EUA’s a better way to pay

On Tuesday, Scott Bocskay, CEO of Sustainable Melbourne Fund presented at the Total Facilities Live conference held at Melbourne Exhibition and Convention Centre emphasising how an Environmental Upgrade Agreement (EUA) provided the most cost effective way to pay for a building upgrade compared with traditional debt.

During his presentation, Scott discussed the availability of EUA’s and types of upgrade projects that can be financed using an EUA. Scott also discussed the importance of working with tenants to deliver desirable project outcomes and provided case studies of existing EUAs.

Importantly though, benefits to cash flow where emphasised. In the worked example presented, by undertaking a $2,620,800 upgrade with repayment terms over 15 years at 6.75% interest through an EUA structure rather than a typical debt structure, project cash flows improved by $448,628 p.a. resulting in a previously negative NPV project becoming positive. An important distinction between an EUA and typical lending is the opportunity to seek contributions from the tenants as they are beneficiaries of better preforming building. EUA loans are repaid through the City Of Melbourne rate system and therefore, a portion can be passed on to tenants, addressing the split incentive. By seeking tenant contribution you will further reduce payments, and improve cash flows.

Being in the front line, facility managers have intimate knowledge of their buildings, being able to deliver value to both landlords and tenants. As buildings tire and as market expectations shift with tenants expecting more energy efficient buildings accessing appropriate finance for environmental upgrades is increasingly becoming a priority.

If you have an upgrade in mind for your building or would be keen on getting a clearer understanding please contact Michael Lambden, Client Manager at Sustainable Melbourne Fund by email or by calling 9658 8740.