A recent article in The Institutional Real Estate Letter – Americas by Robert Johnson Jr., president of Johnson Independent Advisors and managing director of PACE Equity, highlights how and why green investment adds to a property owner’s bottom line and illustrates one compelling financing option in today’s market for property owners.
Green is no longer a fuzzy, feel-good value and service. Now it’s just plain, good business because it often leads to higher rents, lower tenant turnover, higher NOI and greater valuations. A study, The Economics of Green Building, found Energy Star or LEED-certified buildings command effective rental rate premiums of 8 percent (net of concessions) and sales price premiums of 13 percent. Plus, more and more institutional investors are adding ESG mandates to their investment programs, which will only help make green buildings even more liquid going forward. Clearly, green adds to the bottom line.
Now you can help the world and help yourself at the same time. How can you do this? As detailed in the article, one avenue available to building owners today is property assessed clean energy, or PACE. It is a new way to finance energy savings that works like a special assessment district bond where all the uses and benefits are for one specific property. It covers 100 percent of the project costs, the funding amortizes to term and never accelerates. The lending rates typically range from 5 percent to 7 percent.
PACE programs are accessible and growing. Currently, 31 states have passed PACE-enabling legislation, and 12 states and Washington, D.C., currently have active PACE programs. The programs are designed for property owners, which get to keep all the financing benefits of PACE: energy savings, tax credits and rebates. And the programs do not require corporate financial statements or guarantees.
Financing terms will be revised in 2017; learn more about PACE before this window of opportunity closes.
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John Hunt is conference program manager of Institutional Real Estate, Inc.
