01 Performance HIGH INCOME SUSTAINABLE OFFICE TRUST

CEFC ANNUAL REPORT / 2014–15

High Income Sustainable Office Trust

The CEFC has committed up to $125 million as cornerstone equity in the EG Group’s $400 million High Income Sustainable Office Trust (HISOT) – a wholesale property fund focused on improving the building controls and energy performance of commercial office properties.

Project Scope

The HISOT trust, managed by leading real estate fund manager EG Group, is targeting a portfolio of about 12 commercial properties in major metropolitan office markets on the eastern seaboard.

Once acquired, the properties will undergo retrofits including the latest integrated building and HVAC management systems, with real-time energy monitoring technologies and other building improvements to lift energy and operating performance.

The properties are expected to achieve an increase of at least two stars under the National Australian Built Environment Rating System (NABERS) across the portfolio, with each property targeting an outcome of 4.5 stars post upgrade.

Office buildings with a high NABERS rating have been found to have higher rents, higher net operating income and lower capital expenditure.

They also have lower vacancy rates and longer Weighted Average Lease Expiry when compared with buildings with low NABERS ratings.

Looking to the future

There are compelling reasons for property owners to upgrade older commercial buildings.

Apart from lower energy costs, greener buildings have been shown to deliver higher rental income and higher net operating income. At the same time, upgraded buildings require lower capital expenditure and have lower vacancy rates.

About 20 per cent of Australia’s national greenhouse gas emissions come from buildings, and commercial buildings account for nearly half of these. More than 90 per cent of the emissions from commercial buildings comes from the consumption of grid-supplied electricity.

The property sector is a key area where energy efficiency investment can have a substantial and beneficial cross-economy impact.

Our focus is toward taking buildings reaching the end of their economic lifecycle, making the right choices and installing the right equipment to reposition them to meet modern standards and become attractive to high quality tenants.” EG Group CEO, Adam Geha