The engineer I was sitting next to at the seminar leaned over to me and asked “you can do that?” I assured him it was possible and he whispered back, “I need to know about that”, before he turned to listen to the remainder of the story.
We were attending the presentation Keeping PACE with Energy Efficiency in Michigan (next event) hosted by The Energy Alliance Group of Michigan (EAGM) last week. The gathering had attracted an impressive group of contractors, energy efficiency product reps, investors and real estate development companies.
What had attracted my guest’s attention was when the speaker, CEO Scott Ringlein, discussed EAGM’s recent PACE opportunity involving the refinancing of an already completed energy efficiency project. The story was quite fascinating as detailed below.
Several years ago a commercial real estate development company, specializing in historic preservation, bought a large vacant retail property which had been built around 1930. A dramatic change in the neighborhood left the building empty for 10 years prior to the purchase.
The vision for the property was to repurpose the wide open retail space into individual residential family units while maintaining the historic look of the building.
That vision resulted in a $19.8 million renovation with an intense focus on being environmentally friendly and maintaining Energy Star standards. The successful transformation of the retail space into multi-family units included geothermal heating and cooling, solar panels, high efficiency lighting and windows, and extensive use of recycled and sustainable building materials.
“The exterior of the existing building remains historically intact with updates to areas that had decomposed or degraded over the years.”
The re-purposed property, now completely renovated, became an inviting place to live for many families and individuals. The developer is presently looking at doing similar projects in the transitioning neighborhoods surrounding the city of Detroit and has asked EAGM to determine what portion of the project qualifies for Property Assessed Clean Energy (PACE) financing. The amount of money invested in the renovation used to raise the energy efficiency standard of the building above a standard baseline building code, can be refinanced using PACE to free up capital for subsequent historic renovations.
“Utilizing an existing structure, especially one that has demonstrated such significance in our community’s history, changes how we approach and value our iconic local treasures. It is no longer common practice to demolish buildings that have fallen on hard times; we see the importance to keeping and capitalizing on the historical integrity of each structure.” Developer
According to EAGM’s Steve Payer, who is working on the PACE refinancing, “what’s exciting about this project is the developer invested in and saved an old building, made it highly energy efficient, and put fresh development in a struggling city. They are actually involved in rebuilding communities and neighborhoods!”
Property Assessed Clean Energy is a powerful tool that is launching a variety of interesting energy efficiency renovations and repurpose projects. When you take into consideration all of the financial advantages of PACE including: the option for treating the loan “off balance sheet”, long term financing, non recourse, stays with the property upon sale, etc., PACE also becomes a powerful commercial property investment strategy.
If you want to determine if a commercial project qualifies for PACE financing a good place to start is to run the numbers through EAGM’s PACE Project Calculator.