The commercial real estate market is still reeling from the effects of the recession. Capital expenditure and operating budgets have been slashed, putting energy projects on the back burner, especially those with long paybacks. Owners are more likely to set aside capital to meet the needs of their core business rather than to replace obsolete, energy-hungry lighting, HVAC and other technology. Connecticut is trying to address this dilemma with a program that provides easy access to financing for energy efficiency projects. The program, dubbed Connecticut Property Assessed Clean Energy (C-PACE), works like this:
- Enables property owners to access low-cost, long-term funding for qualified energy upgrades through a benefit assessment on their property
- Repayable through property taxes, collected by the municipality in the same way as other benefits assessments
- Assessment has priority over existing mortgages
- Owner must secure written consent from the mortgage holder prior to project approval.
Over a dozen municipalities throughout the state have opted into the program so far, and eight capital providers have been pre-approved to fund the projects. The financing can be used to cover all stages of a project, from audits and engineering to construction and verification of energy savings, and can be used for both large and small projects, single measures such as lighting, and projects with prior energy audits completed but not yet acted on. The many benefits of this type of financing include the following:
- Property tax payments may qualify as an operating expense
- Payments can be passed through to tenants who benefit from the energy savings
- Long-term financing allows energy savings to exceed the finance payments – and create positive cash flow – from day one.
- New energy efficient equipment increases a building’s value and ability to attract tenants