Public Private Partnerships…What are They Good For?

By Duke Dennis Over its 25-year operating history, Metropolitan Capital Advisors (MCA) has worked on numerous Public Private Partnership (PPP) transaction financings. PPPs have increasingly Read more

The Power of RECA (Real Estate Capital Alliance)

By: Scott Lynn and Andrew Hanzl Metropolitan Capital Advisors (“MCA”) is a member of the Real Estate Capital Alliance ("RECA"), a professional association of 18 Read more

Getting Creative: HUD 221 (D) (4)

By: Andrew Hanzl Take notice! The landscape is shifting: In anticipation of a market slow-down, commercial real estate lenders are dialing back their leverage and Read more

Private Lenders: Filling the Void

by Roger Wyche There will be approximately $96 billion of CMBS loan expirations during 2017. CMBS lenders, therefore, have been counting on refinancing  Borrowers to Read more

A Bridge (Loan) to Everywhere

By Charley Babb Do you remember John McCain’s famous “Bridge to Nowhere” speech from 2005? As the Arizona Senator, and then later as the Republican Read more

Limited Service Hotels are, well…limited!

By Todd McNeill In recent times, the Limited Service Hotel sector’s reputation has steadily declined in the eyes of the finance industry. Once the darling Read more

TrumpCare and the Effect on Healthcare Commercial Real Estate Market

By Kevan McCormack Since Donald Trump has taken office as President of the United States, he has been very busy “making good” on his campaign Read more

What is the TRUMP Effect on Commercial Real Estate? 4 Key Points

— By Sunny Sajnani There is no doubt that Donald J. Trump in the White House is a game changer for the real estate industry. Read more

Whither CRE Construction Lending?

By: Justin Laub The mantra of commercial real estate developers around the country when speaking of the state of construction lending these days might be: Read more

The Good, the Bad, the Texas High-Speed Rail Line

By Duke Dennis Brady Redwine of Texas Central Partners (TCP) recently addressed a group of Texas A&M real estate professionals about the high-speed rail line Read more

UT Ranked #1 in Commercial Real Estate Yardage

-By Scott Lynn Every fall season, the University of Texas at Austin McCombs Real Estate Finance & Investment Center (REFIC) sponsors the National Real Estate Read more

2017: Not a Forecast (Just Some Thoughts to Ponder) for the CRE Market

By Brandon Wilhite Accurately forecasting the commercial real estate market’s performance is a nearly impossible task. There are far too many variables to assess and Read more

What is PACE Financing?

By Andrew Hanzl Global warming is now a widely accepted concern. As real estate professionals, what role can we play to ensure environmental sustainability? One Read more

Banks Reign in Leverage in Effort to Curb Apartment Construction

By Charley Babb My real estate career spans over three decades. Yet for the very first time, I have witnessed lenders exercise prudence and consequently Read more

Risk Retention in CMBS Starting to “Sink” in

By Todd McNeill The early signals of Risk Retention are reverberating through the commercial real estate capital markets.  Several conduit shops, including MC Five Mile Read more

Risk Retention, Risky Business?

By Scott Lynn Basel III, HVCRE…all these new lending regulations that mean lenders are loaning me less and charging me more. Good grief!!! And now, Read more

It’s Senior Living Not Senior Dying

By Kevan McCormack Everything in life and real estate evolves.  Static retail shopping centers evolved into vibrant entertainment venues where a family could spend an Read more

Metropolitan Capital Advisors Arranges $5,512,000 Acquisition Loan For A 9.77- Acre Lot In Frisco

Metropolitan Capital Advisors, Ltd. (“MCA”) has arranged a land acquisition loan for a 9.77-acre tract located in Frisco, Texas at the northeast corner of Read more

Metropolitan Capital Advisors Arranges A $4,700,000 Construction Loan For UC Health Emergency Room (Arvada)

Metropolitan Capital Advisors, Ltd. (“MCA”) has arranged a $4,700,000 construction loan for UC Health Emergency Room, located in Arvada, Colorado. The 0.69-acre site is Read more

Ground Leases-Friend or Foe?

On the surface, a ground lease seems like a simple concept: a landowner grants permission for a tenant to use their land in exchange Read more

What Do Baby Boomers and Millennials Have In Common & Why It's Important in Commercial Real Estate

By Charley Babb What do Baby Boomers and Millennials have in common? They both like to spend money. While they may spend their money on Read more

The Economic Benefits of Walkability

By: Brandon Wilhite Starting with the Federal-Aid Highway Act of 1956, the way cities were developed in the United States began changing. Although it was Read more

Brexit – Immediate Effect on Commercial Real Estate?

