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Building Upgrade Finance

The City of Adelaide is proud to offer a new innovative way to finance building upgrades.

Designed for owners of Adelaide city commercial properties, the Building Upgrade Finance (BUF) mechanism assists building owners access long-term finance at competitive fixed interest rates to improve energy, water and waste efficiency of existing commercial buildings and undertake upgrades to heritage buildings.

This helps building owners improve the environmental performance of their property assets, leading to financial savings (through reduced utility bills) and contribution to Adelaide becoming a carbon-neutral city.

In an Australian first, BUF will also support building owners to undertake restoration and upgrades of heritage buildings, including modifications to meet building rules and disability code compliance, a measure to address long term vacancy.

Benefits of Building Upgrade Finance

No upfront capital or security

Upgrades can be made at zero upfront cost to the building owner, and with no additional security required. Traditional finance often requires additional security, and will usually not cover all project costs.

Reduced Re-Financing Risk

Competitive interest rates are available, fixed for 10 years or potentially longer. This reduces the re-financing risk and allows building owners to plan with more certainty. Traditional finance is generally only available for terms of 2-5 years.

Improved Cash Flow

Longer finance terms mean lower annual repayments, delivering immediate cash flow benefits to the owner. Under short term traditional finance, capital intensive upgrades may be unattractive due to the significant impact on cashflow.

Win-win for owner and tenants

Both owners and tenants benefit from building upgrades, through lower operating costs, a better working environment and a more valuable asset. Building Upgrade Finance provides a secure and transparent mechanism for owners and tenants to share the costs in proportion to the benefits they receive. Without this mechanism, it can be difficult for upgrades to be negotiated until the end of a lease.

Source: Sustainable Melbourne Fund

What is Building Upgrade Finance (BUF)?

BUF is a loan mechanism which helps building owners to access loans to improve the energy, water and environmental efficiency of existing commercial buildings.  

BUF is an innovative way to finance a building upgrade. It allows building owners to access longer-term fixed-interest finance, as well as share the costs and benefits of the upgrade with their tenants.

In an Australian first, BUF will also support building owners to undertake restoration and upgrades of heritage buildings, including modifications to meet building rules and disability code compliance, a measure to address long term vacancy.

The mechanism can help building owners to improve the environmental performance of their property assets without the risks and negative cash flow implications of traditional finance, as well as reduce operating costs, increase yields, help attract and retain tenants, and increase asset value.

Simply put, BUF is a new tool for improving the performance of a property asset. It provides an opportunity for commercial building owners and tenants to work together to improve the performance of their buildings, realise financial savings, and achieve win-win outcomes.

How does it work?

Building Upgrade Finance - How it Works chart

Under the Building Upgrade Finance mechanism, the City of Adelaide enters into a Building Upgrade Agreement (BUA) with a building owner and a financier. Under a BUA the building owner agrees to undertake upgrade works in respect of their building.

The financier agrees to advance money to the building owner for the purpose of funding the upgrade works, and the council agrees to levy a building upgrade charge against the land on which the building is situated. This charge is paid by the building owner to recoup the money advanced by the financier for the upgrade works, and is passed on to the financier by the council once received from the building owner.

Under the BUF loan mechanism, a council, a building owner and a financier voluntarily enter into a BUA, where the:

  • Building owner agrees to undertake upgrade works to their building
  • Financier agrees to finance the upgrade works
  • Council agrees to declare and levy a Building Upgrade Charge (BUC) against the land on which the building is situated
  • BUC is paid by the building owner to the council
  • Council passes payment on to the financier once received from the building owner, less administration fees.

The loan is tied to a property rather than a property owner and loan repayments are collected via a local government charge that is levied on the property and passed on to the financier.

As a result of the arrangement, the loan is effectively tied to the property rather than the property owner, with loan repayments collected via the building upgrade charge. In the event of the transfer of ownership of the property, the charge can remain with the property if the purchaser so agrees.

The strength of the mechanism lies within the building upgrade charge. The charge effectively secures the loan, being ranked senior to mortgages, taxes and other charges in the event of default. This provides heightened security to the financier, allowing them to offer finance to the building owner at more attractive terms.

Under many commercial leases, tenants pay local government charges. BUF provides an avenue for building owners and tenants to share the costs and benefits of building upgrades, provided certain conditions are met to ensure that tenants do not incur any financial detriment.

How to qualify and apply for BUF

To qualify for BUF, a building must be:

  • Predominantly non-residential - residential properties are not eligible to access the mechanism
  • At least two years’ post-construction before the BUA is made.

For further information or to apply for Building Upgrade Finance, please ring 08 8203 7203.

Other incentives and schemes you may benefit from

Heritage Incentive Scheme

 The scheme reimburses owners with a proportion of the costs involved in retaining, reinforcing and reinstating the heritage significance of State, Local and Character places which meet specific scheme requirements and in accordance with the Burra Charter. 

Find out more

Sustainability Incentive Schemes

We offer 10 different incentives to all building owners that have properties within the City of Adelaide for works completed within 12 months of applying. 

Find out more

Further Information

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