Building Upgrade Finance — M20 Parramatta


[Music plays] (Michael Peters) The building is
situated in the Parramatta CBD. It’s based on the designs of Jeanette
Le Corbusier, a Swiss Frenchman. It’s known as
brutalism, the design and it was the highest building in
Parramatta at the time it was built. The building was run down.
It was pretty much empty. The tenants that were in the
building, many were here since 1963 and we couldn’t get a
return on the investment. We needed to change the way we
were consuming electricity. So, we had to change the
air conditioning system, had to change the building
management system, had to install LEDs and sensors and pretty much try to
manage how we spent the power. The building’s book valuation
was extraordinarily low. The rental yield was very low. The
outgoings were tremendously high. For example, it cost us something in
the order of $14 – $16,000 a month to put power in this building. Considering that only a third of the
building was actually occupied, that would make us one of the
most expensive buildings definitely in Parramatta and
maybe in Australia for its size. The problem we had is that the
Consultants, the Real Estate Agents, they all advise against
overcapitalising, fixing the building. They all believe that look this is the
maximum that you’re ever going to get, make what you can out of it
but it’s not worth fixing. We never get the money, we never get
the type of client you’re looking for and you’ll never get the
savings you’re looking for because the technology
is just too expensive. The banks won’t lend on it because
the banks are not confident that you’ll get your money back. We visited Council with a
proposal to build a carpark at the rear of the building and at
that meeting we floated the idea of refurbishing the building. We told the Council that we had some
difficulty in raising the finance and they proposed that we look at the
Building Upgrade Finance Project. So, we looked in to it and
we’re happy we did so. We transformed an
underperforming asset. So, now we’re three times more
profitable than we were in the past. We have a better type of tenant.
The building is full. There’s no vacancy and more importantly
people are happy to be here and want to be here. So, we have a
demand for new tenants to come in. Interestingly the property
owners, not just in Parramatta have a perception that if
you’re going to spend a dollar you’re going to get
your dollar back and old buildings are very
difficult to refurbish. So, we’ve proven you can actually
refurbish old buildings. You can increase the rent and also
change the profile of the building and of course that follows through
with increasing the price of the actual asset. So, the asset is performing better,
it’s worth more and its yield is up. [Music plays]

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