mmyrtetus – Page 4 – Philadelphia C-PACE

December 9, 2021

Temporary COVID-19 Extension for Retroactive C-PACE Financing project eligibility

Philadelphia C-PACE Program

December 9, 2021

In response to the COVID-19 pandemic and the resulting protracted impact on the capital markets for commercial real estate, the Philadelphia Energy Authority, the Philadelphia C-PACE Program Administrator, will allow up to a 6-month extension of the deadline for Retroactive C-PACE Financings for projects completed on or before December 1, 2020.

Per Section 11 of the Philadelphia C-PACE Program Guidelines, retroactive financings must close within 730 days of the project’s construction completion date or when the project received its certificate of occupancy.

With this extension, projects that received their Certificate of Occupancy or equivalent on or before December 1, 2020 have been granted an extension of up to an additional six months (183 days) of retroactive eligibility or until December 1, 2022, to complete C-PACE Financing, whichever date is sooner. Several examples follow:

EXAMPLE Certificate of Occupancy or Equivalent	Final Date for C-PACE Financing Closing
August 1, 2019	+913 days = January 30, 2022
December 31, 2019	+913 days = July 1, 2022
June 30, 2020	+884 days = December 1, 2022
August 15, 2020	+838 days = December 1, 2022
December 1, 2020	+730 days = December 1, 2022

All retroactive project applications must continue to adhere to the requirements in the Philadelphia C-PACE Program Guidelines.

November 9, 2021

100 Independence Mall W Closes $25.57MM C-PACE Financing

The Philadelphia Energy Authority and CounterpointeSRE (Counterpointe Sustainable Real Estate) announced the closing of $25.57 million in Commercial Property Assessed Clean Energy (C-PACE) financing for the Class A office building, 100 S. Independence Mall West. It is the largest C-PACE financing in Philadelphia and Pennsylvania.

Philadelphia City Councilmember Mark Squilla (District 1) is “thrilled to see C-PACE being used in Center City Philadelphia for energy efficiency improvements to this large commercial office building. $25.57 million invested in energy and water conservation for this iconic building is a big deal. This is by far the largest C-PACE financing in Philadelphia and Pennsylvania. This deal shows that C-PACE is a great solution for building owners to significantly reduce energy consumption thereby lowering operating costs, improving property value and combating climate change.”

Philadelphia City Council President Darrell Clarke noted that “using C-PACE to finance energy efficiency improvements for this iconic building, overlooking our historic Independence Mall, provides an excellent example of how commercial office building owners are using this important new financing tool to improve the value of their properties. It is also about job creation, fighting climate change, and improving the health of our residents. C-PACE is the mechanism that allowed Keystone Property Group to make this very significant investment in our city.”

Through C-PACE financing, occupants of 100 Independence Mall West’s 400,000+ square feet will benefit from improved energy infrastructure via upgrades to interior and exterior lighting, HVAC, building envelope and low flow water fixtures.

“This project is a great example of how clean energy financing enables important capital improvements and creates economic development. At the Philadelphia Energy Authority, we use energy as a tool for positive local impact, and this project exemplifies that. Congratulations to Keystone Property Group.” said Matt Stern, Senior Director of Commercial Programs at the Philadelphia Energy Authority, which administers the Philadelphia C-PACE program.

The Philadelphia C-PACE Program approved eligible improvements that will provide an estimated reduction of 852,000 pounds of CO2 equivalent per year and 10,000 fewer metric tons of CO2 equivalent over the next 26 years.

“We are pleased to complete a second transaction with the Philadelphia C-PACE team this year,” stated Michele Pitale, M.D., Managing Director at CounterpointeSRE. “100 Independence Mall West is important because it will serve as an example of how sophisticated commercial real estate investment firms can use PACE to improve a building’s performance and cash flows in large metropolitan areas where programs are also new such as New York, Chicago, Boston and Seattle,” Dr. Pitale continued.

100 Independence Mall West was originally designed by Pietro Belluschi and completed in 1965. The nine-story property was formerly known as the Rohm and Haas Building and is listed on the National Register of Historic Places and is itself located within walking distance to several Philadelphia landmarks including the Liberty Bell and Independence Hall.

