Newly upgraded 99 St Georges Terrace re-joins the office leasing market
An environmental makeover by Eocsave, an energy services company that finances building upgrades and guarantees energy savings, has been successfully implemented at a Perth CBD building managed by Colliers International.
Completed in June, the upgrade allowed 99 St Georges Terrace to re-enter Perth’s office leasing market with new environmental credentials in a re-boot that is expected to attract interest from owners of other older office buildings.
Colliers International Sustainability Manager Patrick Jeannerat said a range of funding models from private energy services companies, like the one used at 99 St Georges Terrace, were available to upgrade WA office buildings.
“New funding schemes which would be run through WA’s local governments, and are similar to schemes already in place in Victoria, New South Wales and South Australia, are also being considered to finance building upgrades, so more options are coming to market,” Mr Jeannerat said.
“In the coming years, we are expecting these upgrades to be a timely solution for other buildings in Perth that are short of capital for upgrades and want to improve their occupancies and values.”
Prior to the upgrade, 99 St Georges Terrace had a NABERS energy rating of zero, an ageing plant and a stubborn office vacancy around 75 per cent. The 13-storey building was built in 1971 on the corner of St Georges Terrace and Howard Street and is owned by Singapore-based investors.
To reinstate 99 St Georges Terrace into Perth’s office leasing market, BSA, the company responsible for maintaining the building’s heating, ventilation and air conditioning (HVAC), including the building management system, and Sydney-based Ecosave, collaborated with Colliers International to develop an energy conservation proposal bespoke to the building.
After a site assessment with BSA, Ecosave recommended a new HVAC plant, new building management system control strategies and metering upgrade which would reduce the base building’s energy consumption by 50 per cent. An arrangement to fund the plant and equipment upgrades using a 10-year Ecosave Services Agreement was also put in place.
“For a zero-dollar upfront cost, the services agreement delivered building upgrades worth $751,350 that are predicted to achieve annual energy and maintenance cost savings of $140,000 once the building is fully leased,” Mr Jeannerat said.
BSA, a solution focused technical services organisation is one of the largest multi-services maintenance and construction companies in Australia (BSA:ASX). BSA’s Building Automation Department is expanding successfully into the east coast with branches in WA, Victoria, Queensland and shortly New South Wales. BSA carried out the HVAC upgrade works comprising of a new chiller, boiler, thermal metering and the building monitoring and control system while keeping the site occupied and maintaining comfort conditions. BSA prepared the building energy model in-house.
“The combined effort internally, between BSA’s HVAC Projects Team, Service Department, Advisory and Building Automation divisions and externally, with Ecosave and Colliers International, is a fine demonstration of collaboration between large organisations with diverse backgrounds,” BSA General Manager for Building Automation Roshan Gill said.
As part of the service agreement, Ecosave also guaranteed a 4.0 Star NABERS Energy rating once the building’s occupancy exceeds 75 per cent. Until then, the building is being marketed with a 4.0 star NABERS Energy Commitment Agreement.
“New tenants moving into 99 St Georges Terrace can trust they are relocating into a building with well-controlled comfort, energy efficiency and variable outgoings,” Mr Jeannerat said.
“Since the upgrades were completed, three new tenants have signed leases and negotiations for other new leases are underway, so returns to the building owner are already improving.”
The split in incentives, where owners pay for energy upgrades, often with significant capital outlays or by taking on debt, but the benefit goes to the tenants, is a well-documented disincentive for commercial property owners.
Ecosave’s Group Managing Director John Harriott said the Ecosave Services Agreement overcomes this hurdle by eliminating the up-front capital required for building upgrades.
“The Ecosave Services Agreement solution is favourable for the client because typically debt-funded plant and equipment upgrades can be a hefty impost on the investors’ debt profile with balance sheet implications that could affect future borrowing potential, not to mention risk profile,” Mr Harriott said.
“The Ecosave Services Agreement is fundamentally different to lease-based agreements or other liability-ridden instruments typically used for capital equipment. It can be treated as an off-balance sheet operating expense item because we are essentially providing energy efficiency services to meet or overachieve a guaranteed savings target and we are not limited by what equipment we use during the service period to achieve the savings.
“Ecosave carries the long-term financial and performance risks while the client benefits from immediate building upgrades at zero up-front costs and no debt.”