A historic waterfront property in San Francisco will receive an energy efficiency overhaul courtesy of a creative financing scheme that eliminates the upfront cost to install new equipment. Pier 1, home to real estate firm Prologis, Inc., is the first retrofit project closed (PDF) under the City of San Francisco’s GreenFinanceSF property assessed clean energy (PACE) program.
I’ve written at this blog about the launch of commercial PACE programs in California, Connecticut, and South Florida. The Pier 1 project is further proof that commercial PACE financing is entering the mainstream.
What had been missing until recently were closed deals. In September, I wrote about the HERO program, a residential and commercial PACE program operating in western Riverside County, California, that at the time of my writing had financed 300 residential projects worth $5 million, with $20 million in commercial projects expected to close in the coming year.
The $1.6-million Pier 1 project will shave $98,000 annually from Prologis’ utility bills, reducing purchased electricity by 32%. Improvements include retrofits to 1,500 lighting fixtures, a 200-kilowatt rooftop PV array, and an overhaul of the HVAC system. Work on the project, overseen by Johnson Controls, should be completed by February 2013.
“This is the first project of its kind and by far the biggest commercial PACE upgrade in the country,” Cliff Staton, Executive Vice President, Renewable Funding, wrote in an e-mail. “The Prologis project puts San Francisco and California at the forefront of what could be a very significant state and national move toward energy efficiency in the private commercial building sector.” Oakland-based Renewable Funding administers the GreenFinanceSF program.
As I’ve written previously, perhaps the strongest selling point of PACE financing is that it enables property owners to avoid the upfront cost to install new equipment, one of the thorniest problems of energy efficiency project development.
An audit is often required to identify energy- and water-saving opportunities. Property owners wishing to pursue PACE financing then enter into an assessment contract to finance the project. The property owner agrees to repay the cost of the improvements through an annual property tax assessment lasting up to 20 years. If a building is sold or transferred, the PACE lien remains tied to the property.
Ninety-percent of the Pier 1 project was financed with a $1.4-million, 20-year, low-interest bond purchased by Clean Fund, a San Rafael-based PACE project financier, from the City of San Francisco. San Francisco participates in the CaliforniaFIRST program, the nation’s largest PACE program, which launched in September. One hundred million dollars in bonding capacity is available to commercial property owners in San Francisco to complete energy retrofits under the GreenFinanceSF program.