About Philadelphia C-PACE

Commercial Property-Assessed Clean Energy (C-PACE) financing allows commercial property owners to borrow money for energy efficiency, renewable energy, and water conservation projects. Repayments are made via a special assessment similar to a property tax assessment. Key features include: 100% of project costs can be financed; repayment terms are up to 30 years; the special assessment stays with the property in the event of a sale. For more information, visit www.philadelphiacpace.org.

About Counterpointe Sustainable Real Estate

Counterpointe Sustainable Real Estate (CounterpointeSRE) is the leading commercial real estate finance provider specializing in sustainable infrastructure improvements through PACE financing. Since 2013, Counterpointe and its affiliates have financed commercial real estate construction and upgrades that have reduced annual electricity consumption by greater than 51,000 MWh per year and reduced water consumption by 23 million gallons per year.

About Philadelphia Energy Authority

The Philadelphia Energy Authority (PEA) is an independent municipal authority created in 2010 to advance energy affordability and sustainability. PEA has facilitated over $167 million in clean energy projects in Philadelphia since launching the Philadelphia Energy Campaign in 2016, creating more than 1,700 jobs. As Program Administrator, PEA reviews and approves applications, manages the billing and lien processes, engages in market education, and supports the growth of the Philadelphia C-PACE program. For details, visit www.PhiladelphiaCPACE.org.

View the 100 Independence Mall case study and disclosure here.

September 1, 2021

Rhoads Industries closes $15MM C-PACE financing

The largest C-PACE financing in Philadelphia and Pennsylvania

The Navy Yard Building 57 (“Building 57”), home to Rhoads Industries, located at 1900 Kitty Hawk Avenue, Philadelphia, PA 19112, utilized $15 Million of Commercial Property Assessed Clean Energy (C-PACE) capital to finance the high efficiency interior and exterior improvements incorporated into the renovation of approximately 270,000 square feet of the building.

Building 57 is a historic, heavy industrial manufacturing and testing facility located in the Philadelphia Navy Yard. Originally built in 1919 and listed on the National Register of Historic Places, Building 57 has been instrumental in the constructing, rehabilitating and modernizing of U.S. Navy Vessels. When Rhoads Industries Inc. (“Rhoads”) acquired Building 57 in 2014, it required substantial rehabilitation to become a state-of-the-art manufacturing and testing facility.

The energy efficiency renovations of A & B Bays of Building 57 is being financed with private capital from CCG PACE Funding, enabled by the City of Philadelphia’s C-PACE program. The program is part of the City’s plan to significantly reduce the energy usage of its buildings by making it easier for property owners to pay for energy efficiency, water conservation, and renewable energy projects.

Proceeds from the C-PACE loan funded the installation of energy efficiency measures, including high efficiency HVAC, interior LED lighting and controllers, building envelope (roof and wall) systems, and eligible design and soft costs. The energy efficiency and natural gas conservation improvements to Building 57 will help the property save approximately 19,870 metric tons of CO2-e emissions over the life of the project, a 36% reduction in emissions above Philadelphia’s energy code.

“Funding through the C-PACE program has given us the opportunity to outfit our facility in anticipation of our customers’ needs,” says Mike Rhoads, Vice President and fourth generation owner of Rhoads Industries. “This construction provides the capacity of an additional 140,000 square feet of heavy manufacturing space, while at the same time mitigating the drain on the City’s and Navy Yard’s energy infrastructure.”

Kenyatta Johnson, the Councilmember who represents the Navy Yard, is “excited about C-PACE as a tool for financing energy efficiency investments and supporting the general growth we are seeing in the Navy Yard. This development is creating family-sustaining jobs which are essential to a sustainable future.”

Philadelphia City Councilmember Derek S. Green (At Large) noted that “this project is a great example of the role we anticipated C-PACE would play in bringing private sector investment to our city to help businesses save money, fight climate change, improve public health and create additional jobs. Rhoads Industries has invested $15MM in energy efficiency and as a result will be using a third less energy than the City’s energy code requires, and the code is relatively rigorous.”

