Environmental Upgrade Agreements
By establishing an Environmental Upgrade Agreement, building owners, tenants and investors get access to long term finance for building upgrades at attractive terms. An EUA is an effective means by which to improve asset value and manage the risks associated with increasing energy costs.
Our contribution to large and small scale projects has future-proofed assets and improved tenant desirability by increasing NABERS ratings.
To date, Sustainable Melbourne Fund has facilitated $12.6 Million in energy and water efficiency finance resulting in annual cost savings of $571,000 to two building owners, and abating 6,267 tonnes of carbon.
To understand why you would undertake an EUA project please visit the Better Buildings Finance website. Sustainable Melbourne Fund, along with ClimateWorks Australia, developed this website to communicate why building owners, tenants and service providers should consider EUA finance when undertaking a building upgrade.
Learn more by watching this short video:
To qualify for environmental upgrade finance, applicants need to meet the eligibility criteria listed below as well as any credit criteria set by the financier.
The property must meet the following requirements:
- Location – the property must be located within the municipal boundaries of the City of Melbourne. (Click here to view boundaries map)
- Become a signatory to the 1200 Buildings program
- Current payments – the property must be current on all rates and charges due to Melbourne City Council
- Value ratio – the total value of the environmental upgrade charge – when added to any taxes, rates, charges or mortgages owing on the rateable land – must not exceed the capital improved value of the land prior to any works undertaken as part of the environmental upgrade agreement
- Property type – the property must be an existing building (no less than 24 months post Practical Completion) on rateable land, and is used predominantly for non-residential purposes such as:
- Public buildings
- Institutional buildings
- Recreational venues
- Buildings used for the trade in goods or services, and
- Buildings used for cultural purposes, such as museums and galleries
NOTE: Property owners who do not pay rates or are exempt from paying rates are not eligible for environmental upgrade finance but are still eligible to join the 1200 Buildings program.
Sustainable Melbourne Fund may still be able to assist with non-EUA investment.
Types of eligible projects
Sustainable Melbourne Fund can facilitate finance for commercial properties within the City of Melbourne.
The following types of projects have been pre-approved:
- Solar PV
- Co/Tri Generation
- HVAC ducts fans, pumps and air handling units
- Boiler and chiller upgrades
- Cooling towers
- Lift upgrades
- Lighting upgrades
Please download the Guidance Notes and the list of pre-approved building upgrades works that can be funded under an EUA. A separate list of building upgrade works is also provided for works that will require approval from the Independent Expert Reference Panel.
Energy and water efficiency improvements can be quantified with some certainty. However, at times, technology improvements are driven by location and we encourage property owners to consider energy efficiency projects that are not included on this list, for example a green roof.
Should you have a project in mind that is not on this list, contact us to determine financing eligibility.
Why undertake a retrofit?
The City of Melbourne’s retrofit survey revealed that building owners plan to own an asset for over 10 years, during which time a range of maintenance will be required.
Retrofitting is one of the lowest cost means of upgrading a building to:
- Replace old plant
- Improve service delivery
- Reduce maintenance costs
- Improve reliability
Higher building performance means higher quality and more loyal tenants, and increased asset sale value.
A lack of capital and the ‘split incentive’ – an owner paying for capital improvements while the benefits go to building occupiers – act as barriers to building upgrades.
EUAs provide finance specifically for retrofitting and, because repayments are collected through municipal property rates, they allow for tenant contribution.
By obtaining 100% project finance for building upgrades through an EUA, building owners can use their capital budget for further improvements to their buildings.
You can influence the management of a building
Do you want to save money by improving energy efficiency? Are your customers and employees looking for a company that meets its obligations to minimise environment impact and provide a modern, productive workplace?
An EUA enables you to redirect money you are currently spending on energy towards a better performing tenancy. For the right projects you may even have more money in your pocket.
Furthermore, because the building owner achieves a higher value for the building and keeps a loyal tenant, it is not a difficult discussion to have with your landlord.
A building upgrade tool has been developed to support building owners and managers engaging with tenants around the joint financial benefits of building retrofits. The tool is an initiative of the City of Melbourne and Low Carbon Australia. The tool works hand in glove with tenant involvement in Environmental Upgrade Agreements (EUAs), whereby tenants can contribute to building upgrades which may reduce their utility costs.
To find out more about the tool contact City of Melbourne’s Green Buildings Coordinator on +61 3 9658 8421 or email firstname.lastname@example.org.
