One of the most common complaints from building owners who want to upgrade their facilities, be more energy efficient and green, and save costs is that they do not have the funds to invest in those energy-saving technologies. If they can just get access to capital cheaply, they would make the investment and reap the benefits and savings in the future. As has been discussed in these writings, energy upgrade is a great investment, as good as any in any bank or on Wall St. A well-designed and executed project can net the building owner or company 20%, 30% or greater return on investment per year. Given that, a number of financial institutions have begun specializing in energy project financing. They realize with returns like these the risk of a borrower not having the funds to pay a loan back is very low. With low risk, they can afford to offer relatively low interest rate loans. Never has funds been so available for energy upgrade projects.
One area of lending specifically for energy projects is Commercial Property Assessed Clean Energy or C-PACE (in some areas, known as PACE). With C-PACE, building owners can begin to implement smart energy upgrades quickly and re-pay over a long time through a voluntary benefit assessment lien, levied and recorded against the benefiting property, to be repaid along with property taxes. C-PACE allows building owners to potentially finance 100% of the cost of energy upgrades with, in most cases, only positive cash flow. The team assesses the likely future energy cost savings over time and arranges payments based on those projections, so that there is only positive cash flow. In the meantime, the upgrade is completed and the owner gets the benefits while repayment is made. Payments are usually made at the same time as property taxes are paid to the municipality, which transfers C-PACE payments to the lender. The owner knows when payment is due and how much.
A C-PACE loan is repaid through a long-term assessment, similar to property taxes, spacing out payments longer than traditional 7-year financing. Therefore, energy cost savings will exceed annual C-PACE payments for nearly all applicable projects. Only positive cash flow. While the owner receives a long-term asset upgrade, tenants get lower overall expenses and a more productive work environment.
Building owners commonly express concern that a C-PACE loan binds it to the building. While the buyer does have the obligation to pay back the loan once they take over ownership, the C-PACE lender has no say regarding the sale.
The C-PACE lender does not impose traditional lender requirements, such as quarterly reporting, maintenance of debt covenants or similar requirements. One less item for the building owner to worry about.
Things are topsy-turvy in government, in terms of energy policies and incentives to upgrade one’s energy systems. But waiting is not the answer because there is much money being wasted waiting and in the meantime operating old, clunky energy inefficient systems. This is simply not good business. As funds are now more readily available with terms that are more acceptable, 2019 is the best time to borrow funds and move forward and evaluate, design, and implement good energy upgrade projects.
CCES has the experts to help you plan the most financially beneficial energy upgrade project. We can give you several options to save money on energy and related systems and you can choose the one(s) most beneficial to you. CCES knows the PACE and C-PACE programs, as well as other lenders to help your projects go to reality and get the most benefits for you. Contact us today at karell@CCESworld.com or at 914-584-6720.