Convincing Real Estate Companies of Energy Efficiency’s Benefits Key to Financing

October 28, 2015 By Carl Weinschenk

financingThe key to financing energy efficient and renewable projects is convincing real estate companies that retrofits undertaken with these goals in mind increase the value of properties, according to participants in the 2015 Urban Land Meeting in San Francisco.

The panelists said that financing has “come a long way” during the past few years, but still trails Europe. A panelist said that banks are “getting a little bit more excited” about such financing projects. His company helped finance $45 million in energy-efficient improvements in more than 130 buildings.

Another panelist said that the full value of improved energy efficiency is not being recognized by appraisers, though he believes it eventually will be. A key for that panelist is to make it clear that improvements lower operating costs. Still another speaker suggested that the process must be streamlined and simplified to encourage people to take advantage of what is available in the marketplace.

Green Buildings Management points to a disincentive in Property Assessed Clean Energy (PACE) loans. The challenge is that PACE makes paying down the loan a line item on property tax bills. This lowers the rate on the loan. However, since it is a tax, the loan takes priority over paying the first mortgage if the property owner defaults. Quite naturally, this is looked at askance by mortgage lenders.

2 comments on “Convincing Real Estate Companies of Energy Efficiency’s Benefits Key to Financing

  1. Hi Carl, I want to clarify a couple things you’ve mentioned about PACE. First off, it is important to distinguish between residential and commercial PACE – naturally, those are quite different markets. On the commercial front, we have recorded that over 100 mortgage lenders, all over the country, giving their consents to PACE assessments being placed on properties (these lenders range from large national firms to local banks). These lenders have recognized the power of PACE and understand that in case of a default ONLY PACE assessments in arrears would prime their claims. And most importantly, PACE improves the value of the building. Also, I want to clarify that PACE is not a tax, it is a voluntary assessment or charge. I’m happy to discuss these or any other aspects of PACE. As scores of building owners are taking advantage of PACE across the country, we serve as a source of information and strive to tell the story of PACE nationally!

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