26 October 2012 – UPDATED: Parramatta City Council has announced NSW’s first Environmental Upgrade Agreement, for Australian Unity’s 10 Valentine Avenue, Parramatta, in a deal, initiated by the tenant, the NSW Property Authority.
The move comes as The Fifth Estate last week launched the EUA ebook, a step-by-step guide to the program being rolled in Melbourne, in NSW and other states.
- See The Fifth Estate newly launched ebook Environmental Upgrade Agreements – Your Guide to Australia’s finance innovation for building retrofits
And it also comes as as industry support for the finance program continues to grow.
The Australian Property Institute (NSW) on Monday issued a statement of support and has slated EUAs for coverage at its 13 November conference with the Property Funds Association.
And the Green Building Council has flagged EUAs as a priority on its agenda.
The finance mechanism promises to fuel a bonanza in retrofit of ageing, energy guzzling buildings by using energy savings to pay for the retrofit work and repayments made through an additional charge on council rates.
The attraction of the scheme is that the tight security of the loan makes the cost of funds potentially lower than market rates, especially for non-institutional private owners, who typically own B and C grade buildings.
The announcement of the Parramatta deal, flagged on 21 August, by The Fifth Estate was made on Friday, at the council’s panel and luncheon event, Unlock Your Building’s Potential, which was co-hosted with Low Carbon Australia,.
Parramatta Lord Mayor John Chedid said upgrading Parramatta’s existing building stock was vital for the City’s growth.
“We are home to the sixth biggest CBD in the country with an economy generating more than $14 billion annually. Yet we have one of the lowest A-grade office vacancy rates in the country and almost half of the buildings in and around Parramatta were built over 20 years ago,” Mr Chedid said.
“EUAs in Parramatta’s CBD alone can potentially attract $150 million of investment in building upgrades; create148 full-time jobs; and reduce building owners’ outgoing costs by $26 million, through water and electricity savings.”
Mr Chedid said the EUA program “formalises agreements between a building owner, financier and local council to finance building upgrades to existing non-residential buildings. It offers a number of advantages to traditional commercial arrangements, including removing the need for upfront capital, improved loan rates and making repayments through cost savings.
“EUAs are about making buildings and businesses more efficient and reducing costs. It is also an innovative way for property owners to fund upgrades that can boost the value of their buildings and reduce vacancy rates.”
He said that upgrades work, while it must achieve environmental improvement outcomes, “can relate to common works occurring in older buildings including airconditioning, lift and lighting upgrades as well as reductions in energy and water costs for owners and tenants.”
NSW Environment Minister Robyn Parker said the deal was a milestone for the property sector.
“It marks the start of a new way of financing better performing buildings throughout NSW,” Ms Parker said.
“This opens the doors to others in the commercial property sector looking to do the same. It paves the way for billion of dollars worth of energy efficiency upgrades throughout the NSW commercial property market.”
Australian Property Institute NSW president Bob Dupont said the institute continued to support the ongoing development of initiatives in sustainability in property, in particular with EUAs.
“The NSW Government’s support for EUAs and Local Council adoption of the policy provides significant opportunity for cultural and structural change in how buildings are upgraded to improve environmental performance”, Mr Dupont said.
Under the Parramatta deal, the money that the tenant, NSW State Property Authority, would have been paying in power bills is now split between savings and investment in upgrading the building, he said.
The NSW Government agencies located in the building would be “better off with immediate savings, at zero capital cost to the taxpayer and part of their savings goes to the creation of jobs in retrofitting the building.
“The wider implementation of EUAs will see significant work in the retrofit of buildings, lower peak energy demand and lower energy bills for tenants and building owners.”
The GBCA executive director – advocacy and business services Robin Mellon said EUAs were also on the GBCA agenda in terms of both through its members and through its wide advocacy program with all levels of government and government agencies.
“Knocking down older buildings and rebuilding does not make environmental sense, it doesn’t make economic or even social sense,” Mr Mellon said.
“We support EUAs as a way of encouraging different finance solutions and we work very closely with our members such as Sustainable Melbourne Fund and the banks who are GBCA members to show not just the theory by the reality and case studies involving EUAs.
Chief executive of Low Carbon Australia Meg McDonald said: “It makes good financial sense to operate as cost effectively as possible, and Environmental Upgrade Finance is one way of making it easier for property owners to make improvements sooner.”
“These and the SMF and your book [EUA ebook guide noted above] will help showcase the potential.
“It doesn’t matter whether you’re a council or a private organisation, when you see others doing it, that’s when the risk really gets reduced. Especially in these financial times no-one wants to be taking the first step; but they want to be financial followers (after the leaders and the innovators.)