“As the largest project to date in Pennsylvania, the Rhoads project illustrates how C-PACE can attract private capital and drive economic development in Philadelphia,” said Matt Stern, Senior Director of Commercial Programs at the Philadelphia Energy Authority, which administers the Philadelphia C-PACE program. “This project creates jobs, cuts energy costs, and fights climate change. Rhoads Industries’ leadership on energy efficiency serves as an important model for other industrial facilities.”

“Rhoads Industries, the Philadelphia City Council, the Philadelphia Energy Authority, and the many stakeholders participating in the C-PACE financing of Building 57 should be recognized as being among the early innovators in Philadelphia and Pennsylvania to utilize the long-term, low-cost fixed rate financing that C-PACE provides. Following the Building 57 example, countless other commercial properties located throughout the region are eligible to utilize C-PACE to fund energy efficient improvements that would help to ensure their long-term financial viability while reducing their carbon footprint and creating new jobs. These win-win outcomes are exactly what the C-PACE Program was designed for” observed Paul Hoffman, Managing Director of CCG PACE Funding.

About CCG PACE Funding

CCG PACE Funding, LLC provides long-term, flexible financing to owners of large-scale commercial properties located throughout the United States that intend to utilize C-PACE financing for energy efficiency, water conservation, renewable energy, seismic and wind improvements as part of their capital stacks. The firm’s C-PACE financings are individually customized to meet the needs of each stakeholder. CCG PACE Funding is affiliated with CityScape Capital Group, LLC, an entity that has over 25 years of experience funding more than $1.6 Billion of debt and equity into highly structured transactions located throughout the country involving historic, new markets, energy and low-income housing tax credits. For additional information, please visit www.ccgpace.com.

About Philadelphia Energy Authority

The Philadelphia Energy Authority (PEA) is an independent municipal authority created in 2010 to advance energy affordability and sustainability for the City. PEA has facilitated over $167 million in clean energy projects in Philadelphia since launching the Philadelphia Energy Campaign in 2016, creating more than 1,300 jobs. As Program Administrator, PEA reviews and approves applications, manages the billing and lien processes, engages in market education and supports the growth of the Philadelphia C-PACE program. For details, visit www.PhiladelphiaCPACE.org.

About Rhoads Industries, Inc.

Rhoads Industries, Inc. is a 125-year-old, privately held, industrial fabrication shop founded in Philadelphia that offers a total solution for industrial services and support to commercial and government customers, including the Department of Defense. Rhoads offers a diverse range of technical certifications to provide industrial services for a broad variety of heavy steel and metal fabrication projects, as well as complex precision assemblies, equipment installations and a range of maritime related services. Rhoads has become the resource for industrial maintenance, custom fabrication, and industrial installation/piping for industry leaders based on a reputation for quick response, on time delivery, ingenuity, safety, reliable performance and quality workmanship.

Rhoads is implementing a business plan with the objective of building and equipping a state-of-the-art facility to serve as the preeminent industrial enterprise in the Philadelphia Navy Yard. With the acquisition and rehabilitation of Building 57, Rhoads has created a new East Coast Water Front operation. Rhoads has also secured a competitive position in its traditional metal fabrication and industrial services business, while expanding into the shipbuilding/ship repair and maritime services industry within the Delaware Valley and beyond. For more information, please refer to www.rhoadsinc.com.

View the Rhoads case study and disclosure here.

August 5, 2021

Kirkbride Center uses C-PACE

The Philadelphia Energy Authority completed its 5th C-PACE financing in Philadelphia. The Kirkbride Center, a historic health services center in West Philadelphia, obtained $4.33MM in C-PACE financing for upgrades to its boiler and chiller plants.

