Private Hospital asset
CASE STUDYInvestment Trust gains improved embedded network returns from rigorous cost reconciliation
EMBEDDED NETWORKS, COST RECONCILIATION, MEDICAL, NET LEASE, ENERGY MANAGEMENT, REPORTING
Embedded network cost recovery: getting it right
The Private Hospital is a fully leased medical asset that is anchored by major health tenants and operates as an embedded network with a large rooftop solar system.
Most tenants purchase power directly through the embedded network, while common area electricity costs are recovered via a net lease arrangement and tracked through extensive sub-metering across the site.
With the embedded network and solar system due for an annual cost reconciliation, 1Circle was appointed to establish if electrical usage and financial costs were accurately recorded and correctly allocated.
Embedded networks represent a significant revenue and cost management opportunity for property owners — but only when the underlying data is right. 1Circle’s expertise across embedded network financial structures, metering and reporting ensures that complexity doesn’t become a liability but is a retained profit.
Challenge
The private hospital presented a significant challenge with the following being present:
- 50+ meter points
- large-scale solar system directly supplying the embedded network
- unresolved discrepancies between operational reality and acquisition forecasts
- potential inconsistency between reports, budgets and lease terms
Solution
1Circle’s expert embedded network team completed an audit of the assets’ energy operations. This included:
- Data Collection: Aggregation of electricity consumption, cost, and solar energy data across more than 50 meters.
- Data Verification: Cross-checking consumption and billing data from over 3 years to ensure correct allocation.
- Cost Reconciliation: Collation of all available bills, embedded network reports and budget data to allocate and verify common area electrical costs
- Commercial Review: ensure correct alignment between the net lease agreement, embedded network reports and energy budgets
- Energy Management: Summarise the overall status of all monthly embedded network reports and bills, then provide a clear comparison of the embedded network cost recovery and profitability
An automated reporting solution was subsequently deployed to calculate the cost split between tenant and common area.
Results
12% increase in embedded network profitability
More accurate cost recovery of energy cost resulted in a reduction in embedded network operating cost that had a corresponding impact of improving embedded network profit.
39% improvement in common area cost recovery
Revised cost allocation and recovery to accurately reflect lease conditions and embedded network accounting policy, provided the justification to assign a greater proportion of energy cost to tenants from common area outgoings.
Process efficiency
pulls directly from the monthly embedded network reports and applies consistent formulas and lookups to calculate the cost split between tenant and common area. The result is a reporting tool that gives site management clear, accurate visibility every month — without the complexity that previously made this process difficult to get right.
Confidence in operation and asset performance
Beyond the immediate financial improvement, KordaMentha now has an ongoing reporting framework in place — one that ensures the embedded network numbers stay accurate month to month, without the manual complexity that made this difficult to manage previously.
For further information contact 1Circle