Early deals in other metro markets indicate where we anticipate NYC PACE’s first financing opportunities to come from. Typically, these are mid-stream construction projects that are being developed as the program opens. Energy savings and efficiency were already part of the developer’s plans and they are able to take advantage of the emerging programs. In the New York market, this could very much be the case as well, particularly because the program will be available to new and ongoing builds that face a tighter capital market and rising construction costs in the COVID era, while Climate Act affected existing properties have a little time to prepare their retrofit plans.
Chicago
In a city where 71% of offices meet green standards according to an index published by CBRE Group, Maastricht University, and the University of Guelph, the Chicago PACE program was first utilized in December of 2019 by a gut rehabilitation project for a new hotel development to be called “the Reserve Hotel.” The property qualified for financing based on numerous building envelope improvements, low flow water fixtures and high-efficiency HVAC systems.
In a Chicago Sun-Times article covering the program’s first deal, the Reserve Hotel’s developer, the Prime Group, was reported to be paying 5.5% interest on the C-PACE loan. The money will go toward work on windows, lighting, elevators, plumbing and heating and cooling systems, saving an estimated $3 million in operating expenses over the life of the loan.
“This is a good program for both the city and the private sector,” said the Prime Group’s chairman, Michael Reschke.1
Philadelphia
The first deal in Philadelphia was completed in July of 2020 after the Philadelphia Energy Authority launched its C-PACE program. The mixed-use development called “J-centrel,” will feature 30,000 square feet of ground-floor commercial space, and 116 converted loft-style apartments in a former textile mill.
$1,500,000 in C-PACE financing was secured to pay for energy and water efficiency upgrades in the Kensington-Harrowgate neighborhood of Philadelphia. Together, the measures are expected to reduce the building’s total carbon footprint by 2,700 metric tons of CO2 equivalent.
Brian Murray, CEO and Founder of Shift Capital, the developer of J-centrel, referenced C-PACE as a key tool for their project’s capital stack in a release published by the Philadelphia Energy Authority. “C-PACE provided us with competitively-priced financing and a long-term repayment schedule to allow the energy efficiency improvements for the commercial portion of the project to be cash-flow positive right away,” he said.
Miami
One of the first deals in Miami’s program was a pure retrofit, with PACE financing the amount of $3.7 million over 20-years, supporting the renovation of the Victoria Nursing and Rehabilitation Center, located two miles south of Downtown Miami.
The skilled nursing facility is expanding to provide 48 new beds in an upgraded and more efficient building using C-PACE funding. The program was introduced by professionals at Trane, who were tasked with enhancing the building’s HVAC; however, the capital provider was able to introduce additional eligible improvements within the existing expansion to support a much greater capital contribution. Among the covered measures, the facility was able to add a new standby emergency generator to comply with Florida's state law mandating backup power sources in nursing homes and assisted living facilities signed into law in 2018 by Gov. Rick Scott.
"The PACE program has enabled our team to engage in a project that maximizes both the energy efficiency of our facility as well as the comfort and safety of our residents," explained Richard Stacey, CEO of Victoria Nursing and Rehabilitation Center. "There's a benefit to the property owner, environment and community."2
These three cities have each given an example of what PACE can look like under different settings. Whether it's a hotel, mixed-use development, or a rehabilitation center, PACE can be a useful tool when it comes to energy efficiency.
1. David Roeder. "Luxury hotel on La Salle to get $21M in city-backed financing to save energy." Chicago Sun Times. December 3, 2019.
2. Adam Moskowitz. "CounterpointeSRE Closes $3.7 Million C-PACE Financing for Expansion and Updates to Victoria Nursing and Rehab Center in Miami, Florida." PR Newswire. November 12, 2019.
