Adam Geha, CEO and founding director, EG

The top end of town tends to hog the limelight when it comes to sustainability, but a financially rewarding opportunity lies in wait to turn C and D grade stock into high energy performers. 

With the Clean Energy Finance Corporation as a cornerstone investor, an EG real estate fund is upgrading four mid-tier underperforming buildings up to 4.5 star NABERS Energy rating or above.

EG’s High Income Sustainable Office Trust (HISOT) specifically targetsgoes after mid-tier commercial buildings for energy efficiency upgrades – an “ethical investment philosophy” that can result in serious commercial returns as The Fifth Estate found out in an interview with EG fund manager Michael Noblet for the Flick the Switch ebook.

In 2015, the green bank chipped in $25 million, with the fund also attracting investment from Uniting Financial Services, Deakin University and Tasplan.

The CEFC has since revealed some of the details of the energy performance upgrades in a report released on Thursday, showcasing the huge opportunity to improve the energy performance of B and C grade buildings, which make up 80 per cent of the net lettable area of Australia’s commercial building stock.

The biggest challenge for the fund is the National Archives Australia building 1 in Parkes, Canberra, which had a 1 star NABERS Energy rating when it was acquired in 2018. The plan is to get it to a 4.5 star rating through a series of upgrades.

[From Clean energy and B and C grade office buildings Investment Insight]

The upgrades include BMS upgrade and HVAC tuning, LED lighting and control upgrades, implementing metering and monitoring and 100kW of rooftop solar. 

With government tenants required to occupy a 4.5 star building, the upgrades and their expected energy savings have helped the real estate fund management firm negotiate an extended lease of 12 years with National Archives Australia.

Another asset in the fund, 95 North Quay in Brisbane, occupied by mostly legal firms, is expecting a jump from 2 stars to 4.5 stars thanks to a suite of upgrades.

[From Clean energy and B and C grade office buildings Investment Insight]

The fund also owns the building occupied by Australian Medical Association, 42 Macquarie Street, Barton, ACT, which is targeting an improvement of 3 stars to 5 stars, and a NSW Police Station (965 Botany Road, Rosebery) is aiming to go from 3.5 stars to over 5.5 stars.

The fund plans to bring all four assets up to its minimum 4.5 NABERS rating using tried and tested energy upgrades such as HVAC upgrading or tuning, improved monitoring, implementing digital analytics tools, lighting and controls upgrades and solar.