CounterpointeSRE Provides $4.33 Million in C-PACE Financing to Improve Energy Efficiency at Kirkbride Center in Philadelphia

January 6, 2021

Using C-PACE for Retroactive Financing

Philadelphia Energy Authority, by Lennal Kalawa and Lisa Shulock

Commercial Property Assessed Clean Energy (C-PACE) is a financing tool that facilitates the placement of private capital – with favorable terms and conditions – in order to improve the energy and water performance of commercial buildings. Nationwide, this tool has primarily been used to fund building retrofits and new construction projects. In Pennsylvania, commercial property owners can also take advantage of C-PACE for retroactive financing for projects completed within the past 24 months.

Commercial properties that have recently had qualifying energy and water efficiency work done can use C-PACE to shore up a property’s reserves, improve cash flow, provide liquidity, and even potentially reduce other lenders’ exposure in the capital stack. For example, The Philadelphia Met recently used retroactive C-PACE financing to strengthen its financial position. The owner of The Met borrowed $6,000,000 in C-PACE financing from Enhanced Capital to finance energy efficiency upgrades in the recently renovated Philadelphia landmark.

While not strictly retroactive, for properties nearing completion, C-PACE can also offer funds for cost overruns or to replace lender pullback. The terms and conditions of C-PACE will likely out-perform other forms of financing available to building owners and developers in these scenarios. For example, Shift Capital, the developer of J-Centrel, added $1,500,000 in C-PACE financing to its capital stack while the project was in construction, leveraging its deep investments in energy and water efficiency.

To learn more about whether C-PACE financing – retroactive or otherwise – is right for your project, contact Philadelphia C-PACE at CPACE@philaenergy.org.

December 21, 2020

2020 C-PACE Year in Review Released

Philadelphia C-PACE’s 2020 first year of operation Year in Review can be found here.

December 1, 2020

Energy Efficiency and COVID-19 Safety Measures: Can You Have Both?

Philadelphia Energy Authority – November 10, 2020

By Lennal Kalawa and Lisa Shulock

Philadelphia Energy Authority held a webinar about energy efficiency and COVID-19 mitigation in commercial buildings. The session covered operational adjustments and capital improvements to protect occupants’ health and manage energy use in commercial buildings.

Lisa Shulock from the Philadelphia Energy Authority moderated the panel and she was joined by Dan Kerr, President of Burns Mechanical, a high-performance building service company, Marcelo Rouco, Chairman, Founder and Chief Executive Officer of Ecosave, a supplier of energy efficiency services, and Sam Elbarouki, Senior Vice President, C-PACE Business Development, from Dividend Finance, a C-PACE capital provider.

Shulock kicked off the discussion and provided a high-level description of C-PACE, a financing tool that provides long-term funding for energy efficiency, renewable energy, and water conservation projects. C-PACE financing may be of interest to commercial building owners who want to upgrade their energy systems to achieve high energy performance while also making their buildings more “COVID-safe.”

Kerr shared some tips as to what he has learned as an engineer during the COVID pandemic. He stated that the most important health and safety precaution is for individuals to practice social distancing, wear masks, and practice other personal actions to protect themselves and others. Building operators can also help to keep their occupants safe, but there isn’t one technology or gadget that can be purchased or turned on. Building operators should first make sure their buildings are operating optimally. Kerr noted that approximately 80% of commercial buildings are not operating the way they should. The pandemic is showing that owners who have deferred maintenance have more work to do to get their buildings to safe operating levels. It is now generally accepted that both ventilation and filtration approaches on their own or in combination can reduce the risk of airborne transmission of the novel Corona virus. Achieving the ASHRAE ventilation standard (62.1-2019), maintaining relative humidity between 40-60% and upgrading when possible to MERV 13 rated filters or higher are probably the most important areas to focus on related to HVAC systems operation. Kerr said that Burns has also installed disinfecting UVGI spectrum lights for several of their clients in the HVAC equipment because cooling and heating coils and other equipment inside air handling equipment can become contaminated.

Marcelo Rouco from Ecosave spoke about the reasons you would want to consider implementing energy-saving measures at the same time you are addressing COVID mitigation. He stated that COVID mitigation often increases energy consumption, however, by looking at other energy reduction measures in the building, building owners can achieve the goal of saving energy as well as having COVID mitigation measures in place.

