secured and the loan is tied to the property rather than the owner.

Legislation to enable environmental upgrades has been enacted in Melbourne for the City Council’s Melbourne 1200 Buildings program and in NSW across the whole state.

O’Connell’s OBM House, 26 Wharf Street, Brisbane

Brisbane Low Carbon Australia will directly fund the upgrade of the Harvest Property project, a property known as O’Connell’s OBM House at 26 Wharf Street.

The property’s manager, Harvest Property, aims to raise the NABERS Energy rating from zero to 4+ stars.

It will include new building airconditioning and the replacement of the base building lighting and metering.

Low Carbon Australia chief executive Meg McDonald said the partnership with Harvest was the first of many.

Harvest director Chris Slack said Low Carbon Australia was a perfect fit for what Harvest needed.

“Low Carbon Australia’s expertise and finance align well to Harvest’s objective of buying value add commercial office properties and undertaking cost effective refurbishments that improve NABERs ratings to deliver higher rental returns and capital value,” he said.

Mr Slack said Harvest identified Wharf Street as an opportunity to acquire a commercial office asset and improve its tenant appeal and investor value through upgrading its energy efficiency and NABERs rating.

Chief operating officer for Low Carbon Australia Catherine Bremner said another six or so projects would be announced in coming weeks.

“What we’re doing under the energy efficiency program is providing finance to the non-residential sector to upgrade their buildings.”

The agency last year announced partnership agreements with NAB, Origin Energy and All Leasing and Eureka Funds Management for the environmental upgrades program.

“Criteria under which projects will be judged is that they be cost effective, so that effectively the energy savings pay for the projects over its life,” Ms Bremner said.

Ms Bremner pointed to the joint report Low Carbon Australia conducted with Climate Works last year that identified $13 billion of investment needed to retrofit Australian buildings.

Total funding for Low Climate Australia is just over $100 million so much of this amount will be used to leverage funding delete with through other sources, Ms Bremner said.

Ms Bremner said the Brisbane building was exactly the type of upgrade the agency will be targeting, taking the NABERS Energy rating from zero stars to four stars. And key target was for work that the owner may not be able to fund in its own right.

Funding to Harvest was for $500,000.

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