PACE Project Analysis

The Business Case for Proposed Upgrades to Commercial Real Estate.

Complete the form below to request assistance incorporating C-PACE into project financing with request an underwriting screen, estimate of maximum net proceeds or a cost benefit analysis of your project

Commercial real estate owners and professionals consider the financial impact of  investment into buildings through multiple factors besides the upfront cost of the project. For investors, the typical hold period can be three to seven years explaining the reticence to expend capital for many projects.

C-PACE overcomes this barrier by making most projects net cash flow positive from the first day equipment is implemented. The approach to presenting the business case for utilizing this financing tool are outlined below. There is mounting evidence that efficiency and resiliency upgrades can increase rents and property value. Advancing the economic benefits of social responsibility, we would be pleased to discuss more in depth.

1. Determine Utility Costs

For the professional, an understanding of the utility rate schedule of demand-delivery charges, fixed charges and the complete utility rate schedule is the first step to help the professional approach a potential retrofit. While much emphasis has been on energy use reduction, financial savings can be realized from reduced water use as water utility bill rates continue to escalate.

2. Determine Who Owns and Occupies the Building-and Who Pays the Bills

In many lease structures, the tenants pay the utility and property tax bills, meaning that financing through C-PACE results in zero cost investment to the landlord. In owner occupied buildings, there are multiple accounting benefits that might be realized through utilizing C-PACE financing that factor into the cost benefit analysis. Additional factors include the opportunity costs, capital costs, and if there are credit or green leases in place. Providing information on owner and tenants helps assist the energy professional with analysis of proposed projects.

3. Determine Proposed Measures

Measures generally fall into these categories:

          -Equipment that needs to be replaced, e.g. at end of EUL

          -Measures that may have an effect on revenue production, e.g. improving aesthetics of the building, green roof adds amenity space, additional rental units,                reposition building as sustainable for increased tenant rents/retention

          -Measures that will increase resiliency, which also has impact on income through increased tenant rents/retention and reduced insurance premiums e.g.                   generator to maintain power during outages, flood mitigation

          -Equipment that will significantly reduce energy or water use

          -Equipment that will generate energy or recycle water

Please contact CounterpointeSRE for  guidance on which measures are eligible for financing as eligibility has specific to location, varies widely with nuances that are often updated by the local governing authority.

4. Determine the Estimated Useful Life of Each Measure

EUL determines the maximum term of the financing and is mandatory information in C-PACE financing. Often, more expensive, efficient equipment with longer EUL will result in increased first year net positive cash flow which allows longer amortization schedule and lower annual payment.  EUL may be determined from manufacturer cut sheets or industry standards including non-ASHRAE,  which often estimate longer EUL than engineering industry. Please contact CounterpointeSRE for assistance as EUL is critical to optimizing projects for owners.

5. Estimate the Annual Savings for Each Proposed Measure

Annual savings should be itemized for each measure by annual kWh, therms, saved O&M, and other avoided costs.

6. Estimate Lifetime Savings

Estimating first year is most helpful  with lifetime savings as a second step that may be performed by measure or in the aggregate for all measures. Increased operational expenses may often be financed through C-PACE with prepaid maintenance contracts and may be included in project costs. Please contact CounterpointeSRE to discuss.

7. Estimate the Financing Cost for Each Proposed Measure

Financial modeling is performed by CounterpointeSRE to provide the estimated PACE annual payment attributed pro rata across the measures in this analysis. It is helpful for multiple options (e.g. chiller option #1, chiller option #2) for each measure to be identified.

Conclusion

As a general rule, industry standards guide assumptions the estimations of a C-PACE analysis. A 3 % average annual utility cost escalation and 0.5% average annual performance degradation is typically utilized with other assumptions evaluated with submission of supporting evidence. Savings to investment ratio calculations may be required in a few states with varying guidelines depending upon location.

Complete the form to request assistance reviewing proposed measures and additional information on eligibility of sustainability and resiliency measures for C-PACE funding.