Getting a Collins Street property in itself is a primary focus for a lot of buyers.
Impact fund manager Darren Brusnahan
“Getting a Collins Street property in itself is a primary focus for a lot of buyers,” Mr Brusnahan said.
“But given the refurb involved 12 months of downtime, buyers will look to pay a premium because it’s been done.”
Built in Art Moderne style, the building is mainly occupied by the co-working provider WeWork, which has 12 years on a lease covering 7000 square metres over 11 levels. Natural History – a funky bar featuring taxidermied fauna – occupies the ground level.
The intended divestment follows a $650 million slew of property sales from the boutique funds manager, which aims to marry social purpose with high returns.
In late 2017 Impact sold the Four Points by Sheraton hotel near Sydney’s Central Station to developer Jerry Schwartz for $156 million.
In 2018 the fund sold the Kingsgate office tower in Brisbane’s showgrounds for $170 million and also transacted the $70 million sale of 100 Broadway – occupied by University of Technology Sydney – to MTAA Super for $70 million.
In Geelong, the fund sold the Transport Accident Commission centre to listed funds manager Centuria for $115 million.
Mr Brusnahan hoped the valuation lift on 401 Collins Street would encourage owners of other vintage buildings to invest in sustainability measures.
Initially rated 2.5 stars under the National Australian Built Environment Ratings System, or NABERS, 401 Collins won five-star status after investments including upgrading insulation, installing high-efficiency air-cooled chiller units, overhauling lifts and upgrading the building management system.
“The ratings are designed for newer buildings,” Mr Brusnahan said.
“It’s hard to double glaze older buildings that are single glazed and they don’t have the same air tightness, which makes the airconditioning less efficient.”
Based on US data, Impact estimates that heating, ventilation and cooling accounts for just over half of a typical building’s energy costs, with lighting accounting for a further one quarter.
According to NABERS, buildings use 40 per cent of the world’s energy and 20 per cent of drinking water and are responsible for 40 per cent of carbon emissions. In a benchmarking report, consultant Ausnviro identified only 105 buildings nationally that have achieved a ‘whole building’ NABERS rating of five stars or more.
Of these, only six are more than 70 years old. The five others are the Centrelink-occupied 251 Murray Road in Preston, Melbourne, 23-33 Mary Street in Sydney’s Surry Hills, 200 Miller Street in North Sydney, 49-51 Victoria Street in Grafton and 357 Hunter Street in Newcastle.
According to Sustainability Victoria, the state’s current office stock of 12.6 million square metres averages a 3.13 NABERS rating. But a shift to five stars would halve the 1.9 million kilograms of annual emissions generated by the sector.
The body estimates potential energy savings of up to 29 per cent, with a payback on investment of less than three years.
NABERS is managed by the NSW Department of Planning, Industry and Environment on behalf of other Australian governments.