Analysis: Environmental Upgrade Agreements were always a brilliant idea. A way to fund sustainability upgrades with the cost paid back as part of council rates. The tenant saves money on the energy bills that come from the upgrade; the owner gets better infrastructure. Everyone wins.
Pity they’ve been tied up in more bureaucracy than a Kafka novel.
But while Melbourne struggled to get its first major EUA in several years and Sydney and South Australia are busy with interminable negotiations to streamline their legislation, a clever mob from the workplace office fitout space has jumped in to provide their own version of EUAs.
Incorp, a 75-person company started 29 years ago by Perry Gray and Peter Henderson – who’ve delivered fitouts for the likes of Atlassian, Westpac and Vodafone – has leapt to the fore with a simplified version of the scheme.
It’s about to sign up its first deal involving none other than the Queensland government over its 13,000 square metre tenancy for its Department of Environmental and Heritage Protection at 400 George Street in Brisbane.
The tenant reaps the benefits of energy savings and the owner enjoying a higher grade of office.
A classic win-win situation.
The program goes under the banner of the t3 Building Upgrades Initiative, and it’s managed in a partnership between Incorp and the Brisbane City Council’s CitySmart.
Its name references the triple-bottom-line approach because there is also a charity component involved: some of the energy savings go to a charity chosen by the client.
The program was initiated with a conversation between Perry Gray and Roger Walker who joined the company and moved to Brisbane from Sydney for the job.
Walker has been knee-deep in EUAs since their conception when he worked with Napier & Blakeley, and he’s been a key consultant on several near-deals since.
The frustration of working hard on what made commonsense but somehow was complicated or stopped by nervy lawyers who claimed the loan covenants messed with liquidity of a property and tenant reps who … well … were probably looking for something to justify their fees, led to the conversation with Gray.
Walker recalls: “It was a bit over a-year-and-a-half ago and I was sitting down with Perry talking about lighting and saying that this makes sense so why don’t people do it? But it can get complicated, so Perry said, ‘Why don’t we simplify it and just do it.’”.
The magic of cut-through.
Walker says in Brisbane, “The government is looking at lighting upgrades for [400 George Street] and then a number of buildings after that.”
But Queensland’s government isn’t alone. In NSW a government department is also well advanced on negotiations for a 20,000 sq m tranche of office space, with details still under wraps.
Other property owners understood to be going down the EUA route include Charter Hall, Suncorp, Cromwell, Eagle Property Group and ISPT.
Not complicated, just a loan
Sustainable Melbourne Fund boss Scott Bocskay, commenting on the $1.8 million deal Melbourne deal that we reported on here, said there was nothing complicated about EUAs.
They’re just a loan, he said on Thursday afternoon.
“It’s a loan and it’s paid back on council rates. That’s it.”
But still, legislation is different around the country.
Bocskay said South Australia was still refining its legislation, NSW also, but in Victoria he was talking to 14 councils around the state interested to get in on the action.
Other deals were also in play, especially in the manufacturing and industrial area where new energy bills were coming in at anything from 20 per cent to 400 per cent higher as business came out of their contract periods.
This wasn’t such a big deal for office buildings where energy costs are typically a few per cent of total outgoings.
But in the industrial and manufacturing sector where energy is “10, 20 or 30 per cent, it starts to become a significant problem”, Bocskay said.
He thinks there will soon be a time when critical mass takes over and a raft of done deals and case studies gives confidence to others and the sector will take off.
In Brisbane there is still a hitch. The 400 George Street building is part-owned by HSBC Trinkaus and the Motor Accidents Commission of SA, which is in the process of selling its share. Walker says that is the only thing holding up the deal now.
Time will tell, but if the positive sentiment on EUAs finally fulfils its promise we could see this deal go ahead as well as a big new tranche of work coming on line for building energy consultants, as business owners struggle to stay afloat under rising energy prices.
Incorp works across many borders – Sydney, Melbourne, Brisbane, San Francisco, Seattle and Dubai. Maybe this is exactly the right company to help spread the idea.