Some of the benefits of a combined approach include:

Maintaining building health standard while reducing energy consumption
There is a cost reduction when COVID mitigation and energy efficiency are combined
COVID mitigation can be funded by C-PACE as long as it is combined with other energy-saving methods.

Sam Elbarouki from Dividend finance, a C-PACE capital provider explained how they help finance building upgrades and new construction. C-PACE can provide financing for up to 100% of the cost of energy efficiency upgrades and there is a lower cost of capital than many alternatives. C-PACE is able to integrate with other economic development initiatives such as Opportunity Zones, Tax Increment Financing (TIFs), Historic Tax Credits (HTCs), and utility incentives.

Capital providers can finance roof replacement, windows and doors, lighting upgrades, HVAC systems, energy storage, solar systems and more. The minimum project size is $100,000 in Philadelphia and $10,000 in other Pennsylvania counties with a repayment term of up to 30 years with a fixed interest rate, generally in the range of 5-7%. There is also the option of retroactively using C-PACE financing with a two-year look back.

Shulock wrapped up the webinar by discussing the first Pennsylvania C-PACE projects. Information on the projects can be found here.

To watch the recording of the webinar, click here. The slides can also be found on the Philadelphia C-PACE program resources page in the Philadelphia C-PACE webinars section.

Additional reading and resources:

https://www.aceee.org/blog-post/2020/10/reducing-covid-19-risks-commercial-buildings-without-wasting-energy

https://enverid.com/blog/the-enverid-covid-19-energy-estimator-revealing-the-full-costs-of-hvac-strategies/

November 23, 2020

Iconic Philly Met Uses C-PACE for Retroactive Financing of $6 Million for Energy Efficiency Investments in Philadelphia

PHILADELPHIA ENERGY AUTHORITY
FOR IMMEDIATE RELEASE
DATE: NOVEMBER 23, 2020

CONTACT:
Lisa Shulock, Philadelphia Energy Authority
215-880-8298 (cell)
Lshulock@philaenergy.org

Iconic Philly Met Uses C-PACE for Retroactive Financing of $6 Million for Energy Efficiency Investments in Philadelphia

Philadelphia, November 23, 2020 –

The Philadelphia Energy Authority, Enhanced Capital and EB Realty Management (“EBRM”), owners of The Met, announced today the financial close of the first project in Pennsylvania to retroactively use Commercial Property-Assessed Clean Energy (C-PACE) financing. EBRM is borrowing $6,000,000 in C-PACE financing from Enhanced Capital to pay for energy efficiency upgrades for the former Philadelphia Metropolitan Opera House, renovated in 2018.

Until the pandemic hit, “the reopening of The Met has provided an economic boost to the North Broad Street corridor, particularly neighboring restaurants, hotels and businesses,” said Ian McCulley, Director at Enhanced Capital. “Using retroactive C-PACE was a great solution to strengthen the capital stack and repay some higher cost debt. Philadelphia allows retroactive financing up to two years after project completion, and it can be a useful tool for building owners looking to transition from construction to permanent financing.”

“These are not easy times for any of us, especially for cultural institutions,” said Emily Schapira, Executive Director of the Philadelphia Energy Authority, which administers the Philadelphia C-PACE program. “We are proud to provide a tool like C-PACE that can improve liquidity and reduce costs for commercial properties during this pandemic. C-PACE allowed The Met to pull even more value out of their energy efficient retrofit.”

With this PACE financing, “we are one step closer to curating the North Broad Corridor of Philadelphia into a global example of successful impact development,” said Christopher Cordaro, Vice President at EBRM.

In C-PACE lending in Pennsylvania, existing mortgage holders must consent to the C-PACE financing. In this case, both PIDC and Fulton Financial provided consent. Sue Lonergan, Fulton Bank’s regional president for Southeastern Pennsylvania, said of the consent, “Fulton Bank has been a proud supporter of The Met project, and we’ve seen the positive impact this historic gem has had on the local economy and the community in general. It made sense to use C-PACE to help reduce the owner’s monthly payments to get through this extraordinarily difficult time.”

