Posted on 11/12/2019
As every publican would know, getting your landlord on board to invest in improving your building or venue can, at times, be a daunting and challenging task.
While each of you probably have your own ‘wish list’ of improvements you would like to see made to your venue – it is worth considering capital investments that are beneficial for both landlord and tenant alike.
Among the rising operating costs publicans have had to deal with in recent years, spiraling energy bills tend to stand tall above the rest. In such a competitive market, it makes sense to consider how renewable energy might help sure up your operations against what is one of the biggest challenges facing publicans in SA.
With that in mind, it’s imperative to get your landlord on board to invest in the venue and demonstrate why doing so is a ‘win-win’ scenario. This means presenting a compelling business case, showing them clarity around figures and a practical vision for the future benefits of such a capital expenditure project.
Some of you may be confident handling this process yourselves; however, for others it may be worth considering leaning on the expertise of an adviser to mediate and negotiate the process between yourself and your landlord. Installing solar panels can be a significant investment, and an adviser can ensure that the process is managed effectively, professionally and both you your landlord come away from the situation as beneficiaries.
While each situation is different, according to Paul Maiolo – Managing Director of leading SA-based company Solar Power Direct – a good start point is to consider a 15kw commercial solar solution.
Based on Solar Power Direct’s prices, a system such as this would cost approximately $14,000 installed and produce around $6000 in annual power savings.
While the initial cost represents a substantial investment, Perks Director of Corporate Finance and Advisory Andrew Watson also points out that there are several mechanisms through which the expenditure impact can be reduced.
“Larger solar companies like Solar Power Direct will often finance the capital cost and installation of the system, which enables the purchaser to pay for it in installments,” he says.
“In addition, the Federal Government continues to offer substantial rebates deducted from the upfront cost and based on the size of the system installed, which really helps to manage some of that capital expenditure impact.”
Further to this, Perks Director of Finance Bruce Debenham notes that financing the purchase through a bank is also an option, with some lenders offering better rates for capital projects that demonstrate a positive environmental impact.
“Many people aren’t aware that banks will offer better rates for projects like these to incentivise investment in renewable energy, which highlights the importance of shopping around,” he says.
It’s important to leverage your advisers’ expertise to make the process easier on you. For example, when we put together an application for a commercial loan for our clients, our Finance team looks at a wide range of lenders whilst our Accounting and Advisory teams focus on helping lay out the net impacts for everyone involved – from the landlord making the investment to the impact on your profit and loss as a tenant/ operator.
Importantly, as a tenant, bringing these options to the table when negotiating with your landlord shows that you’ve done your homework and are invested in a mutually beneficial future.
Sign up to receive important financial updates, useful tips, industry trends and whitepapers.