Smarter finance for better building performance
Environmental upgrade finance is a smarter way for building owners to access capital for commercial building improvement projects, allowing both owners and tenants to reap the benefits of operating a more sustainable and efficient building.
Environmental upgrade loans are provided by a lender to fund works that improve the environmental performance of an existing building.
As part of this finance, a contract known as an environmental upgrade agreement (EUA) is entered into by the building owner, the lender and the City Of Sydney. Under this contract, the lender advances funds to the building owner to complete the upgrade works and the loan is repaid through the City’s existing rates collection process, as an environmental upgrade charge (EUC).
Sustainable buildings deliver greater financial returns, have lower vacancy rates and greater value than non-sustainable buildings¹.
Improving the efficiency and environmental performance of a commercial building through upgrades can make an existing building more attractive to tenants. Particularly with the introduction of the Commonwealth’s commercial buildings disclosure program which makes it easier for tenants to find and lease more efficient spaces.
Greener buildings have the added benefit of lowering utility bills and providing protection against rising energy prices in the future.
¹ 'Building Better Returns' by the Australian Property Institute and the Property Funds Association Green Property Investment Index produced by IPD (Investment Property Databank), March 2011.
Benefits and eligibility
Benefits of an upgrade
- Improves asset value and NABERS rating.
- Improves capacity to attract and retain tenants.
- Improves amenity and working environment which has been proven to increase productivity.
- Demonstrates a commitment to sustainability.
- Reduces operating costs and improves cash flow.
Benefits of using an EUA
Financing an upgrade using an EUA delivers multiple benefits to building owners and tenants not generally achievable through traditional commercial finance including:
- 100% finance
- competitive interest rates and long loan terms
- tenant contributions towards upgrade costs.
Upgrading using self-finance or traditional commercial finance usually results in the tenant receiving the majority of utility savings benefits, not the building owner. The building owner has no means of recovering these benefits outside of lease negotiations.
The EUA mechanism overcomes this by allowing building owners to share the costs of the environmental upgrade with their tenants through existing lease provisions or by specific agreement. This was made possible by changes to the Local Government Act 1993 to encourage building upgrades.
Environmental upgrade finance in the City of Sydney is available for works that improve the environmental performance of a commercial building, including projects that:
- increase energy and water efficiency
- prevent or reduce pollution and waste
- reduce material consumption
- improve recycling
- reduce use of private motor vehicles
- enable monitoring of environmental quality
- reduce greenhouse gases.
The City of Sydney has dedicated staff to help building owners access this innovative finance to upgrade their buildings.
The service is part of the City’s commitment to reduce carbon emissions across the local area by 70% by 2030, based on 2006 levels.
Last updated: Monday, 29 December 2014