Philadelphia City Council President Darrell Clarke represents the 5^th District, which includes the stretch of North Broad Street where The Met is located. “We are delighted to see that C-PACE not only facilitates investment in energy efficiency, but also as in this case, has helped strengthen an institution that has been a key part of the North Broad Street revitalization.”

# # #

About the Philadelphia Energy Authority

The Philadelphia Energy Authority (PEA) is an independent municipal authority created in 2010 to advance energy affordability and sustainability for the City. PEA has facilitated over $136 million in clean energy projects in Philadelphia since launching the Philadelphia Energy Campaign in 2016, creating more than 1,300 jobs. As Program Administrator, PEA reviews and approves applications, manages the billing and lien processes, engages in market education and supports the growth of the Philadelphia C-PACE program. For details, visit www.PhiladelphiaCPACE.org.

About Metropolitan Opera House/EBRM:

EBRM is the owner of the Philly Met, a performance venue managed by Live Nation. The Met is located on North Broad Street, just minutes from downtown Philadelphia.

About Enhanced Capital:

Enhanced Capital, with offices in New York City and New Orleans, is a diversified private investment firm focused on financing small and mid-sized companies overlooked by traditional sources of capital. Founded in 1999, many of Enhanced Capital’s funds are backed by institutional capital and finance businesses across targeted investment, asset management and tax credit platforms. In addition, the firm participates in a variety of state and federal public-private investment programs, including the federal SBIC program. For more information, visit www.enhancedcapital.com.

November 20, 2020

Philly’s “Building Tune-Up” Mandate – Using C-PACE to Achieve Compliance

By Lennal Kalawa and Lisa Shulock

Philadelphia Energy Authority held a webinar on November 5, 2020 about Philadelphia’s Building Energy Performance Policy, commonly known as Building Tune-Up, and how C-PACE can be used to achieve compliance. The final Building Tune-Up regulations were issued in October 2020. The law was motivated by the need to reduce the carbon footprint of commercial buildings. The law mandates that all large buildings must submit a certification of high energy performance to the city’s Office of Sustainability or conduct tune-ups.

Lisa Shulock from the Philadelphia Energy Authority moderated the panel and she was joined by Zach Greene from the City of Philadelphia’s Office of Sustainability, the City agency responsible for overseeing Building Tune-Up, Dave Ferro from Pennoni, an engineering firm, and Stephen Bevilacqua from REVL Capital Group, a C-PACE capital provider.

C-PACE is a financing tool that provides long-term funding for energy efficiency, renewable energy, and water conservation projects. C-PACE financing may be of interest to commercial building owners who want to upgrade their energy systems to achieve high energy performance as an alternative to conducting regular tune-ups.

This bill is directed at all non-residential buildings with indoor floor space of at least 50,000 sq. ft. This includes office buildings, retail stores, municipal buildings, hospitals, schools/universities, and more.

Greene explained that the first compliance deadline is September 30, 2021 for buildings larger than 200,000 Sq. Ft. However, they are granting 6-month extensions due to COVID. The last group of buildings which are between 50,000 and 70,000 Sq. Ft. will need to comply by September 30, 2024.

The first way to comply with this new requirement is to conduct a tune-up every five years. Tune-ups must address base building systems including:

Building System Maintenance & Repairs
HVAC Operations and Controls
Lighting System Assessment
Domestic Hot Water and Water Usage
Building Envelope

The tune-ups must be overseen by a “Qualified tune-up specialist” – defined as a licensed Professional Engineer or Certified Energy Manager with at least 7 years of experience. The specialist must be a third-party to the building, unless it is within a large portfolio.

The second pathway is through several high-performance compliance options including ENERGY STAR certification, gold rating or higher for USGBC LEED Operations and Maintenance v4, net zero certification, and many others.

Greene wrapped up by sharing key takeaways: the policy is focused on the operations and maintenance of a building and its existing systems, it does not require capital improvements, it does not require buildings to meet specific levels of efficiency, and the policy aims to increase tenant comfort and decrease energy costs and carbon emissions.

