Impact Investment Group (Melbourne)

Impact Investment Group (Melbourne)

Sector: Commercial office refurbishment

Address: 401 Collins St, Melbourne VIC 3600

Environmental upgrade: Improve the building NABERS rating from 2.5 to 3.5 stars

Key drivers: Improve appeal and value of asset

Interaction with SMF: Engaged SMF to finance EUA under a fixed rate arrangement

 

Problem

How can you safely secure funds to convert an old, undesirable office location into a newly refurbished building – one that will attract a strong, long-term tenant?

401 Collins St is an iconic art-deco building in the heart of Melbourne’s banking district. Built more than 80 years ago in 1936, it has aged significantly and lacks modern features. That was until Impact Investment Group acquired the property in 2014 with the intention of transforming 401 Collins St into a prime blue-chip address.

Solution

Restoration began in 2017. Finance was sourced from several lenders and comprehensive environmental works were undertaken including chiller replacement, pipework insulation, an outside air system upgrade, a toilet exhaust system upgrade, a BMS upgrade, and electrical sub metering.

Process

The funds for these environmental works were sourced via an EUA (Environmental Upgrade Agreement), while the funds for other renovations were sourced via a traditional bank loan. This combination of two lenders provided diversity to Impact’s capital stack at an affordable rate.

“EUAs provide a low-cost capital option.” – Roni Karika, Senior Asset Manager

EUAs reduce bank loan and equity requirements, minimise long-term financial risk, and increase short-term cashflow.

Outcome

Since completing the renovations, Impact has successfully tenanted the building to co-working franchise WeWork on a 15-year contract. In addition, power bills for the property have reduced. Electricity has dropped by 32%, and gas has dropped by 16%.

 

Download the Case Study (PDF, 239KB)
Download Capital Stack Brochure (PDF, 309KB)