This article originally appeared in Australian Financial Review
The push by commercial landlords into renewable energy has gathered pace with fund manager Real Asset Management (RAM) leasing the rooftops of nine of its neighbourhood malls to renewable energy specialist Solar Bay.The deal with Solar Bay will generate a fresh income stream for RAM, whilst also lowering occupancy costs for current and future tenants.
RAM owns 13 neighbourhood centres – 11 of them within its $300 million unlisted retail fund – as well as a medical centre and office building on behalf of high-net-worth individuals and family offices in the Asia-Pacific.
Nine of them – Keppel Bay Plaza, Ballina Central, Yeronga Village, Coles Tanilba Bay, Mowbray Marketplace, Springfield Fair, The Hub Westlake, Miami Day Hospital, North Lakes and Coomera Square – will have their current energy network replaced with Solar Bay systems.
RAM’s head of real estate, Will Gray, said the long-term leasing deal with Solar Bay would generate income equivalent to adding an additional speciality tenant in each mall.
He said the deal would primarily benefit smaller tenants in its malls that don’t have access to the cheaper energy deals negotiated by Coles and Woolworths.
“Over time Coles and Woolworths will also dovetail into the solar platform,”Mr Gray said.
He added that the transaction was also part of RAM’s “continuing drive to look for mechanisms to reduce the carbon footprint across our $420 million diversified real estate portfolio”.
‘Landlords can increase their income’
Solar Bay’s deal with RAM was negotiated by Mark Stowe and Josh Bush of Colliers International.
“By utilising the power of solar electricity, landlords can increase their income and are more attractive when it comes to retaining tenants,” said Mr Bush.
Solar Bay’s chief investment officer, Andrew Archibald, said on a portfolio basis the solar systems will provide over 40 per cent of the centre’s total power consumption and have been future-proofed to allow for new technology such as electric vehicle charging stations.
The RAM deals follows many other commercial landlords across retail, office, industrial and rural investing in renewable energy infrastructure or striking leasing deal with providers like Solar Bay.
Last year, mall owner Vicinity Centres kicked off a $50 million expansion of its solar energy roll-out, creating the largest such commercial property program in the country.
Another retail landlord, SCA Property Group, struck a $4.33 million deal with ReNu Energy in 2017 to install solar panels at four of its shopping centres.
Outside of the retail sector, ASX-listed Industria REIT, the owner of $692 million of East Coast business parks and warehouses, said in February its investment in solar panels had delivered a 15 per cent return on costs. The trust said 43 per cent of the energy used in its Brisbane Technology Park was now being generated by solar energy.