Dave Ferro from Pennoni stated that tune-ups “are all about an effort to control costs, improve occupant comfort, reduce wasted energy and, in many cases, improve cash flow.” Ferro stated that when evaluating a building, they like to start with an ASHRAE level 1 walk-through. “As an engineer, you should be able to walk into a level 1 building and find all the low hanging fruit.” Once you get the level 1 understanding, you can proceed to level 2 and identify no-cost/low-cost energy efficiency measures that can provide payback. One thing that certain engineering companies offer including Pennoni is ongoing monitoring of energy usage and identification of potential problems as an additional way to manage energy use.

If buildings have not yet achieved any of the qualifying high-performance standards, owners and managers have the option of investing in systems to attain one of the compliance options and use C-PACE as the financing tool. Bevilaqua noted the key features of C-PACE include the term of the loan can be up to the maximum useful life of the equipment up to 30 years; the first payment can be delayed two years; the lien stays with the property, not the building owner; financing rates are in the “high 4’s” to 7%; the long term assessment allows for deeper investments in energy efficiency and/or reduces monthly payments for borrowers; and PACE requires no upfront cash and can be treated as an off-balance sheet item. Bevilaqua stated that C-PACE typically will cover up to 30% of a project’s hard cost for new construction and up to 100% of the costs of energy upgrades.

To obtain an energy survey to develop the C-PACE financing package, building owners can reach out to Qualified Engineers listed on the Philadelphia C-PACE website. The owner also needs to select a Capital Provider to provide a term sheet and work with the owner throughout the process of obtaining C-PACE financing.

To qualify for C-PACE in Philadelphia the project must be a commercial or industrial property. C-PACE can be used for upgrades to existing buildings or for gut rehab and new construction projects. The minimum financing amount for a C-PACE project in Philadelphia is $100,000. There is a maximum 95% Lien-to-Value limit and up to a 30-year financing term. There is also the option of retroactively using C-PACE financing with a two year look back.

Shulock wrapped up the webinar by discussing the first two Pennsylvania C-PACE projects which are located in Philadelphia. The first was J-Centrel in which Twain Financial provided $1,500,000 in financing to Shift Capital for a gut rehab project. The Olde City Day School obtained $519,000 in C-PACE financing from Greenworks Lending to install rooftop solar. It was the first solar project in Pennsylvania to use C-PACE financing.

The Building Tune-Up website can be found here. To watch the recording of the webinar, click here. The slides can also be found on the Philadelphia C-PACE program resources page in the Philadelphia C-PACE webinars section.

October 28, 2020

Harrowgate Project From Shift Capital Showcases Versatility Of C-PACE Financing

Repost from BisNow – October 25, 2020 Matthew Rothstein, Bisnow East Coast

A new development and its use of a new financing tool have the potential to be a template for introducing more environmentally sustainable elements to nearly all forms of commercial real estate.

Shift Capital last year announced the beginning of its J-centrel project in the Harrowgate neighborhood, on the opposite side of Kensington from Fishtown. Like all of Shift’s projects to date, J-centrel is the redevelopment of a historic but rundown factory building into a mixed-use project with multiple features designed to proactively benefit local residents.

Shift realized upon gaining access to the building to begin work that it would require more time and money than initially estimated, Shift Vice President of Development Maria Sourbeer said at Bisnow’s Philadelphia C-PACE: How To Close A Deal webinar on Thursday. Meanwhile, Philadelphia City Council had recently passed legislation allowing the use of C-PACE, or commercial property-assessed clean energy, financing. Sourbeer sensed an opportunity.

“Coming from a nonprofit background, I’m used to having my ear to the ground for different financing [opportunities],” Sourbeer said.

C-PACE, the commercial-specific form of the more general PACE program, is a funding idea generated at the national level that requires statewide legislation to enact and local governments to execute. C-PACE passed Pennsylvania’s Legislature in 2018 and Philadelphia City Council last year, and J-centrel is the first project in the city to take advantage of it.

