The Clean Energy Finance Corporation will be a cornerstone investor in a $400 million green property trust dedicated to improving the energy efficiency and upgrading the performance of existing commercial office buildings.
In an announcement on Wednesday, the CEFC said it was committing up to $125 million to the unlisted High Income Sustainable Office Trust (HISOT), which would be managed by leading leading real estate fund manager, EG Group.
The scheme would see EG buy, own, refurbish and introduce sustainability improvements in up to a dozen commercial office properties, with the broad aim of elevating the properties to the equivalent of at least 4.5 stars under the National Australian Built Environment Rating System (NABERS).
EG CEO Adam Geha said the HISOT trust would help meet demonstrated demand for higher performing commercial space in metropolitan areas outside central business districts – demand driven by decentralisation, CBD supply constraints, infrastructure development and urban regeneration.
“Our focus will be towards taking buildings reaching the end of their economic lifecycle, making the right choices and installing the right equipment to reposition them to meet modern standards, attractive to high quality tenants,” he said.
The CEFC’s cornerstone investment in the trust would help the EG accelerate opportunities for institutional investors seeking returns from greener office space, including superannuation funds, which had been increasingly interested in low emissions and sustainable investment opportunities, Geha said.
CEFC CEO Oliver Yates said the the commercial property sector was a key area where energy efficiency investment could have a substantial and beneficial cross-economy impact, as well as contributing to Australia’s overall emissions reduction effort.
“About 20 per cent of Australia’s national greenhouse gas emissions come from buildings, and commercial buildings account for nearly half of these,” Yates said.
“More than 90 per cent of the emissions from commercial buildings comes from the consumption of grid-supplied electricity,” he said, adding that there were also compelling reasons for property owners to upgrade older commercial buildings – as illustrated by the CEFC-backed transformation of a 1970s Brisbane office building, to achieve 5-star a NABERS rating and cut its electricity use by nearly 50 per cent.
“Apart from lower energy costs, greener buildings have been shown to deliver higher rental income and higher net operating income. At the same time, upgraded buildings require lower capital expenditure and have lower vacancy rates.”
Already, the CEFC has invested in revitalising and rejuvenating older commercial properties through energy efficient technology upgrades and the installation of renewable energy technologies.
Other investments being targeted by the Corportation include a joint initiative with the Commonwealth Bank, which has made up to $200 million available to businesses and local government through Energy Efficient Loans to finance energy technology upgrades and solar installations.
It has also made a commitment of $70 million towards a $116 million solar PV Power Purchase Agreement (PPA) program delivered by Sun Edison, to help commercial property owners install and generate their own solar.