13 November 2012 — Here’s a conundrum. Drapac Group’s Michael Drapac was one of the first property investment managers to sign up to the United Nations’ Principles of Responsible Investment.
He designed one of the most sustainable housing developments of its time, Laurimar near Doreen about 33 kilometres north east of Melbourne in 1997, later sold to Delfin. And he’s just notched up a massive 6-star Green Star Office Interiors v1.1 from the Green Building Council of Australia for five floors of an office building leased to the Victorian Environment Protection Authority.
Yet he is angry and scarred by his well intentioned venture into the sustainable property world and vows not trod there again. Instead, after several leading sustainable developments and his career as a pioneer in the field, he’s packed up his drawing board and these days is concentrating on the west coast of the US instead. There, around Los Angeles he’s already onto his 12th project and while he won’t do anything actually unsustainable, he’s over the struggle of convincing a industry back home that he calls, at best, reticent (his words are stronger) and at worst suffering a case of double standards.
Here’s why: at 200 Victoria Street Carlton where the EPA has taken up residence over five floors, the replacement value of the building has been estimated at about $550 a square metre and yet the rent achieved is only half of that.
- See our recent article Drapac Group’s 200 Victoria Street gains 6 star Green Star
It’s not the EPA’s fault, Drapac is at pains to point out in a telephone interview with The Fifth Estate
“The EPA is a great tenant,” he says. The problem is the entire market that refuses to pay a cent extra for green buildings, he says. And that’s despite the productivity gains, despite the value to the company’s brand and despite what companies they say in public and their rapid take up as signatories for UNPRI.
“The industry doesn’t actually want to pay for it.”
At Victoria Street, Drapac did a good deal, but that’s not the point. “We bought the land very cheaply so we won’t lose on it.” Drapac agrees that the building is not in a premium location so that will hold down rents, but all the same, the whole experience infuriated him because he could hear the green talk; what was missing was the walk.
Drapac recalls that as a speaker at a property investment conference a few years ago he induced a member of the audience to walk out of the room by strongly suggesting the man was a hypocrite for signing up – along with more than 80 of his investment funds colleagues – to laudable statements of sustainable intent but not occupying one green building nor owning one green investment.
Drapac says: “You would be shocked [at the attitude. Someone in] one of the biggest companies, said, ‘we don’t need that green nonsense here’ we just want some space”. I said, ‘go and talk to somebody else.’
Underneath the problem has been a lack of understanding of the value of green buildings, and Drapac has written papers on the issue to try to redress this.
“What business tends to do is look at the rent as an isolated component of operating costs.
“You might spend an extra 2 per cent in rent but if you increase productivity by 15 per cent then that’s the cheapest and smartest investment you’re ever likely to make.”
Times have changed and Drapac agrees that the market does now reward green, not so much in terms of rent, but in the reverse way of downgrading the value of buildings that are not green.
None of this helps when you are trying to get a development to stack up though.
At 200 Victoria Street, Drapac Group won’t lose but it won’t make money either.
Drapac is not your average former real estate agent turned developer.
He has a science degree from the University of Melbourne and back in the 90s he and journalist and now business commentator Alan Kohler wrote letters to try to stop destruction of Melbourne’s “cultural character”, as he put it.
“I always had a deep interest in cultural sustainability, and as a hobby I suppose, in the early 90s, I formed a group –Alan Kohler was part of this – and we wrote some letters to the government of the day (Jeff Kennett was premier) to try to make them aware of that the sorts of buildings they were approving at the time were not honouring the cultural heritage of the Melbourne city landscape.
“I’ve also given a few talks on Marvellous Melbourne, and what makes it marvellous.
“To me sustainability is looking at all the things under our control as a developer, of which green is just a part.”