C-PACE loans are available to banks and other private lenders, which would pay all of the hard and soft costs associated with improving a commercial building’s environmental sustainability. The borrower pays back the cost through an additional assessment similar to what determines a property tax, which is passed back to the lender. The sum that a project can be loaned through C-PACE is determined by an auditor hired by the borrower, which panelists agreed is a relatively painless process.

“We worked hard with our general contractor to see what would qualify in the energy audit, and we worked through that before we even brought in the auditor,” Sourbeer said. “So when we hired the auditor, we were able to hand them our analysis.”

The term of a C-PACE loan is as long as the improvements remain in place and operational for up to 30 years, in accordance with Philadelphia’s iteration of the program.

Twain Financial Partners had already purchased historic preservation tax credits to help finance J-centrel and agreed to add C-PACE to its agreement with Shift. Since the assessment portion of C-PACE loans occupy the same part of the capital stack as property taxes and do not accelerate in the case of non-payment, senior lender Fulton Financial was comfortable including the new loan despite its technical position in front of the senior mortgage lender in the capital stack, Twain Business Development Officer Paul Thompson said. Functionally, C-PACE repayments occupy a similar place to a mezzanine loan in the repayment order.

“[J-centrel had] some cost overruns, understandably so because it’s an adaptive project,” Thompson said. “So how do you cover that gap while still keeping your senior lender happy? C-PACE makes a lot of sense in that situation because it’s used in qualifying costs that help improve the efficiency of the building.”

J-centrel is the redevelopment of a two-warehouse complex with connecting walkways on J Street, a block away from the Tioga station on the Market-Frankford Line. Three floors of apartments totaling 116 units will sit atop 30K SF of ground-floor commercial space, including retail and a local business accelerator. Two of the apartments will be reserved for those making 40% of the area median income, and 31 will be priced for 70% AMI.

The residential portion doesn’t qualify for C-PACE under Pennsylvania’s version of the program, which meant Shift was forced to split J-centrel into a commercial condo and a residential one. The Philadelphia Energy Authority, the local agency administering the program, is lobbying the state government to add multifamily to the list of qualified projects, PEA Program Manager Lisa Shulock said.

Shift pursued C-PACE financing to shore up a capital shortfall when costs on J-centrel went up, but a building owner can apply at any phase of a project’s life, from design to two years after completion of construction. Even a long-completed building renovating any qualifying building systems can qualify within two years of the process.

Fulton’s traditional senior loan to Shift for J-centrel was for $14.5M, and Twain purchased $2.5M in historic preservation tax credits. By incorporating the $1.5M C-PACE loan into the operating expenses portion of its balance sheet, Shift was able to take on the loan with a 25-year repayment period and not stress its loan-to-value ratio, Fulton Vice President of Commercial Community Development Jeanne Fields said.

“It’s an easy way to bring some additional capital into the project,” Fields said. “We knew the project that needed to be completed, and we were happy that it was able to cover the cost of completion without requiring more money from us.”

Because repayment is based on a tax assessment rather than something more prone to fluctuation, the funds are held in escrow, which takes away from the building’s cash flow, Fields mentioned as a caution to prospective users of the program. Otherwise, C-PACE provided a means to avoid the type of pitfalls common with social impact-focused projects that operate with thin margins.

C-PACE is structured similarly to tax increment financing packages, only with the beneficiary of repayment being a private lender rather than the state or local tax rolls, Thompson said. He believes the familiarity much of the development community has with TIF will help accelerate the adoption of this program.

“[It’s] a TIF structure with a fancy new name, but it will quickly become ubiquitous, not just in Philadelphia but across the country,” Thompson said.

CORRECTION, NOV. 5, 3:45 P.M.: A previous version of this article misstated C-PACE loans’ place in the capital stack. This article has been updated. Contact Matthew Rothstein at matt.rothstein@bisnow.com

Original article: https://www.bisnow.com/philadelphia/news/sustainability/new-green-financing-program-c-pace-shift-capital-106452?utm_source=outbound_pub_20&utm_campaign=outbound_issue_43446&utm_content=outbound_link_11&utm_medium=email

Click here & log-in to Bisnow to view the Philly C-PACE: How to Close a Deal Webinar from October 22, 2020.