Post on 08-Feb-2017
New Opportunities in Property Assessed Clean Energy (PACE) financing
November 17, 2016
2016 Governor's Housing Conference
• Overview of Commercial PACE
• C-PACE in Virginia
• PACE in Play: Case Studies
Agenda
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Background: Abacus Property Solutions
• Independent real estate advisory firm, developing and financing energy solutions in commercial buildings.
• Provides PACE project development and consulting on national basis.
• Works closely with capital partners to identify PACE opportunities and develop PACE programs.
• Key stakeholder in amending 2015 PACE legislation and developing underwriting guidelines.
• New origination platform, Atlantic PACE, created to drive demand and consistency.
Overview of Commercial PACE
Fundamentals of C-PACE
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• Innovative way to pay for energy efficiency, renewable energy and water efficiency upgrades for commercial, multifamily and non-profit properties.
• Owners receive 100% project funding and pay it back as a line item on their property tax bill.
• Lien is senior to existing mortgage and typically equal status to property taxes.
• PACE assessment runs with the land so it transfers upon sale and does not accelerate.
• Owners receive funding principally through private capital providers.
• Set up by a locality and managed typically by third party contractor.
Eligible Improvements
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Where is PACE ?
7 Source: PACENation
PACE Structure
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3 Primary Parties Involved: 1. PACE Lender 2. Property Owner 3. Taxing Authority (or program administrator)
Assessment Pmts.
PACE Lender
Property Owner Taxing Authority / Program Admin
PACE Financing
Approve Project
Assessment Pmts.
What if you could build this?
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Or this?
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Instead of replacing this?
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Property Owners: Benefits
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No Money Out of Pocket: 100% financing + soft costs
Immediate Savings: Cash-flow positive on day one
Capital Budget: Paid with operating savings
Longer Term (20 + Yr.): Lower annual payments
Comprehensive Financing: Fills Capital Gaps
Replaces Equity or “Mezz” Debt: Frees Up Cash
Non recourse: Limits owner personal liability
Contractors: Benefits
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• Increase sales volume, improve profit margin
• Add staff, partner with other aligned companies like energy engineers
• Help customers reduce costs and improve value of their properties, allowing them to spend more money on even more building improvements
Local Governments: Benefits
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• Local business owners with critical capital improvements to their buildings – tangible retention strategy
• Creates local employment opportunities for G.C.s, trades, engineers, vendors, etc.
• Cap Ex improvements makes “tired” buildings more marketable
• More marketable buildings leads to better tenant retention
• Increased property values & construction fees yield more revenues for jurisdictions
• 3rd party administrator carries cost of starting and running program
C-PACE in Virginia
C-PACE in Virginia
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• Law originally enacted in 2009 and amended in 2015 to make C-PACE attractive to investors (lien priority)
• Law went into effect July 1, 2015 • DMME provided uniform financial underwriting
voluntary guidelines, released December 2015 • Active programs expected in 2017 including Arlington
County and potentially other interested localities including other Northern Virginia counties, Norfolk, Richmond, smaller localities (Roanoke, Charlottesville)
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• Loan secured by a voluntary special assessment lien, equal in priority to real estate taxes and senior in priority to pre-existing mortgages
• Locality must adopt an ordinance to create a PACE program
C-PACE in Virginia
• Locality can set up its own program or contract through a third party administrator
• Both existing buildings and new construction projects eligible under the law
• C-PACE includes all commercial, industrial, and multifamily residential over 4 units
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What’s coming in 2017? • Arlington County expected to select program
administrator by year end • DMME awarded DOE grant to Virginia, DC and
Maryland to drive consistency and cohesion • Virginia Energy Efficiency Council (VAEEC) awarded private
foundation grant to provide outreach to Norfolk, Charlottesville, and Richmond, and hired Jessica Greene to lead this effort
• City of Richmond has set up PACE working group to explore implementation in 2017
• Norfolk Chamber of Commerce promoting PACE in Hampton Roads
• Abacus providing technical expertise to these cities, DMME and VAEEC
PACE in Play: Case Studies
“Capital Gap” Project
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• Redevelopment of Historic Building in St. Louis
• Built in 1920’s as movie theater and office space
• Conversion of 158,000 sf. to a 150 room hotel with 2 floors of office and retail space.
• Improvements included roof & insulation upgrades, LED lighting, high efficiency HVAC and low flow plumbing
“Capital Gap” Project: Financials
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• Eligible for $8,500,000 in PACE
• Savings-to-Investment Ratio of 1.4
• 20-year term, 6% rate, 1 year of capitalized interest
• PACE LTV = 16.5%; CLTV = 73%
• Decreased owner equity by $500,000
• Financing by Twain Financial Partners
“Bread and Butter” Project
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Owner: 100% fixed rate long term financing Municipality: Prop. value increase, no city funding Contractor: greater deal flow, new financial product Mortgage Holder: prop. value increase, less loan risk Environmental: reduces carbon footprint B
enef
its
Project total: ~ $800,000 Term: 20 years Capital Provider: Inland Green Capital Program Admin: Greater Cincinnati PACE Mtg. Lender Consent: Yes O
verv
iew
Solar panels LED lighting Elevator modernization HVAC upgrades Energy savings: ~37% Electricity savings: $12,000/year
Up
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Thank You! Abigail Johnson, President
415.307.7777
Abacus Property Solutions abby@abacusprop.com
Atlantic PACE abby@atlanticpace.com