— By Sunny Sajnani In late June 2016, a historic referendum was voted on approving the British withdrawal from the European Union (EU).  The immediate Read more

Hotels: What Inning Are We In?

By: Justin Laub I recently returned from the Urban Land Institute’s national conference on hotels and resorts. The last time ULI held this event was Read more

Choppy CMBS Market Hoping For Resurgence

By Charley Babb CMBS issuance for the first quarter of 2016 was roughly half of the production for the same period in 2015. This has Read more

pace financing

What is PACE Financing?

By Andrew Hanzl

Global warming is now a widely accepted concern. As real estate professionals, what role can we play to ensure environmental sustainability? One solution is to upgrade our residential and commercial buildings to become more energy efficient, incorporate renewable energy, and include water conservation mechanisms that reduce the carbon dioxide emissions. All these changes will significantly help the fight against global warming.

Currently, the United States produces a staggering amount of excess carbon dioxide emissions. Let me put this into perspective: the buildings in the United States alone, create more carbon dioxide emissions than any other country in world, except China. Furthermore, 40% of carbon dioxide emissions in the United States are attributed to buildings, surpassing both the industrial and transportation sectors. This is a pressing issue but upgrading older buildings is easier said than done. The initial process may seem complicated and costly but the resulting reduction in operating costs and positive impact on the environment is worth the trouble.  The U.S. Green Building Council has estimated that green buildings will lead to $1.2 billion in energy savings, $150 million in water savings, $715 million in maintenance savings, and $55 million in waste savings, between 2015 and 2018.

pace-financing

To make this eco-friendly transformation easier to implement, a means of financing known as PACE (Property Assessed Clean Energy) lending is currently available throughout the United States. PACE financing pays for 100% of the costs (no initial cash outlay) associated with retrofitting older buildings with environmentally friendly improvements, as well as outfitting new buildings with eco-friendly improvements. Some of the upgrades that can be financed through PACE include roofs, heating/ventilation, lighting, water pumps, insulation, and solar panels. The improvements are repaid over 20 years with an assessment added to the property’s tax bill. The local tax authorities simply add a line item to the properties tax bill, which automatically transfers to new owner upon the building being sold.

PACE Financing is available on almost all property types: office, multifamily, residential, agriculture, hotels, retail, industrial, non-profit, and even residential properties. On retail properties with triple net leases the tenants might be burdened by increased real estate taxes. But their utility bills will be considerably lower, resulting in more net savings. The building owner will benefit from all the energy efficiency savings in the common areas throughout the building. For gross leases (multi-family, hotels, etc.) all the energy efficiency savings flow directly to the bottom line for the building owner.

Since its inception in 2005, 750 commercial buildings, representing $250 million in total improvements, have benefited from PACE Financing. 32 states currently have legislation supporting PACE. 16 states currently have active projects.  PACE Financing is available in major markets including Los Angeles, Washington D.C., San Francisco, Austin, St. Louis, and Cincinnati. The availability of PACE in markets is increasing by the day.

The funding for PACE projects are raised from private investors, banks, and investment funds, collaborating in partnership with local governments. The companies raising the capital for PACE financing will lead building owners through the programs guidelines. Furthermore, they will offer engineering reports showing potential energy savings and assist in project management.

PACE assessments are ranked above mortgages, causing building owners to seek lender consent before engaging in PACE financing. For a number of reasons, over hundred mortgage lenders have allowed PACE assessments to take a senior line position. For one, the assessment will mostly likely increase the properties net operating income because the reduction of the operating costs far outweighs the increase in property taxes. Two, the increased cash flow will increase the building’s value to the lender. Finally, PACE financing does not accelerate upon default, which means only the portion past the due date is senior to the lenders claim. Currently, the vast majority of PACE financing projects are being approved by lenders.

PACE financing is an innovative and growing method to fund environmentally friendly improvements. Environmentally friendly practices are something that all owners should consider. If you are interested in obtaining PACE financing, or any other type of debt/equity financing please feel free to contact Andrew Hanzl, the author, at ahanzl@metcapital.com. Andrew is a Financial Analyst in the Dallas office of Metropolitan Capital Advisors.

If you would like to learn more about PACE financing, please go to www.PACEnation.us.

Posted on by admin in Commercial Real Estate Finance, CRE Market Comments Off on What is PACE Financing?