Who’s winning the EUA race…and why is the owner last to know? Change and more change; offshore jobs and their ethical dilemma.

21 August 2012 – NSW could soon be first with an Environmental Upgrade Agreement that’s paid for by tenants.

Market sources say a tenant has initiated a modest retrofit for lighting in one of the buildings it tenants at Parramatta with the repayments to be tied to council rates and paid for in regular outgoings paid by the tenant. The fun part is that the owner may be the last to know.

The owner, we hear, will be informed this week, and it’s hoped – and presumed – they will agree.

After all, the retrofit for new energy-saving lighting will be between $500,000 and $750,000 and it won’t cost them a cent. And better still the tenant gets carbon reductions and ongoing electricity savings.

That’s the way EUAs work.

The benefit of EUAs is that the cost of funds is lower than normal market rates because the loan is more secure, since it is part of statutory charges. And the promise is that energy savings will pay for the retrofit and that the tenant will be no worse off, and potentially better off.

Central Park Broadway
Meanwhile another even more interesting development in the intriguing world of EUAs is unfolding at the Frasers Property/Sekisui House project, Central Park, in  Broadway, Sydney.

Our sources tell us that the wily development team is looking to implement an EUA for the trigeneration component of the project.

This project, understood to cost in the vicinity of $26.5  million, is a pricey thing to fund with regular development costs, the banks being who they are (now that they have given us the GFC, which we now all have to pay for).

So implementing a rock-solid repayment plan that no one has to worry about because it’s set in stone – in council rates – is one way of bringing down the cost of finance.

An in-principle approval for an EUA arrangement was granted at a City of Sydney Council meeting last month, but going ahead with the deal is not certain.

Negotiations are underway but, the word is, “it’s complicated”. As you’d expect.

Patrick Dale, director of Aeris Capital and a former NAB executive credited as a key developer of the EUA mechanism, is understood to be a consultant on the project. He declined to comment.

Mutinies after the bounty and other changes
The ructions in the senior levels of top property companies continued last week with more changes. But it’s not so much a case of shifting the deck chairs on the Titanic as a Mutiny on the Bounty.

Some property chiefs have been nudged off and others have seen the glint of the cutlass and jumped.

It’s the kind of change that is to be expected after the seismic shock of the financial crisis, which is not over yet.

Let’s see. The state of play so far is:

  • Mirvac: Chief executive officer, Nick Collishaw leaves suddenly; Susan Lloyd-Hurwitz, head of LaSalle Investment Management in Europe, announced as new chief executive officer.
  • GPT Property Group: Carmel Hourigan is appointed chief financial officer, leaving her role as managing director, investment management Australia, at Lend Lease. Mark Fookes, current head of investment management, will replace chief financial officer Michael O’Brien. O’Brien will head a new business unit to concentrate on group strategy. Head of strategy and corporate affairs, Judy Barraclough, will take up the role of head of strategy in the team. John Thomas, a former Investa Property Group chief executive, will head the business parks and logistics business, after joining the group earlier this year.
  • Stockland: Scores of redundancies of top executives including the now renowned $1.2 million-salaried position of executive general manager corporate affairs, held by Karyn Munsie, followed later by resignations of managing director Matthew Quinn and sustainability manager Siobhan Toohill.
  • FKP: Managing director Peter Brown expected to step down soon.
  • Dexus: Chief executive officer Victor Hoog Antink replaced by Darren Steinberg, former managing director, Colonial First State Global Asset Management.

In the case of Mirvac, the stock market has complained bitterly about the methods of departure. One analyst lashed out at the sudden exit of Mirvac chief executive Nick Collishaw and called it a “dog’s breakfast” and a “ridiculous” situation of forcing chairman James MacKenzie to run the company while Lloyd-Hurwitz “disentangles herself from current obligations”, The Australian Financial Review reported on Thursday.

Despite the protests, the stock market loves this sort of drama. It doesn’t care that the departing people are taking with them handy new skills in how to  survive an extreme financial crisis.
The important thing is to show there is a changing of the guard.

