PACE 101 Presentation

PACE 101 Workshop | April 2016

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A new way to fund real estate improvements….

Confidential - PACE Equity2

Redirecting

energy

expenditures

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What is PACE?

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✓ Property Assessed Clean Energy is a legislated program for private lending to be secured by a super priority lien.

✓ PACE is modeled after methods to fund public benefits such as roads, sidewalks, and fire departments.

✓ Payments are a voluntary assessment made by the local tax commissioner.

✓ PACE covers 100% of the EE improvement costs, up 25% of a building's value, for terms up to 20-25 years.

✓ 734 Commercial Projects Completed – $230M in funded projects (March 2016)

Confidential - PACE Equity

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Eligible Improvement Measures


LED LightingCommercial Boiler VRF HVAC System

Chiller Fume Hood

Elevator Cool RoofWindows Solar PVControls

Escalator Refrigeration Parking Lights

Benefits of PACE


PACE Benefit Barrier✓ Considered Equity in development capital stack✓ Long-term (up to 20 years) low cost capital✓ Ability to pass on to tenants✓ Differentiated tax & balance sheet treatment✓ Savings to Direct Investment of 1 to 1 or better

ROI

✓ Ease in passing costs to tenants in triple net lease (to match savings) Split Incentive

✓ Transfers upon sale as assessment remains with the property✓ Flexible options to pre-pay balance at sale of asset

Short Term View

✓ 100% financing requires no up-front cash investment✓ Effective with complicated ownership/development structures✓ No acceleration upon bank default ✓ No personal guarantees✓ Funds available early to fund construction costs

Access to Capital

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Capital Stack - Developer Perspective

4.5% 67%Debt$18M

33% Equity$10M

9.0% WACC

12% PACE $3.5M

7.6% WACC

$28 MM Capital Stack Illustration

Traditional Using PACE

18%

4.5%

6.6%

18%

67%Debt $18M

21% Equity $6.5M

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Cash Flow - Owner PerspectiveExample: $920k Chiller Upgrade ($54M, 205k SF Class A Office)

PACE Term 17 yrs @ 6.5%

Fixed Annual PMT

$109,000

Ave. Annual Savings

$233,000

Annual Cash Flow

+$112,000

PACE-centric project advantage

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Project Governance❑ Experience & Knowledge of PACE ❑ Stakeholder Engagement/Collaboration❑ PACE District Interaction

Energy Engineering❑ Bundling of multiple measures❑ Development of energy models❑ Additional Recommendations

Financing❑ Project Development Funding❑ Construction Financing❑ PACE Financing

Confidential - PACE Equity

Ideal PACE Team

PACEProject Mgmt

Owner/Architect

PACEDistrict

3rd Party Reviewer

Engineer/Installer

PACE Lender

PACE reduces barriers, aligns incentives and prioritizes the owner’s interests

PACE and Lenders


❑ Why do Lenders Support PACE?❑ Required Lender Consent❑ Funds do not accelerate upon default❑ No impact to lender’s ability to

foreclose❑ Ability to transfer upon sale for $0 and

no paperwork❑ Long term fixed rate financing❑ Ability to recoup from net lease tenants❑ Savings exceeds direct costs with added

property value❑ Maintain clients or gain new ones who

need additional capital❑ Client Solutions

Lenders Providing Consent


❑ National Banks

❑ Bank of America

❑ Bank of New York Mellon

❑ Citibank

❑ JP Morgan Chase

❑ TD Bank

❑ US Bank

❑ Wells Fargo

❑ Regional Banks

❑ Associated Bank

❑ Bank of the West

❑ BMO Harris Bank

❑ Bremer Bank

❑ California Bank and Trust

❑ Cheviot Savings Bank

❑ Citizens Bank

❑ Fifth Third Bank

❑ First Bank of Boulder

❑ First Community Bank

❑ First Merit Bank

❑ First Republic Bank

❑ First Utah Bank

❑ Five Star Bank

❑ Great Western Bank

❑ Guaranty Bank and Trust

❑ Liberty Bank

❑ NorthEast Community Bank

❑ Mechanics Bank

❑ M&T Bank

❑ Peoples Community Bank

❑ Preferred Bank

❑ Private Bank

❑ Sterling Savings Bank

❑ Umpqua Bank

❑ Union Bank of California

❑ Webster Bank

❑ WestAmerica Bank

❑ International Banks

❑ Deutsche Bank

❑ Hanmi Bank

❑ Helaba Lendesbank Hessen-Thurin-gen

❑ HSH Nordbank

❑ Royal Bank of Canada (as LIHTC Syndicator)

