If you are a commercial property owner, no doubt you’re well aware of how important it is to make your building as energy efficient as possible. Not only does it promote better sustainability practices, but it can save you untold amounts of money in energy expenses as well. As good as this sounds, many commercial property owners find it difficult to make the necessary energy-efficiency upgrades to their properties due to the initial investment costs. This can create a “Catch-22” scenario where it’s too expensive to make the improvements, but not making the improvements is costing money as well.
Fortunately, there is a solution! PACE (Property Assessed Clean Energy) provides an affordable financing solution to help commercial property owners make the needed energy efficiency improvements to their buildings, enabling them to boost their bottom line while reducing their energy costs. You can use PACE financing to upgrade lighting, insulation, roofing, heating and cooling systems, motors, and/or water pumps, or to add equipment that can produce energy, such as fuel cells and solar panels. Through PACE, you can receive 100% financing to make these improvements, and repayment is made by way of a Special Assessment that is added to your property tax bill.
The flexibility of the PACE program is a huge plus, as it allows up to 25 years for repayment, and the energy savings you’ll realize each year will more than offset the cost of the assessment payments. Who is eligible for PACE Financing? Owners of the following types of properties are eligible for PACE financing:
- Multi-family (5 units plus)
Benefits of the PACE Program
1. Preserves Capital and Frees Up Cash Flow
The PACE program requires no down payment or personal/business guarantees, as 100% of hard and soft costs are covered without any up-front capital required. The Special Assessment is simply added to your property tax bill, allowing for a favorable off-balance sheet treatment.
2. Increases Cash Flow and Net Operating Income
Financing rates and terms are fixed over the life of the loan (15 – 25 year term), allowing for more predictability in terms of cash flow management. PACE also offers a low fixed monthly payment, which will be easily offset by the energy savings you’ll realize from the improvements.
3. Produces Zero Net Cost for the Property Owner
Keep in mind that PACE payments are added to your property tax bill via a Special Assessment, which technically amounts to nothing more than an increase in property taxes. This allows property owners to share the cost of these upgrades with tenants under most leases (e.g., triple nets). In addition, one important benefit to note is that PACE assessments transfer to the new owner if you decide to sell your building.
Through the PACE financing program, you can add value to your commercial property by improving the energy efficiency of your building, all without incurring any out-of-pocket expenses.