Solar: next phase
Our story from Leon Gettler in his new column, Green Mashup, looks at how the solar industry is changing at lightning speed and in ways no one predicted five years ago.

Solar panels are now so cheap – there’s a global oversupply – that the industry is looking to the retrofit and upgrade market for the next phase of its growth in Australia.
See

Jobs go global
Was it the Reserve Bank that warned we were about to undergo massive restructure in our workforce …  outside the mining industry?

On Australia’s doorstep is the greatest source of low-skilled and now high skilled workers on the planet at massive discounts to local talent.

Our writer Denise McNabb found out firsthand how this looks. Recently on assignment from a financial publication to write about a successful transport company in Australia, she emailed her contact from her car because she could not easily access his phone number to say she was held up in traffic and would be late.

Within five minutes, a Filipino executive assistant who works 24/7 from Manila for the transport chief at the cost of about $20,000, had contacted her Aussie boss, who called McNabb to reschedule.

“Why would I pay $60,000 a year when I can get the same and better service for far less in The Philippines?” the boss later asked by way of explanation.

The experience prompted McNabb to keep an eye on this outsourcing sector. Most recently she came across some painfully cheap freelance journalism offered through websites.

Here is are some samples that McNabb found on  https://www.freelancer.com, https://www.elance.com and https://www.odesk.com

“Odesk is calling for blogs at $2 an hour, lifestyle articles at $2 for 600 words, 10-15 articles of 500-750 words for $15, a 500-word article on helping men to choose good deodorants for $5.

OK, not everyone is going to be threatened by what happens in journalism, but this is the perhaps the most dramatic iteration of what is already underway in banking, call centres and now  “knowledge process outsourcing”, which is another way of saying pretty sophisticated,  upscale work.

It has massive implications for economic sustainability in this country, and for social and ethical questions that need to be grappled with, whether we like it or not.

For instance, do we prioritise our own labour force, introduce laws, or ethical standards to do so? And what’s the most ethical thing to do here, say, if measured in a social sustainability index? Is it to prioritise Australian workers always? Is it to share the available work with someone from another country who is living at subsistence level?

Do we come up with a mix of job allocations that someone declares is “fair”?

What happens to our own standards of living?

The only answer that is clear is that we are indeed a single planet and that we are all in this together.

The new focus on social sustainability will make green sustainability look like child’s play.

The only constant is change.

Here’s an interesting shift in the political agenda: the first headline to say that Labor could win the next federal election.

The reason, according to Kohler, is that Labor’s biggest “bogies” are now either dead (and buried?) or in an advanced comatose state, such as the carbon tax (yawn).

He says:

“Can the ALP really win? Definitely. The main problems remain the morale of the ALP itself, and Julia Gillard’s lack of public authenticity, stemming partly from the broken promise on carbon tax and her opposition to gay marriage and partly from her robotic style.

“Against that, the economy is travelling very well indeed and the Coalition has a very big looming problem funding handouts without the taxes (carbon tax and mining tax) that go with them. The hole is said to be $70 billion, which will have to come from spending cuts or other taxes.

“Gillard and Wayne Swan believe that if they neutralise boats and company tax as issues, then the $70 billion hole will sink Tony Abbott.”

Another point is that Abbott won’t be able to repeal the carbon tax before 2015, Kohler says.

One Melbourne sustainability adviser said it no longer matter if Labor lost because they had pushed through so many reforms already, agains the toughest odds.

But it’s the carbon tax that could have the most important impact if the country seizes this signal for change.

Plenty of good news
Aurecon’s Jeff Robinson says that there might be “doom and gloom” and he’s a “natural optimist”, but says “there are opportunities if you go and look for them”.

But Robinson says state governments could do a lot to help re-ignite activity in the property industry.

“The government sector makes up 30 per cent of the building market and it could decide when its leases come up that [new buildings they move to] should comply with new green building standards,” Robinson says.

“Ultimately, they are paying the same anyway.

This would give a kickstart to the retrofit market, he says.

“What happens is that existing buildings would have greater incentives to retrofit.”

How about it, premiers?