Sustainability lessons from some of Australia’s leading commercial property investment trusts are being applied to the strata sector in order to drive environmental, social and financial outcomes.

MICM Property general manager strata management Tony Micelotta told The Fifth Estate that having previously worked in commercial funds management, he saw how clients such as GPT and Mirvac had placed corporate social responsibility high on the agenda.

The Melbourne strata property management company is taking a similar approach in order to encourage its owners corporation clients to implement sustainability initiatives.

Micelotta says sustainability is part of the company’s unique selling proposition, and is driving initiatives that go far beyond just increasing the uptake of paper recycling, he says.

The company was an early participant in City of Melbourne’s Smart Blocks program.

Tony Micelotta, MICM Property

“A lot of our properties are within the five-kilometre radius that is Melbourne City Council.”

Melbourne and City Towers at Southbank undertook a raft of initiatives as part of Smart Blocks that saw energy use decrease by an estimated 43 per cent over five years – saving the owners corporation about $120,000 a year in energy bills.

Initiatives included a full energy audit, LED retrofit in common areas, installing a 30-minute timer on gymnasium airconditioning, replacing four car park exhaust fans with more efficient models and timers for stairwell lighting.

The company also engaged with the Victorian Energy Efficiency Target (VEET) program to undertake re-lamping projects, exchanging fluorescents for LEDs. That saw reduced common area energy consumption for the participating strata bodies.

The company is also undertaking Smart Blocks-type initiatives outside of the City of Melbourne area, Micelotta says, with its own version of the program.

The first step is to identifies everything that draws power within a specific strata community. A roadmap is then drawn up for upgrading plant and equipment, and an examination of other initiatives in the market to help reduce energy consumption.

Going green to reduce graffiti

A recent project was a green wall installed to reduce the ongoing costs associated with managing graffiti vandalism, which gained support from City of Melbourne.

When the proposal was lodged with the council for approval, the proponents discovered the City was happy to chip in.

“We weren’t aware they were [financially] supporting green walls,” Micelotta says.

The building in the north of the CBD had a retaining wall near the carpark entry that was being regularly vandalised. The owners corporation had a number of options – continue to use the discounted graffiti removal service provided by council and repaint the wall every six months or so; commission an artist to paint a mural on the wall; or install a green wall.

Going with the green wall, which is adjacent to a garden bed, not only fixed the vandalism problem, it also enhanced the aesthetics of the entry and creates a greener environment.

“It enhanced the property value for lot owners, investors and for residents,” Micelotta says.

As the wall faces the north facade of the building, it receives sun all day, so the green wall also delivers a cooling benefit.

“More and more strata committees are looking at green walls,” Micelotta says.

“It is becoming easier to promote through our portfolio.”

Solar a go-to for mid-rise

While many high-rise strata communities have little if any spare space on the rooftops to install sufficient photovoltaics to make it a solid proposition, it is seeing good uptake on mid-rise and low-rise communities,

There are many factors to consider, Micelotta says. One is that many strata’s long-term maintenance plans do not include PV, as most plans are drawn up based on the property as it is on completion.

It is, however, seen as “nice to have”, and if it is incorporated into long-term maintenance plans the committee will see a return on investment and an ongoing cashflow benefit.

Micelotta says MICM’s research into PV has shown there are a number of dependencies. They include the availability of roof space, and also whether it is going to be paid for upfront or if the cost will be amortised.

Picking the right supplier is also a very important factor.

PV generally has a 20 year warranty, he says, however, should the supplier exit the market during the warranty period, who will honour the warranty and service the equipment?

“We give a heavy weighting to the credibility of the supplier, the warranty and the quality [of the system].”

How the warranty will be enforced and ongoing servicing guaranteed is also part of the equation.

Whether roof space is common property or owned by the lots immediately below is also a factor.

The committee’s own objectives also play a part, whether it is to supply common areas or whether surplus will be fed to lots or fed into the grid to gain a solar feed-in credit.

An area the company is currently undertaking scoping and feasibility analysis of is installing solar PV on carparks and carports of lower density strata properties.

Micelotta says parking lots offer significant area and space for generating power for common areas and lighting.

“The useable space is almost all of it.”

Smart Block’s early adopter – City Tower at Southbank

The company has now commenced rolling out the solar carports and solar carparks opportunity within its portfolio.

Another basic energy efficiency initiative for many strata apartments is installing carbon monoxide sensors and variable speed drives on exhaust fans in carparks, Micelotta says.

There is also a drive to ensure plans for end-of-life plant and equipment replacement include replacing items with more energy-efficient equipment.

“When people buy a new microwave or fridge they look at the energy star rating. There is a common awareness that for equipment to have a higher rating is [positive].”

Movement sensors for lighting in carparks, reception areas and stairwells are another popular move, he says.

The company also implements a “de-lamping” strategy in carparks, which generally have two fluoro tubes in each luminaire. During an LED upgrade, both are removed and only one LED lamp installed in their place.

The rise of embedded networks

While embedded networks in strata are becoming common in greenfield projects, Micelotta says there are now entrants in the space looking to retrofit them to existing and brownfields developments.

The positives of an embedded network include increased purchasing power of the community and the bulk purchase approach, which can lead to lowers prices. The networks are also more sophisticated than old-school metering.

It enables strata units to also meter water and gas for individual apartments and on-bill to the lot owner. This results in reduced common fees per lot owner as the costs of individual units water and gas use are passed on to the relevant users and residents, including investment property tenants.

Installation of rainwater tanks is also becoming more prevalent, Micelotta says. This includes both new developments and retrofits for existing strata properties. The water is mostly used for pool tops ups and landscape irrigation.

How to finance

In terms of financing sustainability initiatives, owners corporations are able to obtain specific strata loans. Micelotta says there are a number of providers his company uses.

The loans are generally unsecured loans, which means there is no security in the form of freehold property. Instead committees need to allocate a specific amount of strata fees to repayment, and a specific motion endorsing the financing needs to be passed by the committee.

The loan then becomes a priority expense item.

“It provides flexibility, especially for owners corporations that haven’t been raising maintenance fees, or where something isn’t part of the long term maintenance plan.”

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