For further details about EUAs please contact Sustainable Melbourne Fund 1300 432 044 or email email@example.com.
Catalyse capital upgrade investment
Is accessing capital potentially slowing down your client’s project? Environmental upgrade financing can be used to fund energy efficiency projects such as lighting upgrades, boiler and chiller upgrades, co and tri energy generation and solar installations for your clients (please review ‘project eligibility’ in the For Property Owners section of this page)
Step your clients through the 5 Step process which outlines the benefits of EUA financing, including longer payment terms that will match the time period of your project and working with financial institutions that understand energy efficiency finance.
EUAs make good business sense. See case studies from leading developers.
Bigger projects can carry larger fees, so developing a successful EUA project for your customer can provide win/win/win solutions, larger projects, better cashflows and net positive benefits for landlords and tenants.
Fees relate to the three phases of the application process: application, funding and repayment.
- Application fee – this $660 fee is due at the time of application submission and is applicable even if the project is not deemed to qualify for finance.
- Processing fee – a tiered fee based on the size of the funded amount, due at the time of funding. This fee covers the costs of ensuring legislative compliance and enabling the signing of the environmental upgrade agreement by the three parties, including preparation of documents, facilitation of meetings and declaration of the charge.
- Administration fee – a percentage of the capital outstanding on the amount financed, collected as itemised by the environmental upgrade charge. Currently the administration is 0.072% of the capital outstanding.
NOTE: All prices are subject to GST.
There are two primary paths a property owner can take to secure a financier and funding for a project:
- Pre-arranged financier – before applying to Sustainable Melbourne Fund for environmental upgrade finance, the property owner identifies a financier and obtains agreement that they will be the source of funds for the project.
- Post-arranged financier – the property owner applies to Sustainable Melbourne Fund for environmental upgrade finance without a pre-arranged agreement with a financier and seeks financing after receiving confirmation of eligibility from Sustainable Melbourne Fund.
Private financier information
Eureka Environmental Upgrade Finance
Eureka Environmental Upgrade Finance provides finance under the EUA program in Victoria. Eureka EUF is financed by National Australia Bank and the Clean Energy Finance Corporation. For more information visit eurekaeuf.com.au or contact:
Bank Australia is providing EUA finance for property owners. Finance packages can be tailored to suit your needs, with no minimum or maximum loan amounts and repayment terms of up to 20 years.
Visit the Bank Australia website for more information.
Alternatively, please contact your personal banking manager or our EUA product specialist:
Commercial Lending Manager
03 9854 4673
Financiers interested in participating in environmental upgrade finance can find out more information by contacting Sustainable Melbourne Fund on 1300 432 044 or firstname.lastname@example.org
Application and financing process
Environmental upgrade finance is now available to create a more sustainable future for your building and your business – click here to request application information.
Two-stage approval process
There are two distinct stages to the approval process for property owners applying for financing through 1200 Buildings environmental upgrade program:
1. Initial project approval
The property owner submits an application, accepts the terms and conditions, and Sustainable Melbourne Fund provides initial approval after verifying that the proposed project meets eligibility requirements. We will confirm eligibility in 10 business days where the project includes only common improvements.
Where custom improvements are included in the project, confirmation of eligibility will take an additional 10 business days. Sustainable Melbourne Fund may also request to a site visit prior to approving an application. The three possible outcomes of the initial application review process are:
- Approval: all improvements meet eligibility requirements.
- Partial approval: some improvements meet eligibility requirements.
- Application ineligible: improvements do not meet eligibility requirements.
In the case of either a partial approval or ineligibility, the property owner will be notified which improvements do not qualify and why. Sustainable Melbourne Fund will grant eligibility based on audit report estimates and/or initial quotes. Final quotes will be required before the signing of the agreement.
2. Financial closing
Upon receipt of the funding documents (letter of offer and payment schedule), statutory declaration and associated annexures, and final project scope and quotes, Sustainable Melbourne Fund will:
- Issue the draft environmental upgrade agreement to the property owner
- Send a copy to the financier
Once the property owner has added their details, the financier adds the funding details and forwards to Sustainable Melbourne Fund.
An environmental upgrade charge is declared on the property once the Chief Executive Officer of the City of Melbourne has signed the environmental upgrade agreement. An example Environmental Upgrade Agreement can be downloaded here.
NOTE: Melbourne City Council cannot enter into an environmental upgrade agreement until at least 28 days after Council has received the statutory declaration. This is subject to all parties agreeing to the environmental upgrade agreement.