❑ Local Banks

❑ American River Bank

❑ Bank of Ann Arbor

❑ Bank Mutual

❑ Bankwell

❑ Berkshire Bank

❑ Chelsea State Bank

❑ Chelsea Groton Bank

❑ Circle Bank

❑ Cornerstone Community Bank

❑ Dime Bank

❑ Exchange Bank

❑ Fairfield Community Bank

❑ First Community Bank

❑ First National Bank of Boulder

❑ First Niagara Bank

❑ Flatirons Bank of Boulder

❑ Guaranty Bank and Trust

❑ Litchfield Bancorp

❑ NUVO Bank

❑ Monson Savings Bank

❑ Oritani Bank

❑ PeoplesBank of Massachusetts

❑ PyraMax Bank

❑ Rockville Bank

❑ Santa Cruz County Bank

❑ Security Bank of Kansas City

❑ Simsbury Bank

❑ Sonoma Bank

❑ State Bank of Delano

❑ Summit State Bank

❑ Thomaston Savings Bank

❑ Insurance Companies

❑ Mutual of Omaha

❑ Metropolitan Life Insurance (and as LIHTC Investor)

❑ Northwest Mutual Insurance

❑ Pacific Life Insurance

❑ Protective Life Insurance

❑ Prudential Insurance

❑ Riversource Life Insurance Company

❑ Standard Life Insurance

❑ The Standard-Stancorp Mortgage Investors

❑ Specialized Lenders

❑ Ally Capital

❑ American Agricultural Bank

❑ Ameriprise Financial

❑ Farm Credit East

❑ Eagle Bank

❑ New Resource Bank

❑ Pacific Union 7th Day Adventists (Parker Mortgage & Investment Co.)

❑ Thrivent Financial

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City of Dallas

Travis/Wilco

Houston ETJ

LRGV Counties

Keeping PACE in Texas

● Uniform Rqmts.● Common Admin.● Open Lending Market

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Upcoming Austin/Travis Projects

$20M Industrial Conversion

$3M Solar PV on Class A Office$2M CHP for Downtown Office

$750k Chiller/Cooling Tower on Historic Building$1M Chiller on Class A Office$400k TPO Roof on Retail Center$640k RTU, Roof and Solar PV on Retail Center

Not applicable in Texas

$300k remodel for Non-Profit Warehouse Facility

X

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Commercial Office:Prologis Headquarters, San Francisco, CA


❑ Customer Objectives❑ Improve building performance &

comfort❑ Reduce energy by at least 30%❑ Allocate savings to 5 tenants❑ Improve cashflow on day 1

❑ Improvements:❑ 1,500 new light fixtures, 200 kW

Rooftop solar, HVAC Overhaul

❑ Results❑ Purchased energy reduced by 32%❑ Annual estimated cost savings of

$98,000❑ No increase in operating expenses

Project Details❑ PACE Program: Greenfinance SF❑ PACE Assessment: $1.4M, 20 years @

6.93%❑ Building: 131k sf, Built in 1918, $30m

value

Source: PACE Now

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Retail:Simon Properties Mall, Santa Rosa, CA


❑ Customer Objectives❑ Install a “Cool Roof”❑ Increase tenant comfort &

satisfaction❑ Improve overall building

performance❑ Reduce energy costs

❑ Improvements:❑ Reflective Cool Roof

❑ Results❑ Implementation of “Cool Roof” that

stays up to 60 degrees cooler

Project Details❑ PACE Program: Sonoma SCEIP Program

❑ PACE Assessment: $463k, 10 years @ 7%

❑ Building: 699k sf, Built in 1971, $240m value

❑

Source: PACE Now

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Industrial:Cambridge Engineering, Chesterfield, MO


❑ Customer Objectives❑ Reduce overall energy use❑ Increase Real Estate Value❑ Improve Indoor Air Quality

❑ Measures❑ Lighting, Roof Replacement,

HVAC, VAV distribution

❑ Results❑ Total PACE Financing: $610,500❑ Term: 10 years❑ Annual Assessment: $83,600❑ Interest Rate: 5.57%❑ Energy Savings: 30%

Project Details❑ Type: Industrial Manufacturing❑ Square feet: 116,239❑ Stories: one story, single user masonry

building❑ Year Built: 1979

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Non-Profit:University Club, Milwaukee WI


❑ Customer Objectives❑ Replace makeup air units to bring

the building in balance❑ Remediate steam traps❑ Window Repairs❑ LED Lighting❑ Fund HVAC as part of renovation

to attract new members

❑ Results❑ $660K in funded building

improvements❑ 30% Utility Savings – avg of

$75K/yr over term❑ 35% Coverage of renovation budget

Project Details❑ First Milwaukee PACE closing (Summer

2014)❑ Financing by Milwaukee Economic

Development Council (MEDC)❑ Rate 6.0%, 18 year term❑ Project governance, energy engineering &

savings guarantee by PACE Equity

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Q&A

Thank You!

PACE 101 Presentation

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Transcript of PACE 101 Presentation