Grow your bottom line and increase your building’s value
PACE makes it possible for owners of commercial, industrial, multifamily, and nonprofit properties to obtain low-cost, long-term financing for energy efficiency, water conservation, renewable energy projects, and more.
Your business or organization can obtain 100% financing for clean energy improvements from a local PACE program. Municipalities and counties work with private-sector lenders to provide this financing for qualified projects, such as solar panel installations, which is paid back through an annual assessment on the organization’s property tax bill.
The payback term may extend up to 20 years, which can save your business money by ensuring that yearly utility bill savings from your energy improvements are greater than your annual PACE payment. PACE programs for commercial properties are operating in 16 states: find a commercial PACE program near you.
To learn more about how PACE works, see “What is PACE?”
- PACE covers 100% of the hard and soft costs of an energy project so property owners don’t have to put any money down.
- Property owners can reallocate funds previously reserved for energy projects.
- This is especially important for properties with limited expenditure budgets (nonprofits, new businesses, etc.).
- PACE allows finance terms up to 20 years while standard commercial lending rarely exceeds 5-7 years.
- Allows projects with payback of 20 years, rather than only low-hanging fruit with quick paybacks. Longer terms may also mean that yearly savings more than make up for yearly payments from day one.
- PACE tax assessments can be passed on to tenants under most lease forms.
- Tenants save on energy costs and experience the same net payments, or sometimes less!
- PACE is attached to the building, not an individual or business.
- If the building is sold, PACE repayment seamlessly transfers to the new owner as part of the taxes, as well as the savings from the energy project.
- Removes part of the risk in investing in capital expenditures.
Why Should Property Owners Use PACE?
The purpose of this presentation is to clearly describe the many benefits of PACE financing for real estate companies and to provide examples of the financial impact of PACE under various lease forms.
Money is Often Misunderstood
The purpose of this presentation is to remove confusion about how the cost of PACE financing compares with the cost of internal capital allocated by companies to energy efficiency and renewable energy projects. This video reviews the concepts of “weighted average cost of capital,” “hurdle rates,” and “allocated cost of capital.”
These presentations were developed by George Caraghiaur, our in-house expert on how commercial real estate companies can maximize EBITDA through sustainability practices . George joined PACENow as a Senior Fellow in April 2014. Until recently, he was SVP, Sustainability for Simon Property Group, an S&P 100 company and a global leader in the retail real estate industry, where he was responsible for developing and implementing the company’s sustainability strategy, including energy efficiency, waste recycling, renewable energy, tenant engagement, sustainable construction, and transparent reporting. George holds a Master of Science from Penn State University, and a Bachelor of Engineering from École Polytechnique de Montréal.
PACE financing is repaid with an assessment added to the property tax bill. Like property taxes and other municipal assessments, current or past due PACE assessments are recorded in a senior position to other property liens, including mortgages. “Lender consent” means gaining the support of an existing mortgage lender for a PACE project, and is widely considered a best practice for commercial PACE projects. A lender’s consent may be required by state PACE enabling statutes, and even if not, most PACE programs, project funders and building owners themselves require the support of an existing lender before proceeding with a PACE project.
Why would a mortgage lender allow a PACE assessment to be senior to its lien on a mortgaged property? There are many reasons, and to date over 100 mortgage lenders have found that approving PACE-funded projects makes sense.
FOR MORE INFORMATION
To learn more, see the page “Obtain lender consent.“
*This is a partial list of banks that have provided consents. This list does not reflect institutional views of the listed banks. Updated May 2016.
Although nonprofit organizations do not pay property taxes, nonprofits can elect to use PACE as a voluntary assessment or PILOT (payment in lieu of property taxes), depending on local municipal requirements. Nonprofits across the country have used PACE to finance upgrades to their buildings; the nonprofit category is one of the largest beneficiaries of PACE financing, and expanding. This year, a nonprofit health center in California made use of the largest PACE financing in history with a $40 million seismic upgrade.
PACE has unique benefits for nonprofits:
- PACE closes the financing gap for nonprofits, often small organizations that lack financing from traditional sources and often do not qualify for specialized solar loans, leases, and PPAs that require a strong credit history.
- PACE-secured PPA agreements ensure that a nonprofit reaps the benefit of the federal investment tax credit for solar PV. Read more about how PACE works for PPAs here, and at the CivicPACE website. PACE also strengthens the case for a PPA provider or tax equity investor because of the extra security afforded by the first-lien position, and the option of a pre-paid PACE PPA.
- Nonprofit-owned buildings often have significantly deferred maintenance and a strong need to increase cash flow. For PACE lenders, this segment of the market presents a strong opportunity for growth.
PACE funded $1.8m efficiency improvements at San Fran’s 644 Broadway
MI building saves money and energy for the owner and for tenants
CA hotel financed efficiency upgrades with $6.8m PACE financing
Through San Francisco’s PACE program, we absolutely realized the power of PACE — the building has become more valuable not only from a financial point of view but from a people’s standpoint. Our vision for the project was to create a creative and cultural mecca, which we’ve done!Jeff Lee, Principal, Cypress Properties Group
Prologis is participating in the PACE program in order to promote new, innovative solutions for financing sustainable building improvements. It provides the flexibility to drive more energy improvement programs and that’s something everyone should embrace.Jack Rizzo, Managing Director, Global Construction and Renewable Energy, Prologis Inc.
PACE is the only funding mechanism that is credible in providing verifiable information to our investors, and therefore is the ideal tool for us to move forward in becoming the gold standard in sustainable hotels.Make Davis, General Manager, Hilton Los Angeles/Universal City
One-pager: PACE for Commercial Building Owners
Learn more about the benefits of PACE financing for commercial building owners and real estate investors. Please download and distribute this printable one-pager!
Whitepaper: Benefits of PACE for Commercial Real Estate Companies
For commercial real estate property owners, PACE financing can remove the typical barriers to the implementation of energy efficiency improvements. In this whitepaper, George Caraghiaur explains how to take advantage of the many benefits PACE provides to commercial real estate companies.
PACE for Commercial Building Owners and Community Leaders: A Primer
Why use PACE? Learn more in our downloadable slides for presenting to commercial real estate companies and community leaders. These slides give a primer on PACE, how it works and why to use it, and the specific benefits of PACE for building owners and communities. Please download the slides that match your needs and share them with your constituents.