PACE Financing in Practice

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1 PACE Financing in Practice Introduction to PACE December 2013

2 OLD CONCEPT 1736 First Assessment District for fire prevention in Philadelphia Today 37,000 Assessment Districts nationwide 2

3 NEW APPLICATION STATE LEGISLATION 31 states and DC, thus far, account for nearly 80% of US population HI Existing Authority 2010 PACE enabled 2013/14 legislative initiatives or planning to establish PACE legislation 3

4 HOW PACE WORKS Local government authorizes PACE assessment Building owner selects projects Building s mortgage lender consents to PACE lien PACE program arranges or provides financing Assessment added to tax roll 4

5 PACE SIMPLE CASH FLOWS Contractor $ for Project Funding $ to Repay Project Funder 2 $ Building Owner 3 $ Tax Receiver 1 $ 4 $ PACE Project Funder 5

6 COMMERCIAL PACE

7 WHO & WHAT? Who Can Use PACE? Large or small commercial Industrial Multi-family housing (5+) Agricultural Not-for-profits Government facilities What Types of Projects? Projects that demonstrate savings Permanently affixed CHP Installation Lighting fixtures & controls HVAC upgrades Roofing Envelope upgrades Elevator modernization Solar PV or fuel cells i. PACE PPA 7

8 WHY PACE? Barriers to EE Upgrades 1. Lack of funds 2. No lenders 3. Poor ROI Short term funding 4. Might sell property 5. Split incentives 6. Information gaps PACE Solutions % external source 2. Unlimited private capital 3. Positive cash flow Long term funding 4. Transfers to new owner 5. Tenants share cost & savings 6. Local awareness 8

9 ENERGY EFFICIENCY MAKES SENSE Sources: CoStar, CBRE, DB, McGraw Hill Construction surveys ( 2012) 9

10 PACE PROJECT EXAMPLE $1,500,000 add to Building Value (8.9%) Estimated Project cost $550, Year Old, 200,000 ft 2 office building in Washington, D.C 10

11 JUNE Projects completed - $5 million PACE enabled Early stage PACE program development PACE programs with funded projects 11 11

12 TODAY 194 Projects completed - $52 million Pipeline Projects - $135+ million PACE enabled New legislative effort Early stage PACE program development Launched PACE programs PACE programs with funded projects 12

13 C-PACE CONNECTICUT - NORWALK CENTER A mall owner in Norwalk found PACE provided an ideal financing solution to pay for energy efficiency and renewable energy Hartford West Hartford Bridgeport improvements. This project resulted in 158,000 lb in avoided greenhouse gas emissions and estimated annual savings of $17,500. Project Economics Amount - $285,000 Term 13 years Rate 4.5% fixed Building Value - $25 MM Norwalk Simsbury Stamford Stratford Southbury

14 SIMON PROPERTY GROUP SANTA ROSA, CA Simon used PACE to finance a $463 thousand cool roof project at its Santa Rosa Plaza Mall in Sonoma County, CA It is our hope that we will serve as pioneers in this arena, encouraging others to explore the many ways to reduce energy use now, rather than delaying sound financial and environmental decisions. George Caraghiaur, SVP Energy and Procurement at Simon Property Group 14

15 PROLOGIS, INC. SAN FRANCISCO, CA Prologis used PACE to finance a $1.4 million energy efficiency and solar energy project at its San Francisco headquarters Prologis is optimistic about the future of PACE,. There are a number of opportunities over a long term in other property sectors too. Aaron Binkley, Director of Sustainability Programs 15

16 TOLEDO LUCAS COUNTY PORT AUTHORITY, OH PACE has financed $12 million in energy efficiency upgrades to over 50 buildings in Toledo in just the last 6 months through a program managed by the Port Authority. Project mix includes buildings owned by: City of Toledo Port Authority Private Commercial 16

17 GRANDVIEW TIRE & AUTO EDINA, MN Family owned Grandview Tire & Auto used PACE to finance solar panels on its roof. The PACE portion of the project was $34,000 and Edina s program cost the city just $12,000 to implement. PACE preserves capital, makes good financial sense for property owners due to the fact that the assessment stays with the property. Most importantly, it is the right thing to do. Brad Hansen, Blue Horizon Energy 17

18 MOUNTAIN VILLAGE SONOMA COUNTY, CA Sonoma Mountain Village used PACE to finance a 1 MW solar electric system in Rohnert Park (CA) that combined with an older system allowed SMV to cover 100% of its electric needs from on-site renewable power. Project Economics Amount - $1,600,000 Term 20 years Rate 7% fixed Building Value - $50,000,000 PACE Assessment to Value 3.2% 18

19 PACE MARKET DATA PACE Projects, k ft 2 Cumulative PACE Financing, millions > $60 $50 $40 $30 $20 $10 $ Dec

20 PACE MARKET DATA PACE Projects by building type PACE Projects by category 6% 24% 15% 13% 23% 4% 4% 4% 7% Office Multifamily Retail Services Agriculture Hotel Industrial Other Government Mixed 15% Energy Efficiency 61% Renewable Energy 24% 20 20