January 12th, 2011



Our first visit of the day was to speak with Matthew Hyder with Legacy Property. Matthew was originally from Ft. Worth but had married an Australian and had moved back to Australia to work for the second time. Legacy’s main focus was on the residential market and they had spent the last 18 months performing due diligence consulting for banks with distressed assets.

During Matt’s presentation he highlighted the differences between development in Australia vs. the US. He told us that the majority of property is sold through auctions and that this made the purchases and strategy of up front property development much different than the US private treaty sale process. In accordance with this, Australians are very inclined to own versus rent property and they have to fight hard to purchase their first home through this auction process. He also told us that the approvals process is much slower in Australia because of the multiple levels of government approval needed and the increased focus on the environment. As for the design, he told us that almost all properties in Australia are smaller (apartment SF and total development size) and that the local councils are much more involved in the approval of your overall building design. Finally he told us that the lending process is very similar that the US process right now but the cap rates are much lower because of yield compression and the taxes different with Australians not being able to deduct mortgage interest from their property taxes. While this information didn’t pertain to sustainable development it was very interesting to me because of my background in construction and real estate.

Along with general real estate topics, Matthew also touched on sustainable development in Australia. He explained the “BASIX” system, which is a residential sustainability baseline that all residential projects must meet in order to be constructed. He said it came around in 2005 and has worked out very well for the residential market. He also explained the “NABERS (National Building Environmental Rating System)”, which is a rating system for the energy and water usage of commercial properties. All commercial spaces in Australia must have their buildings rated and in accordance with the “Building Energy Efficiency Disclosure Act of 2010” they must include these ratings in any property advertisement or listing. I think that this system of rating all commercial spaces and disclosing this information is a great idea for multiple reasons. It obviously causes everyone to figure out exactly how efficient or inefficient their space is and where they can improve. It also informs that market on how efficient a space is and in turn if tenants stop renting space that is rated very inefficient than owners will be forced to make their space more sustainable which is a great result. Lastly, this rating system can give the city planners and developers a map of how sustainable areas of the city are and where there might be an opportunity to gain some efficiency with new development or redevelopment. I wish this system would be introduced in the US so that our market could figure out how inefficiently the majority of our buildings are and then hopefully cause more existing buildings to improve their efficiency.

During the afternoon we met with Robin Mellon, who is the Executive Director of Advocacy and International Relations for the Green Building Council of Australia. Robin was obviously very versed in sustainable development and gave us a great presentation on the green building status in Australia. He told us that, similar to the USGBC, the mission of the GBCA is to rate, educate and advocate sustainable construction and development in Australia and they currently have 900 members and 60 employees. They use a system known as “Green Star” to rate their buildings and it has 9 categories that are very similar to LEED’s system but more defined. Robin told us that, to date, they have 292 certified buildings in Australia and there are 510 projects that have registered or are under construction with certification as a goal. Robin also explained the design certified versus as-built certified process and after hearing his explanation and reasoning behind its use I actually feel quite a bit better about it and feel that the LEED system could possibly benefit from its use. The benefit would come from more buildings being designed with sustainable features and in-turn incorporated in the building. Even if the buildings didn’t incorporate all of the designed sustainable features just using some of them in the building would be better than using none. Robin also told us that they are looking at putting an expiration date on the design certification, which I believe needs to be done so that people can’t just design a sustainable building and have the building get the good will and publicity from this when the building wasn’t actually built as a sustainable structure.

As for the cost of building a certified sustainable building, Robin told us that their current number show that is costs + / - 2% more to construct a 4-star building and + / - 5 % to construct a 5-star building and that they have seen these numbers come down each year. This trend is also being realized in the US right now and I feel that with more experience and thought being applied to building sustainable the cost will continue to drop. This is very important because most people, including myself, believe that you won’t see a huge push to build sustainably until the costs are the same as building conventionally. Robin said that he believes both the government and private market should drive the green development movement and that the feels the Australian government and market have done a good job of doing this. I go back and forth on this topic because while I would love for the market to drive sustainable development I think that the market will not move to sustainable development fast enough and the government is going to have to force the issue some. The US governments are starting to push sustainable development with their policies and I think that if they use the Australian government’s tactics then they can successfully work with the market to spur more sustainable development. To end the visit Robin showed us around their 5-star rated office interior which used lighting controls, fresh air ventilation, worm farms and a blackwater recycling system. I was very impressed with the office features and how seamlessly many of them worked in the office environment. Overall it was a very informative and entertaining visit and I feel like I got a good amount of useful knowledge out of it.