St James’ Hall 169 Phillip Street SydneyBack to all case studies
Environmental upgrade finance
Environmental Upgrade Agreement (EUA) tenant contributions versus total project costs
The total financing costs for the upgrade will be $877,000. The owner of St James’ Hall will contribute only $538,000 towards this total, as shown in the graph. The tenant contributions, expected to be $339,000 over the seven years, are equal to approximately 40 per cent of the projects total financing costs.
Tenant contributions as a percentage of the total financing costs for other EUAs in NSW ranged from 40 to 60 per cent, also included in the graph. The percentage varies depending on the energy savings, upgrade works and loan tenor. In each case, using EUA finance was the most cost-effective way to fund the building upgrade to improve environmental performance, significantly cheaper than financing through traditional debt or using available cash.
The EUA made it possible for the building owner of St James’ Hall to upgrade and improve the 1960s building without having to renegotiate leases and with no upfront costs to the tenants. For a multi-tenanted building this can represent considerable cost and time savings when upgrading the asset.
“Improving the environmental performance of the building will not only result in enhanced capital value for the owners, but also provides long-term attractiveness for tenants.” Troy Shepherd, JLL Director of NSW Property Management
How cash contribution benefits are achieved
The EUA’s unique mechanism permits building owners to share the environmental upgrade costs through existing net leases with their tenants via an Environmental Upgrade Charge (EUC) paid to Council.
Tenant contributions towards the EUC must be equal to or less than the savings they make in their operating/outgoings charges. The owner can then use these contributions to service the works, improve cash flow and greatly improve the return on investment.
This project was financed through an EUA involving Eureka EUF, City of Sydney, NAB and the CEFC.